Monday, June 28, 2021

Do shipowners and ports see eye to eye?

 I just wrote up the intro to a nice little thing we do with two good colleagues from Turkey: Sedat Bastug and Soner Esmer, and I though I should share it in the network, until the full article appears.

The competitiveness of ports has received its fair share of attention in the scientific literature, perhaps more than many other sectors of the economy. This, because the crucial role of ports as the indispensable nodes in fiercely competing global supply chains is becoming increasingly felt by policymakers.

Factors determining the competitiveness of ports are many, but their importance is weighed differently by different stakeholders. This is normal in piecemeal assessments, which often resemble the time-honored fable of the blind men trying to assess an elephant. For instance, (port) costs may not be ‘declared’ of equal importance by all stakeholders, with some of them opting for higher efficiency in port operations, or better access to foreign markets (connectivity and centrality arguments), or a better hinterland access. At the end of the day, however, everyone’s interest is to minimize their costs, may this be achieved from higher operational efficiency, access to markets or from any of the above.

In the absence of a systems approach, or structural modelling, in the literature of port competitiveness (a project we are currently working on), the ranking of paired-comparisons attempted in the full article through the Fuzzy Analytic Hierarchy Process (FAHP) methodology takes us half way to our final objective. There is another objective here, however, summarized in the paper’s implicit questions: Are the criteria used by carriers in selecting a port of call the same as those valued as important by the ports themselves? Do the two actors, shipowners and ports, understand each other well? What is the value of a better ‘understanding’? Would shipowners look at the larger picture (generalized costs), over and above their preoccupation with port efficiency? And would ports understand that their good fortune of having a prime port location should not allow them to rest on their laurels, but understand that more needs to be done to attract the ship? As said, our questions are implicit and so are their answers. But by showing that ports and carriers do not always see eye to eye, we have covered a lot of ground towards helping them to eventually start thinking alike.


Tuesday, June 15, 2021

Port Centrality and the ‘Composite Connectivity Index' - CCI


Port Centrality and the ‘Composite Connectivity Index’-CCI: Introducing a New Concept in Assessing the Attractiveness of (Hub) Ports

A lot of ink has been shed on the concept of (port) connectivity, following the pioneering work of Jan Hoffmann. This is particularly true these days in view of the strength of global shipping alliances (GSA) in ‘managing’ their joint supply of tonnage, and the impact this power has on the frequency of services; number o companies calling at a port; ship- and call sizes, and much more that I have covered before.

But ‘simple connectivity’ alone cannot explain the importance of a port as an international hub, its attractiveness to shippers, and its ability to develop new transshipment traffic. Connectivity needs to be combined with measures of ‘centrality’, as these are derived from network theory (no matter how well connected is a port in the Arctic, or in Tierra del Fuego, it will never assume hub-port functions). 

In our forthcoming research, I have therefore coined the term “composite connectivity”. Through the use of advanced optimization techniques and network theory (Two-Stage Data Envelopment Analysis), we first measure ‘connectivity’ and we use this measure as input to the second stage, which measures the strength of ‘centrality’. The “Composite Connectivity Index” - CCI is thus introduced as a weighted additive (or geometric) mean.