SUPPLY CHAIN COMPLEXITY

The supply chain has been undergoing a long process of evolution. In the 1970s and 1980s, the logistics chain was very much the classic model, focusing purely on the physical flow of goods, with partners separated from each other in different places.

Today the chain is often very much de-linked from the manufacturing process, with all elements of the value chain connected in the search for a new competitive edge, managing the flow both of physical goods and information across the globe.

The supply chain has become an integrated process between the partners. Relationships between supply chain partners are becoming deeper and deeper. Who knows where this will end? Will we end up having the end customer and out throat in real time?

 

GOING GLOBAL

The development of transport and communications has made the world smaller. Compared with 20 or 30 years ago, world transport and communications systems not only cover a much larger part of the globe but are much quicker, cheaper and easier to use. Access to the production process and to consumption sources is now available worldwide.

The phenomena of globalisation and consolidation have been evolving for many years. The production process has gone global, becoming ‘multinational production’, and involving the seeking of not only consumers, but raw materials and a lower production base. The fabrication process involves an integrated supply chain system where raw materials are transformed to a semi-finished product, which may be transported to a different location for product assembly with other parts from different places. Take as an example a simple apple: a fertilizer from Indonesia is transported to Australia for use in apple orchards; the apples are then sent to China for mass repacking before redistribution to Japan for the Japanese market.
Such globalised production and consumption increases competition between substitutes, and leads to an ever-greater emphasis on the control and reduction in costs of production and transportation.

 

INTERMODALISAM AND ‘JIT’

This production and consumption has driven the need for an integrated transport chain and has led to intermodalism. Obviously the major objectives of intermodalism are to distribute the goods as quickly as possible. The fact that goods are consequently transport before they reach their final destination demands an effective management of the supply chain.

Another development that requires effective supply chain management is the introduction of JIT (Just in Time) delivery systems. JIT is a logistical method based on precisely managed and controlled transport and management systems, moving the right product from the right origin to the right destination, in the right quantity and the right quality, on the right schedule or time, and at the right place.

These developments have created the demand for efficient and improved supply chain management. Poor supply chain management will certainly damage the competitiveness of the products.

 

NEW SUCCESS FACTORS

Efficiency, reliability and speed have been the buzzwords for many companies in the supply chain, and without doubt these factors have been successful in providing excellent products and services. But we feel that with the changing trends of supply chain and trade, these traditional key factors are no longer sufficient. There are new success factors that are already emerging in the supply chain management.

Companies are realizing that responsiveness, global service and flexibility are increasingly important to supply chain management. Added value can be provided in the way a company responds to the needs and demands of customers globally, and in the company’s flexibility in adapting and customizing to individual customers.
An effective supply chain also requires transparency and integration. Given the increasingly complex nature of the supply chain, information sharing across the supply chain requires a deeper and more strategic relationship between shippers and the logistics providers. Integration of information technology and communications are often important in this respect.

 

ROLE OF TRANSHIPMENT PORTS

Latest world cargo forecast have been revised downwards due to the current economic downturn: 4.3% compared with earlier estimations of 7% in 2001. However, the actual proportion of transshipment volumes relative to direct shipments will possibly not be affected. The underlying economics of transshipment continue to hold, even in the current economic environment.

This is due to two main factors:

The hub and spoke concept increasingly developing around the world, for example in the Middle East, Europe, the Mediterranean, and South-East Asia; and The continued increase in Containerisation in developing countries.

 

The role of transshipment hubs is therefore unlike traditional ports, in that transshipment hubs are integrated or interlinked with various intermodal elements: ships, land transport, air transport, warehouses and distribution centers, and factories. The transshipment hub is a node in the middle of the supply chain.
In order to improve supply chain management and stay competitive, ports have to respond to the demand by adapting the following:
 

 

In achieving a real partnership with the other supply chain partners, ports must prepare to change and respond to what it takes to cooperate. Partnership is a prerequisite for integrated logistics, as most logistics players lack the scale to survive on their own if they have to be all things to everyone. Cooperation allows partners to leverage each other’s competencies. It also creates a more defensible competitive position, especially for smaller service providers.

Here’s what it takes:
 

 

PTP AS A CASE EXAMPLE

As a case example, let’s see how PTP integrates as a community.

Customer Relationship Management (CRM) is a new dynamism in customer empowerment, and is giving rise to a new breed of technology, enabling savvy management of customer relationships. The key to success in connectivity is differentiation. Customers are looking for unique, value-added services that enhance and complement port services.

The PTP website, a customer service portal, enables total support to the customer, offering container clearance and booking, container tracking, ‘free-zone’ declaration information processing, and vessel clearance systems. It provides real information, acts as a user bulletin board, and providers online support. Through the system’s integration with Port Systems (including the Terminal Operation System, finance and other management systems), it ensures high quality management of horizontal and vertical systems in the supply chain.

 

CHALLENGES FACING TRANSHIPMENT PORTS

After mentioning all the above, there are still several challenges that face transhipment ports currently. The first is that bargaining power favours major customers. Fragmentation and overcapacity among the ports face ever-increasing consolidation on the customer side. Second is the lack of IT standards within the logistics industry. IT investment can be a burden, especially for smaller ports, while integration can be challenge across multiple supply chain players. There is also a shortage of qualified resources.

Another challenge is the capital intensive nature of adaptation of nautical access, infrastructure and superstructures. Lat but not least is the emergence of new markets and the shift of production facilities to North Asia, eroding the position of South-East Asian ports as transhipment centers.

 

CONCLUSIONS

These are challenging times for transhipment hubs. New capacity has been emerging in every corner of the world, resulting in high levels of competition despite unprecedented growth. Service level requirements have also increased.

To stay in a competitive position, ports must integrate deeply into the overall supply chain to defend their long-term hub position. Ports also must be able to partner with other supply chain players to ensure competitiveness.

The winners in the industry are those that can refocus their organizations from operations to customers.

 

THE RISE OF TANJUNG PELEPAS

The Port of Tanjung Pelepas (meaning ‘departure bay’) began with the signing of a privatization agreement with the Government of Malaysia, setting in motion the development of PTP in March 1995. From the start, project objectives focused on a high-efficiency common-user terminal that could become a major regional transhipment hub. Its success has been rapid; PTP was officially launched on 13 March 2000 by the Prime Minister of Malaysia, and by the end of the year it had handled 418,218 TEU. Throughput in the year 2001 was 2.05 million TEU, a five-fold jump. Phase One handling capacity is 4.5 million TEU per annum.

PTP’s strategic location is key to its success: its position at the southwestern tip of Peninsular Malaysia, at the mouth of the Pulai River, puts it at a crossroads of international shipping lanes. It has a sheltered bay with deep waters of 15 metres, an approach channel 12.6km in length and 250 metres in width, and a turning basin of 600 metres. These features ensure immediate berthing for vessels at one of six current berths of 360 metres each.

PTP’s 5.4km ‘access road’ links to the second Malaysia-Singapore expressway, and to the north-south highway that runs all the way to the Thai border. A 31.5km rail link connects with the national rail grid at Kempas.

PTP has free-zone status, which includes 160 hectares reserved as a ‘Distripark’ to enable close interaction across the supply chain. Directly behind the berths is one of the largest container storage facilities in the region, with 110,000 TEU storage capacity. The IT network facilities a free flow of information and nearpaperless transactions between shipping lines, forwardes, shipping agents and the port.