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
Performance
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
5

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.
6
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
management.
Contact
For more information on
high performance for ports,
please contact:
Patrick Leung
patrick.w.leung@accenture.com
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.

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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
www.accenture.com.
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