Port Centric Logistics: From Dissociation to Reinsertion

Port Centric Logistics: From Dissociation to Reinsertion

Historically, ports and adjacent areas had a pronounced maritime support function with a clearly defined port district composed of docks, piers, warehouses, and other related activities. These are usually referred to as first-tier logistics since they are directly related to the support of the port’s cargo transfer. Low mechanization levels implied the usage of a large workforce manually handling break bulk cargo; loading or unloading ships, and moving to adjacent transit sheds. This was a time-consuming process with ships spending a significant amount of time at ports; in many cases, two-third of their operational time. Directly adjacent to port districts were the second tier of port-centric logistics, which included warehouses, distribution centers, manufacturing, and commercial and financial districts. Inefficiencies in port operations and throughput were a strong driver for containerization, and its diffusion indirectly incited a dissociation between ports and their logistical activities.

Because of the technical requirements of containerization, new port terminal facilities were built at locations more suitable for container operations, particularly those with a more extensive terminal footprint. This by itself incited a physical dissociation of the terminal with local logistical activities which was exacerbated by the substantial decline in the port workforce because of mechanization. Many old port sites were abandoned and converted to other uses (commercial and residential), which further contributed to the dissociation. Port districts were declining in size and importance. Lower inland transport costs and low levels of congestion allowed commercial and manufacturing activities related to ports to be less constrained in their locational choice. Container ports were servicing a wider hinterland, which went on par with trade liberalization and the offshoring of manufacturing activities towards lower-cost locations. While port-centric logistics were being dissociated in older port areas, new forms of port centric-logistics were being created in others. For bulk port activities such as metals and petrochemicals, the level of integration did not change much because of the high weight to value transport cost ratio for the involved commodities. What changed was mostly the larger scale of these activities, which for some has incited relocation to more suitable sites.

As containerization is reaching a phase of maturity in terms of its spatial diffusion and lower growth rates, a reinsertion of port-centric logistics is taking place around many container port facilities. Enduring trade imbalances reflected in container flows require the management and repositioning of empty containers and the related logistics activities. For instance, at gateways with a strong import function, transloading the contents of containers into domestic load units is a notable port-centric logistics activity. At export-oriented gateways, warehousing and container stuffing operations are more prevalent. Global supply chains are becoming increasingly complex, which for some sectors incite locating in port-centric logistics zones to maximize connectivity to suppliers and customers that could be shifting due to market, technological or regulatory changes. The impact of congestion is also non-negligible as additional costs, uncertainty and delays could render port-centric sites more suitable than lower costs inland sites. There is also a scale effect as large containerized volumes handled at major ports increase the commercial appeal of their port-centric logistics sites.