In declaring this month that “productivity is the battleground for ports in the future,” APM Terminals couldn’t have nailed the issue more precisely nor sent a clearer marketing message to container lines that it wants to attract as customers.
Port productivity, particularly at the berth where the pace of operations determines how long a ship remains at port, is a paramount issue for container lines. Why? Prior to the recession, the issue was too much volume; terminals struggled to keep pace with the influx of containers from China, and ships as a result idled at port for too long, hurting the carriers’ total fleet utilization.
A container line is like any other asset network. A vessel fleet constantly in motion has greater capacity than if the ships sit idle for lengthy periods, requiring fewer ships on a particular weekly loop, for example. Airlines herding passengers on and off their planes and automobile plants that operate 24-7 have the same objective in mind: higher asset utilization.
Although achieving higher fleet utilization remains an advantage for the carriers, it doesn’t fully explain their single-minded obsession with improving port turnaround time. The driving issue today is rising fuel costs. Carriers are unable to control how many ships their fellow carriers order or the overall volumes that move, so they have limited control over freight rates and thus their revenue.
And they can’t control bunker fuel prices, their largest operating expense. NOL last week partly attributed its $254 million first quarter loss to a 30 percent increase in bunker fuel cost versus the first quarter of 2011. The only material way carriers can control fuel cost is to use less of it.
They can accomplish this by retrenching, in other words, simply deploying fewer ships and scaling back their operations, or by slowing their ships en route. But the only way they can do that while adhering to published schedules and the transit times their customers and alliance partners expect is to get out of port faster to free up time en route for slow-steaming.
Every hour less in port results in $10,000 in fuel cost savings through slow-steaming, one carrier executive told us. That’s why carrier operating teams and their terminal vendors are focusing intensively on productivity, leaving no stone unturned in the search for opportunities to accelerate the transfer of containers on and off their ships so the vessels ultimately can be put to sea sooner.
Carriers scrutinize their stowage plans, acceptance of late exports and out-of-gauge cargo, and other practices that hurt productivity. They pressure terminals to minimize equipment downtime and to deploy more and faster cranes — and those that can lift two containers at a time — to generate higher total moves per hour.
The challenge in productivity is only becoming more pronounced with the growth of ships capable of carrying 10,000 20-foot equivalent units, which obviously take longer to work at the dock.
But the dirty little secret of the industry is that despite all the effort to date, productivity overall isn’t improving. Carriers tell us that over many years, despite terminals’ investment in bigger cranes, sophisticated terminal operating systems, and more advanced yard equipment, and despite their own internal efforts, productivity at the berth has essentially remained flat.
Soren Sjostrand Jakobsen, APM Terminals’ head of project implementation, confirmed this in a speech to the Future Ports Conference in Stockholm this month. “Terminal productivity has stagnated,” he said. APM Terminals’ gross crane productivity remained at roughly 30 moves an hour from the first quarter of 2008 through the first quarter of 2011.
Jakobsen pointed to the example of Maersk Line’s 18,000 Triple-E ships, each of which will have 16 percent greater capacity than its Emma Maersk-class vessels but will be the same length, meaning “crane intensity, and therefore berth productivity will remain the same on these larger vessels unless we change the game,” he said.
“Our customers are building bigger and bigger ships, and it is imperative that we are able to increase our delivered productivity at minimum the same pace as the ships grow — but preferably much more,” Jakobsen said.
Improving productivity at the berth doesn’t just benefit container lines. Higher turnaround of ships unlocks terminal capacity to handle additional vessels, meaning more revenue for terminals. Shippers benefit through faster access to import containers and fewer delays on exports. APM said it is responding to the challenge by deploying faster and smarter cranes, and introducing other innovations such as automated guided yard hustlers to shift containers between the berth and the stacks, and “split head blocks” that can lift two containers side-by-side simultaneously.
APM has the goal right: Aim for a quantum improvement in productivity. This is exactly what the industry requires.