logistics and ports

7/27/2019 Logistics and ports

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Group

3

PGDM-InternationalBusiness

Logisticsa

ndP

orts

This document is about ports describing the evolution, functioning

and role of ports in international business. In the process it also

compares the Indian with the International ports. In the end this

document provides the current scenario and the way forward.

Group 3:

Devarshi Bajpai (03)

Parnamoy Dutta (13)

Ashish Madnoorkar (23)Nitisha Pagaria (33)

Anirudhha Sarawgi (43)

Saahil Sinha (53)


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Introduction:

70% of the world is covered with water and hence provide an excellent medium of low cost

transportation. But for this to happen there is a need for a place where ships or vessels candock. Thus, a port is a location on the coastline containing one or more harbours where ship

can dock and transfer people or goods also referred to as cargo to or from land. But the ever

growing rate of globalisation has resulted in enhanced complexity of functioning of ports

leading to the need of effective and efficient port management. Lets us look at the evolution

of ports.

Evolution of Ports:First generation port: Junction between sea and inland transportation systems. Main

activities in the port region were cargo handling, cargo storage & navigation assistance.

Hence there was negligence about important changes in transportation technology.

Second-generation ports: The activities in these ports were expanded ranging from

packaging, labelling to physical distribution. The second generation ports have a

characteristic that freight forwarders and cargo owners had a tighter relationship which was

not observed in first generation ports.

Third-generation ports:Emergencecontainer transportation & intermodal transport system.

The former services function has been enlarged to include logistics and distribution services.

Todays port authorities are focusing on efficiency rather than effectiveness. Modern day

ports also have customs facilities to enhance international trade.

Major ports in the world:The handling capacity of ports is measured in terms of TEU (Twenty-foot Equivalent Units).

One TEU is a measure of the cargo capacity of a standard

intermodal container 20 feet long and 8 feet wide. There is a lack

of standardisation with regards to height which ranges between 4

feet 3 inches and 9 feet 6 inches. But the most common height is 8

feet 6 inches.


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Container Traffic (in thousand TEUs):

Rank Port Country 2011 2010 2009

1 Shanghai China 31,740 29,069 25,002

2 Singapore Singapore 29,940 28,431 25,866

3 Hong Kong China 24,380 23,699 20,983

4 Shenzhen China 22,570 22,510 18,250

5 Busan South Korea 16,170 14,194 11,954

6 Ningbo-Zhoushan China 14,720 13,144 10,502

7 Guangzhou China 14,260 12,550 11,190

8 Qingdao China 13,020 12,012 10,260

9 Dubai U.A.E 13,010 11,600 11,124

10 Rotterdam Netherlands 11,880 11,140 9,743

30 Mumbai India 4,320 4,280 4,061

As we know that in recent years China has become the centre of the trade-world and hence

justifies the dominance of Chinese ports in the ranking above.

Major Indian Ports:

India has one of the longest coastlines making it one of the biggest peninsulas of the world.

There are 13 major ports (12 government and 1 corporate) and 187 notified minor and

intermediate ports. Cargo handling is expected to grow at 7.7% till 2013-2014. 60% of

Indias container traffic is handled by Mumbai port.

TRAFFIC HANDLED AT MAJOR PORTS (IN ' 000 TONNES)

PORTS 2011 2010 2009

Kolkata 47545 46423 54219

Paradip 56030 57011 46412

Vizag 68041 65501 63908

Ennore 11009 10703 11500

Chennai 61460 61057 57491

Tuticorin 25727 23787 22011


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Cochin 17873 17429 15228

New Mangalore 31550 35528 36691

Mormugao 50022 48847 41681

Mumbai 54586 54541 51876

JNPT 64309 60763 57291

Kandla 81880 79500 72225

The targets for few of the Indian Ports as incorporated by the Ministry of Shipping, Road

Transport and Highways are as follows:

Kandla: world class, multi-cargo, driver of economic growth; Mumbai: leading world class, multipurpose city based port in SE Asia; JNPT: Indias premier container port with integrated logistic services; Kolkata: major sea-river gateway, quality services.

Functions of Ports:

The commercial success of a port could stem from a productivity advantage in traditional

cargo-handling services, from value-added services, or from a combination of both. Studies

have shown that the most successful ports are those that not only have productivity advantage

in cargo-handling, but also offer value-added services.

Major Traditional Functions:Within the port system, one or more organizations have the following roles:

Regulator of economic activity and operations Regulator of marine safety, security, and environmental check Planning for future operations and investments Operation of nautical services and facilities Market and promote port services and economic development Cargo handler and store manager Providers of ancillary activities


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The ports providing traditional services in the bottom left corner of the matrix are

indistinguishable from their competitors. The viable option for such ports is to move to the

right hand side of the matrix, toward productivity-advantage leadership, or to move upwards,

towards value-added service leadership. Perhaps it is for this reason that many ports in

developing countries still concentrate on improving their productivity with regard to

traditional port functions and not value added functions.

The advanced ports around the world have continuously emphasized the function of logistics

centres mainly due to the high degree of global production and the need for value added

logistics services.

The Value Added Logistics services (VAL) activities:

Receiving goods, breaking shipments, preparing for shipment and returning emptypackaging.

Regular storage, distribution and order picking. Countrylizing and customizing, adding parts and manuals. Assembly, repair and reverse logistics. Quality control and testing of products. Installing and instruction. Product training on customers premises.


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Indian Ports

India has a strategic location on the East-West trade route that links Europe and the Far East.

India has a long coastline, spanning 7516.6 kilometres that forms one of the

biggest peninsulas in the world. It has 13 major ports (12 government and 1 corporate) and

187 minor and intermediate ports. The major ports are governed by the Ministry of Surface

Transport (MoST) and the minor/intermediate ports are under the administrative control of

the State Government.

Major ports like Kandla port, Mumbai port, Jawaharlal Nehru port, Cochin port,Mormugao port and New Mangalore port are located on the west coast of India

Tuticorin port, Chennai port, Vishakhapatnam port, Paradip port, Kolkata port andHaldia port are located on the east coast of India

Adani port is the major private port located in the gulf region (Gujarat)


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The major ports have undergone many ups and downs in the growth pattern of traffic during

the last five decades. The table below represents the progress made by major ports in India.

The overall Compound Annual Growth Rate (CAGR) of traffic at major ports from 1950-51

to 2009-10 has been 5.80%, and during the post-liberalization period i.e., from 1991-92 to

2009-10, the CAGR reported was 7.31%. The CAGR for traffic growth at major ports for the

last five years was 7.28%, whereas it was 10.73% if the traffic is taken for the three years

before the global economic recession from 2008-09 to2009-10, this is the highest growth rate

since 1960.


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Infrastructure & Investments in Indian Ports:

A country's Infrastructure depends a lot on its Port and Shipping Industry as it is a major

contributor in its economy. Ports facilitate Exports and Imports of goods. Along with

building ports, a country should also look upon the complementary facilities required (such as

trade barriers, Policies, Labour availability, etc).

All the investment in the Indian Ports are done by the government and hence under direct

control of the Central Government. This method of Control is according to the norms of the

Ministry of Shipping.

Considerable Improvements have been recorded due to newly implemented reforms. But, the

performance of Indian Ports is still below the level of other ports in the World or in Asia for

that matter.


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Reasons and Effects:

Unproductive utilization of the real berth abilities. Labor-intensive and low use of Machines. Hence the turnaround time is higher.

Improvement can be made by adopting Mechanized process.

High handling costs for containers. Bringing mother container ships at Indian ports, this adds the transport costs of

exports and imports of Goods.

Draft limitations, resulting in slow turnover time.Due to the Increasing Demand (projection says there will be a increase in Container traffic) in

this sector, it becomes important for Indian Ports to increase capacities through investments

from Private as well as Public Sector.


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The performance of major Indian seaports:

The contribution of operating performance indicators and physical facility related indicators

in the overall performance of ports as shown in Figure.


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Cargo Traffic:

While Vishakhapatnam Port is leading with about 56.39 MT of Cargo traffic, Mumbai,

Chennai and Kandla have given a very tough competition. Kolkata, Cochin and Tuticorin

and handling a lower level of Cargo as the Congestion level at these ports is very high. They

are not even handling 20 MT of Cargo traffic which is less than 50% of what

Vishakhapatnam is handling.


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Vessel Traffic:

When it comes to Vessel Handling, Mumbai ports and JNPT are the leaders. They are closely

followed by Vishakhapatnam, Chennai and Kandla. Infact, lately Kandla port has been

handling more vessel traffic as compared to JNPT. Kolkata and Mormugaon ports are the 2

ports with relatively low traffic handling capabilities.

Comparison of Indian ports with international

ports:

1. Indian Ports: 12 major ports, 1 corporate port2. All ports are managed by Port Trust of India.3. The major ports together have a capacity of 215 million metric tonnes. Jawaharlal

Nehru Port is 30thon world list having 4.53 million tonnes capacity whereas worlds

top 15 ports have more than 10 million tonnes handling capacity.

4. Several major ports lack sufficient draft for large crude tankers. Large vessels areberthed at Colombo, Singapore, or Dubai, and cargo is shipped to India later in

smaller vessels, thereby escalating the freight cost.


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5. Weak hinterland connectivity is a challenge for most Indian ports, reducingaccessibility.

6. For all Indian ports infrastructure is a major issue.7. Average ship turnaround is 4.72 days where as many international port has turnaround

time as less as 0.8 days.

8. Average ship birth output is 4249 tonnes.9. The performance of Indian ports does not compare favourably with that of efficient

international ports on three important parameters- capacity, productivity and

efficiency.

10.In international terms, labour and equipment productivity levels are still very low dueto the outdated equipment, poor training, low equipment handling levels by labour,

uneconomic labour practices, idle time at berth, time loss at shift change and average

age of labour.

11.International ports like Shanghai has unmanned automatic container yard, wirelesscontrol system and infrastructure which enable it to handle 31.74 million metric tonne

with turnaround time of 18 hrs.

12.Key enablers for International ports to achieve high efficiency are: Infrastructure and Information technology Skilled labour Investment Effective policy implementation

Challenges & way ahead for Indian ports:

India is facing a serious deficit in port infrastructure. Lack of proper connectivity has affected the growth and prospects of some of our

ports: Lack of proper hinterland connectivity results in suboptimal choice of route and

mode of transport made by the shipper, this leads to escalation of time and cost and

congestion in the ports owing to the inability to move cargo out of the port.

Issues inside the port Roadways within the port Port gate entry


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Shortage of storage space Insufficient cargo handling equipment, etc have already taken a toll of

business

The lack of containerization and Cabotage Law which bars the foreign vessels fromcarrying cargo between Indian ports because of which a considerably large part of

Indian cargo for trans-shipment through containers gets diverted to Colombo,

Singapore and Jebel Ali Ports.

It was found that the average berth time for containers at major ports is 1.88 days forunloading and 3.78 days for loading. In a sharp contrast, the time taken by Singapore

port for the same work is 0.6 days.

Shipping lines avoid touching ports in India because of the long waiting time andheavy congestion.

The capacity of various ports in Mumbai has already exhausted and now capacities ofother ports like JNPT are on the verge of exhaustion.

The long turnaround time at ports in India is one of the biggest handicaps in thelogistics service.

Operational problems arise due to frequent breakdowns and lack of modernequipments.

Inadequate dredging and container handling facilities. Labor unrest. Facility of night navigation and pilots. Delays are also caused by stakeholders like shipping and clearing agents, customs

clearance, transporters and other parties who responsible for various pre-and post-

shipment activities.

The draft availability at international ports ranges between 12m and 23m, except forKandla, Mundra and Ennore ports, which are newer ports inIndia; while other Indian

ports have an average draft ranging from 8m to 12m. Hence, they are not able to

handle modernized new generation container vessels which invariably impact the

overall port performance and development.


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Opportunities for Indian Ports:

90% of Indias trade by volume (and 68% by value) takes place through watertransport. Hence, Government is making immense efforts for the development of port

infrastructure.

Committee of Secretaries, Government of India, has recommended that a minimum 4-lane road and double line rail connectivity be provided at major ports.

More than Rs 18,000 crores is being spent now at various major ports all over India,which will take them on par with new modernized private ports in a couple of years.

Maritime activity was mostly under the control of the Government, but the scenariohas now changed with the gradual privatization of development and operation of ports

Apart from the 12 major ports 184 small ports have also been developed. The Government has undertaken expansion and modernization of ports on a priority

basis in its five-year plan allocations in 2007 in continuance with its initiatives in

upgrading India's infrastructure and is expected to invest more than USD 9.7 billion

by the year 2015.

100% FDI has been permitted for port development projects. 100% income tax exemption is provided for a period of 10 years for port development

projects.

The overall port capacity in the country is expected to grow at a CAGR of 13.3%from 1,020 million tonnes in FY11 to 3,130 million tons in FY20. The capacity at

non-major ports is projected to expand at a faster CAGR of 18% during FY 2011-20

and the capacity at major ports is expected to grow at a CAGR of 9.5% during this

period.

At the beginning of the financial year (2010-11), the Ministry of Shipping fixed atarget of 21 projects under PPP for the major ports out of which two projects have

been awarded so far at Tuticorin Port and Ennore Port.

logistics and ports

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