Enhancing Med Ports Competitiveness via Cooperation and Coordination

          Enhancing Port Competitiveness via Cooperation and Coordination     

Author(s):      A.A. Pallis & G.K. Vaggelas. 

  A modified version of this article had been published in:       Indian Ports and Infrastructure Review Magazine, Volume 2, issue 3, March 2010   

         

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Please site this article as: Pallis, A.A. and Vaggelas, G.K.. (2010). “Enhancing port   competitiveness via cooperation and coordination?”. Indian Ports and Infrastructure Review, Volume 2, Issue 3, March 2010.   This   article was uploaded to www.porteconomics.eu On:

 

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Intense competition has reached port markets. Jockeying to attract a larger market share, port authorities, and services providers invest in port infrastructures and superstructures. In the light of the 2008 global economic crisis, and the subsequent decrease of investments vital questions emerge: Are investments the only right strategy for increasing port competitiveness? Or competitiveness might be reached via the deployment of other strategies? Nowadays ports are nodes in the supply chains. The ‘new’ competition provides opportunities to all ports, whether big, medium or small, to adjust via the adoption of appropriate strategies that increase their competitiveness. These opportunities are, for example, evident in the Mediterranean port region. This is an important market with powerful players in the container (but not only) market. This is not least due to the increased European-Asian trade passing through Mediterranean Sea. A port on the Mediterranean region however has to work harder in order to develop a competitive advantage than those that are centrally located near maritime networks or large domestic market, i.e. the major ports of international importance in North Europe (for example Rotterdam, Antwerp, Hamburg etc). For Med ports, investments in port infrastructures and inland transport connections alone are not sufficient. These ports need to grasp the opportunities provided by the supply chains, such as better performing inland transport network, a more customized client approach, a more flexible business environment (quickly adapting to changing customer requirements) and/or the greater reliability that comes from some availability in assets.

Thanos Pallis

&

George Vaggelas

Members, Research in Port Economics and Policy (REPEP) Group, Department of Shipping, Trade and Transport at the University of the Aegean (Greece), Members of founders of the PortEconomics web initiative (www.porteconomics.gr)

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For these and many other ports around the world two growth targets strategies are now on the table. Coordination strategies leading to the provision of an integrated transportation service that is beneficial to all actors involved in relevant supply chains is the first of these strategies. Cooperation strategies, in order to develop business with other ports within a coastal port range, are the second. Both “Coordination” and “Cooperation” approaches are illustrated in the figure. The degree of coordination among supply chain actors focused on servicing a port and its hinterland impacts significantly on the port’s ability to contribute to an efficient regional port infrastructure but also to ensure that inland hinterland areas are well serviced by the transportation and logistics companies using the port. From a public policy perspective, social welfare benefits arising from coordination such as addressing, or even eliminating, bottlenecks and thus better serve the interests of citizens through a more efficient trading network. As regards the reasoning for cooperation between ports (i.e. between port authorities), one might identify at least two justifications. First, there might be gaps in the ability of each individual port to serve the needs of all different shippers, whereas the combination of resources, or other advantages (i.e. geographical) might enhance capacities to match the various types of demand observed. Duplication of services can also be avoided. Cooperation might consist of a common marketing strategy that drives growth in total traffic for the entire port range. Alternatively, it might include an agreement with provisions for specialization in, or even exclusive provision of, certain services at each involved port. Cooperation benefits could lead to strategic alliances among ports premised on the belief that seamless customer service does not require ownership of all the assets and results from managerial values that accept cooperative behaviour.

Source: Brooks, M.R., McCalla, R., Pallis, A.A., Van Der Lugt L.M. (2009). “Coordination and Cooperatio in strategic port management: The case of Atlantic Canada’s ports”. Atlantic Gateway Initiative. Centre For International Trade and Transportation. Working Paper No 7.

In the case of our example, the Med region, not all the ports can be mega hubs for containerised cargo. This potential requires substantial investments when economic conditions make funding more difficult, and develop close relations with potential customers. Med

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ports might seek prosperity via the development of niche markets seeking advantages. The facilitation of Ro-Ro markets and shortsea shipping routes could offer rewards, especially as incentives for advancing the latter are in the centre of the European transport policy. Cooperation could increase the market size of the port and give the ability to facilitate niche market capturing based on cargo specialization. This strategy could be either formal or informal. It certainly needs port authority and policy makers to advance the formation of initiatives having onboard all stakeholders. In the Med region cooperation takes mainly the form of common port marketing initiatives with a good example being the MEDCRUISE, an organization with 72 member ports which cooperate in promoting the Mediterranean area as a cruise destination, increasing the efficiency of the member ports, formulating common positions, policies or plans on cruise-related policies, providing its members marketing, networking and professional development tools and forums. Another example is the newly-formed cooperation between four Northern Adriatic ports (Koper-Slovenia, Trieste, Venice and Ravenna – Italy) which concluded on the establishment of North Adriatic Port Association. These ports cooperate in the development if maritime and hinterland connection (linking the two ports by railway), attracting visits by cruise lines, development of environmental protection tools and policies, safety issues and advances in information technologies. The more advanced cooperation scheme in Europe has been developed by the ports of Malmo (Sweden) and Copenhagen (Denmark). The two port authorities have been merged into one company offering port services for every type of cargo and passengers. In the new port authority each port participates with a 50% stake. On the other hand there is the coordination strategy gives to a port the opportunity to take into advantage the stakeholders (the port and supply chain players) networks in order to attract users via the availability of “best practices” and supply chains offering the highest value to the cargo, and thus to the user of the port. This strategy is quite complex, and conditioned by the presence of leading firms (or port authorities), and the commitment of various players in such projects. Until now coordination efforts are mostly based on coordination of subsidiaries or affiliated companies of a port/terminal with the best example being the European Container Terminals (ECT) operating in North European ports like Rotterdam (The Netherlands) and Duisburg (Germany), or piecemeal efforts of port authorities in Europe or North America that have faced severe congestion problems due the lack of actors coordination. The role of investments in port modernisation remains important. Coordination and collaboration stand as two alternative, or additional, strategies worth to be considered by all those seeking to improve the competitiveness of a port.