Supply Chain Orientation and Port Performance

1
Supply Chain Orientation andPort Performance

• Photis M. Panayides ? Dong-Wook Song
• Cyprus Intl Institute of Management ? University
  of Hong Kong

2
Objectives of this paper

• To establish the role of ports in global supply
  chains
• To identify the parameters of port supply chain
  orientation
• To investigate the relationship between port
  supply chain orientation and port competitiveness

3
Why ports and supply chains?

• Ports as catalysts for economic development
• International trade, transport and ports
• Port competition and competitiveness

4
Ports and economic development

• An efficient port raises the productivity of
  prime factors of production (labour and capital)
  and profitability of the producing units
  permitting higher levels of output
• Ports are recognised as springboards for the
  economic development of the hinterland
• Ports facilitate the efficient transportation of
  goods and hence international trade which is
  vital for economic welfare of the nation state

5
International trade and container traffic

• Current trends indicate that containerised trades
  will continue to increase
• In 2005 container traffic growth of Asian ports
  accelerated to 11.6 compared to the previous
  year.
• Traffic growth of North American and North
  European ports stood at 12.1 and 8.0
  respectively in 2005

6
World fleet development
7
Container fleet development
8
Port container traffic (Million TEUs)
9
Port competition and competitiveness

• The emergence of new ports (e.g. Chinas Pearl
  River Delta Port of Tanjung Pelepas) has
  intensified port competition and threatens the
  competitiveness of the established players (Port
  of Hong Kong and Port of Singapore respectively)
• Established players must continually seek for new
  ways for sustaining their competitive advantage

10
The role of ports in global supply chains

• The development of global supply chains coupled
  with globalisation of production and consumption
  and increased demand for raw materials and
  finished goods has an impact on the role of ports
• The contribution of contemporary ports in the
  containerisation and globalisation era is more
  related to efficient distribution of products
  across supply chains as opposed to performance in
  loading, unloading of ships and berth availability

11
Fulfilling the new role of ports

• Ports may need to be oriented towards supply
  chains in order to meet the changing needs of
  their customers (shipping lines) and fulfill
  their new role in the supply chain management era
• Past research has focused on port efficiency as a
  means for achieving port competitiveness
  (Cullinane, Song and Gray, 2001 Tongzon, 1995
  2001)
• The scientific literature needs to address
  whether being supply chain oriented can also
  contribute to a ports or container terminals
  competitiveness

12
Limitations in the scientific literature

• The relevance of port supply chain orientation
  has been well established (e.g. Bichou and Gray,
  2004 Notteboom and Rodrigue, 2005)
• However we are not aware of the parameters of
  port supply chain orientation (i.e. how is port
  supply chain orientation manifested) and whether
  this has beneficial competitive effects

13
Parameters of port supply chain orientation

• A detailed literature review identified the
  following parameters to be related to port supply
  chain orientation
• Use of technology (Carbone and De Martino, 2003)
• Information sharing (Paixao and Marlow, 2003)
• Relationship with shipping line (Carbone and De
  Martino, 2003)
• Value added service (Bichou and Gray, 2004
  Robinson, 2002)
• Integration of transport modes (Marlow and
  Paixao, 2003)
• Channel integration practices and performance
  (Bichou and Gray, 2005)
• Relationship with inland transport operators
  (Panayides, 2002)

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Competitive performance measures for ports

• Price (cost advantage)
• Quality
• Reliability
• Customization
• Responsiveness
• (From Marlow and Paixao, 2003 Tongzon and
  Heng, 2005 and others)

15
Hypotheses

• Measures of port supply chain orientation will be
  positively related to competitive performance
  measures
• (e.g. Independent variables use of
  technology, channel integration practices etc.
  will be predictors of competitive performance -
  cost advantage, quality etc.)

16
Research methodology

• Measure development
• Questionnaire
• Pilot testing
• Sampling
• Survey
• Methods of analysis

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Measures and questionnaire

• Where available, measurement scales were adapted
  from previous studies and used 7-point Likert
  scale anchors
• The scales have undergone tests of convergent
  validity and reliability
• The instrument was pilot tested with academics
  and managers before final adoption

18
Sampling and survey

• Sample 290 container terminals worldwide
• Sampling frame World Port Directory
• Respondents Key-informants (managers)
• Mailings 3 (weeks 1, 3 and 5)
• Participation incentives report,
  confidentiality, anonymity
• Response rate 23.4 (68 useable responses to
  this moment)

19
Methods of analysis

• Descriptive statistics and reliability analysis
• Multiple regression analysis to investigate the
  relationship between port performance and port
  supply chain orientation

20
Supply chain orientation descriptive statistics
21
Competitiveness variables descriptive statistics
22
Multiple regression analysis

• Multiple regression analysis was used to
  determine the contribution to the dependent
  competitive performance variable of each
  independent variable.
• Five equations were built
• Y1aß1?1 ß2?2 ßn?ne1
• Y2aß1?1 ß2?2 ßn?ne2
• Y3aß1?1 ß2?2 ßn?ne3
• Y4aß1?1 ß2?2 ßn?ne4
• Y5aß1?1 ß2?2 ßn?ne5

23
Multiple regression analysis results
t-values in bracket plt0.01 plt0.01
plt0.05 ns not significant
24
Results

• The regression analyses suggest that
• Value added services are related to price (cost)
  in the port
• Value added services are related to customization
  ability of the port
• Technology is a predictor of quality of the
  container terminals services
• The relationship with the shipping line is a
  predictor of the terminals reliability and
  responsiveness

25
Results

• The results support previous empirical evidence
  indicating a strong positive association between
  technology adoption and quality (e.g. Prajogo and
  Sohal, 2006)
• Relationship with shipping lines have also been
  found to have beneficial performance effects in
  the supply chain (Durvasula, Lysonski and Mehta,
  2002)

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Implications for theory

• Orientation towards supply chain management has
  positive beneficial effects on the
  competitiveness of container terminals
• Ports may be able to customize services and
  provide added value services at higher prices

27
Recommendations

• Appreciate the new role of ports in global supply
  chains
• Gains to be had in technology investment
• Implement programmes on customer and stakeholder
  relationships
• Introducing value added services may justify
  higher port prices
• Customization, responsiveness and reliability are
  essential parameters for ports in the supply
  chain management era

28
Further research

• Develop an instrument of port supply chain
  orientation using confirmatory factor analysis
• Use structural equation modeling to investigate
  impact of supply chain orientation on port
  performance and port competitiveness
• Incorporate other port performance measures and
  investigate relationship with supply chain
  orientation
• Carry out further research on longitudinal basis
  to understand how the variables are manifested in
  practice