Origin And Future Challenges Of Mega Containership Commerce Essay

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Supply Chain Management , which is abbreviated as SCM refers to the management of a network of interelated corporations involved in the provision of product and service packages that are required by end customers (Harland, 1996). Supply Chain Management involves all the processes involved in the transportation and storage of raw materials, inventory of work-in-process and finished products from point of production to the point where they are consumed by the final consumer.

Ronald H (H, 1998) in Business Logistics Management describes Logistics Management or simply supply chain management as the portion of Supply Chain Management that is involved in the planning , implementing , and controlling activities that ensure the effective, forward, reverse flow and storage of products, services and related information between the initial point of production to the point of where consumption takes place in order to meet the requirements of the customers. A Logistics Management is used for logistics automation and it assists the supply chain industry to automate the flow of work as well as management of the entire production system. There are only several generalized soft wares that are available in the current market in the said logistics field. This is due to the fact that there is no rule to generalize the working of the system as well as flow of work even though the process involved is more or less the same. A good number of the commercial companies do make use one or the other of the custom solutions. Nevertheless, there are various solutions on software that are being used within the logistics departments. There are several logistics departments which involve Conventional Department, warehouse, Container Department, Heavy haulage and Marine Engineering among others. The Software that is used in these departments includes Conventional department which include CVT software or CTMS software, Container Trucking software and Warehouse which includes WMS /WC software. In order to ensure improved Effectiveness of Logistics Management there are several factors that have to be considered which include the Logistical Network, transportation, Information, Sound management of the Inventory and Warehousing which involve Materials Handling and Packaging.

EPA Office of Compliance Sector Notebook Project (EPA, 1997) published that

The emergence of the mega-containership, that is, ships capacity of exceeding 5,000 twenty-foot, is of interest to logistics corporations, shippers, port authorities and all the groups of people involved in in maritime planning. The place where such ships unload, rather than transship, impacts greatly the transportation agencies responsible for multimodal planning and highway containers passing through the load center. This paper explores the planning process that can be applied at the state level to select a mega containership site. It is developed as a research study into the effects of containerships on the transportation system in various states but is can also be applied at port sites located in other parts of the world.

BACKGROUND

As the movement of goods and services between countries is increasing over the last few years, so has the demand for the means of transportation that ferries these goods and services. A great majority of international trade is done through the use of ship and over the past two decades, the utilization of containers has grown strongly, underpinning the development of a truly global, intermodal economy.

Marad, (1997) in his report to the US maritime administration wrote that 'Since transportation requirements vary with each country, a variety of ship sizes is also different in those parts of the world. Those vessels with less than 2,000 twenty-foot equivalents are most agile, in terms of port needs and are found at almost all of container ports of the world. Despite the carrying capacity of these large ships, a new class of containerships known as the "jumbo" or "mega" is coming into the market and they will have a huge impact the current route system across the world's trading lanes. This class of "megaship" is fast taking on a vital role in the shipping industry. The emergence of the mega-containership is a cause of great interest to companies involved with logistics, port authorities, shippers and those engaged in maritime planning.

Maritime authority's agencies are not the only ones taking note of these current developments

In the shipping industry. For instance, the TEA-21 legislation which was recentry enacted in the U.S. State developed state transportation plans that are multimodal in character and provided for the connectivity to marine ports where appropriate.'

In a time of increasing pressures of competitiveness,, a worldwide playing field, and an increasing expectations from customers , organizations are facing challenges in tryting to streamline their production of goods and services. Miller and de Mata(2008) says that 'a good way to gain efficiency and reduce non-value added steps in this area is to focus on logistics and supply chain management (L&SCM)'. Logistics and supply chain management is one of the major disciplines that are essential in the global market of production and operation in the bussines world. While research concernig L&SCM initiatives in the United States has been ongoing , studies paying close attention to corporations and environments overseas have also been ongoing. Supply chain management has had a large changes and improvements in recent times from the use of logistics operations that were in house to the use of third party logistics providers. Nevertheless, as world wide supply chains are developing and they are becoming even more complex, a further option for corporations has been the ability to make use of fourth party logistics providers (4PL).

The third party logistics provider commonly known as the 3PL is involved in the operational element in the process of supply chain management, while the fourth party logistics provider is involved in the acting as an effective supply chain consulting organization. For the 4PL to act as a true provider of effective fourth party logistics, the consultant must not have any operational capacity as this would lead to the possibility of a bias towards the provision of services. As such, this means that many companies which claim to provide 4PL services are in effect 3PL providers offering consultancy services, rather than true fourth party logistics providers.'

Whilst the specific services of a fourth party logistics provider will vary between providers. In general, fourth party logistics providers have two main functions. In the first instance, 4PL services focus on a consultative approach of analysing the supply chain and then making recommendations for improvements. The second function relates to management within the supply chain itself, the fourth party logistics company often acting as a manager of numerous smaller third party logistics companies.

The use of a fourth party logistics provider can be a useful tool in supply chain management, especially where supply chains are complex or span international boundaries. By using a fourth party logistics provider, this allows the effective management of a number of third party logistics companies, thus reducing risk within the supply chain. A further advantage of the fourth party logistics provider is that such supply chain consultants are able to bring a great deal of specialist knowledge to a company, as well an objective opinion. Such considerations should lead to a greater level of efficiency within the supply chain, as well as lower costs. The major disadvantage of using a fourth party logistics provider may be seen as one of cost. Whilst, fourth party logistics providers may improve efficiencies, they also add another layer of costs to the distribution channel. As such, a company must weight up carefully the total value that a fourth party logistics provider can add to a company against the additional costs incurred.

INTRODUCTION

Due to the amount of time required to plan, fund, and complete large-scale infrastructure projects, it is necessary for various countries to start planning for mega containership load centers. The process of planning for any transportation infrastructure project requires several steps in which project planners start at the most general level of study and work methodically down to detailed plans and analyses. Government or private entities firstly identify the problems of existing infrastructure and then come up with ideas for solving these problems. Where there is a commitment among the stakeholders, usually these informal discussions are followed by more detailed feasibility studies. The Feasibility studies seek to determine the right reason of a proposition and determine if it has any fatal flaws.

In Englewood cliffs's book Geograhy of market centres and retail distribution, (1967), Where the project is found to be reasonable and there are no fatal flaws, then the public transportation projects involving the use of federal funding must follow a strict legalistic process, which ussually requires the performing of a Major Investment Study . the study is a preliminary planning document that sets forth the purpose and need for a project and discusses a wide range of alternatives to reach the same goal. Projects then move into more rigorous and detailed analyses when planners conduct an Environmental Impact Statement or an Environmental Assessment (EA). Project engineers perform cost-benefit analyses alongside the environmental studies and beyond their completion, forecast usage of the proposed facility, and create detailed schematic designs for the proposed project. At this stage of the process port operators become concerned with issues at the detailed level of operation, such as the width of an entrance gate of a port. Upon completion of the daunting regulatory framework and the project's engineering requirements, the process enters into the difficult phase of funding acquisition. The funding process is often situated in the political sphere, taking place well beyond the direct influence of the port engineers and planners a. Finally, after the project secures funding, construction begins and ultimately the facility begins its operations.

Within the foreseeable future, there will be only a few mega-containership load centers in the several states including the United States, due to their extensive infrastructure requirements and because ship operators need very high levels of container traffic to remain profitable. Even with only a few load centers and a limited number of feasible candidate ports, it will be necessary to make choices. When making these choices, it will be in the interest of both the public and private sectors to opt for load centers that minimize costs, environmental impacts and congestion, while at the same time maximizing efficiency and allowing for profitable operations.

THE MEGASHIP SELECTION PROCESS

In the design of this selection process, five major issues arise. The first of these

issues is whether all ports would be considered "competitive" as a mega-containership load

center. In other words, should the number of ports receiving full consideration be reduced to

those reasonably believed to be competitive? Secondly, which parameters or general issues should be included in the selection process and how should they relate to one another? These

issues range from paying for port improvements to the port's effects on the environment.

Thirdly , what should be the specific criteria included within each of the matrix's parameters?

For instance, a more complete consideration of environmental impacts means examining a

Ports' effects on water quality, endangered species, and neighborhoods, among other things.

Fourth, how should the criteria within these parameters be scored and assessed? Finally, how

should the individual criteria and the matrix parameters be weighted among each other, since

their perceived importance, relative to another, often differs?. The selection team should also involve port operators; however, to maintain the integrity of the process, their involvement should be limited so they are not allowed to sway the final decision.

James A and Howard (1997) defined A heuristic method as one that "contributes to the reduction in the average search for a solution. Employing a heuristic method in the mega-containership port selection process might consist of a two-stage technique. The first of these two stages would eliminate non competitive ports before examining the competitive sites in a selection matrix. Two possible heuristic methods for this first stage are a "fatal flaw" analysis or a preliminary scoring matrix. With the fatal flaw analysis, a port is assessed through a series of "yes" or "no" questions. These questions are arranged in a format that simulates a flowchart, in which an unsatisfactory answer to any of the questions eliminates a port from further consideration. It is expected that most of the ports would "fail" the fatal flaw analysis and receive no further consideration, while ports that "passed" would be studied in greater detail in the selection matrix.

A second heuristic method is a preliminary scoring matrix wherein a port would be

assessed and scored based on a series of criteria demonstrated in Table 1. For example, a

criterion in the preliminary matrix might be "Is the port channel at least 45 feet deep?" If the

answer is "yes," the desirable answer, a port receives one point. If the port's channel is less

than 45 feet deep, it receives a score of zero. It may also be desirable to weight the questions

in the matrix, so that more important issues like channel depth have a greater impact on the

final results. Additionally, federal and state agencies could weight the matrix to emphasize

those port issues that they have resources to assist. Criteria scores are then totaled for each

port. Collectively, it is expected that the ports would form two groups: a few ports with

relatively high scores (or attractiveness for becoming a mega-containership port) and secondly the remaining majority of ports with relatively low scores would be considered unattractive). Those ports receiving the highest scores are examined further using the detailed selection matrix, while ports receiving the lowest scores are eliminated from further consideration. The initial criteria for either the fatal flaw analysis or the preliminary matrix would need to be determined by a technical advisory committee. Both the fatal flaw and the scoring methods are effective tools in eliminating non competitive ports early in the selection process. The scoring method may be more politically acceptable, since no port is immediately ruled out for failing to meet a single criterion. However, the fatal flaw method would be more efficient and would not allow a

port with a very serious defect to remain under consideration. Ultimately, however, a fatal

flaw analysis would have to be carried out on the ports chosen for further study using the

heuristic preliminary matrix or non heuristic method. Without the consideration of fatal flaws

at some point in the process, a noncompetitive port could be selected as the best alternative.

An alternative to the heuristic method would be to evaluate all ports in the more

detailed selection matrix. The disadvantage of the non heuristic approach is that additional

time and effort are required to gather information on ports that are not likely to be

competitive candidates. However, using the non heuristic method might avoid the main

criticism of the heuristic technique-that a port was eliminated for a single or a few reasons,

even though it has many other attributes that would make it attractive as a mega containership

load center.

Matrix Parameters and Sensitivity Analysis

Selection matrices typically consist of several "parameters" that encompass the major

issues surrounding a project. With the inclusion of a variety of parameters in the selection

process, a narrowing of alternatives can occur. It is believed that this narrowing approach

leads to the selection of a problem's optimal solution. Conceptually, this idea is similar to

finding an optimal minimum or maximum point in linear programming. When considering the optimal location for a mega-containership port, the following parameters are deemed to the most important.

Infrastructure Requirements

The minimal level of infrastructure necessary to regularly service mega-containerships compared to the existing infrastructure at each port. The port needing the least amount of infrastructure improvements would be considered the optimal site.

Environmental Impacts

Infrastructure improvements and port operations create impacts on both the natural and human environment. This parameter would consider the current state of the environment and the potential consequences of action. The location creating the fewest environmental impacts would be considered the best location.

Port Finance

Measures of a port's ability to finance the necessary improvements to become a mega-containership port. Ports able to finance improvements with the least amount of external funds would be the most attractive.

After choosing the selection matrix parameters, it is necessary to determine how they

relate to one another. Thus, multiple parameters cannot be considered separately without

first creating some type of common measurement. Without this common unit of assessment,

it would be difficult to produce a consistent method for evaluating each port. Having a

common unit of measurement for each parameter's overall score permits the option of a

sensitivity analysis, which allows each parameter score to assume a range of importance in

relation to the other parameters. The purpose of varying a parameter's importance, or its

weight, is to determine whether the matrix produces consistent findings. Thus, a "valid"

selection matrix would generally choose the same alternative most of the time, even as the

parameters' weights change. If, as the parameters' weights change, there are great

fluctuations in the optimal choice, the selection matrix is considered a less useful decision making tool. The purpose of a sensitivity analysis is to acknowledge the matrix's inherent subjectivity and to consider decisions from differing points of view. Unfortunately, performing a sensitivity analysis does not remove these problems, though it does attempt to account for them.

THE CRITERIA

Once the parameters of the selection matrix are chosen, it is then necessary to decide

which criteria should be included within those parameters. Although much of the load center selection process is driven by the private sector, based upon their willingness to provide mega-containership service at a particular port, the public sector also has a role. The public sector maintains a role because regardless of which ports serve as mega-containership load centers in the future, public funds will almost certainly be used for infrastructure improvements. Accompanying and occasionally interfering with the port planning process is the political process. The political process often determines which alternatives receive consideration, while elected officials give advice on the presentation of information

and, at times, posture to give the impression that they directly control the planning process.

In other instances, elected officials act to stop projects. Ultimately, however, if a proposed

project requires federal and state regulatory compliance and private sector bond financing, its

proponents must provide government agencies and investment banks with documentation

that is judged to be reasonable and objective. Federal and state agencies must produce a

justification for the project and demonstrate there are no reasonable alternatives.

Demonstrating that there are no reasonable alternatives requires using a process that narrows

down an array of choices and ultimately selects a preferred alternative.

The purpose of the selection process proposed in this paper is to assist in the

narrowing of alternatives, leading to the selection of a preferred alternative. The matrix can

be used to narrow between alternatives in different locations or with the appropriate changes,

select between alternatives for a single facility. Additionally, the process can be employed in

the feasibility stage, the MIS stage, and/or EIS stage. When

developing the selection process, several goals have to be kept in mind: a sound foundation both in pragmatism and theory; fairness; relevance; and accessibility. While a pragmatic view of

port development is useful, it offers no consistent structure. While an approach

could can be designed that requires sophisticated statistical techniques or some other

advanced quantitative methods, it is vital that the selection process should not

necessitate a special understanding of mathematical techniques-although such techniques

could be employed if desired. The planning process would be of little use if it is designed

in a manner that constraines maximum participation by federal and state transportation

officials, ship and port operators, local transportation planners, and knowledgeable members

of the public.

CONCLUSIONS

The narrative of this paper has describes a process that provides a rational and flexible framework for statewide transportation planners to select ports that canl serve as Mega-containership load centers. The process' flexibility allows planners to choose those techniques which they believe will inspire the most confidence in the final results. The process insures consideration of a number of issues that are important to ports which include infrastructure requirements, environmental impacts, financing issues, and locational demand. It also allows these issues to be considered from different perspectives of relative importance so that a variety of viewpoints can receive consideration.

From the perspective of statewide transportation planning, the selection process can

be used to successfully integrate mega-containership load centers into statewide

transportation plans. Since mega-containerships are a relatively new development in the

transportation industry, many states have not yet considered what impact they will have on

statewide transportation networks, much less how to integrate them. Using this selection

process, which is similar to the process used for other transportation modes, integration can

occur more easily. Second, as users of the selection matrix gather data for its parameters and

criteria, planners will begin to understand how the port may affect other modes of

transportation. Once states understand the effects of mega-containerships, planners can

identify the transportation infrastructure needs of the other modes that would serve a load

center. This information will allow states to allocate their funds to improvements that have

the most positive impact in reducing landside congestion. Thirdly, the process described in this

paper offers a partial framework for fulfilling the requirements of reasonableness and

objectivity that agencies and private sector institutions need, before they are willing to

approve or fund port expansion proposals. Finally, because the selection process is relatively

simple, it is transparent and understandable to the general public. Additionally, since the

selection process identifies the many issues related to port development, it informs those

individuals that become involved in the process and permits discussion at an appropriate

level of discourse.

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