Operators of Southampton Port ABP - Lab Report Example

Operators of Southampton port ABP 744893) Introduction The port of Southampton is considered to be one of the busiest ports of UK and generates significant amount of revenue for the government. Apart from handling cruise ships, roll-on/roll-off vehicle, container ships, bulk carriers also form a part of its charter. Data shows that it handles around 300 cruise ships and approximately 1.2 million passengers every year. Total tonnage of load handled equalled 37.2 million tonnes while approximately 471000 vehicles were handled in exports and imports. 840,000 containers were dealt with in 2009 making it UK’s second largest container port. (Atkins, August 2011)Southampton port also handles a wide variety of dry bulk like cement, fertiliser, wheat and glass with around 1.7 million tonnes being transported in 2009. Source: ABP, 2010, Ports of Southampton-Master plan 2009-2030 UK which is dependent on oil imports receives a large chunk of oil through the Esso and BP oil terminals at Fawley and Hamble. Although these are located close to the Southampton port, it does not fall under the ABP jurisdiction. Estimates suggest that around 28 million tonnes of oil products is handled every year. (Atkins, August 2011)The Port of Southampton has therefore become an important player in the government’s scheme of things not only because it generates such large revenues but also because it generates significant avenues for employment thus boosting the social sector. The Marchwood Sea Mounting is a Defence facility located in proximity to the Southampton port having both road and rail connectivity. (Atkins, August 2011)Apart from this it also has a significant draught of around 15m which is quite capable of handling cargo and container ships. To sustain the growth of the Southampton port one would need to expand its area of operations and this defence facility could provide an ideal foil for its expansion. External factors affecting Port Expansion There is however a host of factors that affects the setting up of a vehicle or container terminal. Converting a defence port that would handle limited amount of cargo and transport into a container terminal would require a significant amount of initial capital investment and one would need to study the pros and cons to ascertain the economic viability of this venture. Some of these external factors are as follows 1. With the increase in competition among hub ports and the tendency of carriers to introduce large vessels of the range of 8000 TEU, it has become essential for ports to expand its wharf capacity to cater to these ships. Malacca-Max range of ships of capacity 18000 TEU and large container ships (ULCS) of capacity 12500 TEU would require 14.5 m draught apart from 361m length and 57m width.( UN, 2005 ) Increasing the size of ships would require the carriers only to attend to limited ports which are more logistically connected. To cater to these huge ships would require a large capital for dredging, increasing material handling equipments and arrange for efficient distribution to control bottlenecking. 2. UK introduced port privatization in 1983 and sold 49 percent of its stake in ABP (Associated British Ports). This was raised to 51 % in 1984. This proved an efficient disinvestment policy since close to 121 billion USD could be raised through this venture at the same time keeping its control over the port authority with respect to property rights. (UN, 2005 ) However the role of the national port authority should be carefully defined to avoid friction between the various government organizations and its private operators. Significant among these relate to its dealing with the customs, security and labour laws within the port jurisdiction. 3. With the growth of major hub ports, the financial benefits of the building a new container or vehicle terminal should be strategically worked out since profit can only be generated if it is available to attract major carriers and be able to compete in the global market. Hence providing efficient service along with providing good logistical support should be paramount. 4. Creating a container terminal is only one part of the exercise as the port should develop facilitate further connectivity inroads either by road or rail since carriers are looking increasingly at one stop ports. (Simon Emde & Nils Boysen, 2012) 5. Any kind of infrastructure development on a large scale is invariably linked with displacement of the local population and these needs to be addressed carefully before taking a call. Apart from these security issues and safety concerns of the port need to be chalked out. 6. Other concerns include impact that this would have on the environment with regard to water and noise pollution, oil or hazardous material spillage from ship, impact on marine ecology, air quality and waste management. (MMO, April 2012) 1. Finally a plan for embarking on a new venture of such magnitude should only be taken if one is convinced that the execution would be able to meet the standards that one had initially set upon. This would only be possible if there is an efficient management capable of exhibiting strong leadership qualities and who are able to thrash out issues through consultation and dialogue and provide solutions that are acceptable to all stakeholders. (Corporate Responsibility Report, 2011) Container Terminal Requirements Container terminals are ideally designed to allow for the entry of large carriers named Panmax, Aframax, Suezmax and the VLCC. It is stated that for operating a VLCC a draught of 68 ft (21m) would be required to prevent grounding. Capability of a container ship port is measured by ability to cater to these huge ships. Container capacity is denoted by TEU or twenty foot equivalent unit which is considered the industrial standard. (ABP, 2010) Source: ABP, 2010, Ports of Southampton-Master plan 2009-2030 Listed below are some of the requirements which need to be considered while developing a container terminal. 1. Prior to developing a port it should be carefully assessed whether there is sufficient space for creating large container terminal. This is because a container terminal would have essentially three areas, the operational area, containment space and the terminal area which would house the office building, customs, container maintenance area and storage facilities. Source: Birgitt Brinkmann, 2011, Operations systems of container terminals 2. The operation system includes the movement of containers from the vessel, between the quay and stacking area and further to the hinterland operations. Therefore designing a container terminal would depend on the number of containers that would be anticipated to be handled in the available area utilizing the available interior distribution network. Source: Birgitt Brinkmann, 2011, Operations systems of container terminals 3. The port needs to have good logistical access and area since container ships typically load and discharge at the same time using cranes. Source: Astrini Niswrai, 2005, Container Terminal Expansion to build capacity The STS (ship-to-shore crane) offloads the container from the ship onto the land and on its way out the cranes on the terminal, load the ship outwards. (Birgitt Brinkmann, 2011) This does not occur simultaneously, however careful planning needs to done to avoid bottlenecking. Source: Birgitt Brinkmann, 2011, Operations systems of container terminals 4. The system of operations that need to be adopted for a particular terminal would therefore depend on size of vessels, annual container volume and its density during peak hours, cost, productivity of the crane, dwell time or the time the container would remain at bay, TEU factor, conditions of wind, snow and light, percentage of empty containers and location of the terminal with respect to further inland connectivity. (Birgitt Brinkmann, 2011) 5. Other factors include limiting the number of crane breakdowns, increasing productivity and also availability of qualified reefer mechanics who are able to attend to a breakdown immediately any time of the day and repair it quickly. (Daganzo C.F, 1989) Expanding the Southampton Port The capacity of a container terminal is further defined by number of quay ‘moves’ that can be handled annually. This would be reflected in the number of container visits that would be made to the port. Before embarking on the exercise of expanding the Southampton port ABP needs to carry out a risk analysis which includes taking the following factors into consideration. a. If the demand is less than 15% then the terminal would be over invested and would not be able to recover sufficiently in time to break even. Source: Atkins, August 2011, Economic Impact of the port of Southampton b. Ideally 33 moves/ hour would be rated as an efficient and productive exercise. However the container fails to meet up to these expectations resulting in over capacity, bottlenecking and lower productivity. (Astrini Niswrai, 2005) c. Faced with demand which is higher than expected and the expansion envisaged is not able to cater to this high capacity. This is otherwise termed as sub optimum expansion. d. Increase in operational costs, land lease, other equipment costs along with strikes, trade unionism, bad weathers and electrical failures. (Astrini Niswrai, 2005) It is within this context that the UK government has strategized a Master Plan 2009-2030 for the Port of Southampton and seeks to review a series of daft proposals, one of which is in discussion here; to expand the port and bring in more investment. Broadly the plan addresses the following 1. To achieve a gross value added (GVA) of 3.5% annually by 2026 as per the South East Plan. (ABP, 2010) 2. The master plan sets out the agenda for development and formulates a strategy for the government on the South Hampshire sub-region. 3. The Southampton City Council, New Forest Council in consultation with ABP is comprehensively framing Local Development Framework guidelines to cater to the expansion. (ABP, 2010) 4. The degree of expansion till 2030 has been scientifically worked out using the services of MDS Transmodal. (N.Kemme, 2012) 5. Other factors that necessitate ABP to look for areas of expansion is because it is estimated by 2030, Southampton ports would be handling 4.2 million containers units (TEU), 2.1 million tonnes of dry cargo, 2 million cruise ship passengers and around 840,000 vehicles. 6. With the existing defence terminal already having a rail connectivity, further development needs to be made since it is estimated that by 2030 there would be an increase of 40% of container shipment at the ports of Southampton. Currently, 70% by road, 25% by rail and 5% by coastal ship account for the percentages of hinterland transport. (ABP, 2010) 7. Expanding the port is also paramount since it is a vital sector providing for employment to around 130,000 either directly or indirectly and accounts to over 7.7 billion pounds being contributed to the GDP. Case Studies Although the Southampton port is a leading port in its own right, it is very noteworthy that ABP which are the principal operators have started looking ahead into the future as far 2030 to consolidate its port expansion. This case study looks at the progress made by the Port of Los Angeles which in November 1999 had an agreement with Maersk Sealand that envisaged building a 48 acre container terminal at a cost of 800 million US dollars. This would be the largest terminal in the world. It was anticipated that the contract duration which was for 25 years would generate close to 2 billion US dollars. (UN,2005 ). The agreement had in its terms of agreement a minimum number of loading and discharging cycles which would generate enough revenue to break even the investment made in the port. Any revenue that would be generated additionally would be shared with Maersk Sealand according to a profit sharing agreement. This proved to be a win-win situation for both the carrier and the port operators since both were incentivised enough to help each other out in generating profits. Other port that overcome space restrictions and developed itself includes the Port of Shanghai. Significant tie-ups with Ningbo Port Group (45% ), Ning Xing Holdings (25%), Cosco Pacific (20%) and Zhoushan Yongzhou Container Terminal Limited (10%) have meant that five more berths of 2000m lenth and 15m depth have been added which could cater to 18 super post panama carriers generating a annual capacity of 3.5 million TEU. (Jan Svendsen & Jan Tiedemann, 2006) Source: Jan Svendsen & Jan Tiedemann, 2006, Port Development in the Greater Shanghai Region It can therefore take a cue from various other ports which had to overcome odds of low traffic, space limitations and become a world class port simply because of critical investments made at the right time, strategic partnerships with shipping carriers but also long term efficient planning. CSR policy of ABP The CSR policy followed by ABP with respect to topic under discussion is related to the work culture that is followed by ABP and degree of significance that is attached to workplace safety and sustainable development. This is because all international carriers would like to be associated with ports that provide complete client satisfaction not just at the level of personnel interaction but also the work culture that exists in these ports. In respect to the CSR policy followed by ABP the following could be listed as its significant achievements in wooing investors and international carriers alike at its Southampton ports. 2. The number of reported injuries per thousand came down to 5.7 from 7.3 reported in 2010. (Corporate Responsibility Report, 2011) 3. 96% of staff was reportedly trained at the Institute of Occupational safety and Health which brought down accidents significantly. 4. Organizing and effectively implementing the CR cycle where needs of the customers are met and sustainable developments undertaken in consultation with all stakeholders. Suppliers and contractors are encouraged to with safety and environmental guidelines so as to benefit both the port and the customer. These further include aspects of inbound and outbound vessel management. Since most carriers have to navigate through extremely sensitive waters close to the port, competent Statutory Harbour authority, Local Lighthouse authority and statutory port authority should be readily available to provide its services including pilot navigation provide lighting, harbour information & berthing facilities and have contingency plans in place in case of oil spills or grounding. (Corporate Responsibility Report, 2011) Lastly the CR cycle which is responsible for all kinds of services including cargo loading and discharging to cruise ship activities, oversees that no activity is done without taking into confidence the customer and also the local people who would be the worst affected in the event of a mishap to the environment. (Corporate Responsibility Report, 2011) 5. Absenteeism, trade unionism is not particularly encouraged and severe penalties have been imposed on acts of bribery. 6. Five sustainable development policies have been framed namely, reducing environmental risk, maximum utilisation of resources, all new growth agendas critically analyse impact on environment, effective communication of ABP policies to all stakeholders and strategic plans in case of an environmental emergency. Source: ABP, 2010, Ports of Southampton-Master plan 2009-2030 Conclusion Although ABP has identified the long terms prospects and growth of the Southampton port, its plan are being hampered by not being able to acquire the available land for expansion. Although the Marchwood defence facility has agreed to move out and provide the land for the ABP ports, the action actually taken on the ground has not been impressive. The master plan 2009-2030 though an effective action document needs to implemented in place if the Southampton ports with ABP as its operators are to compete in a high competitive environment where other ports around the world are stepping up operations to become a global player. Bibliography 1. Corporate Responsibility Report, 2011, Associated British Ports, available at http:// abports.co.uk/, [Accessed on 8th November, 2012] 2. Birgitt Brinkmann, 2011, Operations systems of container terminals: A compendious Overview, Handbook of Terminal Planning, Springer 3. Atkins, August 2011, Economic Impact of the port of Southampton, Plan Design Enable-Final Report 4. Jan Svendsen & Jan Tiedemann, 2006, Port Development in the Greater Shanghai Region, Containership-Info Special, available at http:// containership-info.net.tc/, [Accessed on 8th November, 2012] 5. United Nations, 2005, The port industry, Free trade zone and port hinterland development, available at www.unescap.org/ttdw/publications/tfs_pubs/pub_2377, accessed on 8th november 2012. 6. ABP, 2010, Ports of Southampton-Master plan 2009-2030, pp 7-131 7. Astrini Niswrai, 2005, Container Terminal Expansion to build capacity: a case study, MSc Maritime Economics and Logistics. 8. Simon Emde & Nils Boysen, 2012, Berth allocation in container terminals that service feeder ships and deep-sea vessels, Working papers in Supply chain management, available at http:// pubdb.wiwi.uni-jena.de/, [Accessed on 8th November, 2012] 9. N.Kemme, 2012, Container-Terminal Logistics, Design and Operation of automated Container storage, Springer. 10. MMO, April 2012, Marine works (Environmental Impact Assessment) Regulations 2007, p.21 11. Daganzo C.F, 1989, The Crane scheduling problem, Transportation Research part B, 23: p 159-175 Read More