Transformation to Enable High Performance in Ports


Transformation to Enable High Performance in Ports

Transformation to

Enable High Performance

in Ports

As ports around the world, especially

in Asia, face the challenge of rapidly

increasing demand, port enterprises

have a brief window to achieve

high performance by transforming

their business capability and

securing the lion’s share of this

immense market opportunity.

With global demand for containerized

traffic continuing to surge and evolve,

port enterprises are struggling to

roll out sufficient terminal-handling

capacity. Many port businesses

have responded with a traditional

focus on new infrastructure and

geographical expansion, but

this effort may not capture the

business opportunities on offer.

Port investors, whether from

traditional global port operators

or new entrants bringing fresh

investment funding, have paid

high multiples for port stocks in

recent years, indicating their strong

expectations of the sector. Yet the rush

for growth may not secure long-term

value. For a port business to generate

lasting and sustainable benefits, it is

critically important to get strategy,

process, organization and systems

right before any significant expansion.

Forward-thinking port executives

are redesigning their businesses to

optimize the overall performance of

their terminals. To be successful, a

ports business must focus relentlessly

on the drivers of total return to

shareholders, identifying and tracking

the factors that create progressively

expanding profit streams within and

beyond the existing business.

Terminal performance management

must address the greatly increased

complexity of day-to-day business

operations in an expanded and

distributed organization. The

corporate structure should facilitate

the control and management of

multiple business units and the

integration of business functions,

and the management team must

continually drive to create incremental

enterprise value by synergizing and

integrating business processes.

At an operational level, the ports

business is moving away from a pure

“capacity game.” To be productive,

catalyzed by the rise of mega

vessels, requires massive throughput

capability with quick port turnaround

time, triggering the need for a more

sophisticated mode of operations

management – one that focuses on

delivering more (greater volumes, more

responsively to changes, increased

productivity) with less (smaller

resource requirement per box handled,

lower unit costs).

Operations flexibility is another

challenge. Driven by service

customization and supply chain

integration, shipping lines

and logistics service providers

increasingly expect an agile service

response. Ports must offer mass

customization that balances service

fulfillment, terminal productivity

and cost for individual customer.

In this battle for a growing but

increasingly demanding market, the

winners will be ports that can achieve

high performance, that manage

terminal performance holistically

to deliver maximized return to

shareholders, driving continuous value

creation across enterprise functions

and providing terminal operations with

the agility to deliver an optimal mix of

service level and cost.

Timing is Essential

As global volume growth continues,

especially in emerging regions such

as Greater China, port enterprises

looking to achieve high performance

need to be alert to the earlymover

advantage that will accrue

to the first operators to deploy

and operationalize capability. This

benefit applies in competition both

between port clusters – as inward and

intra¬national investment decisions

are made – and within those clusters,

among established local customers.

In order to achieve high performance,

it is necessary for ports enterprises

to jointly develop both the capacity

– the physical fabric of port

infrastructure, and especially the

capability – the strategy, process,

organization and systems, which

ensure the enterprise continues

to deliver incremental value for

shareholders. There are three critical

areas of business capability that

senior management should address:

terminal performance management,

terminal enterprise management and

terminal operations management.

Overall, the recent bullish sentiment

of port investors, evidenced by the

strong M&A interest in the sector,

points to an expectation that ports

can deliver significantly higher returns

than in the past. Shipping lines and

logistics services providers will choose

to partner with ports that can reliably

and consistently meet their own

growth and flexibility expectations.

Therefore, now is time for those

operators who expect to thrive in the

coming era, whether existing leaders

or market challengers, to invest in the

business capability improvement in

order to achieve high performance.

The Road Map to

High Performance

Managing Terminal


If port enterprise management

teams are to justify shareholders’

expectations of progressively

increasing value creation, a key

challenge is to identify the factors

that most directly contribute value

to the organization, both current

and especially future value, and

to monitor and nurture them.

Terminal performance management

is crucial to provide an integrated

understanding of the value creation

road map for total enterprise value,

correlating the value drivers of

tangible and intangible assets that

sustain progressive growth. Terminal

performance management informs

an effective strategy to enhance

market focus and position (see

side box on page 5), which creates

confidence among shareholders and

allows communication directed to

the operational management drive

the actions that will continuously

create value within the business.

To effectively assess and lead a

port enterprise, shareholders and

senior management need not only

earnings-based figures (ROIC, EBIT

per TEU, revenue mix, price-volume

mix analysis), but also management

information about factors that drive

incremental value and indicate the

business’s growth potential (expected

market position, capacity supplydemand

dynamics, per-customer

profit margin), as well as about the

ability and resilience of the port

enterprise to support sustainable

growth, (terminal productivity, asset

productivity, back-office productivity,

human capital development indices).

Managing Terminal

Enterprise Process

By nature, terminal operation is asset

and labor intensive and involves many

stakeholders (including regulators,

shipping lines, intermodal logistics

service providers and other port users

as well as interest groups). This web

of integrated enterprise management,

from terminal operations and

engineering to procurement, marketing

and external liaison, becomes only

more complex as a port operation

grows, ultimately to involve the

management of multiple business units

and locations.

It is not surprising that individual

business functions in some port

enterprises focus overmuch on daily

transactional processes and lose sight

of the need for process integration,

resulting in silos of operations that

hinder process efficiency, management

control and even the ability to create

incremental value.

Effective terminal enterprise

management focuses on the

integration of such processes, which

is essential if a port enterprise is to

grow successfully. By implementing

a unified corporate structure and

processes that can manage these

business functions optimally across

multiple business units, manpower

is released to generate incremental

value for the company. Such a

redesign of the enterprise must take

account of many factors specific to

port business operations, starting

with an end-to-end consideration

across business functions of multiple

business units. Integration among

By structuring the business to

optimize its value drivers, supported

by back-end business algorithms

(such as activity-based costing

and balanced scorecard) and

business analytics tools, terminal

performance management allows

port enterprises to benefit both

by immediately revitalizing the

performance management system,

and by unleashing the analytic

power that will continue to drive

value-creation activities such as

customer- and service-specific

profitability reviews, differential

customer strategy, tariff reviews,

cost structure and cost effectiveness

reviews and asset productivity

improvements, and the ability to track

the results these actions deliver.

units such as construction and

engineering with project finance,

procurement and supply chain, can

provide senior management with

a better overview on its business

performance. In areas of customer

service, terminal operations and billing,

an integrated process can ensure

efficient use of working capital and

prevent unnecessary revenue loss due

to inefficient billing reconciliation and

over committed tariff discount.

Terminal enterprise management helps

realize maximum value and establish

a firm foundation for future business

expansion, creating the performance

anatomy needed to become a highperformance

business (see side box).

The High Performance Business Building Blocks

Over the last five years, Accenture has developed the High Performance Business

Building Blocks, drawing on analysis of more than 6,000 companies in all business

sectors. This approach provides a powerful framework for understanding how

today’s port enterprises can flourish in the coming changes. Accenture identifies

three key building blocks that high-performance businesses must leverage to

differentiate itself from competitors, each of which talks directly to the current

needs of port operators.

Market Focus and Position

– choose where and how to compete,

in order to consistently make

better decisions

• Identify and seek to capture the

most valuable markets

• Be a good “parent” to

owned businesses

• Compete through

organization design

• Manage shareholder

value creation

• Manage multiple horizons

Distinctive Capabilities

– focus the business on the critical

interplay between capabilities and

value creation, to ensure the best

possible practices

• Define a customer-centric

business algorithm

• Align capital deployment

• Concentrate integration efforts on

core processes

• Use stretch goals and fast learning

• Balance evolutionary and

revolutionary change

Performance Anatomy

– develop a distinctive leadership

mindset that nurtures winning

business methodologies

• Balance market making

and execution

• Multiply workforce talent

• Generate strategic advantage

through IT

• Improve performance through

focused measurement

• Renew continuously


Managing Terminal Operations

A starting point of any terminal

business remains the ability to

optimize the productivity of its

infrastructure, including the ability

to respond to the evolution of mega

vessels. But worldwide, terminal

operations are expanding from a

focus on “box shifting” to “service

flexibility,” which is key both to

attracting and retaining customers and

to maximizing profitability. Effective

terminal operations management

enables ports enterprises to extend

and leverage this operational agility

and thus, achieve high performance.

Increasingly, port businesses are

aligning their operations with the

requirements of shipping lines, which

are moving from port-to-port carrier

services to door-to-door logistics

providers. High performers in terminals

are already focusing on “mass

customization” – providing tailored

services that meet each customer’s

needs within an efficient operational

framework. Through supply chain

integration and other measures, they

are able to meet the varied demands

of shipping lines and other port

users, such as guaranteeing response

to late and unexpected changes

in schedules and requirements.

Greater workforce and capacity

flexibility, driven by well-managed

information processing and backed

by timely and deep management

statistical support, are essential.


Good terminal operations management

strives to constantly deliver

more with less; that is, to deliver

improved manpower and asset

productivity and operational agility,

operating with lower unit resource

requirements and unit costs.

The distinctive capabilities building

block of a high-performance

business (see side box) usefully

frames the issues facing port

enterprises in this area. Tactically,

ports should take measures such

as an integrated berth-and-yard

planning strategy, maximizing

equipment utilization and reduction

of nonvalue-adding movements.

To improve terminal operations

management capability, operators

need to look beyond core terminal

operations. Transaction-oriented

processes in terminal operations

are the focus of a four-pronged

approach. Firstly, scenario analysis

supports decision making to optimize

resource deployment as early as

the planning stage; secondly, cost

analysis can control bottom-line costs

in fulfilling service commitments

and reviewing asset, manpower and

contractor performance and costing;

thirdly, process integration with

industry stakeholders is the basis

of integrated planning and service

integration with upstream and

downstream partners; and fourthly,

process integration with enterprise

functions (such as engineering repair

and maintenance) enhances crossfunctional

process efficiency.

Well-implemented terminal operations

management drives the construction

of a solid operational capability. As

with terminal enterprise management,

port businesses that leverage

terminal enterprise management

to deliver best practices that are

replicable in capacity expansion

are securing the future value of

the enterprise as it takes on the

challenge of growing dynamically.

The Path to Growth

The journey to becoming highperformers

will vary from one port

enterprise to another. Each business

operates in a unique business

environment, has a growth pattern and

direction, inherits a cultural background

and a history, and runs its own legacy

processes and systems. Yet every port

business stands to gain from visionary

management and the structured

strengthening of capabilities. Business

leaders with foresight are adopting a

blueprint-driven approach to growth

for their business and drawing up a

road map to become a high-performer,

looking to systemize the creation

of enterprise value built on three

capabilities – terminal performance

management, terminal enterprise

management, and terminal operations



For more information on

high performance for ports,

please contact:

Patrick Leung

The key issue for any port aspiring

to achieve high performance is

the criticality of the window of

opportunity today. As market growth

continues apace, we are at a moment

when existing market leaders may

cement an outright leadership position,

or when challengers may rapidly

capture the new business and change

the dynamics of their environments.

The port enterprises that can

systemize their business operations

on a firm footing and replicate them

rapidly will be the clear winners in the

very near future. The time is now.

Copyright © 008 Accenture

All rights reserved.

Accenture, its logo, and

High Performance Delivered

are trademarks of Accenture.

About Accenture

Accenture is a global management

consulting, technology services and

outsourcing company. Combining

unparalleled experience, comprehensive

capabilities across all industries and

business functions, and extensive research

on the world’s most successful companies,

Accenture collaborates with clients to

help them become high-performance

businesses and governments. With more

than 1 8,000 people in 9 countries,

the company generated net revenues of

US$19. 0 billion for the fiscal year ended

Aug. 1, 00 . Its home page is

ACC 9 6

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