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Abstract: Much has been said of the importance of port and terminal integration in the
supply chain. Authors have stressed the importance of agility to the port environment,
which involves being proactive along supply chains, facilitation of intermodal integration,
as well as organizational integration and partnership between ports and users. Despite the
well articulated importance of the issues, little has been offered in terms of
conceptualisations and empirical evidence of what really is meant by port/terminal
integration in the supply chain, how such integration can be measured and quantified as
well as the extent to which different ports/terminals in the world are integrated in the
supply chain and competitive performance implications arising thereof. This paper aims to
make a contribution in this respect by (i) reviewing the relevant literature on supply chain
integration and port integration in the supply chain, (ii) conceptualising measures for
port/terminal integration in the supply chain, (iii) empirically testing the influence of
port/terminal integration in the supply chain on port competitiveness and (iv) outlining the
significance and value of the study for port operators, shipping lines, transport providers
and for further research.
1. INTRODUCTION
The importance of seaports for national economies is well established in the literature. It
has been held that an efficient port raises the productivity of prime factors of production
(labour and capital) and profitability of the producing units thereby permitting higher
levels of output, income, and employment (Walter 1975; Talley 1988). It follows that
seaports are important to national economies, more so economies that depend to a large
extent on international trade.
Ports were recognized as the springboards for economic development of the hinterland. On
this basis much of the research and developmental emphasis has been on the ability of
ports to carry out their functions of accommodating ships and other modes of transport
effectively and efficiently. Contemporary developments in transportation however, dictate
that emphasis should be placed on the ability of ports to fulfil a new role in the logistics era
in the context of operating as parts of integrated global supply chain systems.
This paper aims to identify the parameters of port supply chain integration, develop
measures for assessing the extent of seaport (container terminal) integration in global
supply chains and investigate the relationship between port supply chain orientation and
port competitiveness. The paper is organized as follows. The next section will review the
literature relevant to the scope of the study. This includes the literature on supply chain
integration and the studies that relate to the integration of ports and terminals in supply
chains. The literature review will assist in the development of the conceptual model in the
following section through the precipitation of the parameters of port/terminal integration in
∗
Corresponding author; Paper for KNU Conference, Taiwan, 29-30 March 2007.
2. LITERATURE REVIEW
O’Leary-Kelly and Flores (2002) state that “…integration refers to the extent to which
separate parties work together in a cooperative manner to arrive at mutually acceptable
outcomes. Accordingly this definition encompasses constructs pertaining to the degree of
cooperation, coordination, interaction and collaboration”. In attempting to decipher and
conceptualize the constructs of port integration in the supply chain, it is important to
review the literature relating to the constructs of supply chain integration.
The literature acknowledges that the higher the degree of integration across the supply
chain the better a firm performs (Narasimhan and Jayaram 1998; Johnson 1999; Frohlich
and Westbrook 2001) whereas there are dangers if suppliers and customers are not fully
integrated in terms of their business processes (Armistead and Mapes 1993; Frohlich and
Westbrook 2001). The findings together with the inherent strategic nature of co-ordination
render supply chain integration a concept of overriding importance in supply chain
management.
Recent studies have conceptualized and tested measures of supply chain integration.
Vickery et al (2003) emphasize the existence of integrative information technologies and
secondly the existence of practices that strengthen linkages between companies occupying
different positions in the supply chain (vertical linkages as in supplier partnering and closer
customer relationships and horizontal linkages as in forming intra-firm linkages using
cross-functional teams).
Narasimhan and Kim (2002) used three levels of integration, viz. a company’s integration
with suppliers (measured using six items adopted from Stevens 1989; Narasimhan and
Carter 1998; Tan, Kannan and Handfield 1998 and Carr and Pearson 1999), internal
integration across the supply chain (measured using eight items from Stevens 1989,
Narasimhan and Carter 1998 and; Wisner and Stanley 1999) and integration with
customers (measured using seven items from Stevens 1989; Zaheer, McEvily and Perrone
1998; Tan, Kannan and Handfield 199; Wisner and Stanley 1999).
Customer and supplier relationships also seem to be central in the context of supply chain
integration. Supplier partnering treats the supplier as a strategic collaborator manifested by
supplier involvement in product design or acquiring access to superior supplier
technological capabilities (Narasimhan and Das 1999). Closer customer relationships
involve proactively acquiring information from downstream customers about their needs
and becoming responsive in serving them.
Ports nowadays play an important role as members of a supply chain. In this role, the port
is considered as part of a cluster of organizations in which different logistics and transport
operators are involved in bringing value to the final consumers. In order to be successful,
such channels need to achieve a higher degree of coordination and cooperation (DeSouza,
Beresford and Pettit 2003). The determination of the parameters that encompass the extent
of integration of ports/terminals in global supply chains has, therefore, become of great
importance for ports.
Scholarly work on the integration of ports/terminals in the supply chain has been limited.
Probably the most updated empirical work has been undertaken by Carbone and De
Martino (2003) who adopted a case analysis to investigate the contribution of the port of
Le Havre to value creation in an automotive supply chain. The most suitable variables
identified were ‘relationships between the port operators and the focal firm’, ‘supplied
services that add value’, ‘information and communication technologies’, and ‘performance
measurement indicators common to supply chain partners’.
The recognition that ports are increasingly integrated in supply chains is illustrated in the
papers by Paixao and Marlow (2003), Marlow and Paixao (2003) and Bichou and Gray
(2004). Paixao and Marlow (2003) and Marlow and Paixao (2003) introduce the logistics
concepts of ‘lean’ and ‘agile’ operations as key factors in the measurement of port
performance. It is therefore, implied that port performance depends to a large extent on
logistics measures of cost and responsiveness. Bichou and Gray (2004) indicate that
adopting a logistics approach to the measurement of port performance is beneficial to port
efficiency because it directs port strategy towards relevant value-added logistics activities.
The parameters identified in the literature review to make-up the concept of port
integration in supply chains include “use of technology for data sharing”, “relationships
with shipping lines”, “value added services”, “relationships with inland transport
providers”, “transport mode integration” and “channel integration practices and
performance”
Paixao and Marlow (2003) put forward a framework than can be adopted for adding value
in a port environment. This involves adding value in the context of the different operations,
services and capabilities that take place in a port environment including capacity to provide
hinterland and foreland for road/rail access, to launch new tailored services, to handle
different types of cargo, speed at which the port can take decisions on altering schedules,
amend orders and changing design processes to meet customers’ demands, variety of
services in intermodal operations, capacity to convey cargo through the most diversified
routes/modes at the least possible time to end-users premises, and capacity to deliver
tailored services to different market segments and to act as collaborative intermodal hub
networks.
participants.
4. METHODOLOGY
The very basic requirement for a good measure is content validity, which means that the
measurement items in an instrument should cover the major content of a construct
(Churchill 1979). Content validity is usually achieved through a comprehensive literature
review and interviews with practitioners and academicians. The items for port integration
in the supply chain were generated based on previous literature (Bichou and Gray 2004;
Carbone and De Martino 2003; Carr and Pearson 1999; Narasimhan and Kim 2002; Paixao
and Marlow 2003; Stevens 1989; Tan, Kannan and Handfield 1998; Wisner and Stanley
1999; Zaheer, McEvily and Perrone 1998).
In order for ports to fulfill their performance goals as well as those of the supply chain,
they must be capable of attaining objectives of the supply chain and not merely objectives
of efficiency. The items conceptualized to be critical to terminal competitiveness in the
supply chain era include issues of cost advantage (price), quality, reliability, customization
and responsiveness to customer’s needs. Such items are increasingly regarded as critical in
the measurement of contemporary container terminal performance and those that clients
will be looking at, whereas traditional measures of efficiency (i.e. how quickly and
efficiently containers are loaded/unloaded and passed through the port as quantified by
throughput) have passed into the zone of expectation for customers. The performance
measures for each item were derived from the literature and can be seen in Table 1.
Construct Measures
Use of Information and 1. We use integrated electronic data interchange to
Communication communicate with shipping lines
Technology 2. We use integrated information systems to share
data/information with shipping lines
3. We adopt computerized port service systems for our
operations with shipping lines
Relationship with 1. The shipping line is viewed as a strategic partner in
Shipping Line mutually designing the flow of goods and information
2. The relationship with the shipping line is more based on
mutual trust rather than on contractual obligations
3. We work together with the shipping line to ensure higher
quality of service
4. We work together with the shipping line to reduce costs
Value Added Service 1. We have adequate facilities for adding value to cargoes (e.g.
pre-assembly, manufacturing, packaging)
2. We have the capacity to provide the widest possible
hinterland and foreland for road/rail access
3. We have the capacity to launch new tailored services should
the need arise
4. We have the capacity to handle different types of cargo
5. We are quick on taking decisions regarding altering
schedules, amending orders and changing design processes
to meet customers’ demand
6. We have a variety of services to handle the transferring of
cargo from one mode to another
7. We have the capacity to convey cargo through the most
diversified routes/modes at the least possible time to end-
users premises
8. We have the capacity to deliver even more tailored services
to different market segments
Integration of Transport 1. The port has adequate connectivity/operability for the
Modes ship/rail interface
2. The port has adequate connectivity/operability for the
ship/road interface
3. The port has adequate connectivity/operability for the
ship/inland waterway interface (if applicable)
Relationship with Inland 1. We use integrated electronic data interchange to
Transport Operators communicate with inland transport operators
2. We use integrated information systems to share
data/information with inland transport operators
3. We adopt computerized port service systems for inland
transport operations
4. We study how road/rail transport operators use the port
facilities
5. We listen to inland transport operators in
developing/upgrading our port facilities
6. We meet with inland transport operators to discuss issues of
mutual interest
Construct Measures
Channel Integration 1. We constantly evaluate the performance of the transport
Practices and modes available for linking our port/terminal to its
Performance hinterland destinations
2. We evaluate alternative routes for more efficient
transportation of cargoes via our port/terminal
3. We collaborate with other channel members (e.g. shipping
lines, shippers etc) to plan for greater channel optimization
4. We seek to identify other competing channels for cargoes
that might flow through our port
5. We benchmark the logistics/supply chain options available
for cargoes that will flow through our port vis-à-vis
alternative routes via competing ports
6. We seek to identify least cost options for the transport of
cargoes to hinterland destinations
Cost 1. We offer competitive prices
2. We are able to offer prices as low or lower than our
competitors
3. We can offer lower service charges than competitors
4. The cargo handling services at our port are cheaper than
competitors
Quality 1. We are able to compete based on quality of services
2. We offer port services of high quality to our customers
3. Our port service performance creates higher value for
customers
Reliability 1. Our port services are highly reliable
2. We deliver the kind of port services needed
3. We deliver services on time (minimize delays)
4. We provide dependable service delivery
Customization 1. We provide customized port services to our customers
2. We alter our service offerings to meet client needs
3. We respond well to customer demand for ‘new’ service
features or specific performance
Responsiveness 1. We have fast new service development
2. We deliver new services to the market quickly
3. We are first in the market in introducing new services
4. We have time to market lower than industry average
‘reliability’, ‘customization’ and ‘responsiveness’. The measures can be also seen in Table
1.
The sample included managers of 300 ports and container terminals worldwide. The
survey was specifically addressed to those individuals that were responsible for strategy at
the port/terminal. The respondents were asked to indicate the degree to which they
agreed/disagreed with a series of questions reflecting the above-mentioned parameters on
Likert-scales ranging from 1: strongly disagree to 7: strongly agree.
5. DATA ANALYSIS
The Cronbach alpha values are indicative of the high reliability of the scales employed as
all measures exceed the 0.7 threshold that is commonly applied.
All variables were metric satisfying the conditions for multiple regression analysis. The
stepwise method was used with settings at 0.05 α levels. t-tests were conducted on each
independent variable and F-tests for the overall regression. As no multi-collinearity was
detected among the explanatory variables, all variables were included in the analysis.
Examination of pair-wise correlations indicates correlations below the 0.8 point that may
suggest a potentially problematic degree of multi-collinearity. Further examination of
tolerance and variance inflation factor (VIF) statistics did not reveal any multi-collinearity
concerns. All variables in the model demonstrated normal distribution following a test for
univariate normality by applying the Kolmogorov-Smirnov test and low skewness and
kurtosis statistics. The threat of heteroscedasticity was checked by examining the residual
plots of the actual residual values of the dependent variables against the predicted residual
values. The examination did not show any pattern of increasing or decreasing residuals,
hence confirming the assumption of homoscedasticity. The plots also indicated linearity.
The significant results of the regression analysis are shown in Table 4.
The results indicate a positive association between technology adoption and high quality of
the services offered by the port. This association is supported by previous empirical
evidence in other contexts, which indicates a strong positive association between
technology adoption and quality (Prajogo and Sohal, 2006). It seems that the investment in
technology is merited by the resulting higher performance (in terms of service quality)
which is an important parameter for the selection as well as evaluation of the services of
the port.
Another important theoretical implication from the results of the study is the association
between the relationship port terminals have with the shipping lines and the beneficial
effects this has on the performance of the port terminal. It is interesting to note that the
performance measures used related to responsiveness and reliability and not the traditional
performance measures of throughput. Responsiveness and reliability are performance
measures utilized in the context of logistics, and the establishment of client relationships
by ports has a beneficial effect in the port’s function of fulfilling its modern role in the era
of logistics and supply chain management. The finding is in line with previous research by
Durvasula, Lysonski and Mehta (2002) who identified a positive association between the
relationship with the shipping lines and performance effects in the supply chain.
Other theoretical implications which can be extracted from the results of the study is the
possible need for a re-conceptualization of what constitutes port performance and how port
performance should be evaluated and assessed. This arises from the fact that there is a
positive relationship between input factors into port productivity such as investment in
technology or in extending port services and output factors such as higher quality, value
added services, customization, responsiveness etc.; factors which have not been previously
treated as potential parameters for evaluating port performance (and port competitiveness)
by traditional efficiency-related measures and techniques. It can be stated that throughput
as a proxy for terminal efficiency may not be sufficient to measure aspects relevant to port
performance in the global supply chain era. The results also indicate that orientation
towards supply chain management has positive beneficial effects on the competitiveness of
container terminals.
determine the degree of integration of their port/terminal in the supply chain and decide on
strategies to enhance such performance.
Evaluation of the extent of port/terminal integration in the supply chain can also be useful
to shipping lines, logistics service providers and inland transport operators. It has been
established that the interest of these stakeholders, being part of the supply chain, is direct
as the integration of ports and terminals in supply chains has an impact on their operations
and the satisfaction of their customers. In liner shipping, more economical ships and
alliance co-operation have lowered the costs associated with the sea-leg and ship operation.
At the same tine, intermodal costs share an increasing part of the total cost. The portion of
inland costs in the total costs of container shipping would range from 40% to 80%
(Notteboom and Rodrigue 2005). This suggests that liner-shipping companies would have
a direct interest in working with ports (and other stakeholders) in an attempt to reduce the
costs associated with port and inland handling and transport operations in a door-to-door
context. Port integration in the supply chain as hereby conceptualized can certainly assist
in this direction.
In addition, this study examined and identified a positive relationship between terminal
integration in the supply chain and terminal performance. It is important for this
association to be replicated empirically using different ports and different contexts and
performance measures. It is important for measures of competitiveness to be also
incorporated in the measurement of port performance. The privatization of ports and
terminals, together with the quest for competitiveness means that traditional performance
measures such as market share, sales growth and even profitability become legitimate
performance measures for ports. A container terminal with high efficiency indicators may
not be necessarily competitive due to the higher cost involved in becoming more efficient.
7. CONCLUDING REMARKS
This paper makes a contribution to an area that is highly topical and relevant to
developments taking place in maritime logistics, transportation and port development. Port
authorities have traditionally played the role of facilitator, focusing on the provision of
superstructure and infrastructure for berthing and loading/unloading operations. As such,
research has focused on efficiency and performance within ports. Contemporary
developments in maritime transport and logistics indicate that ports should play an
important strategic role as a member of a supply chain that involves sea and inland
transportation. The paper puts forward six parameters conceptualized to account for most
of the variation in the degree of seaport integration in logistics and supply chain
management. They include adoption of information and communication technologies,
relationships with shipping lines, value added services, inter-connectivity/inter-operability
with inland modes of transport, relationships with inland transport operators and channel
integration practices and performance. The model developed is important for evaluating
the extent of port integration in supply chains. In addition, the paper investigates and
identifies a positive relationship between certain parameters of supply chain integration
(e.g. use of technology, value added, user relationships) and parameters of port
competitiveness such as cost, quality, reliability, responsiveness and customization. The
findings form a basis for further research on what really can contribute to port
competitiveness in the supply chain and how such competitiveness can be achieved and
assessed.
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