MARIT. POL. MGMT.

, JANUARYMARCH
VOL.

31,

NO.

2004

1, 4767

A logistics and supply chain management

approach to port performance measurement
KHALID BICHOU and RICHARD GRAY*
Centre for International Shipping and Logistics, Faculty of Social
Science and Business, University of Plymouth, Plymouth PL48AA,
Devon, UK
Although there is widespread recognition of the potential of ports as logistics
centres, widely accepted performance measurements for such centres have yet to
be developed. The essence of logistics and supply chain management is an integrative approach to the interaction of dierent processes and functions within a
rm extended to a network of organizations for the purpose of cost reduction and
customer satisfaction [1]. The logistics approach often adopts a cost trade-o
analysis between functions, processes and even supply chains [2]. This approach
could be benecial to port eciency by directing port strategy towards relevant
value-added logistics activities. This paper seeks to show that through conceptualizing ports from a logistics and supply chain management approach, it is possible
to suggest a relevant framework of port performance. A proposed framework is
tested in a survey of port managers and other international experts.

1. Introduction
Measures of port eciency or performance indicators use a diverse range of
techniques for assessment and analysis, but although many analytical tools and
instruments exist, a problem arises when one tries to apply them to a range of
ports and terminals. Ports are very dissimilar and even within a single port the
current or potential activities can be broad in scope and nature, so that the choice
of an appropriate tool of analysis is dicult. Organizational dissimilarity constitutes
a serious limitation to enquiry, not only concerning what to measure but also how to
measure. Furthermore, the concept of eciency is vague and proves dicult to apply
in a typical port organization extending across production, trading and service
industries.
Ports are complex and multipart organizations in which institutions and functions
often intersect at various levels. This paper distinguishes between logistics, trade and
supply channels. The interaction among these three channels makes it dicult to
identify which institutions are (or could be) performing what functions in the port
system. The logistics channel consists primarily of specialists that facilitate the
ecient progress of cargo through a supply chain (e.g. shipping lines, freight
forwarders). Both the trade channel and supply chain are associated with ownership
of goods moving through a system of interacting organizations, with the dierence
that the trade channel is normally perceived to be at the level of the sector or

* Author for correspondence. e-mail: rgray@plymouth.ac.uk

Maritime Policy & Management ISSN 03088839 print/ISSN 14645254 online # 2004 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/0308883032000174454

48

K. Bichou and R. Gray

industry (e.g. the oil trade) and the supply chain at the level of the rm. It is important to make this distinction because, although there are industry-wide conventions
based on factors such as the nature of the product or the structure of the industry,
it is also true that individual companies have their own corporate culture based on a
variety of factors. Industry-wide conventions are often associated with regulation,
enforcing standards, reducing uncertainty, information exchange, supporting mutual
interests, or developing a common identity [3]. Traditionally, bulk maritime transport tends to be analysed by trade (crude oil, iron ore, fertilizers, etc.) and even
smaller consignments are merged into a trade category traditionally called general
cargo. Industry- or trade-wide markets have existed for centuries. For example, the
origins of the London Metal Exchange can be traced back to 1571 [4] and the Baltic
Exchange was founded about 250 years ago [5]. More modern developments attempt
to enhance the supply chain performance of individual members at the trade channel
level making use of developments in e-commerce. For example, since 2000, major car
manufacturers have combined eorts to form a single global business-to-business
supplier exchange working with manufacturers, suppliers and industry trade groups
to ensure supply chain eciency [6].
Nevertheless, much literature on supply chains is oriented at the level of the
rm [7]. A supply chain is dened as a set of rms that pass materials forward [8];
an alignment of rms that brings goods or services to market [9]; or a network of
organizations that, through upstream and downstream linkages, produce value in
delivering products or services to the ultimate consumer [10]. The emphasis on the
level of the rm means that the term supply chain management is frequently used,
although it is dicult to nd a universally agreed denition because it has emerged
from a number of disciplines [1112]. Indeed, the terminology has not yet stabilized
and alternative expressions such as network sourcing, supply pipeline management,
value chain management, and value stream management are also used [13]. Products
or services can move through or along networks, channels, chains, pipelines or
streams.
Ports have an important role to play in the integration of all three types of
channel. There are many organizations occupied (or potentially occupied) with
logistics and supply chain integration within and around ports, mainly in the role
of logistics channel facilitators (ocean carriers, land-based carriers, port operators,
freight forwarders, port agents, etc.), but also as public institutions such as Customs
authorities. This paper seeks to adopt an approach that incorporates within a valid
framework of analysis existing measures of port performance and eciency, the
association of ports with logistics and supply chain management, and appropriate
measures of logistics and supply chain management eciency.
2. Background literature
2.1. Port performance and eciency
UNCTAD [14] suggests two categories of port performance indicators: macro
performance indicators quantifying aggregate port impacts on economic activity,
and micro performance indicators evaluating input/output ratio measurements of
port operations. In this paper, we focus on the micro level. Various references,
particularly UNCTAD monographs, provide a range of port indicators by ratiotype and category of operation [see, for example, 1518].
There are many ways of measuring port eciency or productivity, although
reducible to three broad categories: physical indicators, factor productivity

A logistics and supply chain management approach

49

indicators, and economic and nancial indicators [19]. Physical indicators generally
refer to time measures and are mainly concerned with the ship (e.g. ship turnaround
time, ship waiting time, berth occupancy rate, working time at berth). Sometimes,
co-ordination with land modes of transport is measured, e.g. cargo dwell time or the
time elapsed between cargo being unloaded from a ship until it leaves the port.
Factor productivity indicators also tend to focus on the maritime side of the port,
for example to measure both labour and capital required to load or unload goods
from a ship. Similarly, economic and nancial indicators are usually related to the
sea access; for example, operating surplus or total income and expenditure related to
gross registered tonnes (GRT) or net registered tonnes (NRT), or charge per twenty
foot equivalent unit (TEU). Port impacts on the economy are sometimes measured
to assess the economic and social impacts of a seaport on its respective hinterland or
foreland. The results may be provided in port statistics, e.g. the port of Rotterdam
[20] or by research institutes such as ISEMAR in France [21].
The traditional port measures focus on sea access rather than land-side connections, and there is a need for better measurement of land-side eciency. For
example, on East Coast North America (ECNA) port productivity has been stagnating, particularly in the context of land-side operations [22]. Many ports, particularly
those in urban areas, have inadequate land-side connections. Land-side eciency
also needs to be addressed when ways are sought to expand port capacity [23]. Port
capacity is dicult to measure or even to dene. It is, nevertheless, likely to be easier
for a port to make better use of existing capacity rather than subsidize new transport
infrastructure [24]. A logistics and supply chain approach may achieve better use of
port capacity.
Port activities are usually measured by cargo output or through production
functions. In the rst case, the assessment of eciency is based either on the
contribution of a single factor productivity to port throughput such as output
per worker [25] or output per wharf [26], or on the measurement of total cargo
handling productivity [2728], where performance evaluation equates port operations to the production function [2930]. Much empirical research falls under this
category and seeks to compare actual output to optimum output using the frontier
method [31].
Frontier models have assessed port eciency both within a single country [32] and
across dierent countries [33]. Recent models propose or use data envelopment
analysis (DEA) to evaluate port eciency [3437]. A detailed review of such techniques for measuring port eciency is provided by [38]. Such techniques do not
always provide consistent results. For example, Cullinane et al. [39] suggest that
the size of a port or a terminal is positively correlated with its eciency, whereas
Coto-Millan et al. [40] found that larger ports are more likely to be economically
inecient. Such apparently conicting results suggest that generalization is dicult
and that the complex structural organization of ports is a major obstacle to conducting valid port performance measurement and comparison. Another limitation of
the frontier model literature is that it has focused mainly on container terminals. In
fact, this is a common denominator for much of the literature on port eciency and
performance measurement.
Some approaches look at ports as business organizations with performance
measurement based on prots. For instance, Leonard [41] analyses port performance
and comparison from a value-added perspective. Value-added in this context is
dened as the dierence between port revenues and port costs, and varies according

50

K. Bichou and R. Gray

to ship and cargo types. An index adjustment with coecients for each ship/cargo
type is produced. Despite its originality, Leonards model limits port activity to
quay-side operations (i.e. ship services and cargo handling) neglecting other portrelated activities. It also assumes that all ports undertake the same pricing and
marketing strategy based on a universal estimation of ship/cargo-type value.
The techniques and methods mentioned above largely ignore aspects of logistics
and supply chain integration relevant to a ports role and potential in the modern
international trading system. Conceptual and organizational dierences explain the
variety of measures, but also underline the diculty and complexity of port performance measurement and comparison. As long as there is no unanimously accepted
approach to the roles and functions of ports, the subject of what and how to measure
will remain debatable.
2.2. Review of port literature relevant to logistics and supply chain management
In the port and shipping literature, few authors have addressed the issue of logistics
and supply chain management within ports and across their network of organizations, and many published works adopt a fragmented approach to port operations.
Although current literature recognizes the role of ports as integral components of
distribution systems, many studies disaggregate total port operations and focus on
single or a few elements of port activity. Literature on port logistics has only
developed over the last two decades or so, for example by UNCTAD through a
series of monographs on port management and operations, or the World Banks
Port Reform Tool Kit describing recent trends in port management and suggesting
a framework for port reform and development. UNCTAD denes third generation
ports as those oering value-added services (e.g. warehousing, packaging) in
addition to cargo handling, and fourth generation ports as those that are
separated geographically but with common operators or administration, such as
by global multi-port companies [42]. In an eort to assess the logistics potential
of ports, Harding and Juhel [43] distinguish between general logistics services
(GLS) and value-added activities or logistics (VAL), with the latter being a common
feature of containerised and general cargo. They highlight the increasing role of
ports as distriparks or dedicated areas for both GLS and VAL. They also
point out the future of inland logistics centres or dry ports (e.g. inland container
depots) for logistics operations that do not need to be carried out in the seaport
area.
Much of the literature advocating the future of ports as logistics centres highlights
their nodal role in the changing patterns of maritime and intermodal transport
(e.g. hub and spoke systems), but overlooks logistics integration of the various activities performed within the port organization itself. Most published articles address
separately dierent aspects of port management (cost-analysis, marketing, strategic
planning, etc.) without incorporating them into an integrated logistics framework of
customer service, total costs or trade-o analysis. For instance, the question of the
total cost that a cargo bears throughout dierent port operations up to the nal
customer or user does not appear to have been discussed in the academic literature.
The same applies to competitive benchmarking between the management of seaports
and that of other entities with similar operational features, e.g. airports or regional
distribution centres [44, 45].
For some [4647], this fragmented approach is mainly due to the complex
organizational structure and management of ports, although recent port privatiza-

A logistics and supply chain management approach

51

tion schemes may have made it relatively easier to apply an integrative logistics
approach to port operations. Fleming and Baird [48] consider that the lack of a
competitive community spirit among dierent port actors (e.g. customs authorities)
is largely behind the diculty of managing activities from a logistics perspective.
The complex organizational structure of ports has always been a central issue
in most aspects of port management, and probably constitutes the major obstacle
to the development of a comprehensive conceptual framework of port logistics
management.
Supply chain management extends the principle of logistics integration to all
companies in the supply chain through strategic partnerships and co-operation
arrangements [49]. Some regard the next challenge of supply chain management is
to manage pliant ows so as to ensure that all parts of the chain oscillate together
in an holistic fashion [50]. In similar vein, others stress the need for agile supply
chains in order to survive in a rapidly changing global environment [51]. Paixao and
Marlow advocate the application of agility to the port environment, proposing that
ports should be proactive rather than reactive along supply chains in a modern
globalized world economy [52].
In general, only two concepts that can be associated with supply chain integration
in the context of ports, namely intermodalism and organizational integration, appear
to have captured widespread attention in the academic community. The word
intermodalism is usually associated with the inter-links between dierent transport
modes and nodes, not only as a technology but also as an interorganizational
process. Thus, there is a call for a framework of systems thinking and process
integration for intermodalism [53], and for organizational integration and partnership prior to achieving an eective intermodal system [54]. As far as seaports are
concerned, most studies associate intermodal development with aspects of container
port management [5556]. Morash and Clinton studied the role of intermodal
capabilities in international supply chains through a comparative analysis of the
USA, Japan, Korea and Australia [57]. Their survey shows that in a deregulated
and global environment, the contribution of the intermodal function in international
supply chains takes on more importance in countries where organizational eciency
and co-operation is highly achieved. Organizational co-ordination is of paramount
importance to any successful intermodal planning and management [58]. For
shipping and port businesses, highly competitive logistics channels are required to
compete against other forms of intermodal transport such as landbridges.
Developments in patterns of sea-borne trade (e.g. round-the-world trips, triangular
routes, hub and spoke systems) are typical examples of partnership arrangements
that are benecial to all members in the intermodal chain.
In the context of organizational integration, we are in an era of substantial
restructuring of the logistics channel [59]. Typical examples include carriers ownership and/or management of ports or terminals, freight forwarding agencies, logistics
providers, and even IT and e-commerce companies [5061]. Sometimes it may be
dicult for members of the international logistics channel to integrate. For instance,
integration between shipping lines and ports is dicult to implement if both parties
try to optimize the use of their respective assets (ships versus berths and warehouses)
by transferring costs to each other. Other types of international logistics channel
conict may be between freight forwarders and shipping lines or between freight
forwarders and ports. Taylor and Jackson [62] rank ocean carriers as the most
dominant in the current organization of international logistics channels for container

52

K. Bichou and R. Gray

and intermodal transport, whereas logistics channels of bulk commodities are more
likely to be controlled by shippers or their agents.
Ports rarely control logistics channels although they are key institutions in
international shipping and logistics. Some may argue that the emergence of global
port operators (GPOs) is an eort by ports to control logistics channels, but GPOs
often have other business interests, including as shipping lines. In any case, the
nature of ports as non-movable assets facing the growing number of footloose
arrangements (both from shippers and shipping lines) does not encourage a close
collaboration nor a long-term partnership among channel members in the port and
shipping industry.
Nevertheless, ports could be more proactive in the supply chain [63], and, despite
channel conict, ports should be seen as key elements in value-driven chain systems,
contributing to supply chains through the creation of competitive advantage and
value-added delivery [64]. Robinsons [65] model of the port value chain, albeit
limited only to the logistics channel, depicts various ows and relationships in
a typical port organization. They range from completely fragmented systems of
shipping line, shipping agent, customs agent, stevedore, freight forwarder, inland
transport, etc. to a fully functionally integrated system controlled by mega-carriers.
2.3. Review of relevant logistics and supply chain measurements
Many techniques of logistics measurement adopt ratio instruments of nancial
reporting and productive eciency. For instance, logistics performance is assessed
through productivity and utilization measurement [66], or by applying the DEA
model to international channel productivity [67]. Most of the available logistics
measurements correspond to a rms internal functions and processes. For example,
a report by the European Logistics Association [68] arranges logistics performance
measurements into eight groups, but does not organize them into an integrative and
comprehensive framework. Measurement techniques that have gained recognition
from logistics professionals include activity-based costing (ABC) and total cost
analysis (TCA). The former proposes an evaluation of the costs of a rms activities
based on the actual resources and time consumed to perform them [69], whereas the
latter proposes a trade-o analysis among dierent internal functions to minimize
the total cost [70], while at the same time maintaining customer satisfaction [71].
The use of TCA is extended to external logistics performance by integrating various
ows and processes in the supply chain [72].
In the area of supply chain management, the academic literature has been less
successful in providing valid tools for performance measurement [73], and most
performance measurements have been initiated by practitioners or consultants
rather than through academic research. Exceptions include Kaplan and Norton
[74] who combine several dimensions of performance measurement. They provide
a linear cause-and-eect model claimed to serve both measurement and management objectives. The Supply-Chain Operations Reference (SCOR) initiative
undertaken by the Supply-Chain Council (SCC) attempts to integrate process reengineering, benchmarking, and process measurements into a cross-functional
framework [75]. Holmbergs model [76] proposes a conceptual framework of performance analysis throughout a systems approach to supply chain measurement.
Process benchmarking is a technique that proposes the collaboration of all
members in the supply chain for the purpose of process comparison and performance analysis [7778]. Institutions at the trade channel level can play a valuable

A logistics and supply chain management approach

53

and neutral role in benchmarking. Any valid performance model, within a logistics
and supply chain management context, should integrate dierent measures of
internal activities and link them to measurement activities of other entities in the
supply chain [79].
3. Towards a logistics and supply chain approach for ports
From the above discussion, it appears that there may be a methodological diculty
in linking supply chain performance measurements to ports. Traditional port
management is often typied by institutional fragmentation and conict with
other members of the logistics channel, whereas the supply chain management
philosophy advocates process integration and partnership. A systemic approach to
port performance is required. The systems approach should allow a neutral and
objective perception of a problems denition and investigation, and particularly
helps in overcoming the obstacles of channel identication and conicting standpoints. However, despite successive attempts to apply the systems approach to
operational problems in shipping and ports (e.g. [8082]), very few would claim to
apply the concept of systems thinking to the whole port organization [83].
The role of ports exceeds the simple function of services to ships and cargo. Apart
from their role as the traditional sea/land interface, ports are a good location for
value-added logistics, in which members of dierent channels can meet and interact.
Thus, the port system not only serves as an integral component of the transport
system, but is also a major sub-system of the broader production and logistics
systems. Perceived from an integrated logistics, trade and supply channel approach,
ports can claim further roles and dimensions. From a logistics standpoint, the port is
a very important node since it serves as an intermodal/multimodal transport intersection and operates as a logistics centre for the ows of goods (cargo) and people
(passengers). From a trade channel perspective, the port is a key location where
channel control and ownership can be identied and trading take place. The port
not only links outside ows and processes but also creates patterns and processes of
its own. At this level, ports are one of the very few networking sites that can bring
together various members of the supply chain. This new approach, illustrated in
gure 1, extends the traditional port system to an integrated channel management
system where the port stands as a key location linking dierent ows and channels
with their members.
Figure 1 represents the current and potential interactions of the three classes of
channels with a port and assumes the existence of four ows or processes (physical
ows of goods and cargo, capital ows, payment ows and information ows)
common to all commercial cargo ports. In gure 1 the integrated port management
system refers to the aggregate management of the port community regardless of the
specic details of port ownership and organization. Often, the port authority ts
perfectly in this role (for service and tool ports), but with current trends in landlord
organizational structure the port authority may be more concerned with property
and estate development than goods transfer or cargoows management. Following
recent strategies of vertical integration by carriers (e.g. into terminal leasing and
ownership), shipowners are sometimes associated with port management. Shippers
are also sometimes perceived as shipowners (industrial or bareboat shipping) and
even as port managers (dedicated oil or car terminals). In these cases, all such
institutional types are part of the integrated port management system. Other external
members inuence the port system without being an integral part of it, e.g. business

54

K. Bichou and R. Gray

External world

Integrated port system

Traditional port system
Resource
allocation

Port development
and strategic planning

Port manager

Potential interactions

Current interactions

Capital
flows

Trade channels
(service pro viders)

Information
flows
Supply channels
(shippers)
Payment
flows

Physical
flows

Figure 1.

Logistics channels
(shipowners,
intermediaries, landside
transport)

Interactions of channels in an integrated port management system.

associations, public regulators, trade unions and nancial institutions. Actors and
operators within the port community system (stevedores, multimodal transport
operators, logistics providers, etc.) are sub-members of the port management system,
and not part of the external world.
Figure 2 links dierent components throughout a chain of inuence and relationships. The upper part of the model shows external drivers of change and associates
them to management concepts of logistics (internal integration) and supply chain
management (external integration) within the context of an integrated port management system. The lower part of the model depicts core management disciplines, both
operational and strategic, and traces their contribution to performance management
systems. Note the links between logistics and operations on the one hand, and supply
chain management and strategy on the other hand.
The key performance indicators (KPI) for ports form the focal point of the model
and integrate both the port management system and the performance management
system. Since the objective of our investigation is to propose a valid framework of
port eciency and performance management, a combination of the two components
should constitute the central issue of analysis. The next stage is to develop a model of
port performance measurement as an interim stage on the way to developing a
working KPI model for ports (see gure 3).

A logistics and supply chain management approach

Evolutions in global
production and trade
channels
Structural changes in
international logistics
Intermodalism
Vertical integration
Outsourcing
Logistics patterns of
maritime transport

Ports as logistics
centres
Strategic
management

Value to the
customer

Channel management and

inter-firm process
integration
External integration
Supply chain mgt

Port management
system

KPI model for ports

Performance
management system

55

Developments of
production
manufacturing and
distribution
management systems
Total costs
Trade-off analysis
Modern inventory
systems
Customer service

Internal integration

Improvement

Implementation
Operational
management

Operational
productivity

Figure 2.

Inuences on a key performance indicator (KPI) model for ports.

4. Methodology
4.1. Action research
The methodology adopted for this study works within the action research paradigm.
Action research is a process suitable where change is the main research subject, and
the researcher participates in the change process. It requires a close relationship and
collaboration between practitioners and researchers, made possible in the research
described in this paper when one of the authors undertook a short-term appointment
with the World Bank. Action research is most suitable for technique development or
theory building, but is less suitable for hypothesis testing [84]. Its advantage over
traditional survey approaches is that the latter tend to be past-oriented or snapshots [85], whereas action research is a forward-looking process with implications
beyond the immediate project. Action research is undertaken by using an appropriate intervention technique analogous to experimentation [86]. The technique used in
this approach is to present port managers and other experts with a model of port
performance for examination and assessment by them, leading to an improved
model. This technique is supported by a questionnaire of port managers focusing
on performance indicators.
4.2. Exploratory investigation into feasibility of port performance model
As an exploratory investigation, individuals with dierent types of expertise related
to ports were approached to comment on the relevance and feasibility of the

56

K. Bichou and R. Gray

LOGISTICS
1. Design internal logistics process
Current sequence of port operations
and activities
(ship-type and cargo-type)

2. Current performance
Performance = Profit
Performance A

3. Improvement of
internal process
TCA/VAD/customer
service

4. Performance B

Aggregate
performance

SUPPLY CHAIN
5. Design supply chain process
By cargo: logistics channel
By trade: trade channel
By customers/suppliers: supply
chain

6. Current performance
Performance = Channel
output/profit
Performance C

Supply chain management

8. Process benchmarking
9. Collaboration and partnership

11. New
performance
Performance D

Figure 3.

7. Identify competitive
channels
Within the port market
Within the port industry
Beyond the port sector
10. New channel
organization

Interim model of port performance measurement (see also Appendix).

proposed model, shown in gure 3 with covering notes (see appendix). The participants consisted of three panels of experts, namely:
Ports Panel (1). 45 employees drawn from a sample of 60 ports world-wide, of
which 35 ports have completed projects nanced by the World Bank. Continents
or regions represented by the sample were: for World Bank nanced ports
(Africa, Asia, Central and Latin America, Europe); for other respondent ports
(Australasia, Europe, Asia, North America).
International Institution Panel (2). Fourteen employees of international
institutions (mainly World Bank Group) drawn from a sample of seventeen
originating from eleven countries.
Academics and Consultants Panel (3). Fourteen academics and other experts:
drawn from a sample of seventeen academics, three consultancy rms, and three
independent (freelance) consultants originating from eleven countries.
The nature and limitations of the research inquiry shaped the size of each panel of
experts. The number of qualied participants, especially in the academic and consultant panel, is very limited world-wide and budget constraints did not allow the
enlargement of group members to more than 100 or so participants. Out of 57 ports
that have completed projects nanced by the World Bank Group (WBG) between

57

A logistics and supply chain management approach

Table 1.

Number and percentage of responses by each panel of experts.

Number of
participants

Number of
responses

Responses as
percentage

Ports nanced by the WBG

Other sampled ports
Total Panel 1

35
25
60

31
14
45

89
56
75

World Bank sta and consultants

IMO expert
UNCTAD experts
OECD expert
Total Panel 2

13
1
2
1
17

12
1
1
0
14

92
100
50
0
82

Academics
Consultants
Total Panel 3

17
6
23

12
2
14

71
33
61

Grand Total

100

73

73

Panels of experts

1985 and 2000, 35 ports were contacted. 25 other ports were also approached to
reect a wider variety of organizational, operational and managerial features of
ports.
A combination of interviews and questionnaires were prepared for each panel of
experts, consisting of:
. An on-line questionnaire was designed exclusively for port managers in order to
investigate their perception of logistics concepts and processes. In some cases,
surveys were conducted and administered over the telephone.
. A model (see gure 3) was examined and assessed by all participants.
. Extensive telephone and face-to-face open interviews were used to contact
Panels 2 and 3.
Both open-ended and closed questions were used depending on the type of information required.
The high response rate (73%) is attributable to the careful selection of participants showing a direct interest in the subject of inquiry, and in particular to the
established contact base through the WBG. Repeated telephone calls and emails
helped to raise the response rate. The varying degrees of association of 43 participants (59%) with the WBG could constitute bias, but it was considered acceptable
given the wide range of ports, countries and types of expertise represented by the
participants.
5. Analysis and results
5.1. Questionnaire responses and analysis
The questionnaire investigated current techniques of port performance measurement. The 45 respondent ports conrmed the regular use of combined indicators
for both internal and external performance evaluation. As shown in table 2, nancial
measures are the most commonly used, closely followed by throughput measures for
internal performance, whereas productivity and economic-impact indicators become
more prominent for external comparison with other ports.
Most ports were not satised with the current indicators (see table 3).
However, when asked about logistics techniques for performance measurement

58
Table 2.

K. Bichou and R. Gray

Respondents cumulative ranking of performance indicators by frequency of use.
Internal
performance

External
comparison

Cumulative
responses

Number of
mentions

% of
total

Number of
mentions

% of
total

Combined
mentions

% of
grand total

44
37
24
7

38.3
32.2
20.9
6.1

35
43
35
25

25.2
30.9
25.2
18.0

79
80
59
32

31.1
31.5
23.2
12.6

2.6

0.7

1.6

Financial indicators
Throughput indicators
Productivity indicators
Economic-impact
indicators
Others
Total

115

Table 3.

100

139

100

254

100

Satisfaction with current performance indicators.

Replies

Very satised
Satised
Neither one nor the other
Dissatised
Very dissatised

5
3
13
16
8

Total

45

Table 4.

%
11.1
6.7
28.9
35.6
17.8
100

Use of logistics techniques for performance

measurement and management.
Replies

Always
Often
Sometimes
Very few times
Never

2
7
11
15
10

Total

45

%
4.4
15.6
24.4
33.3
22.2
100

and management over half of the ports replied that they use them very seldom or
never (see table 4).
Although responses may reect a lack of interest in logistics operations and
management, an alternative explanation may be the diculty in understanding or
applying logistics concepts and measurement techniques.
Respondents were also surveyed about aspects of channel relationships and
co-operation, being asked to recognize and rank their customers/suppliers out of
seven categories of organizations in order of importance. The cumulative score
(high most important) of rankings shows shipping lines as most important, but
closely followed by freight forwarders and NVOCCs, shippers, inland transport
providers and port operators (see table 5).

59

A logistics and supply chain management approach

Table 5.

A rating scale analysis of participants main customers and suppliers.

Type of customer/
supplier
Shipping lines
Freight forwarders and NVOCCs
Shippers
Inland transport providers
Port operators
General public
Others (e.g. public authorities)
Total count

Cumulative ranking score

(numbers)

Cumulative ranking score

(%)

254
236
235
202
198
83
52

20.1
18.7
18.6
16.0
15.7
6.6
4.1

1260

100

The fact that shipping lines do not dominate in the rankings suggests a strategic
commitment of ports as a group to diversify their client portfolio, and be less reliant
on the decisions of shipping lines. This was conrmed by 63% of respondents
regarding themselves in competition with their suppliers (mainly shipping lines
and freight forwarders), and many consider this competition to focus on the cost/
price and sometimes the marketing of port services. Furthermore, other ports
(almost 21%) claim to act in conict with their major suppliers and customers. In
this context, ports expressed their concern about the current practices by shipping
lines and freight forwarders who may suddenly change the port of call or operation
sometimes without notice. Ports take a particular interest in the recent mergers
and acquisitions in the shipping and port industry, and the resulting footloose
operations. Nonetheless, the majority of ports (85%) expressed their interest
in collaborating with other logistics channel members and developing current
co-operation arrangements (e.g. information sharing through EDI) to a more
advanced partnership to the benet of all participants.
5.2. Comments by expert panels on model validity
Figure 3 and the appendix [87] present a model applying logistics and supply chain
management concepts to port performance measurement. The model was sent to and
discussed with dierent participants to assess its validity and feasibility within the
context of port operations and management. Responses varied in many aspects,
although all considered the model valid as a rst initiative that looks at port
eciency from the perspective of logistics and supply chain management. The following sections present and analyse the responses by each of the three expert panels.
5.2.1. Panel 1: Ports. Almost all respondent ports have measured eciency in a
way similar to that of Performance A in the model. However, about half (53%)
mentioned the problems of accountability and process continuity in performance
control and management. Members of the port community still disagree on which
actor or operator should bear the responsibility and authority to collect data, measure and assess the overall port performance. Some ports do not know where their
logistics process (or activity sequencing) starts and particularly where it ends, simply
because many activities are at the interface between the port area and the outside
world (e.g. industrial parks).
For further stages of performance measurement (stages 3 to 11 in gure 3), most
respondents approved of the logistics and supply chain management integration

60

K. Bichou and R. Gray

despite their unfamiliarity with concepts and techniques introduced in the model. 31
ports (69%) considered that Performance B would be an improved measure of port
performance. Of these, 18 ports already applied a variation on Performance B to one
or several segments (cargo type, ship type, etc.) while the remaining 13 ports only
approved the method without implementation. The continuous improvement of
internal processes through total cost and trade-o analyses is of interest to ports,
and many support the use of TCA as a tool for the measurement of ports aggregate
eciency. Even so, over 90% of replies in support emphasized the need for
appropriate organizational structures or integration of the port community prior
to implementation.
With respect to channel organization (stages 6 to 11), 87% of respondent ports
suggested major obstacles in successfully designing and managing their channels.
Some ports attributed these limitations to the lack of reliable data and information
while others explain such a problem by the complexity of channels and the confusion
that surrounds their categorization. Many respondents admitted diculty in understanding the complex and changing logistics and trade channels, and that in most
cases they do not participate in the design and management of channels.
Nevertheless, nearly all ports appreciated the concept of channel organization and
supported shared management with other channel members based on long-term
partnership arrangements. There were 102 citations of the word partnership and
related terms.
Performance measurement through supply chain management was even more
dicult to understand and apply. Most respondents could not compute quantitatively the overall channel output (performances C and D) nor had they been able to
use and apply some of the proposed techniques of analysis such as process benchmarking. In their comments on the measurement of supply chain performance, 19
ports (42%) approved the method, 9 (20%) considered it impossible or too dicult
to implement and 17 ports (38%) remained undecided about the validity and practicability of the proposed techniques. Such a high proportion of undecided responses
suggests that many ports are unfamiliar with the concepts and practices of channel
organization and management.
Subsequent informal communications with 25 ports (out of the 45 total port
respondents) conrmed these results. There was substantial misunderstanding
of the concepts or techniques of process management, channel output and benchmarking.
In conclusion, it appears that most ports are already aware of their logistics
potential and try, although sometimes unsystematically, to apply logistics techniques
for performance measurement and analysis. Nevertheless, they lack an understanding of supply chain management concepts and consequently an ability to apply the
related techniques to identify, manage and assess channel output and performance.
5.2.2. Panel 2: International institutions. The procedure of data collection and
analysis for the second panel was very demanding and time-consuming, conducted
through extensive telephone and face-to-face interviews. The panels responses
suggest a general awareness of the potential for ports in the evolving global logistics
climate.
All respondents supported the application of a logistics and supply chain
approach to port management and performance measurement. They pointed out

A logistics and supply chain management approach

61

the need to generalize these concepts beyond container-related activities to all types
of ships and cargo movement.
All respondents considered the proposed technique for performance evaluation
through internal process mapping (stages 1 to 4 of the model) particularly interesting. They consider logistics activity sequencing and segmentation, if applied within
the framework of the port system an innovative tool of analysis. This reects a
frequent criticism of conventional nancial techniques, where, for example, the original cost and prot estimates of most World Bank Group port projects carried out
between 19501990 were lower than expected. This is due to intense competition
among contractors as well as inaccurate trac forecasting. Such biased estimates
could not measure real improvement in port eciency.
The proposed analytical framework has the advantage of computing the real
performance by sequencing port operations (Performance A) and continuously
improving them (Performance B). In this way, every project seeking to improve
port organization and management can be assessed through the measurement of
the real performance before and after the projects implementation. Respondents,
however, stressed the need to quantify further the proposed tools and instruments of
performance measurement. In addition, respondents suggested training assistance
and guidance such as IMO model courses and UNCTAD monographs prior to
using, applying and generalizing any of the proposed techniques.
The proposal to design, manage and improve supply chain processes in which
ports are active members appealed to almost all participants (93%) with only one
respondent questioning the relevance of the whole approach. The suggested techniques for channel eciency measurement (performances C and D) would only be
practicable with adequate information access and sharing among dierent channel
members. Partnership and collaboration seem to be the key elements for the success
of any performance improvement and channel management. Respondents stated the
need to expand and develop current co-ordination arrangements between channel
members in international shipping and logistics to a closer partnership aimed at
reducing total distribution costs and increasing the eciency of the integrated
logistics system.
5.2.3. Panel 3: Independent academics and consultants. The response rate for this
group was lower, with more than half of responses commenting on aspects other
than those primarily requested, e.g. the models design and presentation.
Respondents largely (83%) supported the contents and objectives of the proposed
model, but three key conditions prior to implementing or generalizing the proposed
model emerged from this group.
First, it is necessary to quantify the proposed techniques of performance measurement. In order to assess performances C and D it is essential to provide the port
manager with quantiable and visible ratios and formulae capable of designing,
correlating and computing the contribution of both individual and aggregate channel output. Second, respondents cast serious doubts on the usefulness and relevance
of segmenting trade channel processes since the real contribution of seaports in
international trade channels is not that obvious. Finally, the dierent concepts,
procedures and techniques introduced in the proposed model should be both further
detailed and simplied. Port managers are not very familiar with logistics and supply
chain concepts, nor are they willing to apply them without a clear and detailed
description. In this regard, some proposed changing the layout of the proposed

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K. Bichou and R. Gray

model into cyclical diagrams with inter-related stages and procedures evolving
around evaluation, implementation and re-evaluation.
6. Conclusions
The research aims at conceptualizing the port system from the perspective of logistics
and supply chain management, and suggesting a valid framework of eciency measurement capable of reecting the logistics scope of port operations and complementing, if not replacing, the conventional methods for port performance measurement
and management biased towards sea access. By adopting a structured approach and
methodology and involving a range of interest groups, the authors tried to ensure
a valid and reliable inquiry given the time and cost constraints.
The results show a common interest in logistics and supply chain management
concepts across the various panels of experts. Respondents from the port group
showed a lack of familiarity with logistics and supply chain management concepts,
especially those related to logistics integration, benchmarking and channel design,
although there is common recognition of ports as key logistics and distribution
centres.
An important conclusion relates to channel control and management.
Respondent ports mention the problems of information sharing and highlight the
need for collaboration or partnership arrangements with other logistics channel
members. This is in a context of an increasing rate of mergers and acquisitions
favouring vertical integration, and a growth of footloose practices by shipping
lines. Despite traditional conict relationships between channel members in international shipping and logistics, there is a need to expand the scope of the inquiry
beyond seaports to other logistics channel members (e.g. shipping lines and freight
forwarders) in order to investigate their perceptions and potential contribution to a
shared management of international supply channels. Academics and consultants
commonly expressed this view.
Finally, a logistics and supply chain management approach to ports may prove of
great benet in underlining the strategic role and future potential of ports within
the framework of international business in general. It can serve particularly as a
valid analytical framework allowing an unbiased assessment of port performance
measurement and management. The enquiry described in this paper stands as an
initiative requiring further research and investigation.
Acknowledgements
Acknowledgements to the Ports and Logistics Division of the World Bank for their
assistance in part of the empirical study described in this paper.
Appendix
Interim model of port performance measurement
(Numbers 111 refer to boxes in gure 3.)
Logistics performance
(1) Designing the internal logistics process (sequence of port activities and operations).
By ship-type calling at the port and by cargo-type moving through the port.
(2) Assessing current performance.
Performance A Prot Revenue
Cost

A logistics and supply chain management approach

63

where
Cost (C) total cost [Capital, labour, time (expressed in cost/monetary unit),
other expenses, etc.]
Revenue (R) revenue earned from a particular sequence:
For cargo sequence: R revenue from services to cargo (handling rates, warehousing, consolidation, etc.);
For ship sequence: R revenue from services to ship (mooring, pilotage, wharf
dues, bunkers, ship repair, etc).
(3) Improving internal process or activity sequencing through a combination of
three logistics performance measurements:
Total Cost Analysis (TCA): reduction of the total cost relative to the whole
process or sequencing, even if this may lead to an increase of individual costs
of some operations/activities.
Value-added (VAD): increasing prot by oering new services to ships and
cargoes. Note that any revenue from a proposed service (value-added) should
be higher than it costs.
Customer service: implementation of TCA and VAD should always take into
account the satisfaction of a certain level of customer service (as dened by the
port).
(4) Re-designing internal process and determining new performance.
Performance B new performance (from new sequencing)
Performance A
new prot
former prot (as calculated in 1)
Supply chain performance
(5) Designing supply chain process (sequence of activities across and beyond the
port):
Identify logistics and supply channels
By cargo (trade channel): origin and destination of a cargo-type that passes
through the port
By mode (logistics channel): patterns of a particular trade or maritime
routeing that involves the port (hub/feeder, triangular, end-to-end, round-theworld, etc.)
By customer/suppliers (supply channel): channels that involve the main
customers/suppliers of the port.
(6) Assess current channel performance
Performance C Port prot from each channel
(7) Identify competitive channels
Investigate other competitive channels (by cargo, logistics, and/or customer/
supplier):
Of other ports within the hinterland or the foreland (extent of the port market),
Of other ports worldwide,
Of other similar channels within the seaport industry (e.g. involving airports,
regional distribution centres, etc.).
(8) Process benchmarking.
Benchmarking: comparison with best-class processes, i.e. highly competitive
channels
as identied in (6)

64

K. Bichou and R. Gray

(9) Investigate partnership arrangements.

Collaborate with other channel members (e.g. shipowners, shippers, etc.) to
optimize channel output.
(10) Propose new process/channel organization in the light of process benchmarking
and partnership arrangements.
(11) Assess new channel performance.
Performance D new performance (from new channel/process organization)
Performance C
Aggregate performance total performance Performance B Performance D

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