Global Supply Chain and Port/Terminal: Integration and Competitiveness

GLOBAL SUPPLY CHAIN AND PORT/TERMINAL: INTEGRATION

AND COMPETITIVENESS
Dr Dong-Wook Song∗ Dr Photis M. Panayides
Logistics Research Centre Cyprus International Institute of
Heriot-Watt University Management
Edinburgh EH14 4AS 21 Akademias Avenue
United Kingdom POB 20378, Nicosia
Tel: +44 131 451 8206 CY-2151, Cyprus
Fax: +44 131 451 3498 Tel: +357 2246 2246
E-mail: D.Song@hw.ac.uk Fax: +357 2233 1121
E-mail: photis@ciim.ac.cy

Abstract: Much has been said of the importance of port and terminal integration in the
supply chain. Authors have stressed the importance of agility to the port environment,
which involves being proactive along supply chains, facilitation of intermodal integration,
as well as organizational integration and partnership between ports and users. Despite the
well articulated importance of the issues, little has been offered in terms of
conceptualisations and empirical evidence of what really is meant by port/terminal
integration in the supply chain, how such integration can be measured and quantified as
well as the extent to which different ports/terminals in the world are integrated in the
supply chain and competitive performance implications arising thereof. This paper aims to
make a contribution in this respect by (i) reviewing the relevant literature on supply chain
integration and port integration in the supply chain, (ii) conceptualising measures for
port/terminal integration in the supply chain, (iii) empirically testing the influence of
port/terminal integration in the supply chain on port competitiveness and (iv) outlining the
significance and value of the study for port operators, shipping lines, transport providers
and for further research.

1. INTRODUCTION

The importance of seaports for national economies is well established in the literature. It
has been held that an efficient port raises the productivity of prime factors of production
(labour and capital) and profitability of the producing units thereby permitting higher
levels of output, income, and employment (Walter 1975; Talley 1988). It follows that
seaports are important to national economies, more so economies that depend to a large
extent on international trade.

Ports were recognized as the springboards for economic development of the hinterland. On
this basis much of the research and developmental emphasis has been on the ability of
ports to carry out their functions of accommodating ships and other modes of transport
effectively and efficiently. Contemporary developments in transportation however, dictate
that emphasis should be placed on the ability of ports to fulfil a new role in the logistics era
in the context of operating as parts of integrated global supply chain systems.

This paper aims to identify the parameters of port supply chain integration, develop
measures for assessing the extent of seaport (container terminal) integration in global
supply chains and investigate the relationship between port supply chain orientation and
port competitiveness. The paper is organized as follows. The next section will review the
literature relevant to the scope of the study. This includes the literature on supply chain
integration and the studies that relate to the integration of ports and terminals in supply
chains. The literature review will assist in the development of the conceptual model in the
following section through the precipitation of the parameters of port/terminal integration in

∗
Corresponding author; Paper for KNU Conference, Taiwan, 29-30 March 2007.

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

supply chains as well as the theoretical evaluation of the impact of port/terminal

integration in the supply chain on port competitiveness. This is followed by a
conceptualization of the inter-relationships that are empirically examined via a survey if a
global sample of container terminals. The results are presented and the implications of the
study for theory, practice and further research are thereby discussed.

2. LITERATURE REVIEW

O’Leary-Kelly and Flores (2002) state that “…integration refers to the extent to which
separate parties work together in a cooperative manner to arrive at mutually acceptable
outcomes. Accordingly this definition encompasses constructs pertaining to the degree of
cooperation, coordination, interaction and collaboration”. In attempting to decipher and
conceptualize the constructs of port integration in the supply chain, it is important to
review the literature relating to the constructs of supply chain integration.

2.1 Supply Chain Integration

Supply chain management has been defined as the systemic, strategic coordination of the
traditional business functions and tactics across these business functions within a particular
organization and across businesses within the supply chain for the purposes of improving
the long-term performance of the individual organizations and the supply chain as a whole
(CLM 2000). The definition recognizes the strategic nature of co-ordination between
trading partners and explains the dual purpose of supply chain management to improve
organizational and supply chain performance.

The literature acknowledges that the higher the degree of integration across the supply
chain the better a firm performs (Narasimhan and Jayaram 1998; Johnson 1999; Frohlich
and Westbrook 2001) whereas there are dangers if suppliers and customers are not fully
integrated in terms of their business processes (Armistead and Mapes 1993; Frohlich and
Westbrook 2001). The findings together with the inherent strategic nature of co-ordination
render supply chain integration a concept of overriding importance in supply chain
management.

Recent studies have conceptualized and tested measures of supply chain integration.
Vickery et al (2003) emphasize the existence of integrative information technologies and
secondly the existence of practices that strengthen linkages between companies occupying
different positions in the supply chain (vertical linkages as in supplier partnering and closer
customer relationships and horizontal linkages as in forming intra-firm linkages using
cross-functional teams).

Narasimhan and Kim (2002) used three levels of integration, viz. a company’s integration
with suppliers (measured using six items adopted from Stevens 1989; Narasimhan and
Carter 1998; Tan, Kannan and Handfield 1998 and Carr and Pearson 1999), internal
integration across the supply chain (measured using eight items from Stevens 1989,
Narasimhan and Carter 1998 and; Wisner and Stanley 1999) and integration with
customers (measured using seven items from Stevens 1989; Zaheer, McEvily and Perrone
1998; Tan, Kannan and Handfield 199; Wisner and Stanley 1999).

A key characteristic of supply chain integration is the presence of integrative information

technologies that increase the flow of relevant information amongst process participants to
facilitate the integration of processes that transcend functional and firm boundaries
(Bowersox and Daugherty 1995; Lewis and Talalayevsky 1997).

Customer and supplier relationships also seem to be central in the context of supply chain
integration. Supplier partnering treats the supplier as a strategic collaborator manifested by
supplier involvement in product design or acquiring access to superior supplier
technological capabilities (Narasimhan and Das 1999). Closer customer relationships

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

involve proactively acquiring information from downstream customers about their needs
and becoming responsive in serving them.

2.2 Seaports and Supply Chains

Traditionally port authorities played the role of facilitator, focusing on the provision of
superstructure and infrastructure for ship operations, loading/unloading, temporary storage
and intra-port operations. On this basis the bulk of research in the area has been on the
efficiency and performance of seaports and container terminals (e.g. Cullinane, Song and
Gray 2002; Tongzon and Heng 2005).

Ports nowadays play an important role as members of a supply chain. In this role, the port
is considered as part of a cluster of organizations in which different logistics and transport
operators are involved in bringing value to the final consumers. In order to be successful,
such channels need to achieve a higher degree of coordination and cooperation (DeSouza,
Beresford and Pettit 2003). The determination of the parameters that encompass the extent
of integration of ports/terminals in global supply chains has, therefore, become of great
importance for ports.

Scholarly work on the integration of ports/terminals in the supply chain has been limited.
Probably the most updated empirical work has been undertaken by Carbone and De
Martino (2003) who adopted a case analysis to investigate the contribution of the port of
Le Havre to value creation in an automotive supply chain. The most suitable variables
identified were ‘relationships between the port operators and the focal firm’, ‘supplied
services that add value’, ‘information and communication technologies’, and ‘performance
measurement indicators common to supply chain partners’.

The recognition that ports are increasingly integrated in supply chains is illustrated in the
papers by Paixao and Marlow (2003), Marlow and Paixao (2003) and Bichou and Gray
(2004). Paixao and Marlow (2003) and Marlow and Paixao (2003) introduce the logistics
concepts of ‘lean’ and ‘agile’ operations as key factors in the measurement of port
performance. It is therefore, implied that port performance depends to a large extent on
logistics measures of cost and responsiveness. Bichou and Gray (2004) indicate that
adopting a logistics approach to the measurement of port performance is beneficial to port
efficiency because it directs port strategy towards relevant value-added logistics activities.

3. CONCEPTUAL MODEL AND HYPOTHESES

The parameters identified in the literature review to make-up the concept of port
integration in supply chains include “use of technology for data sharing”, “relationships
with shipping lines”, “value added services”, “relationships with inland transport
providers”, “transport mode integration” and “channel integration practices and
performance”

3.1 Use of Technology for Data Sharing

Establishing electronic links with suppliers and customers enables companies to transmit
and receive orders, invoices and shipping notifications with much shorter lead times, which
give the potential to speed up the entire shipping transaction (Stefansson, 2002). The
sharing of information among supply chain partners is viewed as a building block that
characterizes a solid supply chain relationship (Lalonde 1998). Authors have suggested
that the key to the seamless supply chain is making available undistorted and up-dated
information at every node within the supply chain (Towill 1997) and by taking the data
available and sharing it with other parties within the supply chain, information can be used
as a source of competitive advantage (Novack, Langley and Rinehart 1995). Information
sharing to be effective requires accuracy, timeliness, adequacy and credibility (Monczka et
al 1998). This means that integrated information technology should be central in
facilitating the exchange of information between supply chain partners and between ports

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

and their downstream and upstream partners.

3.2 Relationship with Shipping Lines

In discussing the importance of integration in supply chains it has been stated that a supply
chain based on relationships has the greatest potential to result in unique solutions that are
simultaneously effective, efficient and relevant (Bowersox, Closs and Stank 2000). The
importance of creating long-term relationships in supply chains has also been made explicit
by Kalwani and Narayandas (1995) who state that supplier firms in long-term relationships
with select customers are able to retain or even improve their profitability levels more than
firms which employ a transactional approach. To achieve intermodal operational
synchronization it is essential to have an appropriate governance structure in the
relationship between ports and shipping lines (Panayides 2002). Ports that build long-term
co-operative relationships will be deemed to have higher levels of integration in the supply
chain.

3.3 Value Added Services

This variable entails the ability of the port to add value to the services that it provides in
the context of facilitating further the objectives of the supply chain system. For instance,
Robinson (2002) suggests that ports form part of a value-driven chain and as such they can
add value to the goods passing through them. Carbone and De Martino (2003) indicate that
procurement and pre-assembly stages are becoming of considerable significance and may
well shape the future development of ports.

Paixao and Marlow (2003) put forward a framework than can be adopted for adding value
in a port environment. This involves adding value in the context of the different operations,
services and capabilities that take place in a port environment including capacity to provide
hinterland and foreland for road/rail access, to launch new tailored services, to handle
different types of cargo, speed at which the port can take decisions on altering schedules,
amend orders and changing design processes to meet customers’ demands, variety of
services in intermodal operations, capacity to convey cargo through the most diversified
routes/modes at the least possible time to end-users premises, and capacity to deliver
tailored services to different market segments and to act as collaborative intermodal hub
networks.

3.4 Transport Mode Integration

Ports are bi-directional logistics systems in that they receive goods from ships to be
distributed to land (road/rail) and inland waterway modes that perform the remaining legs
of the transport systems, whereas at the same time ports receive cargoes arriving by
road/rail and inland waterway and deliver them to ships for the sea-leg. This bi-directional
logistics system requires a high level of co-ordination and inter-connectivity capabilities
within the port system. Robinson (2002) suggested that ports are part of a value-driven
chain system competing with other value-driven chain systems. Cargo flows will seek for
routes that offer the lowest cost, and ports offering efficient hinterland accessibility due to
productivity, efficiency and reliability in inter-modal transport connectivity and inter-
operability add value to shippers and consignees in the supply chain.

3.5 Relationships with Inland Transport Providers

Supply chain relationships entail customer as well as supplier relationships. In the same
way that ports formulate and engage in relationships with shipping lines, they should also
initiate, develop and foster relationships with inland transport providers and operators. As
indicated by Notteboom and Rodrigue (2005), regional port authorities and market
participants can engage in co-ordination that can substantially improve inland freight
distribution like for instance streamlining container flows and reducing empty hauls.
Various methods of networking strategies may be used from informal programs of co-
ordination to advanced forms of strategic partnerships. Central to all forms of co-
ordination is communication and the characteristics of the relationship between the

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

participants.

3.6 Channel Integration Practices and Performance

Bichou and Gray (2004) indicated that port and terminal integration may involve the extent
to which the port plans and organizes activities, processes and procedures beyond its
boundaries and monitors performance in such activities. Their findings, however, were
discouraging in that most respondents in the particular survey did not seem to
understand/appreciate the issue of port integration in the supply chain channel. Notteboom
and Rodrigue (2005) indicate that such practices may include involvement in the
introduction of new shuttle train service to the hinterland, together with the respective
national railway companies, rail operators, terminal operators, shipping companies and/or
large shippers. In addition, it includes the extent to which port management collaborates
with other members of the supply chain in order to identify cost-effective and supply chain
performance enhancing solutions for the goods passing through the system.

As revealed in the literature review, integration of contemporary terminals in global supply

chains is essential and such integration should lead to performance improvements and to
competitive advantages for the port (terminal) that fulfils its modern role in the logistics
era. Port integration in the supply chain is conceptualized to impact port performance. This
follows logically from the understanding that the role of modern seaports involves
integration in the supply chain and fulfilling this role means greater ability of the port to
satisfy customers and achieve its objectives. On this basis, it is hypothesized that specific
measures of integration in the supply chain will be positively related to specific measures
of port performance and competitiveness – the measures themselves reflecting
contemporary logistics goals and not merely traditional efficiency measures.

4. METHODOLOGY

4.1 Measure Development

In order to achieve the objectives of the study the first step would be to develop a survey
instrument in order to collect data on the parameters conceptualized to make up port
integration in the supply chain as well as the terminal competitiveness performance
measures. The process involves a review of the literature to identify measures used in
previous studies and exploratory interviews with people capable of understanding the
nature of the concept being measured (port managers), as suggested by Churchill (1979).

The very basic requirement for a good measure is content validity, which means that the
measurement items in an instrument should cover the major content of a construct
(Churchill 1979). Content validity is usually achieved through a comprehensive literature
review and interviews with practitioners and academicians. The items for port integration
in the supply chain were generated based on previous literature (Bichou and Gray 2004;
Carbone and De Martino 2003; Carr and Pearson 1999; Narasimhan and Kim 2002; Paixao
and Marlow 2003; Stevens 1989; Tan, Kannan and Handfield 1998; Wisner and Stanley
1999; Zaheer, McEvily and Perrone 1998).

In order for ports to fulfill their performance goals as well as those of the supply chain,
they must be capable of attaining objectives of the supply chain and not merely objectives
of efficiency. The items conceptualized to be critical to terminal competitiveness in the
supply chain era include issues of cost advantage (price), quality, reliability, customization
and responsiveness to customer’s needs. Such items are increasingly regarded as critical in
the measurement of contemporary container terminal performance and those that clients
will be looking at, whereas traditional measures of efficiency (i.e. how quickly and
efficiently containers are loaded/unloaded and passed through the port as quantified by
throughput) have passed into the zone of expectation for customers. The performance
measures for each item were derived from the literature and can be seen in Table 1.

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Global Supply Chain and Port/Terminal: Integration and Competitiveness
Table 1. Measures of Port/Terminal Supply Chain Integration
Construct
Use of Information and
Communication
Technology
Relationship with
Shipping Line
Value Added Service
Integration of Transport
Modes
Relationship with Inland
Transport Operators
2007 International Conference on Logistics, Shipping and Port Management
Measures
1. We use integrated electronic data interchange to
communicate with shipping lines
2. We use integrated information systems to share
data/information with shipping lines
3. We adopt computerized port service systems for our
operations with shipping lines
1. The shipping line is viewed as a strategic partner in
mutually designing the flow of goods and information
2. The relationship with the shipping line is more based on
mutual trust rather than on contractual obligations
3. We work together with the shipping line to ensure higher
quality of service
4. We work together with the shipping line to reduce costs
1. We have adequate facilities for adding value to cargoes (e.g.
pre-assembly, manufacturing, packaging)
2. We have the capacity to provide the widest possible
hinterland and foreland for road/rail access
3. We have the capacity to launch new tailored services should
the need arise
4. We have the capacity to handle different types of cargo
5. We are quick on taking decisions regarding altering
schedules, amending orders and changing design processes
to meet customers’ demand
6. We have a variety of services to handle the transferring of
cargo from one mode to another
7. We have the capacity to convey cargo through the most
diversified routes/modes at the least possible time to end-
users premises
8. We have the capacity to deliver even more tailored services
to different market segments
1. The port has adequate connectivity/operability for the
ship/rail interface
2. The port has adequate connectivity/operability for the
ship/road interface
3. The port has adequate connectivity/operability for the
ship/inland waterway interface (if applicable)
1. We use integrated electronic data interchange to
communicate with inland transport operators
2. We use integrated information systems to share
data/information with inland transport operators
3. We adopt computerized port service systems for inland
transport operations
4. We study how road/rail transport operators use the port
facilities
5. We listen to inland transport operators in
developing/upgrading our port facilities
6. We meet with inland transport operators to discuss issues of
mutual interest
6
Global Supply Chain and Port/Terminal: Integration and Competitiveness

Construct Measures
Channel Integration 1. We constantly evaluate the performance of the transport
Practices and modes available for linking our port/terminal to its
Performance hinterland destinations
2. We evaluate alternative routes for more efficient
transportation of cargoes via our port/terminal
3. We collaborate with other channel members (e.g. shipping
lines, shippers etc) to plan for greater channel optimization
4. We seek to identify other competing channels for cargoes
that might flow through our port
5. We benchmark the logistics/supply chain options available
for cargoes that will flow through our port vis-à-vis
alternative routes via competing ports
6. We seek to identify least cost options for the transport of
cargoes to hinterland destinations
Cost 1. We offer competitive prices
2. We are able to offer prices as low or lower than our
competitors
3. We can offer lower service charges than competitors
4. The cargo handling services at our port are cheaper than
competitors
Quality 1. We are able to compete based on quality of services
2. We offer port services of high quality to our customers
3. Our port service performance creates higher value for
customers
Reliability 1. Our port services are highly reliable
2. We deliver the kind of port services needed
3. We deliver services on time (minimize delays)
4. We provide dependable service delivery
Customization 1. We provide customized port services to our customers
2. We alter our service offerings to meet client needs
3. We respond well to customer demand for ‘new’ service
features or specific performance
Responsiveness 1. We have fast new service development
2. We deliver new services to the market quickly
3. We are first in the market in introducing new services
4. We have time to market lower than industry average

As noted by Churchill (1979), to increase reliability and decrease measurement error, it is

advisable to use multi-item scales instead of single-item scales. The final set of items of the
scales was then assessed for content and face validity by two academic experts, one with
knowledge of the method employed in this study and another one with extensive
knowledge of the literature on supply chain and port integration. Considerable importance
was given to such aspects as the breadth of theoretical content covered by the item,
consistency of the contents tapped by individual items under a single factor and clarity of
the meaning and comprehensibility of the item (Matsuno, Mentzer and Rentz 2000). All
items were measured on a seven-point Likert scale.

4.2 Sampling and Survey

A survey questionnaire is developed on the basis of the parameters that will be examined,
viz. ‘information and communication technologies’, ‘relationships with shipping lines’,
‘value added services’, ‘relationship with inland transport operators’, ‘transport mode
integration’ and ‘channel integration practices and performance’. In addition data are
collected on the competitiveness factors for ports and terminals, such as ‘price’, ‘quality’,

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

‘reliability’, ‘customization’ and ‘responsiveness’. The measures can be also seen in Table
1.

The sample included managers of 300 ports and container terminals worldwide. The
survey was specifically addressed to those individuals that were responsible for strategy at
the port/terminal. The respondents were asked to indicate the degree to which they
agreed/disagreed with a series of questions reflecting the above-mentioned parameters on
Likert-scales ranging from 1: strongly disagree to 7: strongly agree.

Response bias was minimized by providing assurances of confidentiality and anonymity as

well as offering incentives in the form of a management report of the results once the study
was completed. Non-response bias was tested by assessing the differences on a sample of
variables between early and late respondents (Armstrong and Overton 1977). No
statistically significant differences were identified indicating the absence of non-response
bias.

5. DATA ANALYSIS

5.1 Descriptive Statistics

Tables 2 and 3 show the descriptive statistics (means and standard deviations) for the
variables as well as the reliability statistics (Cronbach alpha values).

Table 2. Descriptive Statistics and Reliability Values for Port/Terminal Integration

Variable Mean St. Dev.

Use of technology (a=0.86) 5.2 1.8
Information sharing (a=0.88) 4.9 1.5
Relationship with shipping lines (a=0.81) 5.4 1.4
Value added service (a=0.88) 5.2 1.5
Integration of transport modes (a=0.87) 5.1 1.6

Channel integration practices and performance (a=0.90) 5.1 1.5

Relationship with inland transport operators (a=0.89) 4.6 1.8

Table 3. Descriptive Statistics and Reliability for Competitiveness

Variable Mean St. Dev.

Price (a=0.86) 5.2 1.6
Quality (a=0.88) 5.9 1.1
Reliability (a=0.86) 5.9 1.0
Customization (a=0.81) 5.8 1.0
Responsiveness (a=0.88) 4.8 1.3

The Cronbach alpha values are indicative of the high reliability of the scales employed as
all measures exceed the 0.7 threshold that is commonly applied.

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

5.2 Multiple Regression Analysis

Multiple regression analysis was adopted to test the hypothesized inter-relationship
between the dependent performance variables and the independent variables that relate to
the integration of container terminals in the supply chain. Five equations were built; one
each with price (cost), quality, reliability, responsiveness and customization, and with each
equation including all the independent variables.
The regression models were as follows:
Y1 = α + β1X1 + β2X2 + …. + βnXn +ε1
Y2 = α + β1X1 + β2X2 + …. + βnXn +ε2
Y3 = α + β1X1 + β2X2 + …. + βnXn +ε3
Y4 = α + β1X1 + β2X2 + …. + βnXn +ε4
Y5 = α + β1X1 + β2X2 + …. + βnXn +ε5

All variables were metric satisfying the conditions for multiple regression analysis. The
stepwise method was used with settings at 0.05 α levels. t-tests were conducted on each
independent variable and F-tests for the overall regression. As no multi-collinearity was
detected among the explanatory variables, all variables were included in the analysis.
Examination of pair-wise correlations indicates correlations below the 0.8 point that may
suggest a potentially problematic degree of multi-collinearity. Further examination of
tolerance and variance inflation factor (VIF) statistics did not reveal any multi-collinearity
concerns. All variables in the model demonstrated normal distribution following a test for
univariate normality by applying the Kolmogorov-Smirnov test and low skewness and
kurtosis statistics. The threat of heteroscedasticity was checked by examining the residual
plots of the actual residual values of the dependent variables against the predicted residual
values. The examination did not show any pattern of increasing or decreasing residuals,
hence confirming the assumption of homoscedasticity. The plots also indicated linearity.
The significant results of the regression analysis are shown in Table 4.

Table 4. Results of Multiple Regression Analysis

Port terminal competitive performance measures

Cost Quality Reliability Responsiveness Customization
**
0.272
Use of technology ns ns ns ns
(1.975)
Relationship with 0.375** 0.382*
ns ns ns
shipping line (2.073) (2.212)
Value added 0.326* 0.393**
ns ns ns
service (2.351) (2.966)
F-Statistic 3.251** 3.365** 3.503** 4.713*** 5.745***
Adjusted R2 0.132 0.138 0.203 0.274 0.235
Note: * , ** and *** indicate significance at 10%, 5% and 1% levels, respectively.

The regression analysis suggests the existence of the following relationships:

1. Value added services and price (cost) in the port
2. Value added services in the port and the ability of customization by the port
3. Use of technology and the quality of the port’s services
4. The relationship with the shipping line and the port’s reliability and responsiveness.

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

6. DISCUSSION AND IMPLICATIONS

6.1 Theoretical Implications

The first relationship that can be examined is that between value added services provided
by the port and the prices that the port charges for use of its services and facilities. The
positive relationship suggests that provision of value added services justifies the higher
charges because the port is perceived to be offering prices that are competitive since it is
offering services that add value to the users, unlike competitors who may charge less but
not offer the same added value. It follows that a high price will not necessarily render a
port un-competitive as long as the port offers services that users perceive to be adding
value to their business, which includes customization of port services.

The results indicate a positive association between technology adoption and high quality of
the services offered by the port. This association is supported by previous empirical
evidence in other contexts, which indicates a strong positive association between
technology adoption and quality (Prajogo and Sohal, 2006). It seems that the investment in
technology is merited by the resulting higher performance (in terms of service quality)
which is an important parameter for the selection as well as evaluation of the services of
the port.

Another important theoretical implication from the results of the study is the association
between the relationship port terminals have with the shipping lines and the beneficial
effects this has on the performance of the port terminal. It is interesting to note that the
performance measures used related to responsiveness and reliability and not the traditional
performance measures of throughput. Responsiveness and reliability are performance
measures utilized in the context of logistics, and the establishment of client relationships
by ports has a beneficial effect in the port’s function of fulfilling its modern role in the era
of logistics and supply chain management. The finding is in line with previous research by
Durvasula, Lysonski and Mehta (2002) who identified a positive association between the
relationship with the shipping lines and performance effects in the supply chain.

Other theoretical implications which can be extracted from the results of the study is the
possible need for a re-conceptualization of what constitutes port performance and how port
performance should be evaluated and assessed. This arises from the fact that there is a
positive relationship between input factors into port productivity such as investment in
technology or in extending port services and output factors such as higher quality, value
added services, customization, responsiveness etc.; factors which have not been previously
treated as potential parameters for evaluating port performance (and port competitiveness)
by traditional efficiency-related measures and techniques. It can be stated that throughput
as a proxy for terminal efficiency may not be sufficient to measure aspects relevant to port
performance in the global supply chain era. The results also indicate that orientation
towards supply chain management has positive beneficial effects on the competitiveness of
container terminals.

6.2 Implications for Ports, Shipping Lines and Logistics Providers

Competition between ports, particularly those in the same geographical range has
intensified. Port competitiveness nowadays depends to a large extent on the ability of ports
to integrate in global supply chains. This study crystallizes parameters that contribute to
port/terminal integration in supply chains. The identification of the parameters enables port
operators to establish strategies to increase integration and achieve competitive advantage.
The results suggest that the identified variables of technology, value added services,
relationship with clients and liner operators, facilitation of inter-modal transport and
channel integration practices are critical for port integration in supply chains. To achieve
competitive advantage port operators must implement strategies that involve the above-
mentioned parameters suggesting that they must look beyond the narrow geographical
limits of the port in attempting to achieve competitiveness. By benchmarking their own
port’s performance on the above-mentioned variables, port operators are also able to

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Global Supply Chain and Port/Terminal: Integration and Competitiveness

determine the degree of integration of their port/terminal in the supply chain and decide on
strategies to enhance such performance.

Evaluation of the extent of port/terminal integration in the supply chain can also be useful
to shipping lines, logistics service providers and inland transport operators. It has been
established that the interest of these stakeholders, being part of the supply chain, is direct
as the integration of ports and terminals in supply chains has an impact on their operations
and the satisfaction of their customers. In liner shipping, more economical ships and
alliance co-operation have lowered the costs associated with the sea-leg and ship operation.
At the same tine, intermodal costs share an increasing part of the total cost. The portion of
inland costs in the total costs of container shipping would range from 40% to 80%
(Notteboom and Rodrigue 2005). This suggests that liner-shipping companies would have
a direct interest in working with ports (and other stakeholders) in an attempt to reduce the
costs associated with port and inland handling and transport operations in a door-to-door
context. Port integration in the supply chain as hereby conceptualized can certainly assist
in this direction.

6.3 Implications for Research

The results of the study contribute to the quest for integrating logistics and supply chain
management concepts in port research, in line with the integration that has been taking
place at physical and management level between port terminals and port users, and the
integration of the port into the logistics and value chain. The study identifies certain
parameters perceived to be instrumental in the integration of ports in global supply chains.
Further research is required to ratify the development of a measurement instrument for
assessing port/terminal integration in global supply chains. The lack of an appropriate
measurement instrument has hindered research in the area. Without a valid and reliable
instrument measuring port integration in supply chains, generalizable implications and
strategies cannot be accomplished.

In addition, this study examined and identified a positive relationship between terminal
integration in the supply chain and terminal performance. It is important for this
association to be replicated empirically using different ports and different contexts and
performance measures. It is important for measures of competitiveness to be also
incorporated in the measurement of port performance. The privatization of ports and
terminals, together with the quest for competitiveness means that traditional performance
measures such as market share, sales growth and even profitability become legitimate
performance measures for ports. A container terminal with high efficiency indicators may
not be necessarily competitive due to the higher cost involved in becoming more efficient.

7. CONCLUDING REMARKS

This paper makes a contribution to an area that is highly topical and relevant to
developments taking place in maritime logistics, transportation and port development. Port
authorities have traditionally played the role of facilitator, focusing on the provision of
superstructure and infrastructure for berthing and loading/unloading operations. As such,
research has focused on efficiency and performance within ports. Contemporary
developments in maritime transport and logistics indicate that ports should play an
important strategic role as a member of a supply chain that involves sea and inland
transportation. The paper puts forward six parameters conceptualized to account for most
of the variation in the degree of seaport integration in logistics and supply chain
management. They include adoption of information and communication technologies,
relationships with shipping lines, value added services, inter-connectivity/inter-operability
with inland modes of transport, relationships with inland transport operators and channel
integration practices and performance. The model developed is important for evaluating
the extent of port integration in supply chains. In addition, the paper investigates and
identifies a positive relationship between certain parameters of supply chain integration

2007 International Conference on Logistics, Shipping and Port Management 11

Global Supply Chain and Port/Terminal: Integration and Competitiveness

(e.g. use of technology, value added, user relationships) and parameters of port
competitiveness such as cost, quality, reliability, responsiveness and customization. The
findings form a basis for further research on what really can contribute to port
competitiveness in the supply chain and how such competitiveness can be achieved and
assessed.

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