Essay: Port choice and competitiveness determinants

Literature review: port choice and competitiveness determinants

In the situation of fierce competition between ports, it is essential to identify the determinants of port competitiveness. In order to do that, a total of 30 references were used as the basis for the analytical review. Some older sources like Slack (1985), Branch (1986), Bird and Bland (1988), Frankel (1992), Murphy et al. (1992), Gibson et al. (1993), Murphy and Daley (1994) and Tongzon (1995) are reviewed, but main focus is on the most recent literature. The choice of sources was not constrained by geographical considerations.

Decision makers

The decision makers that are identified by the authors of the papers are: shippers, forwarders, shipping companies, terminal operators, port authorities and government agencies. A major part – 15 of the studies – identify shippers

as main or one of the decision makers in the port selection. Studies done by Branch (1986), Murphy and Daley (1994), Kumar and Vijay (2002), Nir et al. (2003), Tiwari et al. (2003), Malchow and Kanafani (2001), (2004), Guy and Urli (2006), Ugboma et al. (2006) and Leachman (2008) focus only on shippers as decision makers in port selection. Other sources, like Slack (1985), Murphy et al. (1992), Song and Yeo (2004), Cullinane et al. (2005), De Langen (2007) and De Martino and Morvillo (2008) consider shippers, but also take into account other actors as decision makers for port selection.

The studies that evaluate forwarders’ decisions in port selection are by Slack (1985), Murphy et al. (1992), De Langen (2007) and De Martino and Morvillo (2008); in these sources other actors are also considered. However in studies of Bird and Bland (1988), Tongzon and Sawant (2007), Tongzon (1995),(2009), Grosso and Monteiro (2008) forwarders are the only decision makers considered, and a survey is chosen as the method of research.

Eight of the sources (Murphy et al. (1992), Lirn et al. (2004), Ha (2003), Song and Yeo (2004), Shintani et al. (2007), De Martino and Morvillo (2008), Meersman et al. (2008)) also evaluate shipping companies as port choice makers.

Terminal operators

are mentioned only in four sources (Song and Yeo (2004), Acosta et al. (2007),Meersman et al. (2008), Wiegmans et al. (2008)). Only few (Frankel (1992), Cullinane et al. (2005), De Martino and Morvillo (2008), Meersman et al. (2008)) focused on port choice criteria influence by government/port authority decisions. Literature reviewed in time Shippers and shipping companies have been in focus of the researchers during the whole period covered by the literature reviewed (from mid 80s till 2009). For a brief period of time around 1990 (Bird and Bland (1988); Frankel (1992); Murphy et al. (1992)) and in recent years (De Langen (2007); De Martino and Morvillo (2008); Grosso and Monteiro (2008); Tongzon (2009)) literature focuses on forwarders. Terminal operators are evaluated as port choice decision makers in since 2004 in the literature reviewed (Song and Yeo (2004); Acosta et al. (2007); Meersman et al. (2008); Wiegmans et al. (2008)).

Methodology

The most popular methodology for approaching the problem of determining port choice criteria is surveying the decision makers. This approach was taken in half of all the sources reviewed. Other approaches like analytic hierarchy process, literature analysis, multivariate and discrete choice analysiswere also used by the authors in the literature reviewed. Criteria The literature reviewed reveals a considerable range of factors that have influence on the decision of port choice. The most mentioned factors in order of citation times are: cost, location, port operations quality/reputation, speed/time, infrastructure/facilities availability, efficiency, frequency of sailings, port information systems,hinterland/intermodal links and congestion in port . Other port selection criteria are mentioned in the sources reviewed less than 3 times. Importance of criteria for different actors For different actors authors have focused on different criteria as important for port selection. The criteria that are most mentioned as important to shippers (in order of citation times) are cost, port operations quality/reputation and port location. Of a bit less cited is frequency of shipping services, speed/time, efficiency of service, efficiency, port facilities/infrastructure, port information system, intermodal/hinterland connections, congestion in port, port services and flexibility (for special cargo).

According to literature the most mentioned criteria for forwarders are efficiency and port operation quality/reputation. Fewer times mentioned are cost, frequency, location, speed/time, port information systems and intermodal/hinterland connections. For

shipping companies

criteria that are most mentioned (in order of citation times) are cost, location, port facilities/infrastructure and port operations quality/reputation. Criteria of a lesser importance are speed/time, efficiency, congestion in port, frequency of shipping service, intermodal/hinterland links, port information systems, information availability, port administration, port services and flexibility for special cargo.

For

terminal operators

criteria that are mentioned as important (in order of citation times) are: port facilities/infrastructure, port operations quality/reputation, cost, location, intermodal/hitnerland links, port information systems, congestion in port and efficiency.

The following gives a summary of the literature reviewed.

Table 1: Summary of port choice criteria in literature reviewed

Source	Decision maker	Criteria	Methodology
Slack (1985)	Shippers Forwarders	Number of sailings Freight rates Congestion Intermodal links	Survey
Branch (1986)	Shippers	Cost Nature of traffic Adequacy of port facilities Overall efficiency Industrial relations record	n/a
Bird and Bland (1988)	Forwarders	Frequency of shipping service Port charges Time Grouping and freight consolidation Labour problems at ports Spirit of free enterprise Delivered price	Survey
Frankel (1992)	Governmental bodies Shipping companies Shippers Freight forwarders	Liner companies revenues / costs / fleet size / fleet employment Cargo volume / value / allocation	Analytic hierarchy process
Murphy et al. (1992)	Large/small shippers International water carriers International water ports International freights forwarders	Loading/unloading facilities for large/odd sized freight Large volume shipments Low loss and damage frequency Available equipment Convenient pickup and delivery times Information concerning shipments Assistance in claims handling Flexibility in meeting special handling requirements	Survey Univariate analysis Multivariate factor analysis
Murphy and Daley (1994)	Purchasing manager (shipper)	Shipment information Loss & damage performance Freight charges Equipment availability Convenient pickup and delivery Claims handling ability Special handling ability Large volume shipments Large & odd-sized freight	Survey
Kumar and Vijay (2002)	Shipper	On time performance Value Information technology Customer service Equipment and operations	Analytic hierarchy process
Mangan et al. (2002)	Decision makers (on ferry choice) in transport companies	Service availability Sailing frequency Risk of cancellation Fastest overall route Proximity of ports to origin/destination Cost Speed of getting through ports Suitability for special cargo Delays Intermodal/connecting links Information availability	Modeling Survey
Nir et al. (2003)	Shipper	Highway travel time (origin: company, destination: port) Travel cost Number of available routes Frequency	Survey Revealed preference multinomial logical model
Lirn et al. (2004)	Shipping lines	Physical infrastructure (including depth) Geographical location (proximity to markets, main routes) Port administration and service to vessels (turn around time) Carriers cost per call	Analytic hierarchy process
Tongzon (1995);(2009), Tongzon and Sawant (2007)	Forwarders	Frequency of ship visits Port efficiency Adequate infrastructure Location Port charges Quick response to port users’ needs Port’s reputation for cargo damage	Survey
Ha (2003)	Shipping companies	Information availability on port activities Port location Port turnaround time Facilities available Port management Port costs Customer convenience	Survey
Tiwari et al. (2003)	Shippers	Ship calls (frequency) Total TEUs handled at the port TEUs per berth at the port TEUs of cargo per crane Handling volume (thousand tons) per length of quay Number of routes offered Port and loading charges	Literature review Discrete Choice Analysis
Malchow and Kanafani (2001);(2004)	Shippers (commodity types)	Distance Frequency of sailings Average size of vessel Loading/unloading time	Discrete choice model
Song and Yeo (2004)	Ship owners Shipping companies Shippers Terminal operators Academics	Cargo volume Port facility Port location Service level Port expenses	Analytic hierarchy process Experts surveys
Cullinane et al. (2005)	Shippers (demand trends) Port authorities (supply)	Price Generalized cost Quality of service Policy developments	Relative competitiveness analysis
Guy and Urli (2006)	Shipping companies	Port infrastructures Cost of port transit for a carrier Port administration Geographical location	Multicriteria analysis
Ugboma et al. (2006)	Shippers	Efficiency Frequency of ship visits Adequate infrastructure	Analytic hierarchy process
Acosta et al. (2007)	Terminal operators	Infrastructure Superstructure Technology and communications systems Internal competition Cooperation of the institutions and companies involved in the port activity	Survey
De Langen (2007)	Shippers Forwarders	Location of port Efficiency of cargo handling Quality of terminal operating companies Quality of equipment Quality of shipping services Information services in port Good reputation to damage/delays Customer focus Connection to hinterland modes Personal contacts in port	Survey
Shintani et al. (2007)	Shipping companies	Costs Empty container distribution	Algorithm-based heuristic analysis
De Martino and Morvillo (2008)	Port authorities Shippers Forwarders Shipping companies	Quality of the entire port: infrastructure, links to transport systems, terms of services Value is generated by joint effort of port actors in the satisfaction of clients’ needs	Literature review
Grosso and Monteiro (2008)	Forwarding companies	Connectivity of the port Cost and Port Productivity Electronic information Logistics of the container	Literature review Survey
Leachman (2008)	Importers	Transportation costs Alternative routes Door-to-door transit times Shipments pooling Lead times of container movement	Economic optimization model
Meersman et al. (2008)	Shipping companies Terminal operating companies Port authorities	Port hinterland connection capacity	Analysis of expected trends
Wiegmans et al. (2008)	Container terminal operators	Port physical and technical infrastructure Geographical location Port efficiency Interconnectivity of the port (sailing frequency of deep-sea and feeder shipping services) Reliability, capacity, frequency and costs of inland transport services by truck, rail and barge (if any). Quality and costs of auxiliary services such as pilotage, towage, customs, etc. Efficiency and costs of port management and administration (e.g. port dues). Availability, quality and costs of logistic value-added activities (e.g. warehousing). Availability, quality and costs of port community systems. Port security/safety and environmental profile of the port. Port reputation (satisfactory ranking in benchmarking studies).	Interviews Literature review
Karlaftis et al. (2009)	Shipping company	Distances between ports Demand Supply Service time	Modeling

Interviews

In order to test the information obtained in the literature review and objectively evaluate the criteria discussed previously interviews are done. For the interviews the following actors (a total of 35) were selected:

• Shipping companies;
• Terminal operators;
• Shippers;
• Logistics groups;
• European Logistics Centres.

Interviews were done during a period of almost 2 months from 7 April till 15 June 2009.

Shipping companies

The input provided by respondents from shipping companies enables us to identify decision makers in port selection, evaluate the importance of port selection criteria for shipping companies, and applying those to a selected set of ports in Europe, to verify their attractiveness. Equally, the company’s current flows are mapped, and insight is gained in the evolution of their future flow structure. Finally, an evaluation by shipping companies of the importance of and the score on different characteristics of hinterland transport modes will be done.

Terminal operators

The input provided by terminal operators enables identifying decision makers in port selection, evaluating the importance of selection criteria for investment purposes, and obtaining similar information on port selection by their customers. Evaluation of perceived current and future qualities of a selected set of seaports in respondents’ opinion, split among terminal operators themselves, as well as by their customers, will also be achieved. The same is done for the wider chain sections. An estimation is also made of the future development of carriers’ networks.

Shippers

Data on shippers’ importance of transport service selection criteria are obtained, and performance of transportation services or transportation modes is evaluated. Perceived current and future qualities of selected ports can also be identified from the results. .

Logistics groups

The questionnaire allows for evaluation of transport solution and port selection decision making and criteria that the decisions are based on. Also, from the point of view of logistic groups, perceived current and future qualities of transport modes can be identified. The same is true for seaports in case the logistics operator is involved.

European Logistics Centers

The purpose of the questionnaire is to evaluate the importance of different location criteria, with main cateories seaport accessibility, customer accessibility, land price, building/rental price and fiscal policy. Different regions in western Europe are compared in their scores on the different variables. The EDC market is also mapped by gathering information on traffic flows through EDCs’ logistics chains.

Results:

A summary of some results from the interviews that have taken place can be given.

Respondent: shipping companies

Decision makers

The answers on decision makers obtained from shipping lines seem to be greatly influenced by the business strategies that each company is using. However some general conclusions still can be done.

In selection of transportation solution or selection of transport modes the most important role is played by the forwarderand sender of the cargo, however in some cases the shipping company takes part in making this decision.

Logistics/transport providers

in most cases are selected by forwarder or sender and only in some business conducts it is done by the shipping company or receiver of goods.

Seaport selection

is always done by the shipping company, but as comments obtained during the interviews show, this choice is influenced by geographical considerations (range of clients that can be served through that port, links to particular destinations). Recently there is a trend that the big shippers become more powerful in the decision on seaport selection because of their increased importance in the market. On individual shipment level sender, forwarder and receiver also take part in seaport selection.

Seaport choice criteria

In order to evaluate the importance of port selection criteria for shipping companies during the interviews they were presented with a list of port selection criteria and asked to rank them and give comments on them. The most important criteria in order of importance for sipping companies are cost , quality of hinterland connections, port capacity , reliability , port location (at sea or indand) and cargo base. Criteria of a lower importance are flexibility , customer servicequality, location in por (if locks need to be used), total door to door transport time and feeder frequency . Risk of loss/damage is of low importance.

Shipping companies comment that a decision to call port is usually made based on the availability of cargo from/to that port which is closely linked to ports’ geographical location and area that can be served through it. Also, inland port location is perceived as an advantage by the shipping companies, because it allows for cost savings.

Evaluation of hinterland transport modes

In evaluating hinterland transportation services or hinterland transport modes by far the most important criterion is cost . Then come reliability, frequency of service, flexibility
, total door-to-door transport time and customer servicequality. Environmental impact and risk of loss/damage are of low importance.

Shipping companies comment that the transport mode or a set of transport modes that is used is chosen mainly taking into account the destination that has to be served, value of goods, time constraints and cost. Environmental impact of a transport mode chosen is slowly gaining importance because of government policy. ort performance

During the interviews respondents were asked to evaluate different criteria in different ports in scale from 1 (very bad) to 5 (very good). Due to geographical distribution of the companies surveyed, not all companies could comment on all ports that were included in the questionnaire. and Table 3 show summary of evaluation of seaports.

Table 2: Evaluation of criteria for seaports (averages)

	Felixstowe	Zeebruges	Antwerp	Hamburg	Le Havre
RELIABILITY	3.0	4.3	4.5	4.1	2.4
FLEXIBILITY	3.0	4.0	4.5	3.8	2.4
RISK OF LOSS/DAMAGE	4.0	4.4	4.8	4.6	4.3
FREQUENCY	2.7	2.9	3.4	4.8	2.6
COST	3.2	4.0	4.4	3.4	3.1
CUSTOMER SERVICE	3.5	3.8	4.2	3.9	3.1
PORT CAPACITY	2.7	4.3	4.6	3.7	4.4
PORT LOCATION	3.2	3.4	4.2	4.4	3.8
CARGO BASE	3.4	3.1	4.4	4.2	3.3
HINTERLAND CONNECTIONS	3.4	3.3	4.5	4.4	3.6
CUSTOMS SERVICE	3.6	3.4	3.0	3.9	2.9

Table 3: Evaluation of criteria for seaports (medians)

	Felixstowe	Zeebruges	Antwerp	Hamburg	Le Havre
RELIABILITY	3.0	4.0	4.0	4.0	2.0
FLEXIBILITY	3.0	4.0	5.0	4.0	3.0
RISK OF LOSS/DAMAGE	4.0	4.0	5.0	5.0	4.5
FREQUENCY	3.0	2.5	3.0	5.0	2.5
COST	3.0	4.0	5.0	3.0	3.5
CUSTOMER SERVICE	3.0	3.5	4.5	4.0	3.0
PORT CAPACITY	2.5	4.0	5.0	4.0	4.0
PORT LOCATION	3.5	4.0	4.0	4.5	4.0
CARGO BASE	4.0	3.0	4.0	4.0	3.0
HINTERLAND CONNECTIONS	3.0	3.0	5.0	4.0	4.0
CUSTOMS SERVICE	3.0	3.0	3.0	4.0	3.0

Table 4: Evaluation of criteria for seaports (AVG (MIN – MAX))

	Felixstowe	Zeebruges	Antwerp	Hamburg	Le Havre
RELIABILITY	3 (2 – 4)	4.3 (4 – 5)	4.5 (4 – 5)	4.1 (3 – 5)	2.4 (2 – 4)
FLEXIBILITY	3 (2 – 5)	4 (3 – 5)	4.5 (4 – 5)	3.8 (2 – 5)	2.4 (1 – 3)
RISK OF LOSS/DAMAGE	4 (2 – 5)	4.4 (4 – 5)	4.8 (4 – 5)	4.6 (4 – 5)	4.3 (2 – 5)
FREQUENCY	2.7 (1 – 4)	2.9 (2 – 4.5)	3.4 (2 – 5)	4.8 (4 – 5)	2.6 (1 – 4)
COST	3.2 (2 – 4)	4 (3 – 5)	4.4 (3 – 5)	3.4 (3 – 4)	3.1 (1 – 4)
CUSTOMER SERVICE	3.5 (3 – 5)	3.8 (3 – 5)	4.2 (3 – 5)	3.9 (3 – 5)	3.1 (2 – 5)
PORT CAPACITY	2.7 (1 – 4)	4.3 (3 – 5)	4.6 (4 – 5)	3.7 (2 – 5)	4.4 (4 – 5)
PORT LOCATION	3.2 (2 – 4)	3.4 (2 – 4)	4.2 (3 – 5)	4.4 (3 – 5)	3.8 (2 – 5)
CARGO BASE	3.4 (1 – 4)	3.1 (2 – 5)	4.4 (3 – 5)	4.2 (3 – 5)	3.3 (2 – 4)
HINTERLAND CONNECTIONS	3.4 (3 – 4)	3.3 (2 – 4)	4.5 (4 – 5)	4.4 (4 – 5)	3.6 (2 – 4)
CUSTOMS SERVICE	3.6 (2 – 5)	3.4 (3 – 4)	3 (2 – 4)	3.9 (3 – 5)	2.9 (2 – 4)

Respondents from shipping lines commented that port of Le Havre is scoring low in reliability and flexibility because of the social instability created by trade unions and frequent strikes. Some shipping lines mentioned that this is one of the main reasons why they decide to stop calling Le Havre. Also, lack of hinterland connections is mentioned as a disadvantage. For Felixstowe the port capacity is one of the main problems. It is reflected also in the ratings in Table 2 , >Table 3 and Table 4 . The advantage of Antwerp is that it is closer to the customer compared to a port located at the seaside. erceptions of investment plans

Shipping lines were presented with a summary of planned improvements and investments (see Table 5 ) that are planned or being done in some of the ports in order to ask to give their evaluation of the importance of these actions to them. In general all the investments are perceived positively, but also some valuable comments and suggestions were received.

Table 5: Summary of improvements and investments

Port	Improvements
Felixstowe	improved rail connections
Zeebruges	Extend quay length at various terminals + new terminal (3 million TEU extra); new lock; logistics zone development; new shunting yard
Antwerp	complete Deurganckdok + build Saeftinghedok (3+6 million TEU extra); new intermodal terminal; Scheldt deepening
Hamburg	terminal extensions: 10 million TEU more by 2010
Le Havre	logistics zone and multimodal platform for rail and barge developmentComplete Port 2000 (capacity of 4.2 M TEU)
Gioia Tauro	terminal extension; industrial development zone; rail gate development

For Le Havre

it was mentioned that further investments should focus on development of hinterland connections. In the direction of Paris barge and rail connections should be improved. Further promotion of barge connections in the direction of Strasbourg was also mentioned as a suggestion. The improvements that were mentioned (see Table 5 ) were evaluated as valuable. It was also noted that Le Havre has no capacity problems. Social instability was the main problem that the port is facing and it was also mentioned as the main reason for the shipping lines decision to stop calling the port of Le Havre. Also, extraordinarily high container handling cost (according to shipping lines 2.5 times higher than in Zeebruges and 2 times higher than in Antwerp) is one of the reasons for not choosing Le Havre.

In Felixstowe the developments of rail connections were valued positively since rail hinterland connections is the problematic issue that this port is facing. Zeebruges receives very positive valuation of developments: extending of quay length, logistics zone development and railway developments. Some shipping lines mention that Zeebruges might become a hub port for their operations in the future. For Antwerpone of the developments that mentioned are valued positively. Scheldt dredging is of vital importance. However Saeftinghe dock development is perceived as an unnecessary at the moment and it should be slowed down or postponed until the end of economic crisis. In Hamburgthe planned developments are valued positively because lack of capacity is an important issue; some rationalization initiatives should also be developed. It is mentioned that dredging works should be planned in order to be able to accommodate new larger ships.

Most of the shipping companies surveyed had no operations in Gioia Tauro , so no conclusions on perception of the investment plans can be drawn.

Perceived Future Quality of hinterland transport modes

The respondents from shipping lines were asked to give evaluation of perceived future quality of hinterland transport modes. Table 6 and Table 7 show summary of the responses.

Table 6: Perceived Future Quality of hinterland transport modes (averages)

	ROAD	RAIL	INTERMODAL (including ShortSea and Barge)
RELIABILITY	3.90	3.56	4.40
FLEXIBILITY	4.64	2.44	3.50
RISK OF LOSS/DAMAGE	3.50	3.67	3.80
FREQUENCY	4.70	3.44	3.75
COST	3.40	3.33	4.30
D2D TOTAL TRANSPORT TIME	4.09	3.28	3.50
CUSTOMER SERVICE	4.10	2.67	3.70
ENVIRONMENTAL IMPACT	1.90	4.00	3.90

Table 7: Perceived Future Quality of hinterland transport modes (medians)

	ROAD	RAIL	INTERMODAL (including ShortSea and Barge)
RELIABILITY	4	4	4
FLEXIBILITY	5	2	4
RISK OF LOSS/DAMAGE	3	4	4
FREQUENCY	5	3	4
COST	3.5	3	4
D2D TOTAL TRANSPORT TIME	4	3	3.5
CUSTOMER SERVICE	4	3	4
ENVIRONMENTAL IMPACT	2	4	4