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Ports in Global Supply Chains

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I gave this presentation to the department Technology and Operations Management to explain my thoughts on how sea ports act in global supply chains through organisational, logistics, and information networks.

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Ports in Global Supply Chains

  1. 1. PORTS IN GLOBAL NETWORKS Rob Zuidwijk Associate Professor Supply Chain Management MANAGEMENT OF TECHOLOGY AND INNOVATION
  2. 2. ROLE OF PORTS IN GLOBAL SUPPLY CHAINS? 2 “Port Vision 2030” downloadable via www.portofrotterdam.com port as a global hub port as an industrial cluster
  3. 3. PORTS AND GLOBAL SUPPLY CHAINS Fact: About 11.9 million containers were handled by the Port of Rotterdam in 2012 Question: How many supply chains have used the port of Rotterdam as a hub? 3 GLOBAL HUB Problem Does “one size fits all” still work?
  4. 4. PORT AS A GLOBAL SUPPLY CHAIN PARTNER 4 Source: Port Vision 2030 Source: Ross Robinson (2002) Ports as elements in value-driven chain systems: the new paradigm, Maritime Policy & Management 29(3): 241-255. “ports must now be seen as elements in value-driven chain systems [...] they deliver value to shippers and to third party service providers; customer segmentation and targeting is on the basis of a clearly specified value proposition; and the port captures value for itself and for the chain in which it is embedded.”
  5. 5. SUPPLY CHAIN BUILT ON NETWORKS Simple framework to organize the discussion Global supply chains supported by three global networks: 1. Organizational networks Organizations linked via business relationships: financial flows 2. Logistics networks Facilities linked via transportation services: goods flows 3. Information networks Systems linked via communication channels: information flows “Ports in Global Networks” 5
  6. 6. COORDINATION FOR SUSTAINABLE GLOBAL SUPPLY CHAINS ORGANIZATIONAL NETWORKS 6
  7. 7. SUPPLY CHAIN COORDINATION Coordination of decision in supply chains  Usual objective is better economic performance;  Less attention for environmental or societal objectives;  One of the exceptions: closed-loop supply chains in which people, profit, and planet go hand in hand. Research Focus Joint involvement of sea ports and global supply chains in voluntary or regulated programs to reduce the negative externalities of logistics processes. PhD student Xishu Li works on “Green Port Tools” with Rommert Dekker, Rene de Koster, and Rob Zuidwijk. 7
  8. 8. CARBON FOOTPRINT REDUCTION IN SUPPLY CHAINS Regulated programs Emission Trading Scheme large emitters in Europe Voluntary programs Supply chain wide emission reduction programs initiated by OEMs (Mattel, SCA) or retailers (Walmart, Tesco) Why does one need coordination?  Downstream partners feel the pressure  Upstream partners best able to reduce footprint Why is it different from usual supply chain improvements?  Result of carbon footprint reduction hard to verify; needs certification  Incentives via constructs such as carbon price Preliminary work: Felipe Caro, Charles Corbett, Tarkan Tan, Rob Zuidwijk (2013). Double-Counting in Supply Chain Carbon Footprinting. Manufacturing & Service Operations Management 15(4): 545-558.8
  9. 9. CARBON REDUCTION: PORTS IN GLOBAL SUPPLY CHAINS World Port Climate Initiative  Environmental shipping index based on ship design;  Measure of global emissions of vessels;  Good index results in reduced port dues.  Ambitions go much further: “Ports’ carbon footprint inventories can be expanded beyond the immediate boundaries of the ports to include entire supply chains, from manufacturers or suppliers through intermodal shipment to distribution points or even to retail outlets. This type of expanded disclosure may be required by manufacturers, retailers, or other participants in the supply chain, and can lead to the identification of opportunities for efficiency improvements.” Source: Guidance document “Carbon Footprinting for Ports”, June 2010. 9
  10. 10. COORDINATED MANAGEMENT OF SUPPLY CHAIN RISKS Coordination problem One organization is facing a particular risk while another organization is in the position to manage the risk Example Freight forwarder wants to expedite goods in an efficient and secure way, truck carrier controls carriage of the goods Example OEM wants to control the quality of its re-used products, third parties are involved in remanufacturing and may unintendedly source counterfeit parts Morteza Pourakbar is now visiting McGill University to study these types of problems 10
  11. 11. SYNCHROMODAL TRANSPORT NETWORKS LOGISTICS NETWORKS 11
  12. 12. PORT AS LOGISTICS HUB: EXTENDED GATE NETWORK  New business model for container transport  A seaport container terminal operator that extends its gates to inland container terminals.  High capacity corridors (Barges and Trains) to hinterland destinations  Competition (Cost, Time): Road and intermodal carriers Main Network Design Decisions  Which inland terminals will act as extended gates?  What capacity, frequency on the corridors?  What prices for services? 12
  13. 13. MODEL OF EXTENDED GATE (DRY PORT) NETWORK Final Customers sea port dry port dry port dry port • Port-to-port services • Port to door services Source: Panagiotis Ypsilantis, Rob Zuidwijk (2013). Joint Design and Pricing of Intermodal Port - Hinterland Network Services. Manuscript. 13
  14. 14. JOINT DESIGN AND PRICING  We model joint design and pricing of container transport services on a network with economies of scale and transit time constraints  Port-to-door services are priced independently of route through the network: Pricing follows competition and design minimizes costs.  Port-to-port services design and pricing decisions are mutually dependent: revenue enhancement by pricing intermodal transport per (geographical) market segment.  Transit time constraints: intermodal transport penetrates markets through frequent services instead of achieving economies of scale through the use of bigger vessels. 14 PhD student Panagiotis Ypsilantis works on the design and planning of intermodal network services with Leo Kroon, Jan van Dalen, and Rob Zuidwijk.
  15. 15. SYNCHROMODAL TRANSPORTATION Adapted from: The future of freight transport: ECT’s vision on sustainable and reliable European transport. Europe Combined Terminals, October 2011.15
  16. 16. BOOKING OF SYNCHROMODAL TRANSPORT CAPACITY Amodal booking  Booking of transportation without specifying the mode of transport in advance;  No signal to commit specific transport capacity. Questions amodal booking  How to source transport capacity?  How to price transport capacity? Research Focus The design, planning, and execution of synchromodal transportation services under new business models 16
  17. 17. AVAILABLE TRANSPORT CAPACITY Question How to compare transport capacity on road, rail, and inland waterways in order to manage overall transport capacity? Road: use of infrastructure by autonomous vehicles under traffic conditions Rail: regulated allocation of paths to specific train services Question How to determine the opportunity costs of putting a container on a truck instead of a train? 17
  18. 18. INTER-ORGANIZATIONAL SYSTEMS IN LOGISTICS INFORMATION NETWORKS 18
  19. 19. “DATA PIPELINE” FOR GLOBAL SUPPLY CHAINS New business model for Customs  Beyond existing voluntary customs programs (CTPAT, AEO);  Customs: access to supply chain operational data via data pipeline;  Customs improve risk profiles;  Move from transaction based to audit based risk assessment;  Supply chain partners improve compliance;  Supply chain partners improve operational performance? “Allowing traders to supply information once in a seamless integrated process and minimising the burden on business by utilising commercial systems and data streams must be the right direction. And we must build partnerships with economic operators in order to understand each other’s business [...]” Source: David Hesketh (2009). Seamless electronic data and logistics pipelines shift focus from import declarations to start of commercial transaction. World Customs Journal 3(1): 27-32. 19
  20. 20. CARGO INFORMATION SHARING FOR INTERNATIONAL LOGISTICS 20 Better capacity utilization Less empty container movement Decoupling maritime/ continental flows
  21. 21. VALUE OF INFORMATION IN TRANSPORTATION Value of (sharing) information  Widely studied in context of inventory management;  Less attention in context of transportation management Example Information on container release times stimulates use of barge and rail instead of truck and improves trade-off between efficiency and reliability Rob Zuidwijk and Albert Veenstra (2013). The Value of Information in Container Transport. Transportation Science. Accepted for publication. Research Focus Study of the value of (cargo) information in freight (container) transportation 21
  22. 22. PORT COMMUNITY SYSTEM ≈ ? PhD student Irina Romochkina works on governance modes for Port Community Systems with Peter van Baalen, Eric van Heck, and Rob Zuidwijk
  23. 23. PORT COMMUNITY SERVICES Rail planning The service Rail planning ensures optimal exchange of information surrounding the processing of trains and their cargo in the ports. Rail operators, traction suppliers, rail terminals, sea terminals and rail infrastructure operators stand to benefit. The information exchange in the service allows them to work more efficiently. It allows the processing of trains to become considerably more streamlined, saving the sector around 50,000 phone calls a year. On average it takes 1 1/4 hours less to process the administration associated with a train.
  24. 24. PRICING OF SERVICES ON A PLATFORM  Users are both producers of data and consumers of services  The platform provides an infrastructure  The services provide value to the users  The platform provides value to the services  What prices should the users pay and how should these revenues be distributed among services and platform? Factors  Structure of interdependent services  Service value dependent on adoption rate of users Service 1 Service 3 Service 2 price/fee User 2 User 1 User 3 value Platform data/infrastructure contributions = - Price computed from contributions and value
  25. 25. SUMMARY Ports act in global supply chains built on organizational, logistics, and information networks Research focus  Coordination for sustainable global supply chains;  Synchromodal transport networks;  Inter-organizational systems in logistics. 25
  26. 26. DISCUSSION
  27. 27. CONTACT DETAILS Prof. dr. Rob A. Zuidwijk Associate Professor Supply Chain Management Rotterdam School of Management Erasmus University Email rzuidwijk@rsm.nl Web http://rzuidwijk.wordpress.com 27

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