The evolutions in supply chains and logistics models urge container terminal operators to re-think their function in the logistics process. Terminals are central to the design of supply chains and are considered as strategic assets.The Institute’s research program The Role of Container Terminal Operation in Global Logistics focuses on how Container Terminal Operators are responding to this new opportunity and responsibility.

Findings from the Institutes research program “U.S. Beneficial Cargo Owners Sourcing in China: The Logistics Challenges” identified that “Best in Class” international logistics departments supporting procurement departments sourcing intercontinentally, demand direct relationships with each stakeholder in the logistics process.
The majority of Fortune 500 companies outsource directly to third party logistics provider’s (3PL’s) however it is regarded as “best practice” to have direct contact with the the key logistics service providers, particularly the liner shipping company and the container terminal operator.
Home Depot who the Institute has accredited as “Best In Class” in the execution Of Container Logistics Strategy pioneered direct relationships with container terminal operators.
The driver for this is that Beneficial Cargo Owners (BCO’s) do not have contractual relationship with any of stakeholders inside the port, leading to a dependence on third parties for status reports etc. This can lead to misreporting and guessing about the status of a particular container. This is mitigated by container terminal operators liaising directly with BCO’s and their 3PL’s. As the custodians of the export and import gateways used by the shipment, container terminal operators have an enormous influence on the safe, secure, efficient and timely execution of the dispatch and receipt of the containers. BCO’s report that direct relationships with container terminal operators has led directly to greater Visibility, increased Velocity and added Value add in their container logistics processes.
For terminal operators direct relationships with their end user had a direct influence on decisions by shipping lines to include their terminal on their network maps. Shipping lines are heavily influenced by their upstream customers − the port’s end users.
The collaboration also leads to logistics innovation particularly in the area of “Port Centric Logistics”
The Institute’s research program The Role of Container Terminal Operation in Global Logistics focuses on how Container Terminal Operators are responding to this new opportunity and responsibility.
Research Scope
1. Collect the widest possible range of viewpoints on the role of container terminal operation in global Logistics
2. Identify the key organizations, agencies and individuals to work with
3. Create an industry wide consensus
4. Identify the benchmark container terminal

Container Terminals who succeed in adding value play an important role in the supply chains of global shippers (buyers and manufacturers) — a role that ports traditionally found themselves excluded from. Our research concludes that the container terminal operator could be capable of even greater impact.

As globalisation increasingly drives shippers to seek to track their goods at every stage, the container port is becoming a facilitator and partner in the supply chain. It is becoming easier than ever to forge international business ties, thanks to the internet, global communication and improved transport infrastructure. But either sourcing raw materials or finding a global customer for your finished goods are only first steps in a journey toward fulfilling those obligations.
With the push towards efficient manufacturing processes such as “lean” and “six sigma” continuing, it’s not enough to know that critical parts or stocks are on the way or have been shipped. You need to know where they are in the supply chain, whether they’ve cleared customs, whether they’re sitting in a warehouse or if they’re on the last leg in a journey to your loading dock or your customer.
But keeping up with inbound and outbound shipments globally is not a core competency for manufacturers. So thirdparty logistics (3PL) providers have emerged. In 2005, 3PL providers based in the US had total annual revenues of about $100bn (t77.7bn). Fourth-party logistics (4PL) providers have also emerged recently. These manage supply chains from various suppliers while acting as the intermediary between the manufacturer and its suppliers.
Both types of provider can help manufacturers to negotiate the maze involved in shipping goods around the corner or around the world. On behalf of the shipper, they stay in touch with shipments at each stage in its journey. To facilitate this continuous visibility, more and more 3PLs are working to improve their relationships with port operators. As the custodians of the export and import gateways used by the shipment, these operators have an enormous influence on the safe, secure, efficient and timely execution of the dispatch and receipt of the container(s) in question.
The stevedoring industry is one of the world’s most traditional and long-established communities. But globalisation has led to the development of a new, more modern, type of container terminal operator. Rather than being the “big brother” in the transport cycle, it now sees itself as an equal but vital member of the global supply chain family or “ecosystem”.
Accordingly, more and more container terminals are seeking to develop relationships with the world’s shipping community to provide visibility and control to shippers in an ever-lengthening supply chain. In doing so, they are following the example of Yantian International Container Terminals in Shenzhen, southern China – the world’s largest privately managed container terminal and the recipient of the accreditation “Global Best in Class Container Terminal” from the Global Institute Of Logistics (GIL).
This year, more than 40% of the US’s imports are from the overseas subsidiaries of its corporations. And China accounts for about 25% of the global growth of GDP. Both of these factors are imposing a shift in global freight flows and creating an ever lengthening supply chain. Comparative advantages are shifting rapidly, leading to de-industrialisation in North America and Europe, and a re-industrialisation of Pacific Asia.
The 1980s and 1990s have seen the transformation of logistics into the more comprehensive mode of supply-chain management (SCM). This process has been accelerated by the globalisation of manufacturing, SCM is based on new information and communications technologies, and also on changing habits of corporate management – such as the elimination of inventories and the integrated management of the chains. So the global expansion of production networks has been built upon logistics. And new forms of production organisation by global manufacturers are being determined entirely by provision of logistics services.

One such development is “modular production”, in which production is driven by contract manufacturing, and vertically disintegrated and horizontally integrated management of value-chains. This modular manufacturing network happens against the background of organisational change. It comprises both small and large firms, and small and large geographical scales, and it aims to create many products within few processes, in order to maximise revenue through economies of scale.
Logistics has grown to become the key unit within this production system. It has to provide for the agility or flexibility of any module, and the interaction of all modules in the entire network. Flexibility is not only organisational, but also geographical. So a major shift has occurred in how and where commodities and their components are being assembled, manufactured and distributed.
This change is prompting a welcome development in the way organisations behave. The lengthening of the supply chain is forcing shippers and their service providers to relate more closely in the pursuit of visibility and process improvement. They are adopting collaboration as one of the central tenets of organisational behaviour in the global supply chain.
Academics have long identified the power of collaboration in improving logistics service quality. The idea first surfaced in 2002 in the US (in research by Zhao and Stank at the Department of Marketing and Supply Chain Management at Michigan State University’s Eli Broad Graduate School of Management). Zhao and Stank’s research concluded that operational and relational capabilities do not only just complement and enhance each other’s impact on performance but act as a strategic fit. To achieve superior performance, they require either a high-low or a low-high combination of the two capabilities.
Their research (based on resourced-based theories combined with the notion of capacity limitations from operations management) presents theoretical explanation of the trade-off between operational and relational capabilities in the logistics service context.
They concluded:
“Organisations that identify and develop relational marketing capabilities and operational capabilities to support relational capabilities set themselves apart from the competition.”
So what exactly is collaboration in the context of global logistics? It is the proactive creation, development and maintenance of relationships between global supply chain partners, resulting in mutual exchange and fulfilment of promises at a profit. It is a philosophy of doing business successfully that promotes an organisational culture, putting the buyer-seller relationship at the centre of a firm’s strategic and operational thinking.
At the GIL, we believe that the higher the levels of collaboration achieved between the stakeholders in the global supply chain, the greater the improvements in operational logistics service quality, resulting in better economic performance for all.
The crucial question in logistics has always been integration between the various parties in the supply chain. GIL’s definition of supply chain management includes coordination and collaboration with channel partners – suppliers, intermediaries, thirdparty service providers or customers – as being critical to supply chain operations.
Supply chain partners and leads have always considered integration essential to improving operational and economic performance. This theory is now being put into practice. The evolution in supply chains and logistics models has driven supply chain partners such as shipping lines, stevedoring companies, inland transport operators and forwarders to rethink their role in the logistics process.
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The greatest challenges and opportunities from a globalized container supported supply chain is the one faced by container terminals, now defined as as functional nodes in the logistics network. Globalisation has led to increased activity at the world’s container terminals, particularly those in China and other low-cost manufacturing centres where large hubs are experiencing heavy congestion and problems getting goods in and out. Above all, this is an infrastructure-related problem at the landside, creating bottlenecks and congestion in and around the larger container terminals.

Terminal operators are like jugglers trying to balance four different functions: the receipt and delivery of containers to and from landside partners arriving by road or rail; the receipt and delivery of containers to and from seaside partners arriving by barge or ship; the transfer of containers between sea and land, and, finally, the storage of containers waiting to go or come.
Terminal operators’ ability to keep these four balls in the air with the fewest touches is what determines how much ground they need to stand on, how many hands they need to juggle with and how much energy they need to spend in the process. In other words the fewer touches of the containers inside the terminal, the less energy expended, the less time wasted and the less money spent. This leads ultimately to a greater return on investment for container terminal operators and cost-savings in terminal handling charges, which can be passed on to the shipper and, ultimately, to the consumer.
However, as terminal operators become busier and the number of containers grows, adding labour and equipment, and adding space can be difficult. The answer lies in reducing the overall number of containers in the terminal at any one time and to do this operators must manage their own supply chain of containers and attempt to regulate their movement in an out on a ‘just-in-time’ basis.
To do this, terminal operators — already adept at using their hands and feet, as in the juggler analogy — must now use their heads too. They can see that their container terminals are becoming busier, but they need to reach out further and understand much better what is happening at the point of origin of the freight coming through, and what happens to it when it moves away from the dockside.
This means looking both upstream and downstream to the point of demand and supply, and ultimately into the minds of the logisticians who are engineering the supply chain in the first place. By involving themselves earlier in the supply chain planning process terminal operators exchange their expertise — particularly in relation to customs process and security issues (both traditionally very real enemies of time) — for early visibility of what is coming down the chain and when.

Armed with accurate forecasts, terminal operators need not treat all containers the same, but can create a real class-system whereby known containers can benefit from express clearance or guaranteed positioning. This VIP treatment will allow shippers to send cargo to the port of departure on a ‘just in time’, squeezing more time out of the chain by eliminating dwell-time at the port and resulting in a real win-win situation for terminal operator and shipper alike.
And that’s not all. The terminal operator’s guarantee of greater visibility for shippers of their containers inside the perimeter fence of the terminal is the real diamond in the exchange. Traditionally for shippers and for outsource logistics service providers working with them, the container terminal has been the black hole in the supply chain where, once the container has entered the terminal , visibility is lost. This loss of visibility has forced shippers to base decisions about inventory and delivery ‘logical conclusions’ as opposed to real intelligence based on events inside the container terminal .
This information-disconnect between the virtual or office world and real world down at the container terminal is responsible for shippers’ over compensation in inventory levels. Shippers erring on the side of caution because of uncertainty about delivery times build up stocks close to market in anticipation of missing delivery for one reason or another. In a nutshell, greater reliability through increased collaboration and visibility amongst supply chain partners allows them to reduce inventory levels. On the other hand, uncertainty through a lack of visibility and collaboration drives up safety stocks, which in turn use up working capital, not to mention real space on the warehouse floor or container terminal yard.
When you consider that inventory costs make up 25 per cent of the $2.7 trillion spent annually on global freight logistics (or $750 billion) you can see why terminal operators are being welcomed with open arms outside the perimeter fences of the terminals . In essence, the combined agendas of shippers, terminal operators and logistics service providers is forcing a confluence of opinion which is leading to a shift in emphasis. It is a change from focusing on meeting service standards and minimising storage and transport costs to reducing inventory levels.
The third party logistics industry is at the heart of this exchange playing the role of ambassador between shippers and the owners of the infrastructure and logistics assets on whom they rely to transport their products around the world. In this capacity, logistics service providers work tirelessly to create good communications between all parties and a formula which adds up to a win-win scenario for all concerned.
Logistics operators ought to be keen to leverage relationships as much as possible, bearing in mind that their entire focus is to streamline process and find cost- and time-savings in the supply chain on behalf of shippers. In many cases now, the logistics service provider can share the benefits of these savings directly through a gain-share arrangement.
Traditionally, though, this collaboration has been absent. Once any consignment has left a port of origin in, say, a low-cost economy and is destined for a high-cost, high-price consumer market, it can cost money even to look at a shipment, never mind moving or storing it. For this reason, 3PLs would often effect as many of the value-added services needed in the customisation of any product — it was in their interest to do so.
As collaboration gains ground, however, we have seen the development of new ideas such as the ‘direct-to-store’ model, in which 3PLs offer to deconsolidate bulk shipments at the country of origin, breaking them down to exact quantities and shipping them with shop-specific promotional materials directly to the point of sale. By availing themselves of this new product offering, shippers, particularly those in retail, are using the opportunity to keep inventory moving from manufacturer to end-customer, eliminating stops at warehouses along the way.
Because companies can shrink the fulfilment cycle and eliminate inventory costs, direct-to-store can offer a good balance between fulfilment speed and logistics cost. It has become a particular favourite with shippers whose products are tied to specific holidays or seasons, companies, in other words, whose stock is virtually worthless once the holiday or season is over. Direct-to-store can ensure that products arrive just when they’re needed without having to rely on costly temporary warehouses. The model is also effective in the case of items that are out-of-stock and have to be replenished directly from the factory.
Although not a panacea for all global logistics challenges, the direct-to-store concept proves the tangible benefits of relationship orientation in global supply chains. It is of itself, a testament to joined-up thinking at source and in particular is proof positive of the creative impact that outsourcing to 3PLs is having on global supply chains. The concept proves that collaboration with all parties does lead to real innovation, and results in higher profitability all round.

The research made a number of key recommendations which in turn helped inform the future direction of the Institute’s research and mission.In particular it called for “joined up thinking” between all stakeholders in the global container logistics supply chain.The Institute duly formed the “Global Maritime Logistics Council”

From our findings, thr were successfully delivered. For clarity, we will deal with each of these separately. They are:
• The development of the Container Terminal Quality System (CTQS) which measures the effectiveness of Container Terminal Operations and provides a quality indicator score from a checklist of 80 factors.
• The description of a Port Centric logistics model which enjoys the benefits of situating warehouses near ports to reduce the time spent trucking cargo between holding areas and in turn reducing fuel and labour costs.
• The identification of problems faced by 3rd party logistic companies and Beneficial Cargo Owners in determining the status of containers moving through ports and the costs that could be reduced by better communication and visibility in this regard.
Research in to the Container Terminal and its role in global logistics began after our research in to how U.S Beneficial Cargo Owners (BCO’s) from the consumer goods and retail sector were coping with the logistics challenges arising from sourcing in China.
International supply chains have become complex. Logistics models have evolved continuously as a result of influences and factors such as the globalization and expansion into new markets, mass customization in response to product and market segmentation, lean manufacturing practices and associated shifts in costs.
The evolutions in supply chains and logistics models urge container terminal operators to re-think their function in the logistics process.Terminals will develop an increasing ‘power’ in the design of supply chains and are to be considered as strategic assets. To that end the Institute’s research department focuses much of its attention on how Container Terminal Operators are responding to this new opportunity and responsibility.

In bestowing the Institutes inaugural ‘Global Best in Class Container Terminal” accreditation on YICT, we have identified the benchmark port in global containerization. Since its inception in 1994, YICT has set itself apart by approaching its task differently. YICT, as a result of its enormous responsibility to provide a quality service that supports China’s emergence as the world’s leading trading nation and also because of competition from other port operators in the region, adopted a very open flexible approach.

Yantian International Container Terminal (YICT) is the world’s largest single container terminal and are champions of “Joined Up Thinking”. YICT’s management and executives have become available to the global logistics community in a way that we haven’t witnessed before and have done much to herald in a new dawn in the history of port operator/shipper relations and have built their cargo volumes through marketing directly to cargo-owners a strategy they called ‘End User Marketing’.
YICT is regarded as the first container terminal operator to deploy an End User Marketing strategy. The driver for this is that Beneficial Cargo Owners (BCO’s) do not have contractual relationship with any of stakeholders inside the port, leading to a dependence on third parties for status reports etc. This can lead to misreporting and guessing about the status of a particular container. This is mitigated by container terminal operators liaising directly with BCO’s and their 3PL’s.
BCO’s report that direct relationships with container terminal operators has led directly to greater Visibility, increased Velocity and added Value add in their container logistics processes. For terminal operators direct relationships with their end user had a direct influence on decisions by shipping lines to include their terminal on their network maps. Shipping lines are heavily influenced by their upstream customers − the port’s end users.
The YICT approach to collaboration has also lead to logistics innovation particularly in the area of “Port Centric Logistics” which again the terminal is credited with innovating.
Port Centric Logistics has grown to become a vital part of global supply chain strategy today was born in Shenzhen out of this dynamic and continues to proliferate globally, DP World’s $2.5 Billion Dollar development London Gateway in the U.K. is built on a port centric model.
After researching how container terminals across the world compared with YICT it became evident that they had first mover advantage and as such were identified as the benchmark in container terminal operation globally. This led to accreditation of YICT as the the World’s “Best in Class” Container Terminal by the Institute.
In recognising YICT, the Institute is underlying the importance of the continuing and expanding co-operation between end users and container terminal operators to make the port centric logistics process more efficient.
The philosophy behind YICT and its attitude towards its operations is that it is part of the logistics process, where there must be due regard for both the inbound and outbound mechanisms that surround port movement. The Institute believes that this innovative approach, the port paying due respect to the smooth operation of the supply chain, should be mirrored across the globe.
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