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The Port Operator’s Vital Role in International Trade

By Megan Doyle

In a world of global supply chains and rising consumer expectations of two-day shipping, port operators play an integral role in ensuring efficiency in international trade. But the job isn’t always easy. Each port has a unique combination of operations, infrastructure, geography, and governance challenges that can sometimes make port operations management a logistical nightmare.1

Add hazardous weather, geographical constraints, and geopolitical challenges to the mix and it’s no wonder that port operators must put as much as six months of thought and preparation into making sure consumers can click on two-day shipping with confidence.2

 

What Is Port Operation and What Do Port Operators Do?

 

At its core, port operation involves managing the movement of cargo containers between ships, trucks, trains, and warehouses. Ultimately, the goal is to maximize port efficiency while minimizing the amount of time a ship spends in port. To do so, a port operator takes on several roles. A port operator, for example, might:3,4

 

  • Handle paperwork to get incoming shipments through customs
  • Connect shipments to potential recipients
  • Handle and store merchandise that passes through the port
  • Finance, install, operate, and maintain necessary infrastructure and equipment to run the port

Port operations can be public and/or private. Most ports in the U.S. are governed by some form of public port authority, but some are being privatized to improve efficiency and cut costs. Typically, a private port operator will purchase a contract with the local port authority and run their business on site, promising a certain level of productivity.5

 

The Many Challenges of Port Operations

 

Port performance is, in many ways, the number one priority of port operators. Specifically, port operators must be concerned about dwell time, or the amount of time ships spend in port. Container vessels operate on strict schedules, and adhering to those schedules is critical to managing port capacity, equipment, and labor to maximize throughput, according to a 2018 report by the U.S. Department of Transportation.6

 

However, there are many factors that can prevent a port from running on schedule. Physical factors like size of terminals, berths, type of cargo, and depth of access channels can limit a port’s capacity and cause port congestion.7 Other conditions and external events can also impact the performance of a port, such as weather disruption, customs delays, labor-related slowdowns, geopolitical concerns, tariffs, and more.8,9

 

Port Congestion Grows, Adding to Port Operation Woes

 

In recent years, the combination of the above factors has contributed to a growing port congestion problem. Port congestion creates significant hurdles for the ports, and can come at a high cost for companies involved in international trade.

 

For example, port congestion can contribute to lower sales, especially when goods are stuck in transit during crucial times. Companies shipping perishable goods overseas have had to work to find last-minute domestic buyers, and retail companies have had to postpone scheduled product releases.10 To combat port congestion, ports in the eastern U.S., for example, have recently invested in upgrading their facilities to process larger ships deployed through the expanded Panama Canal, according to World Maritime News.11

 

Digital Automation May Help Port Congestion

 

Port operations in the Asia Pacific, such as those in China, Japan, and Australia, have been working towards improving ports and terminals with automation.12 But other areas of the world, especially the U.S., have been slow to digitize operations compared to other industries.

 

Still, momentum for port operations automation may be building—and the benefits may be tangible. According to a McKinsey & Company article from December 2018, successfully automated ports could see operating expenses fall by 22-55 percent and productivity rise by 10-35 percent.13

 

How? First and foremost, port automation could boost port performance by reducing human error and enabling 24/7 service.14 Some port operators are already dabbling in computerized yard management systems and automated systems with optical scanners to make port operations more efficient.15 Improved data could help companies better track shipments and identify port delays. And new machine learning and deep learning techniques combined with high resolution satellite imagery could provide affordable and non-intrusive ways to measure port capacity.16

 

But port operators are only slowly incorporating automation, and it seems many efforts to push for automation haven’t been as successful as they could be. According to the same McKinsey article, poor data quality and siloed operations are holding port operations back—not to mention the fact that many port operators are unprepared for the challenge of implementing automated solutions.

 

What’s more, not all port workers are keen believers in the promises of AI assistance. Many dockworkers in California ports, for instance, have outwardly expressed concerns about losing jobs in the face of automation.17

The

Takeaway:

Port operators play a critical role in keeping international trade running smoothly and safely. In the face of constant physical constraints and geopolitical concerns, port operators help get shipments through customs, store merchandise, and manage the necessary equipment to run a port. Port congestion issues have been on the rise in recent years, but a push towards automation could provide the boost port operators need to keep shipments on track.

Megan Doyle - The Author

The Author

Megan Doyle

Megan Doyle is a business technology writer and researcher based in Wantagh, NY, whose work focuses primarily on financial services technology.

Sources

1. Port Performance Freight Statistics Program 2018, U.S. Department of Transportation; https://rosap.ntl.bts.gov/view/dot/39609
2. “Notes From an Imperfect Paradise (Ep. 380),” Freakonomics Podcast; http://freakonomics.com/podcast/live-los-angeles/
3. “Financial Implications of Port Reform,” PPIAF; https://ppiaf.org/sites/ppiaf.org/files/documents/toolkits/Portoolkit/Toolkit/module5/characteristics.html
4. Port Performance Freight Statistics Program 2018, U.S. Department of Transportation; https://rosap.ntl.bts.gov/view/dot/39609
5. “I’m Running a Port—What Do I Do?,” Slate; https://slate.com/news-and-politics/2006/02/what-does-a-port-operator-do-anyway.html
6. Port Performance Freight Statistics Program 2018, U.S. Department of Transportation; https://rosap.ntl.bts.gov/view/dot/39609
7. Ibid.
8. Ibid.
9. “Port Delays Leave Retail Goods Stuck in Transit,” The Wall Street Journal; https://www.wsj.com/articles/port-delays-leave-retail-goods-stuck-in-transit-1418866644
10. “Port Delays Leave Retail Goods Stuck in Transit,” The Wall Street Journal; https://www.wsj.com/articles/port-delays-leave-retail-goods-stuck-in-transit-1418866644
11. “Moody’s: Latest China Tariffs to Negatively Impact Port, LNG Sectors,” World Maritime News; https://worldmaritimenews.com/archives/277406/moodys-latest-china-tariffs-to-negatively-impact-port-lng-sectors/
12. “The future of automation at terminals and ports,” iContainers; https://www.icontainers.com/us/2018/10/09/the-future-of-automation-at-terminals-and-ports/
13. “The future of automated ports,” McKinsey & Company; https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/the-future-of-automated-ports
14. “The future of automation at terminals and ports,” iContainers; https://www.icontainers.com/us/2018/10/09/the-future-of-automation-at-terminals-and-ports/
15. “I’m Running a Port—What Do I Do?,” Slate; https://slate.com/news-and-politics/2006/02/what-does-a-port-operator-do-anyway.html
16. Port Performance Freight Statistics Program 2018, U.S. Department of Transportation; https://rosap.ntl.bts.gov/view/dot/39609
17. “Heated battle over automation and jobs at Port of L.A. moves to City Council,” LA Times; https://www.latimes.com/business/la-fi-ports-automation-vote-20190620-story.html

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