The container terminal’s traditional customer has been shipping lines such as Maersk and MSC. Since the industry began value propositions were built on attracting lines to the terminal. Terminals did this by offering services such as “on arrival berthing”, and a benchmark average berth moves per hour/gross moves per hour. The terminals direct reach was and still is limited to the shipping line. This model continued to grow and the business centered around attracting more containers by offering line’s discounts and other benefits. The terminals never really knew what cargo was inside that those 6 metal walls, and even if they knew they are unable to truly leverage that information to provide more value.
The Traditional Terminal Operator Value Proposition
Terminal operators have built their competitive advantages on geographical location, connection to the hinterland, and average productivity. They do this to increase “stickiness” with their liner customers. But, even with these 3 factors being in their control operators still, have to adjust to the whims of the lines that could change freight rates and services at any time. Such changes may lead to diversions which would lead to a decrease in overall volume. Operators would be unable to identify which shippers diverted their containers.
Terminal operators also entered joint ventures with shipping lines to reduce the risk of diversion. The line’s entered the joint venture thinking they would be able to influence terminal efficiency with this method, believed they could provide enough cargo to take the advantage of the economies of scale and, improve their own business networks. With this model, the lines were traditionally seen as the dominant figure in the space. Port’s catered to them and depended on the line’s to supply them enough cargo to take care of their high fixed costs.
Today the port experience is largely geared to transporters moving their cargo to and from the vessel as efficiently as possible. The product being offered is a competitive price for terminal handling, an average productivity, low dwell time fees for containers, and secure cargo security. This has resulted in terminals that are more productive to attract more lines. In developing countries where terminal infrastructure is limited, this model has led to monopoly-like profits for port operators due to lack of competition. But in developed countries, terminal operators need new ways to re-invent themselves.
The Insights Ports Have
Ports have always have had a tremendous amount of data and insights on shipper’s, carriers, and the cargo. They just have not been able how to leverage these insights, to provide more direct value to the end customer-the shipper.
In terms of container visibility within the port, the terminal operators have always had more visibility than the line during the journey from the In Gate to Yard to Vessel. Every time stamp is recorded in the terminal’s TOS. Compared to the line’s system of trying to track through a system electronic data interchanges, the journey is much clearer to the port.
Shipper data also flows through a terminal’s systems in the form of manifests and advance lists. Terminals also have community systems that can be extended to the shipper to ensure smoother entry and formalities into the terminal. The means the operator could have to information such as “cargo owner name” and “goods description”. By having these insights operators should be able to identify routes goods are moving on and should be able to identify the key supply chains moving through the terminal.
A New End to End Logistics Product
With these insights available, it seems possible for terminals to transform themselves into complete supply chain companies. This expansion of digital services targeted at improving supply chain execution could rival the high margins traditionally seen in terminal operations in gateway ports.
The terminal operator will have the ability to influence and secure catchment of cargo by leveraging the data insights and turning into a complete logistics company. For example, a large volume of chemicals is being imported in 40-foot boxes from the Port of Houston to West Texas for manufacturing. By knowing this Houston should start extending services such as transportation to connect import movements with export movements originating from West Texas. These insights would allow Houston to start securing this cargo and decrease the likelihood of diversion to a nearby port in Louisiana.
With this type of control and insights on the port’s natural cluster, the terminal operator would be able to influence the logistics cost of potentially both shipper and consignee, giving them an advantage over other port’s trying to divert the cargo. This newly added efficiency in supply chain efficiency for the West Texas Shipper could give the terminal a cushion in total logistics cost when competing with other logistics player’s who are trying to divert the cargo. This cushion is important in situations where the line tries to divert services or increase ocean freight, as it can help the port maintain the most efficient total logistics. With this model it is likely shipper itself will be enjoying very efficient logistics prices, thus will be reluctant to change providers.
In this new model, the terminal operators will directly connect with the shipper. As the world shifts toward more digitized services, it is critical for operators to be able to influence the end customer experience with a complete end to end solution.
The Risk of Being Disrupted
If the terminal operator is unable to extend its reach; there is a greater risk that the business will become commoditized. In this future terminals would provide the same level of productivity and lines will be able to exert more control in deciding which shipper’s cargo goes to which terminal.
A Possible Future
Terminal operators will be able to transform into a complete end to end logistics provider once they are able to harness their data. This complete data insight could potentially, lead to the port itself to driving and influencing an entire supply, chain. In this future the terminal operator has started leveraging its data on the flow of goods to move goods at the most efficient method, at the most efficient time, providing them with the most efficient cost.
The port is a unique entity in the supply chain experience with its visibility on freight, the shipper and carriers. This gives it an opportunity to become a pioneer a transforming logistics world, where digitization is still limited to incomplete solutions due to lack of complete visibility. The port’s unique place within complicated supply chains provides it with a unique opportunity where the operator itself can start orchestrating and controlling supply chains.
