Choosing logistics service suppliers: customers` perspective in benchmarking container terminals

Development of a customer-oriented model that allows benchmarking of container terminals. This model takes into account the consumer's preferences regarding the importance of certain attributes of a port. Typology of consumers based on their preferences.

Рубрика Менеджмент и трудовые отношения
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St. Petersburg University

Graduate School of Management

Master in Management

Master's Thesis by the 2nd year student

Concentration --International logistics and supply chain management

CHOOSING LOGISTICS SERVICE SUPPLIERS: CUSTOMERS` PERSPECTIVE IN BENCHMARKING CONTAINER TERMINALS

Dvoryaninova Yulia

Research advisor:

Associate Professor Yury V. Fedotov

St. Petersburg

2016

Аннотация

Автор

Дворянинова Юлия Сергеевна

Название магистерской диссертации

Выбор поставщиков логистических услуг: бенчмаркинг контейнерных терминалов со стороны потребителей

Факультет

Высшая Школа Менеджмента (СПбГУ)

Направление подготовки

Международная логистика и управление цепями поставок

Год

2016

Научный руководитель

Федотов Юрий Васильевич, профессор

Описание цели, задач и основных результатов

Данная магистерская диссертация посвящена проблеме выбора контейнерных терминалов потребителями. В качестве потребителей мы рассматриваем экспедиторские фирмы. Целью работы является разработка ориентированной на потребителей модели, позволяющей провести бенчмаркинг контейнерных терминалов. В результате использования данной модели потребитель получает ранжированные терминалы. В данной модели учитываются предпочтения потребителя относительно важности тех или иных атрибутов порта. Мы применили данную модель для бенчмаркинга пяти терминалов Санкт-Петербурга. В данной работе предложена типология потребителей на основе их предпочтений. Для каждого из типов предложено решение в форме ранжированных терминалов, позволяющее потребителю выбрать лучший. Данное исследование способствует развитию литературы по проблеме выбора контейнерных терминалов со стороны экспедиторских компаний. Практическое значение состоит в предложении модели для потребителей, которая позволила бы им выбрать лучший терминал. Кроме того, данная работа дает судоходным компаниям, а также портам представление о том, как экспедиторские компании делают выбор относительно терминалов и какие атрибуты важны для них.

Ключевые слова

Морские перевозки, выбор порта, поставщики логистических услуг, бенчмаркинг контейнерных терминалов, экспедиторские компании, метод рандомизированных сводных показателей

Abstract

Master Student's Name

Dvoryaninova Yulia

Master Thesis Title

Choosing logistics service suppliers: customers` perspective in benchmarking container terminals

Faculty

Graduate School of Management

Main field of study

International logistics and supply chain management

Year

2016

Academic Advisor's Name

Ass. Prof. Yury V. Fedotov

Description of the goal, tasks and main results

This master thesis deals with the problem of the choice of container terminals from customers` perspective. We consider freight forwarders` perspective as they are the main port`s customers and they often make a choice about container terminals. The goal of this thesis is to develop a customer-oriented benchmarking model to choose a container terminal. By using this model, a customer gets ranked terminals. This model takes into account customers` preferences regarding the importance of various attributes of the port. We have implemented this model for benchmarking of five St. Petersburg terminals. In this paper, we also propose a typology of customers based on their preferences. For each type we provide a solution in the form of ranked terminals, allowing to a customer to choose the best one. This study contributes to the literature on the problem of the choice of container terminals from the perspective of freight forwarders. The practical contribution is that we propose the model for customers to choose the best-suited terminal. In addition, this study gives to the shipping companies and ports the idea on ??how freight forwarders make choice about the terminals and which port attributes are important for them.

Keywords

Maritime transportation, port selection, logistics service suppliers, benchmarking of the container terminals, freight forwarders, aggregated indices randomization model

Table of Contents

  • Introduction
  • 1. Review of the state of the art
    • 1.1 Seaport competition and competitiveness9
      • 1.1.1 Physical performance evaluation
      • 1.1.2 Economic performance evaluation
    • 1.2 Customers` perspective
    • 1.3 Research gap
  • 2. Methodology
    • 2.1 Theoretical framework
    • 2.2. Hypothetical typology
    • 2.3 Identifying the type of research
    • 2.4 Data collection approaches
      • 2.4.1 Expert`s perspective
      • 2.4.2 Customers` perspective
    • 2.5 Quantitative model
      • 2.5.1 Multiple-criteria decision analysis
      • 2.5.2 Multiple-criteria evaluation problems
      • 2.5.3 Aggregated indices randomization method
      • 2.5.4 Problem formulation in methodological terms
    • 2.6 Decision support system APIS
    • Summary
  • 3. Empirical part
    • 3.1 Data collection
    • 3.2 Expert`s estimations
    • 3.3 Findings and the results of empirical study
      • 3.3.1 Estimation of alternatives from company`s perspective
      • 3.3.2 Customers` typology
      • 3.3.3 Scheme of customers` typology
    • 3.4 Managerial implications
    • 3.5 Limitations and restrictions
  • Conclusions
  • List of references
  • Appendix

Introduction

Maritime logistics plays an extremely important role in global trade of goods. According to the International Maritime Organization, 90% of the world trade is carried by the sea. http://www.imo.org/ International Maritime Organization The huge part of all shipped goods falls at those transported in containers. Recent crisis created challenges for container shipping industry. According to McKinsey&Company McKinsey&Company report, Container Shipping: the untapped value of customer engagement. Travel, Transport& Logistics, March 2016 research many shipping companies started to cut costs by different ways in order to regain profitability. However, these cutting-costs measures influence the quality of service provided to the customers. Shippers face the problems of lengthening the supply chain, operational complexity, communications gaps between shippers and shipping companies and others, which emerged as a consequence of those cost-cutting measures. However, in crisis situation, cutting the costs is not the only one measure that needs to be undertaken by maritime logistics service suppliers. Understanding of customers` needs and overall customer orientation is necessary so as to retain customers.

Maritime transportation service, which shipping company provides to the customers, include many components. The services that delivered in container terminals play a critical role in overall customer satisfaction about shipping of goods. Home port and port of destination play the strategic role of network node in the chain of cargo transportation. The speed of operations in the terminals directly influences the whole supply chain responsiveness of customer`s business. That is why, from customer perspective it is important to understand which container terminal would satisfy the best any particular need. The right choice of terminal would influence the speed and overall quality of transportation of goods.

The topic of choosing the container terminal is explored in different studies. However, just a little attention is paid to the issue of customer decision-making process and the preferences that might differ from one customer to another and that influence the final choice of container terminal. In our study we are going to look closer to the decision-making process of terminal selection from customer perspective and provide the benchmarking solution for customer problem of port selection, according to their specific preferences. Moreover, the subjective aspect of decision-making process will be explored, which include relational and interpersonal characteristics.

Therefore, the goal of this paper is to develop a customer-oriented benchmarking model to choose a container terminal. Within this goal the following objectives are set:

1. To identify the key port`s customers

2. To select the port`s attributes taken into account by the customers when they assess the port's attractiveness

3. To conduct a survey of customer typologies based on various criteria and to develop the customer typology for the ports

4. To select and argument the methodology for solving the port selection choice problem with regard to the customer preferences

5. To provide a solution for each customer type in the form of benchmarking the alternative ports

The first chapter is devoted to analyzing the scientific sources for covering the first and the second objectives. It includes the port evaluation from different parties` perspectives and the port competition issue. First of all, it helps to identify the main port customers. Second, analysis of these two parts reveals the attributes that are important for port customers. The research gap is identified as a result of relevant literature review. In order to cover this gap the answering to the following 4 research questions is necessary:

1. What kind of typology can be implemented to differentiate different port customers?

2. How does the process of choosing a port differ from one type of customer to another?

3. How do relational aspects influence the decision-making process?

4. How to rank the alternatives of ports for each type of customer?

The second chapter of thesis includes the methodological issues. First, we suggest the hypothetical model of customers` typology for consideration. As a tool for data gathering we use questionnaire for customers and for industry experts. In this study we use quantitative model, which allows to rank alternatives. The second chapter includes model description and specification.

In the last chapter we discuss the main findings and results. The main customer typologies are defined and ranked alternatives are provided for each type.

1. Review of the state of the art

logistic supplier customer benchmarking

Choosing logistics service suppliers is a common problem, which businesses face very often. The role of service providers can be performed by different actors, third-party logistics companies, freight forwarders, shipping companies (maritime, air etc.). In this study we consider port as a subject of service supply for different groups of customers. Hereinafter, we can use both terms - a port and a container terminal as synonyms.

The port choice is a process, which implies the element of port competition. In order to be chosen, ports have to compete for customers. That is why let us start from the defining of concept of port competition.

The issue of choosing a port was examined in many researches. The process differs depending on the subject who makes a decision and the criteria which are used to do it. These criteria that customers considered to be important changed over time. Let us look at this process more closely.

To start with, it should be noticed that all ports can be classified in terms of the operations as general ports and transshipment ports. Main functions of the general ports are the following:

· maritime access to navigational waters;

· maritime interface to support maritime access through dedicated space (capacity),

· infrastructure (e.g. piers, basins, stacking or storage areas, warehouses, terminals) and equipment (e.g., cranes)

· land access to inland transportation (e.g., rail, truck) Park, B. I., & Min, H. (2011). THE SELECTION OF TRANSSHIPMENT PORTS USING A HYBRID DATA ENVELOPMENT ANALYSIS/ANALYTIC HIERARCHY PROCESS. Journal of Transportation Management, 22(1).

For transshipment ports in addition to mentioned functions there is also transshipment function which implies intermediating role of a port. The containers can be stored in a transshipment port so as to be delivered in other destination. A port that represents a transshipment point is often considered a hub port where cargoes are either consolidated or break-bulked to be delivered to a destination point. The considered in this chapter articles contain researches either for general or transshipment ports.

In the context of the discussed problem, ports compete to each other to be chosen by the customers. The concept of competitiveness therefore needs to be considered.

1.1 Seaport competition and competitiveness

The issue of port competition is examined in different studies. However, it is hard to find one common definition and concept of competition conformably to ports due to its complex nature and different characteristics that port possesses, according to Notteboom and Yap (2011). These characteristics depend on the type of port (gateway port, local port, transshipment port) and type of commodities this port handles (containers and liquid bulk). Moreover, the concept of port competition can be defined in different ways in accordance with the level at which this competition takes place. Voorde and Winkelmans (2002) identified 3 such levels: at first level intra-port competition takes place, when different terminal operators compete within one port; at the second level, inter-port competition occurs between different ports, however, within one region or country. The third level is defined when inter-port competition takes place between different ports which cover different port ranges. It means that ports serve different geographical areas and customers with no overlapping of hinterland. These differences in the level of competition, types of port and commodities are among factors that define the criteria, according to which the port performance is assessed.

One of the important aspects that was taken into account in the most of studies concerning port competitiveness is the degree of hinterland connectivity. The factor of transport integration was closely examined in different studies. Ducruet and Van Der Horst (2009) showed the significant influence of hinterland integration on port performance. Notteboom (2010) also supported the idea of dependence of level of competitiveness from the inland transport cooperation. lvarez-SanJaime et al (2014) closely consider the problem of how the port`s inland transport service integration influences port competitiveness, namely they consider ports as profit maximizing entities deciding whether to cooperate with road transport companies or not. They found that despite ports often find it advantageous to cooperate with inland transport, it can be deleterious to the welfare, as shippers' aggregate surplus decreases - those who are far away from the ports benefit at the expense of those who are close to the ports. The authors also suggest the strategies aimed at eliminating this negative effect: asymmetries in port capacities, government regulation and efficiency gains.

Port competitiveness itself was examined in some studies considering the problem of assessing port efficiency. Oliveira and Cariou (2014) revealed that the dependence from the degree of competitiveness exists, but needs to be examined from the different perspectives: global, regional and local. They showed that only for regional competition (covering the distance of 400-800 km) the interdependence is the following: the higher competition, the lower is the efficiency score.

The concept of competitiveness in the economic sense is closely related to the performance of a unit, the level of competitiveness of which is assessed. Therefore, let us look at the concepts of performance evaluation for ports.

1.1.1 Physical performance evaluation

Traditionally, port`s performance and the level of competitiveness was considered from the operational point of view, Talley (2007). It compares optimal and actual throughput over time, and if the actual one approaches to the optimal one, then it is concluded that the performance has improved. The optimal throughput is usually defined from the technical prospective, namely the maximum possible throughput that port can handle under certain circumstances (or under certain level of inputs). Mostly such evaluation of performance was widespread in the beginning of the process of containerization, when a lot of investments were made for the ports` re-equipment, and a lot of studies aimed at analyzing to which extent those investments were effectively allocated. Performance was mostly associated with port`s productivity. Thus, ports competed for being more productive with the focus on operational efficiency. At that time most studies concerned operational efficiency. Neufville and Ysunokawa (1981) considered 5 container ports in USA for the purpose of its operational efficiency: they analyzed, how resources, invested in ports, influence the production output. They used engineering production function method, in which quay length and number of cranes were inputs and container cargo was an output. The authors also suggest that container ports show significant returns to scale throughout the range of observations. Williamson and Daunt (1982) explored the problem of improving the performance in different developing countries. They elaborated the framework of operational changes which aimed at enhancing port`s productivity. All operational changes were divided into 2 parts: improvements in operational methods and investments in new facilities. After, this methodology was applied to different ports and showed as a result higher rate of cargo handling.

In the last decade of 20th century deeper analyses of port performance were carried out. They steal appealed to number of containers handled in port as an output, but used more factors influencing this level as inputs. Tongzon (1994) empirically proved that at least the following factors are determinants of ports` efficiency: economic activity of the region, geographical location, frequency of ship calls and terminal efficiency, which represent combined estimate of efficiency of terminal equipment and resources. It should be mentioned that the abovementioned studies used so-called “single port” approach, which means that efficiency of particular port was estimated with no relation to other ports` performances.

The development of the mathematical models which allow to estimate the efficiency of different decision-making units, made it possible to implement multi-port approach in evaluating port performance. It means that the efficiency evaluation of a particular ports is estimated in comparison to other ports. Such analysis as DEA (data development analysis) is commonly used in assessing port`s performance, applying “benchmark” approach. This model uses multiple-inputs (which play the role of resources) and multiple-outputs (which result is obtained) in order to estimate efficiency of resource allocation. The concept of port performance also evolved from engineering perspective towards broader one. Besides facilities and equipment, that previously were used as main determinants of production efficiency, other resources (land and labor) were paid close attention in different studies as well.

The first applications of DEA to maritime industry are dated by early 2000th. Previously, Roll and Hayuth (1993) applied DEA to ports, although their analysis was not based on real data. Tongzon (2001) compared and benchmarked four Australian ports and twelve other international ports in terms of its efficiency by use of DEA-model. He used throughput and ship working rate as outputs; number of cranes, berths and tugs, number of port employees, terminal area of the port serve as inputs. Applying DEA-model he found that 10 out of 16 ports were inefficient and identified the sources of inefficiencies in these 10 ports. This study gives the framework of how to implement this model in port efficiency assessing, and which kinds of conclusions and recommendation can be made. The same year, another study of Song et al. (2001) also showed how to apply DEA to container terminals by looking at those in Korea and the UK.

Since that moment numerous studies dealt with the problem of port performance assessing, in different parts of the world, using approximately the same framework. At the same time, different models and extensions of DEA were applied to the estimating port performance, with different variables and different concepts of decision-making units. For example, Wang et al. (2003) and Cullinane et al. (2005) considered a broad series of DEA variants. They considered and compared results from DEA-CRS (constant return to scale), DEA-VRS (variable return to scale), and FDH (free disposal hull) models. Moreover, some studies compared the results from DEA models and other different models. The most frequent comparison is used for DEA and SFA (stochastic frontier analysis).

Koster et al. (2009) conducted the research, the goal of which was to implement DEA analysis for assessing real (primary) data and to compare it with the previous research based on secondary data. The results differed in a large extent in a new research in comparison to the previous one. The authors conclude that it happened not only because of the usage of secondary data, which turned out to be non-reliable, but also because researches mix up ports and terminals. The authors argue that only primary, verified data of port terminals` characteristics should be used for using in the model. New results showed that larger terminals performed better than small ones and that those terminals that provided transshipment operations showed higher efficiency scores than those provided export/import operations, whereas in previous studied result differed in terms of ranking of ports.

DEA is not the only one model, which is used for evaluation of port physical performance. One of the recent studies uses the concept of TOPSIS (Technique for Order Preference by Similarities to Ideal Solution), which belongs to the class of multi-criteria decision making models (Kim and Lu, 2016). The model is based on the calculations of distances from the chosen alternative to the Positive Ideal Solution (should be the shortest), and to the Negative Ideal Solution (should be the longest). After the alternatives are ranked according to the results. In this study authors consider the ports of Busan and Shanghai and aim to compare the competitiveness of these two ports. The criteria are purely physical and objective - port throughput and port facilities factors (such as depth, the number of C/C, berth length, the number of berth, total area, storage area. The results indicated that Shanghai port is more competitive than Busan port in total competitiveness and in throughput competitiveness, whereas Busan port has a higher score in port facility competitiveness.

1.1.2 Economic performance evaluation

However, Brooks and Cullinane (2007) state that in the presence of competition the physical performance evaluation should be implemented along with economic performance estimation. The authors suggest that in the competitive environment ports should evaluate performance from the economic (or financial) perspective. In such situation ports should assess not only the physical ability to handle the cargo, but also the ability to compete for cargo. According to authors, in a competitive environment there are two important determinants in the process of port selection: port charges and time-related costs that both shippers and carriers incur. Both these actors are willing to reduce these two types of costs. Ports can be distinguished according to these criteria. If the approach of comparing optimal and actual throughput is used in the competitive environment, then the optimal one should be defined from the perspective of economic objective (for example, profit maximizing). Another way to assess port performance is to compare port performance indicators (benchmarks) that are chosen so as to optimize port`s economic objective and the actual ones. Brooks, M. R., & Cullinane, K. e. (2007). Devolution, Port Governance and Port Performance. Research in Transportation Economics series, vol. 17

Indeed, the topic of economic perspective of port competitiveness and performance was illustrated in different studies. BANД OS-PINO and RODRВIGUEZ-AВ LVAREZ (2000) applied stochastic frontier cost function to estimate economic efficiency of Spanish ports. They found that smaller in size ports and those managed under centralized regime are more economically efficient. By economic efficiency the authors imply the degree at which port costs are minimized given a certain output level.

Pricing strategies directly impact economic efficiency, which is, in turn, influences the competitiveness, according to Marlow (2000). He found that for short shipping price strategies have implications for competitiveness. He suggested that price differentiation would be based not on the value of cargo, but rather on the quality of port service (which are the time in port, and the punctuality of handling the vessel and its cargo). Such strategy provides ports with efficiency enhance, and in regard to short shipping, ports can compete with road transportation if they use efficient pricing strategy.

However, commonly used financial ratios are not suitable for evaluating port`s performance and its benchmarking. Bichou (2006) argued that financial performance can be overestimated (e.g. high profit) due to some external reasons (such as price inflation, for example) being not really effective and efficient in resources utilization. Another reason why port`s financial performance should not be considered alone is that it is used mostly for assessing short-term profitability, which contradicts the nature and goals of long-term investments. According to Bichou, there are other aspects which differ from country to country and influence financial performance, which are access regulation, statutory freedom, access to private equity and market power. That is why economic perspective of ports` performance evaluation is relatively less considered in studies rather than physical perspective.

Considered above physical and economic perspective are evaluated from internal perspective. However, the external assessment from customers` point of view is paid attention in las years. Let us look more closely on what studies exist on the topic of evaluation of port`s performance from customer perspective.

1.2 Customers` perspective

Recent research studies, concerning port competitiveness, more and more focus on customers` perspective in assessing ports` performance, in addition to the physical and economic perspectives. Understanding of customer needs has been discussed in business and management studies. At the same time port industry is highly competitive nowadays, that`s why ports are seeking for sustainable competitive advantage that would give them opportunity to stay steady in competitive environment. Pardali and Kounoupas (2014) argue that orientation toward market is a key strategic tool for achieving port competitiveness. They assert that right interaction with customers by means of marketing tools and techniques influence port performance.

According to the Forte (2013), customer-oriented attitude is the approach that ports should implement to keep and extend hinterland and foreland, and that directly influences annual cargo throughput. The authors also argue that it concerns not only the relationships that ports have with its external customers, but also with those within a port. “Internal customers” within a port environment are all port`s employees who are suppliers and buyers of the services performed within a port that when brought together contribute to the stream line port operations and procedures to deliver the services requested by the external customers.  E. Forte (2013), Economics and logistics in short and deep sea market, Franco Angeli

Due to existing difference between customers, we can distinguish between customers` groups, which have different goals, needs and preferences concerning ports` services.

Because of the complex nature of port business and operations let us first identify the main ports` users. The criteria, which help to identify the port`s competitiveness, depend on the party, assessing the port.

According to the Talley (2011), key users of port include the following parties:

1) Shippers, passenger and transportation carriers (freight forwarders)

2) Maritime carriers (liner shipping companies)

3) Providers of port services

The last group represents significant part of port users, especially port (or terminal) operator plays big role for cargo handling because it performs interchanging service for cargo received from shores and waterways, and vice versa for export operations. The other service providers of ports are:

1) The stevedore: a company which is hired by shipping line; it provides loading and discharging cargo from/to the ships;

2) The ship agent: represents ship-owner interests and looks after the ship while it is in port;

3) The pilot: helps to ship`s master when ship is entering and leaving a port;

4) The towage company: uses a tugboat for the berthing and unberthing of ship to/from the ports` wharf

5) Customs broker: clears cargo through customs at a port;

Among above-mentioned users we identify the following customers for ports, which perspectives we are going to consider: shippers, freight forwarders, shipping companies, port operators. By shippers we name individual companies which need to transport goods, while freight forwarder - is a person or a company that organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer or final point of distribution.  "Freight forwarder." Random House Unabridged Dictionary (1997). Random House, Inc. Individual shippers often appeal to freight forwarders which are experts in logistics network, and they arrange transportation of goods by organizing the network, combining different modes of transportation: rail, road, maritime of air. The liner shipping company is a carrier that performs regular transportation of goods overseas. http://www.businessdictionary.com/

Considering the customers` perspective in port competitive environment it is important for port to maintain and increase customer equity. For achieving these goals it is necessary to understand, what exactly customers need in ports, what they expect to achieve as a result of a service, and how they make a decision of choosing a port. In early 90-s a few researches were conducted by Dalenberg, Daley, Murphy who examined different parties` perspectives in choosing port, namely the viewpoints of worldwide water ports (1988), water carriers (1989), U.S.-based international shippers (1991, 1992), international freight forwarders (1992), and purchasing managers (1994). According to the researchers, the most significant difference in factors exists between worldwide water ports and the rest of players. U.S.-based international shippers, water carriers and international freight forwarders also have different perspectives on significant factors that port should possess. Therefore, we find it reasonable to consider different parties` perspectives separately.

Shippers` perspective. Traditionally, it was shippers itself, who made a decision about the choice of a port. That is why their perspective is considered in numerous studies, with the use of a wide range of methods. Let us look on how these studies evolve over time.

Slack (1985) in his paper explored different criteria, which could be important for shippers when choosing a port. He argued that cost factors are not the only one that determine the choice. The results of the survey he conducted confirmed it. It turned out that among numerous factors that could be applied to ports just a few matter for the shippers, which are price and service quality offered by land and ocean carriers. The port facilities were considered as taken for granted and were not too important for shippers. Interesting result that was revealed is that the minimum price criteria was often mentioned by small companies, whereas for larger ones quality of service was more important since they wanted to avoid congestion and other problems that might influence negatively the flow of products. This finding is explainable: large companies work on a constant basis and with large volumes, which imply economy of scale. Study also revealed increasing role of shipping lines not only as a direct users of port facilities, but also as a source of information for exporters and importers of cargo. This study aimed at defining factors that would determine the carrier, and most of the respondents pointed out that a port played a role of decision facilitator.

Further studies from shippers` perspective indicated the importance of other different factors. D`Este and Meyrick, (1992) found that the most important port`s characteristics are: proximity to point of production, port turnaround time, and availability of appropriate loading facilities. Such factors as port charges and railway access to the port were hard to identify in terms of importance because of too much dispersion in answers of respondent. It means that it highly depends on the particular shipper. There are also factors that were identified to be relatively important such as tradition of company to ship through a particular port and marketing initiatives of port management. This study complements the previous one, first considering a port as a part of logistics network.

However, the problem of a port choice requires not only understanding of which criteria are important for a customer, but also the order of ranking of these criteria. There is a set of methods that is commonly used for dealing with a problem of a port choice. The huge part of the methods belongs to the Multi-Criteria Decision-Making models, which generally imply several alternatives to evaluate according to a set of criteria (factors or attributes). Such models results in numeric score that shows overall “attractiveness” of an alternative. The other part of methods belongs to the regression analysis models, and usually is used to evaluate the probability of choosing any particular alternative given a set of attributes.

That is why a lot of studies are dedicated to constructing a model, which would result in the most appropriate solution according to a decision-maker`s preferences. Nevertheless, the insight on a decision-maker`s preferences about the importance of criteria is of huge importance as well.

Let us first consider the most frequently used model, when the problem of choice is considered. Analytical Hierarchy Process, which belongs to the class of MCDM models, is one of the most used models for dealing with the problem of port choice. AHP is a multi-objective, multi-criteria theory of measurement. This model implies decomposing of problem on simple components and processing of decision-maker`s estimations. At the beginning the hierarchy is defined, which includes goals, criteria and alternatives to be estimated according to these criteria. The elements of each level are pairwise compared and the coefficients of importance are derived. As a result, the quantitative estimation of each alternative is calculated and the best alternative is determined.

In this paragraph we consider shippers` perspectives. That is why in the terms of MCDM analysis in this case a decision maker is a shipper. The authors, who used this model, and the considered criteria are listed below in the Table 1.

Table 1. AHP use in different studies: shippers` perspective

Authors

Criteria

Service

Cost

Ugbomai et al. (2006)

· Efficiency

· Frequency of ship visits

· Adequate infrastructure

· Location

· Port's reputation for cargo damage

· Quick response to port users' needs

· Port charges

Song and Yeo (2004)

· Cargo volume

· Port facility

· Port location

· Service level

Analytical hierarchy process (AHP) uses rankings of different criteria to model system of preferences in the selection process. However, other models use different techniques to predict the choice of a port. For example, discrete choice model (Multinomial Logit Model) offers a different approach. The theory of discrete choice is developed in a tradition where probabilistic concepts and formulations play a key role. The model implies predicting possible outcomes of categorical dependent variables (alternatives), given the independent variables, which can be binary-valued, categorically valued etc.

Nir et al. (2003) and Malchow and Kanafani (2004) have used the Multinomial Logit (MNL) model to estimate the effect of important factors on port choice. Tiwari et al. (2003) have studied the port choice behavior in China by using shipper's survey data on the discrete choice model and concluded that distance and port congestions are the most important factors influencing port choice. Nir et al. (2003) have employed survey data on the model and found that proximity of port, recent use and port cost are more important in comparison to competition, frequency, route, port facilities or service. Malchow and Kanafani (2004) have reported that inland distance and frequency of shipments are negatively correlated with the probability of a port-shipper combination being chosen.

Multinominal logit model was also used for the process of choosing ports in Spain. Veldman et al. (2011) showed that the location of a port, both in terms of origin and the destination of its traffic, is the most significant factor for explaining the observed container port choice in Spain. The authors also considered such variables as hinterland transport costs, maritime transport costs and broad group of variables for quality of service provided. The suggested model can also be used for the analysis of cost sensitivity of port choice. The table below reflects theconsidered factors from shippers` perspective.

Table 2. Use of MNL model in different studies: shippers` perspective

Authors

Considered factors

Veldman et al. (2011)

· Port location

· Hinterland transport costs

· Maritime transport costs

· Quality of service

Malchow and Kanafani (2004)

· Oceanic distance

· Inland distance

· Sailing headway

· Vessel capacity

· Probability of last port

Tiwari et al. (2003)

· Inland distance

· Port congestions

· Ship calls

· Total TEU handled at port

· Number of berths

· Number of cranes

· Water depth

· Routes offered

· Usage factor (hauling volume/length of quay line)

· Port and loading charges

Nir et al. (2003)

· Travel cost

· Travel time

· Route

· Frequency

To sum up, different methods were used in order to identify the important criteria for shippers and suggest the best solution for them. The studies and considered factors evolved over time: starting from considering purely physical characteristics of the ports and costs, and moving towards looking at the port as a part of logistics network.

However, shippers not always directly communicate with shipping lines and choose a port themselves. More and more companies delegate the logistics function to the freight forwarders or third-part logistics companies (3PL), which also perform a duty of freight forwarders. Hereinafter we will name this perspective “freight forwarder”, implying both pure freight forwarders and 3PL companies. That is why the perspective of freight forwarders needs to be considered.

Freight forwarders` perspective. Just a few researchers consider the problem of a port choice from the perspective of freight forwarders, whereas nowadays they play an important role in this process. Hesse and Rodrigue (2004) introduced the term “supply chain power” and refer the essence of such power to the third-party logistics providers (3PL), or freight forwarders due to the fact that “they are able to command the conditions of delivery that have to be fulfilled by service providers.” Hesse, M., & Rodrigue, J. P. (2004). The transport geography of logistics and freight distribution. Journal of transport geography, 12(3), 171-184. Tongzon (2008) also admits the growing power of 3PL in supply chain functioning. Moreover, Murphy et al. (1992) and Nazemzadeh (2015) found that shippers` and freight forwarders` perspective, regarding the important factors of ports, differ to certain extent. That is why we find it reasonable to consider this perspective as well.

Grosso and Monteiro (2008) implemented statistical approach to the problem of identifying the most important criteria of port selection for freight forwarders. They used factor analysis in order to define groups of factors. Initially explored 39 characteristics were reduced to 31 due to irrelevance of those 8 ones. Further, these 31 variables were grouped in 4 factors which are: connectivity of the port, cost and port productivity, electronic information, logistics of the container. Analysis revealed that the most important criteria for freight forwarders are connectivity of the port which includes the following characteristics: customs procedures, electronic customs procedures, followed by customs efficiency, customs hours and fill in and clear out procedures. This factor also includes road, rail and hinterland connections. Cost and port productivity factor also plays role in the process of port choosing, but less prominent. This consolidated factor consists of the 10 variables, among which the most influential ones are road cost and port charges.

Freight forwarders` perspective was further examined by Tongzon (2009), who found that for Southern Asian freight forwarders the most important criteria are the following: high port efficiency, good geographical location, low port charges, adequate infrastructure, wide range of port services, and connectivity to other ports. Author also provides the analysis of a decision-making process, which shows that forwarders first choose a shipping line, and only then they choose a port among those, served by the line. Moreover, the results showed that ports are not viewed by the freight forwarders in isolation but are considered together with other requirements associated with the movement of cargoes across the port-oriented supply chain. The results of this study complement the results of previous ones, concluding that port infrastructure and quality of services are also important for freight forwarders.

Freight forwarders as port`s users were also considered by Nazemzadeh (2015) upsides with shippers and carriers. 3 ports were examined: Antwerp, Rotterdam and Hamburg. The AHP model was used in order to offer the most appropriate alternative for each type of the customers. The order of important criteria differs from one group of customers to the other, which is explained by their respective positions and responsibilities within the supply chain, and the contract of carriage concerned (carrier haulage or merchant haulage). The overall results indicate the following order of port selection criteria in decreasing order of importance: port costs, geographical location, quality of hinterland connections, productivity and capacity. In respect of general port attractiveness, Antwerp turned to be the most attractive, followed by Rotterdam in second place, and Hamburg in third.

The studies considered above aim to solve two main problems: first - to identify, which criteria are important for decision-makers when choosing a port; second - to suggest the best alternative for a customer, taking into account the preferences about port`s attributes. However, the list of possible research directions is not limited to these two problems.

According to Mazzarino (2004), there is a class of choice models that deal with the replicating of the process of choice making. Such models are called process-oriented. In such models the decision-makers estimate the situation, using qualitative characteristics, goals, hierarchies of needs, preferences and values, which not always can be mathematically represented. The sense of process-oriented models is that it tries to analyze, how different factors which enter decision-making process interact in order to yield results. Such models mostly result in behavioral framework.

There are just a few studies that emphasize the process of analyzing different port alternative and the decision making. Mazzarino (2004) considers ro-ro (roll-on/roll-off) sector (which deals with the shipment of wheeled cargo, such as cars, trucks and so on) for building the behavioral framework of taking a decision of carrier/port choosing. The author uses qualitative approach by conducting in-depth interviews and survey among key users of port services - shippers and carriers. After, they come up with the port-shipping choice model in the Adriatic ro-ro sector. The specific of this model is that it gives an insight on how the decision-making process is built on the different hierarchal level: from the perspectives of shipper or freight-forwarder the first-level choice should be made when establishing a partnership agreement with a shipping company. The interesting fact here is that the shipper/freight forwarder chooses the shipping company first (which was already noticed by Tongzon (2009)), and only then he makes a decision about the port, rather than putting port choice decision on the first forefront. According to the empirical study personal relationships, perceptions, conservative attitude prevail on the rationality of choices. The second-level choice is made when the shipper/freight forwarder chooses a port from those suggested by a shipping company. During this stage the decision-makers mostly concern about the quality of service, rather than about monetary aspects. Other discoveries regarding the decision-making process are the following:

· Decision-makers often are not rationally conscious about the characteristics of decision-making process. Instead they appeal more to the intuition, perceptions, experience and other more subjective matters;

· Decision-makers of port are quite conservative: once they made a choice, they continue taking the same choice in other times, thus adopting routine behavior;

· Overall, the procedure of decision-making process can hardly be called rational and formalized, instead, the personal experience and relationships matter. As authors conclude it demonstrates that the choice process of carrier/port is human activity.

All in all, there is a lack of studies for freight forwarders in the literature, whereas their role in a decision-making has increased during the last decade. The researches demonstrate the evidence that freight forwarders` preferences about the attributes of ports differ from those of shippers. In comparison to the shippers` perspective, studies, concerning freight forwarders mainly focus on the identification of important criteria of a port, while the problem of the choice is not underexplored.

Maritime carriers` perspective. Maritime carriers (or shipping lines) play the intermediate role between shippers/freight forwarders (end customers) and ports. They represent a party that directly collaborates with port. They sign contracts with those ports, which are of interests to the end customers. That is why the perspective of maritime carriers is also paid great attention in the literature.

The first papers of Malckow and Kanafani (2001 and 2003) consider the problem of port choice of being strongly connected to the problem of vessel choice. The authors state that while selecting a port a customer indeed chooses the vessel. That`s why in their researches they look at the problem of choosing vessel/port. Moreover, the authors initially assume that a shipper does not choose a port, but instead, he chooses a carrier, which in its turn already has some port preferences. Thus, carriers` perspective is explored in the problem of port choice. Because of the initial assumptions factors, that hypothetically influence port`s overall systematic utility, mostly reflect vessel`s and geographical characteristics such as: the distance between the port and point of destination (oceanic distance), the inland distance to the port, the average headway between voyages by carrier from port to the destination of shipment and others. The multinomial logit function was used in order to estimate the importance of different characteristics in overall port “attractiveness”. It turned out that it mainly depends on oceanic distance and inland distance, whereas vessel capacity is not significantly important. These factors remain significant for discretionary cargo as well (cargo originating in a region that does not contain a port), but in this case some other ones can also be important.

Ng (2006) continued exploring this topic and analyzed transshipment ports in Northern Europe. He carried out the research from the shipping lines` perspective, which are the permanent users of ports. By carrying out a survey he found out that besides cost and location criteria, qualitative ones are important. Among others, the most important ones turned out to be: port infrastructure, advanced technology, availability of dedicated facilities for container transshipment and the availability of professional personnel in ports.

Yeo et al. (2008) explored the competitiveness of ports in North-east Asia, namely in Korea and China due to Chinese ports` developments and its threat to be superior to Korea`s ports. The authors came up with the proper framework of factors influencing port`s competitiveness form the point of shipping companies. Applying factor analysis they found that such factors as port service, hinterland condition, availability (which include such sub-factors as “availability of a vessel berth on arrival in port” and “port congestion”), convenience (namely “water depth in approach channels and at berth”, “sophistication of port information and its application” and “the stability of port labor”), logistics cost, regional center and connectivity are the determining factors for ports` competitiveness in these regions. They also noticed that some sub-factors that were significant in previous studies have been replaced by other ones. For example, the key factor has shifted from hardware and labor towards software and technology, which means that the most competitive ports rely on efficient hinterland logistics systems. Another attribute that has become important is the availability of a vessel berth on arrival in port, whereas in preceding studies it was such components as the numbers of loading and unloading facilities and the capacity of the container yard. The authors conclude that in the considered region shipping companies perceive port service and technology to be not less important than investments in infrastructure development.


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