Knowledge is power is advice to terminal operators

Wednesday, 08 September 2010

Container terminal operators must study their shipper, forwarder and shipping line customers more carefully during times of crisis, according to a new report from Ocean Shipping Consultants (OSC), writes Mike King.

Container Terminal Management – A Post-crisis Perspective argues that during the 2008-2009 global financial crisis, loss-making shipping lines were quick to turn on ports and terminals in a bid to generate costs savings.

With global container movements falling by 10% in 2009, the first contraction on record, many terminal operators were unable to withstand the pressure from lines and cut tariffs to maintain volumes.

Some operators that stood-up to lines lost vessel calls and market share, says the report.

According to OSC, if ports and terminals had known more about their customers and hinterland supply chains, they would have been better placed to make informed decisions when placed under tariff pressure.

“During the crisis, the shipping lines turned to terminal operators for realising cost savings,” said an OSC spokesman, “announcing that volumes would be switched to other ports if certain requested discounts were not granted.”

If ports and terminals had studied the customer base of the relevant shipping line, its geographic spread and the impact on hinterland costs if it moved to a rival port, they would have been able to make more informed decisions, claims the report.

“It helps the commercial policy of ports and terminals if they have a good insight into the rationality of such threats,” the spokesman told IFW. “Would there be a commercial risk of losing or gaining volumes if a certain port is no longer, or less frequently, called at?

“An example was Hamburg, which lost considerable transhipment volumes to Antwerp and Rotterdam because they refused to reduce tariffs because they believed they had a strong position.”

The report includes tools to aid comparative port cost analyses and quantitative assessments of the risks of losing customers.

“During the crisis some ports and terminals were confronted with above-average volume and/or revenue declines, while others did significantly better,” added the spokesman. “Apart from local factors, this was also due to a lack of insight into customer motives and economics.

“If one lesson from the crisis should be learnt, it would be that the terminal operators need to know much more about their customers.”