Port Management: Supply Chain Dynamics
By Capt Gajanan Karanjikar
Multi-modal Transport expert, Independent Port Consultant
“Whosoever commands the sea, commands trade; whosoever commands the trade of the world, commands the riches of the world, and consequently the world itself.” – Sir Walter Raleigh (1552–1618)
When the huge container ship Even-Given grounded in the Suez Canal back in March 2021 one of the world’s most important commercial channels with respect to transport came to a halt. The effect on the global economy was dramatic and, it seems, a shock to many. I was talking to furniture manufacturer/vendor other day in tier 2 city and he was explaining me how the crisis was perceived by him. I was concerned for his panic of having his raw material for furniture getting delayed and production lines came to stand still. What must have happened to BIG production houses? How big impact did the Ever-given have on supply chain? If this had to happen in any port, would that too disrupt the market and its dynamics. Like canals ports are also important in maintaining the supply chain lubrication for smooth running of production houses.
Supply chain management (SCM) literature has highlighted the benefits deriving from logistics integration, meant as the coordination and integration of activities devoted to planning, managing, and controlling the flow of goods, services and related information from the point of origin to destination (transportation, inventory management, order processing, etc.). Integration is the core concept of SCM and all definitions emphasize, to different extents, the need to integrate processes and flows between organisations within a supply chain through inter-organisational relationships with the aim of increasing value for the final customer. According to some authors, the higher the level of integration between actors of the chain, the more potential benefits for all the actors (including the final customer) and thus, the more competitive the whole supply chain.
The significance of port connectivity became magnified over the past few years, when globalization and outsourcing required the transport of large sea trade volumes throughout expanded global sea routes.
Ports are a nexus in supply chains as they support the interaction between lobal supply chains and regional production and consumption markets. Global supply chains have become complex, pressuring the logistics industry to simultaneously improve their costs, performance, and resilience to disruptions. Logistics services that still offer value may experience a debasement and become basic services, only generating a small margin. This is especially the case for physical added value.
SCM models evolve continuously due to influences and factors such as globalization and expansion into new markets, mass customization in response to product and market segmentation, lean manufacturing practices, and associated shifts in costs. Service expectations of customers are moving towards a push for higher flexibility, reliability, and precision. In many industries, product innovation has become a significant competitive factor.
Many studies on SCM have analysed the effects of integration on three interdependent levels:
(1) Intra-organisational, i.e. among the different departments and company activities;
(2) Dyadic, i.e. among activities of the company and its suppliers or customers; and,
(3) Inter-organisational (the supply chain), i.e. among the activities of the company, its direct suppliers and its
customers
With reference to port competitiveness, some authors have referred recent contributions and conceptual categories within SCM literature to re-define strategic positioning and port strategies. Indeed, consistent with the spread of the new paradigm by which real competition is not company against company but rather supply chain against supply chain (Christopher, 1992), it has been stated that also for port, competition is between logistic chains (Huybrechts et al., 2002).
One of the main basic driving forces of change in the port industry emerges from globalization and the structural shift from supply-driven to demand-driven economies. The supply-driven economy was based on economies of scale in production, standardization, and mass consumption of standard products. This approach was being scrutinized as productivity increases linked to economies of scale met their structural boundaries and as a growing individualism began to reflect on consumption patterns.
Globalization and outsourcing open new windows of opportunities for shipping lines, forwarders, terminal operators, and other logistics service providers and transport operators. Manufacturers are looking for global logistics packages rather than just shipping or forwarding. Global logistics is the dominant paradigm where most transport chains have responded by providing new value-added services in an integrated package through a vertical integration along supply chains.
IMS
(Courtesy: Marex Media)