Dubai Ports World Operations - Coursework Example

Dubai Ports World Operations Name Institution Date Table of Contents Dubai Ports World Operations 1 Name 1 Institution 1 Date 1 Table of Contents 2 Dubai Ports World Operations 20 2 Introduction 4 Company Background 4 Business Model 6 Organization Structure 7 Operational Strategies 8 Supply Chain Practice 10 Supply Chain Strategies 12 (DP World Ltd, 2012) 15 Supply Chain Issues Facing the Company 15 Roadmap and Recommendations 16 Conclusion 18 References 19 Abstract Dubai Ports World is one of the biggest marine terminal operators in the globe, with forty nine terminals and main expansions in thirty one nations. It was established in 2005 as a result of the merger between Dubai Ports international and Dubai ports authority Company. The company aims at enhancing clients’ supply chain efficiency through effectively managing bulk, containers and other terminal cargo. Dubai Ports World persistently invests in terminal facilities, infrastructures and people, and work closely with business partners and customers to offer quality services, where and when clients need them. The paper critically looks at the supply chain practices with specific interest on the key elements that play strategic roles in the growth and development of the organization. A clear roadmap and recommendation are also provided. Introduction Dubai Ports World which is based in Dubai, United Arab Emirates is a worldwide leader in business of global marine terminal operations, logistics, development and related services. The organization is wholly owned by the government of Dubai and is a subsidiary of the Ports and Free Zone World, which is its parent company. DP World became a worldwide port operator in 2005, following a merger between Dubai Ports International and Dubai Ports Authority. The company offers several cargo-handling services to commercial companies internationally, entailing services to move containers, bulk cargo and general cargo. The major objective of Dubai Ports World is to enhance supply chain efficiency of the customers through managing bulk, container along with other terminal cargo. A client centric approach is used that focuses upon quality service and well established relationships. Company Background Dubai Ports World is a UAE based company and an established global developer of container ports and a provider of terminal and stevedore services. Along with its subsidiaries, the company is engaged in global marine terminal development and operations, logistics and associated activities. Apart from its maritime terminal business, the company also operates P&O services, offering marine services to government and industry; Dubai Ports World cargo services, which provides a variety of stevedoring services, entailing bulk, general cargo, containers, project cargoes, reefer vessels , car carriers, baggage handling and passenger vessel stores and Dubai Ports World intermodal , which offers gate service. The company is entirely owned by Dubai government and it owns, manages and operates container terminals along with other port infrastructure across the globe, majorly in South Asia and Middle East. The company attained its name in late 2005 when the government of Dubai merged Dubai Ports International with Dubai Ports Authority (DP World, 2006). Previously, the company was under the ownership of government holding company known as The Corporate Office which is also the owner of investment Istithmar and real estate developer Nakheel. In the year 2005, Dubai ports international and Dubai port authority were merged to form Dubai Ports World and consolidated with Dubai customs and free zone under holding corporation ports, customs and Free Zone Corporation. The corporate office and ports, customs and free zone corporation are shaped on the Singapore government owned holding corporations and overseen by the Dubai emir. Dubai Ports World limited grew out of Dubai ports authority that was established to manage home ports of Rashi and Jebel, the biggest man made harbor in the world. Dubai ports international was established in 1999 to sell this skills globally and the corporation grew rapidly, purchasing terminals in Djibouti, Saudi Arabia, Romania and India. In early 2005, the ports authority completed a 1.15 billion dollars acquisition of international port assets of the American based CSX global corporation, giving the corporation a strong position in the Asian continent and propelling Dubai ports international to its present position as among the biggest port operator in the entire globe. Dubai it was renamed Dubai ports world in 2005, and presently operates terminals in Venezuela, Germany, Dominican Republic, UAE, China, Australia, India, Romania, Saudi Arabia, and Djibouti, and South Korea. Business Model Dubai Ports World has changed its business model over years to become a key market leader and has innovated to achieve the growth demands. Since its establishment, the company has sought after understanding from the viewpoint of customers and offer innovative solutions, particularly in the filed of optimized port automation and operations. Additionally, DP World has set up a track record of identifying advantageous acquisitions and partnerships that has driven the company from humble beginnings to the driving forces in worldwide logistics. Peng, (2010) argues that today, the company has a worldwide portfolio, handling approximately 43.4 million TEUs twenty foot equivalent container units the year 2009 and is growing swiftly. The company has succeeded in exporting Dubai culture to other nations in which it operates and has also been able to import ideas and skills from other countries to Dubai. Therefore, there exists immense exchange of technologies and knowledge for the acquisitions and the company is vision to be global leader in the industry, and this is the key driver of the company’s growth and expansion into diverse regions and across the globe As a key player in the market, the company is influencing the global supply chains and business models. In the business, the major demand is speed along with process optimization and automation. In order to align the needs of the customer with the company’s goals and objectives, the company has adopted a total system approach to operate the business and extended the approach to the whole market. In the recent years, every stakeholder in the procedure, entailing the port, customs, and trucks, were conducting their businesses separately and clients needed several documents with every stakeholder. However the company has currently integrated these detached players and make he scheme automated. The company has created automated online schemes such as Dubai Trade, which enable customers to pay duties and clear cargos online through the port. This has made the process much quicker and easier. Dubai Ports World also put all trucking companies online to enable customers to choose the trucking firms they need to work with (Oxford Business Group, 2008). The company continually re-assesses its relationships with present and probable future stakeholders and partners to make sure that it remains at forefront of the industry, seizing the highly attractive business opportunities through engaging the pertinent stakeholders from outset. It is the believe of the company that its record as one of global biggest container terminal operator presents DP World as a natural associate of choice and seeks to enable this perception around the world. The company leverages its relationships with partners in Dubai as it looks for novel opportunities that will eventually change local economies of nations in which the company operates in and subsequently enable value proposition for the business (Peng, 2010). Organization Structure Dubai Ports World organizational structure is shaped by business objectives and strategy. The company is highly committed to its customers, people, quality and international growth. Opportunities for its people emerge from developing a thriving business, which subsequently originates from listening and reacting to customers as well as meeting their needs with superior services. The Company believes that it is the role of the management team and head office to govern and support the company. The global business of the company is managed by a board of seven director managers based in the Dubai head office. This management team has considerable industry experience and majority of the managers have experience in container shipping industry. The key responsibility of the directors is to promote long term success of the firm and is liable for all company’s operations (DP World, 2006). Additionally, local operations are run by eight regional managers who are experienced in container terminal industry and widespread regional and local knowledge and supported by a experienced team of the local container terminal managers. DP World, (2006) notes that board of directors delegates several responsibilities to the management including the creation and commendation of strategic plans for review by the board, implementation of policies and strategies of the company as established by the board of directors, monitoring of financial and operating results against budgets and plans , monitoring quality of investment procedure against organizational objectives, prioritizing allocation of human, technical and capital resources and development and implementation of risk management schemes . Dubai Ports World follows an open communication policy with retail and institutional stakeholders. As a portion of this attempt, the executive directors frequently meet with investors and analysts and engage in road shows and conferences that draw outstanding members of global financial community. Operational Strategies The strategy of Dubai ports (DP) World Company is to create and manage the most safe, secure and efficient schemes of directing the movement of products via the vital gateways that drive global trade. Underpinning the operational strategy of the company is the DP World’s focus upon delivering sustainable and profitable growth for company owners via improved operational and logistical efficiencies, cost management propelling returns and cash flows and incremental revenue generation. The continuing focus of the company is to make sure that the shipping business is adequately prepared to react to the instant needs of the customers, in terms of reliability, extra capacity at the existing ports, minimizing turnaround duration of vessels and improving the rate of removal of containers form port. Improvements on the productivity is a key concern for the company and several terminals have significantly improved productivity, which have subsequently resulted to improvements in the company’s EBITDA margins and customer loyalty (Nottenboom, 2009). The ports and shipping business of the company falls in a long term industry where dispensations are in surplus and the major topmost line driver of worldwide trade is anticipated to go on growing. The company believes that as shipping lines plan for future with bigger vessels and novel trading routes, port traders are greatly required to follow suit. The ports industry continues to experience a scarcity of the suitable capacity in the appropriate places to achieve the medium term customer needs. Therefore, port operators are required to plan ahead to make sure that there is availability of capacity to match the shifting trends in the outsourcing of manufacturing, upcoming growth in consumer demand and to tackle the expanding size of the container vessels on order. Dubai Ports World is focused upon delivering the appropriate capacity in right places that match market demand, via the expansion of the existing terminals within the portfolio of the company or creating new terminals. The company has added more than five million TEU of extra capacity via novel developments and expansions of the existing terminals entailing in Africa, China and India. Providing global customers with value enhancing logistics and ports is the cornerstone of the company’s operating strategy. The company seeks to sustain its consultative approach to consumer relationship management to make sure that it invests in facilities across the world where its services are needed. The company utilizes a proactive management procedure that focuses upon key aspects of information sharing, security and connectivity, which offer strategic solutions in cost and inventory control in worldwide supply chain. The company believes that the efficiency and reliability of its information flow and operations enhances its clients’ competitive edge. According to Jacobs (2005), Dubai Ports World is in port management and its business involves cargo handling. Thus, the company is geared towards complementing its customers and not competing with them. In addition, the company is within logistics and supply chain management business and this is shaping the company and innovation strategy, and assisting it to sustain a strong position and marketplace and with its customers. Customer demand is drastically growing and size of ships has dramatically changed, with clients wanting bigger ships for the scale of economy as well as speed. In order to handle the increased capacity, the company has developed an innovative design for new cranes that is able to handle at least four containers once. With the use of the new high capacity cranes, the company is able to carry more containers with a short duration. In DP World, key assets are people, infrastructure, technology, customer information and relationships with stakeholders within the network. Thus, the innovation that the company intends to utilize is to surpass the port or gate and leverage these assets and work together with agencies outside the port to bring them together and to make operations easier for customers (Nottenboom, 2009). Supply Chain Practice According to Cox et al. (2007) modern port customers are searching for incessant improvements in effectiveness as containers are transported on bigger vessels so as to take advantage of the economies of scale. This is because when a port is highly efficient, the turnaround duration of vessels is quicker. Integral to the supply chain strategy of the company is investment capital to promote efficiencies around the unloading and loading of vessels entailing novel quay cranes. Shippers and shipping lines alike are looking for more efficiency across the entire supply chain so as to improve and increase their competitiveness in market. The company is seeking out to smooth the movement of the containers to and from the ports via beyond the gate actions. Dubai Ports World has highly spent on a container train with the aim of improving connectivity amid surroundings and the ports in Indian subcontinent section (Oxford Business Group, 2008). The company runs a container shipment station outside port gates in India and has spent on and run inland depots in Canada and Northern Europe. The core business of the company is to handle containers and Dubai Ports World anticipates maintaining around eighty percent of its revenues from container associated activities. Nottenboom (2009) argues that the company also remains focuses upon terminals that are situated in destination and origin as well as gateway markets with around seventy five percent of its volumes originating from the quickly growing upcoming along with frontier markets. This blend offers the company a highly stable cash flow and revenue, greater EBITDA margins and also offers greater flexibility during unfavorable macroeconomic times. Key Statistics for DPW Current P/E Ratio (ttm) 46.1114 Estimated P/E(12/2012) 20.1127 Relative P/E vs. DFMGI 3.9649 Earnings Per Share (USD) (ttm) 0.2709 Est. EPS (USD) (12/2012) 0.6210 Est. PEG Ratio - Market Cap (M USD) 10,366.70 Shares Outstanding (M) 830.00 30 Day Average Volume 98,102 Price/Book (mrq) 3.4506 Price/Sale (ttm) 3.4506 Dividend Indicated Gross Yield 1.50% Cash Dividend (USD) 0.0530 Last Dividend 04/09/2012 5 Year Dividend Growth - Next Earnings Announcement 03/28/201 Key mrq = Most Recent Quarter; ttm = Trailing Twelve Months (DP World Ltd, 2012) Supply Chain Strategies Dubai Ports World have pursued an insistent strategy of merging, horizontal integration, acquisition and leasing of port terminals beyond its home base. The success any global maritime terminal operator is contributed by the emergence of worldwide supply chain and the associated shifts in the governance and organization of maritime logistical sector. Shipping lines land based hinterland transporters and private terminal operators have vertically and horizontally integrated their services and operations via strategic alignments, application of novel technologies and corporate takeovers. According to Robinson (2006), as a port operator, DP World’s competitive strategic advantage is based on location or operational efficiency as well as the level to which the company is embedded in supply chains, is capable of enhancing the efficiencies in the supply chains and capable of extracting value from the supply chains. Dominance, insertion and integration are strategic goals of port operators and authorities, terminal operators and carriers. Therefore, DP World seeks to insert itself in supply chains as it offers them with access to vital resources like markets, technology, knowledge, expertise and capital. Being inserted into numerous supply chains is a vital precondition for the company to be a place of economic activity. Over the past years, DP World have pursued the objective of insertion through improving its landside connections, through providing financial incentives and lease concessions in order to draw more port calls and shipping lines. According to Slack et al (2002) terminal operators inserted in supply chains might seek integration of activities in the supply chains so as to lessen the overall costs of transaction and offer services more effectively. Terminal operators have been involved in horizontal and vertical integration strategies that efficiently go beyond their control in logistic chains with the aim of reducing transport and transaction costs and uncertainty. One role of DP World is to contribute to the reduction of cost for actors in the logistical and supply chains. The company has been able to achieve this goal through the establishment of digital information scheme that offer cheap, easy and reliable accessible operational information to the port users. The company provides inter modal transport possibilities and through efficient land utilization planning, the company is able to stimulate creation of clusters, which subsequently promotes harmonizing, learning and innovating processes amid port users. According to Cox et al. (2007), marine terminal operators and port authorities operating in supply chain activities seek dominance, the power or capability to extort value from the logistics activities on an ongoing basis. To a certain level, all supply chain actors are in business rivalry with one another over the extortion and attainment of the value generated by the logistical operations. A key strategy that organizations use to dominate supply chain is securing control over the scarce asset or competency like the capability to deal with niche cargo, exploitation of economies of scale. Dubai Ports World utilizes the structure of provision approach to ensure dominance in marine terminal operations and supply chain strategies. Jacobs (2007) notes that as structure of approach are a network of organizations institutions and social relationships connected with provision of certain forms of building at particular points in space and time. Structure of provision approach enables DP world to pursue insistent supply chain strategies that facilitate its global expansion. The structure of provision approach is also important in the creation of strategic opportunities through which international operating corporations might become territorially entrenched in a port and in doing so, can get the value generated in certain geographic location. Additionally, structure of provision approach plays a very vital role in the creation of strategic opportunities for the locally based as well as port dependent operators to attach to and be entrenched within certain global production networks. Income Statement for DPW (DP World Ltd, 2012) Supply Chain Issues Facing the Company Globalization of supply chain is a key chain facing Dubai Ports World Company. This is because the company has made dramatic shifts from the major local for local operational and marketing strategies. The company has extended its supply chain activities from Dubai to other sides of the world. As a consequence, the company is highly exposed to geopolitical hazards and changes in exchange rates as well as longer lead times. According to Brechler, et al (2010), worldwide impacts influencing supply chains, processes and people are rapidly happening. Shifting population growth, forecasted global inflation, volatile fuel prices. The capability to mitigate and control these challenges will require the company to use a novel approach, one that goes beyond interior optimization and positioning of the firm to compete at point of customer demand and utilize supply chain uniformity across an influential competing field with partners and competitors. Trends in global trade demonstrates an increase in carbon intensity and vulnerability of logistics and thus DP World is required to shift trade patterns and logistics systems , especially in the emerging markets. The company will be required to reconfigure its international supply chain as a way of responding to future shifts in relative production costs across the globe. In addition, so as to attain a quantum improvement in environmental and economic performance of its logistics scheme, the company is anticipated to be ready to collaborate to a higher degree and come up with business models that will provide ways of developing novel collaborative platforms in which supply chain data will be exchanged and logistical procedures effectively managed (Mentzer, 2006). Roadmap and Recommendations Long term growth and expansion is forecast to continue and with bigger vessels joining the global fleet, port capacity is under pressure with greater utilization rates in numerous markets and reduced levels of efficiency and productivity in others. In line with its strategy, the company is focused upon investing for long term capacity needs of its clients, both in developed markets which lack the capabilities of efficiencies to handle bigger vessels and developing markets which have narrow port capacity to meet the growing needs. With forty two terminals across six continents, DP World believes that it has the greatest diversified portfolio of terminals within the industry and the diversity and size of its portfolio offers the company a competitive advantage over more concentrated and smaller operators. The company’s asset base entails a different blend of both newer and established terminals and a considerable number of brownfield and Greenfield projects that DP World is in the process of developing. The company believes that the combination of the development sites along with fully functional facilities is the key driver in enhancing the future growth strategies of the company and the portfolios permits the company to benefit from generally steady returns on equity in the lower risk established markets like Australia and Europe and the probability for higher returns on equity in the higher risk upcoming markets like Africa and Latin America. Because the rise in globalization together with global markets and international sourcing has made worldwide supply chain longer, harder to manage and more complex, DP world should ensure that its supply chain is agile and functional as a connected global business networks. In order increase its efficiency and effectives in global operation, Dubai Ports World should highly develop novel technologies, increase its investment in the physical infrastructure assets and adopt a novel supply chain management technique. In order to remain competitive and be able to penetrate to new markets, DP World should ensure a higher level of information sharing and transparency across demand and supply network. The company should adopt tools like evenet management systems to enable the company to have more awareness of probable hitches before they turn into crises. According to Waters, (2010), organizations that are capable to respond rapidly to disruptions in supply chain have a highly collaborative model to relationship management. Most importantly, a critical precondition for risk mitigation in supply chain isa strong devotion to improvement of supply chain flexibility. Agility is the capability of the network to react quickly to unanticipated events and organizations with agile capabilities are able to quickly bounce back when there is a disruption in their supply chains. Conclusion Dubai Ports World is a global leader in marine terminal operations. Based in UAE, the company provides several cargo handling services to commercial companies globally, including services to move bulk cargo, general cargo and container. Dubai Ports World has changed its business model over years to become a key market leader and has innovated to achieve the growth demands. The company utilizes an effective business model that has enabled it to operate both locally and internationally. The company view customers as the most valuable asset and thus strives to align the needs of customers with organizational goals and objectives. The company has adopted a total system approach which has enabled the company to offer services where and when they are needed. Offering global clients with value enabling logistics and ports is the cornerstone of the DP Word’s operational strategy. The company uses a proactive management procedure that focuses on key aspects of connectivity and information sharing. References Branch, A., (2008). Global supply chain management and international logistics. New York: Taylor & Francis Brechler, B., Flynn, B., & Machuca, J., (2010). Managing global supply chain relationships: Operations, strategies and practices. New York: Wiley Publishers. Cox, A., Lonsdale, C., Ireland, P., & Sandersons, J., (2007). Supply chains, markets and power: mapping supplier and buyer power regimes. London: Routledge. DP World (2006). DP World Guaranteed by Ports, Customs and Free Zone Corporation, Dubai. Press Release, February 18, 2006. Jacobs, W., (2007). Empire along creek: the case of Dubai ports, IURPD working paper no.1. Sharjah: American University Sharjah. Mentzer, J., (2006). Supply chain management. London: Routledge. Nottenboom, T., (2009). Current issues in shipping, ports and logistics. New York: Academic and Scientific Publishers. Oxford Business Group (2008). The report: Dubai2008. Oxford: Oxford Business Group. Peng, M., (2010). Global business. New York: Cengage Learning. Slack, B., & Fremont, A., (2005). Trasnformation of port terminal operations: from the local to the global. Transport Review, 25, 117-130. Slack, B., McCalla, R., & Comtois, C., (2002). Strategic alliances in the container shipping industry: A global perspective. Maritime Policy & Management, 29, 65-76. Waters, D., (2010). Global logistics: New directions in supply chain management. London: Kogan Page. Read More