Authors: Dr. Athanasios Pallis and Dr. Theo Notteboom
The concept of port performance is formed by two interconnected components; efficiency and effectiveness. Resilience to disruptions emerges as the additional third component.
1. Port Performance Components
The quest for performance measurement has always been a key issue for ports. Port managers, whether port authorities or terminal operators, need to organize complex processes efficiently and effectively to find the best ways to capture value for their customers and address the concerns of stakeholders. In combination, these port performance components provide port operators and government policy-makers with the essential feedback for assessing whether they meet their strategic objectives.
Performance refers to the execution of port activities in a manner that meets targets set by the owners and service providers and fulfills the expectations of the port customers (users). Operating in a given economic context, and with the broader structures defined by the port governance models endorsed and the targets set, ports and their operators develop their strategies. This involves organizing the use of available resources, planning their expansion, developing interactions with port users to improve the produced output of their function and port performance. The level of the produced performance will help the port (or a specific actor) reach the set targets. It will inform any needed realignment of the governance model and the reorganization of the available resources, with the scope being to improve the recorded performance of the port further.
Performance is a broad concept covering almost any objective of operational management and competitive excellence of a firm and its activities. In the case of ports, based on the complexity of the contemporary port product, each actor (authorities, operators, and stakeholders) applies multi-faceted examinations of different performance components. These are based on the development of several, occasionally unique performance indicators grounded on the distinction between terminal operations, cargo transfer operations, port logistics, and production and postponed manufacturing activities. The users of these products and the respective selection criteria of each specific service offered at a port differ substantially. Given the spatial and functional expansion of ports (port regionalization), linking and integrating operational design and strategy within the multi-institutional and cross-functional port sector has become an emerging dimension of port performance. Tailoring performance measurements and communication of performance measures to specific objectives are increasingly common.
The addition of performance indicators is a key development in recent port performance measurement. Depicting the taxonomy of the applied performance measurement dimensions, efficiency and utilization interact with quality and effectiveness. Service quality is a measure of how the customer is experiencing the expected level of service. Thus, a simple and effective view of service quality matches what the customer expects and what the customer experiences. For a port to respond to stakeholders satisfactorily, performance measures need to focus on the linkage between expectations and performance.
The concept of port performance is formed by two interconnected components, namely efficiency and effectiveness. Efficiency has been noted as “doing things right” while effectiveness is “doing the right things.” In combination, these port performance components also provide government policy-makers with the essential feedback for assessing the governance structure of ports in meeting national strategic objectives.
Ports use several indicators to measure each of these performance components and their various dimensions. Indicators are quantitative or qualitative factors or variables that provide a simple and reliable means to measure achievement, reflect the changes connected to an intervention, or help assess the performance of an actor.
Resilience to disruptions emerges as the third component of port performance. Along with the changing economic environment, unexpected events, such as economic crises, political events, natural disasters, cybersecurity incidents, and health crises, all challenge the infrastructural and operational integrity of ports, their terminals, and their industrial and logistics sites. When such events take place, extended supply chains are put at risk. Thus, efforts to enhance port efficiency, effectiveness, and ultimately competitiveness provide an additional port performance component. Resilience is defined as the capability to anticipate, prepare for, respond to, and recover from significant multi-hazard threats affecting and disrupting maritime networks. Differences in resilience are the outcome of diverse strategies, policies, governance practices, or simply different approaches to terminal operations.
2. Performance Measurement: Industry Level Initiatives
Each port measures its performance targeting to proceed in any necessary strategic, structural, operational, or other adjustments to improve its competitiveness. In addition, the interest in measuring performance at the port industry level is expanding, with efforts to measure port and related supply chains performance at the industry level developed by two different groups of actors. This reverses the past situation when this interest has been relatively low compared to other infrastructure industries, like the airport industry where several independent industry performance management initiatives already exist. However, widely accepted measurements providing opportunities to benchmark against industry averages to individual companies, aggregated industry performance figures to industry stakeholders, and linked industry performance to macro-indicators of country performance remain absent in the global port industry, despite efforts referring to either port, or port authority, or operational terminal performance.
The first group of actors developing indexes measuring aspects of port performance at a global or regional scale includes intergovernmental international organizations such as the World Bank, UNCTAD, OECD, and the European Commission. These initiatives aim to facilitate decision-makers to better understand the missing links in improving the competitiveness of an industry of critical importance for trade prosperity by monitoring and comprehending trends happening in ports worldwide or within broader constituencies.
Among the most influential indicators developed by international organization to compare countries across economic performance criteria and provide evidence of the performance of ports, either at port or country level, are:
- The Global Competitiveness Index (GCI) of the World Economic Forum. Seaports contribute to the country scores through the dimension of infrastructures and the adoption of information and communication technologies.
- The Liner Shipping Connectivity Index (LSCI) released by UNCTAD incorporates many port-related characteristics related to the connectivity of port systems, such as the number of shipping lines offering services to the national port system and the largest ship sizes.
- The Logistics Performance Index (LPI) was released by the World Bank and included as a component the availability of efficient seaports.
The second group of actors developing industry-level performance measurement initiatives are regional or global associations representing ports and port authorities, such as:
- In the Americas, the American Association of Port Authorities (AAPA) implemented a Customer Service Initiative for East Coast US ports to measure user perceptions of service quality. In addition, AAPA has managed to collect traffic data on American ports. These datasets on trade and traffic flows are made freely available via its website. AAPA also reports on the economic importance of ports to the US economy.
- In Europe, the European Sea Ports Organisation (ESPO) has mainly focused on the environmental performance of European ports via the ECOPORTS initiative. ESPO has also been involved in the successive European projects PPRISM and PORTOPIA, exploring how to detail the different dimensions of port performance and the best ways that the related measurements might develop within a balanced, integrated, and objective approach. National or sub-regional port associations and committees also collect port performance data. Examples include Puertos del Estado (Spain), Assoporti (Italy), the Baltic Ports Organisation (BPO), Danske Havne (Denmark), and the Finnish Ports Association.
- In Asia, the Indian Ports Association (IPA), which fosters growth and development of all Major Ports which are under the supervisory control of the Ministry of Shipping, publishes performance metrics on cargo and vessel traffic and port equipment. The ASEAN Ports Association (APA) was founded in 1975, with the port performance statistics mainly reported via national websites such as APA Malaysia.
The examples are indicative of the collective interest of ports in increasing the knowledge and awareness of port industry performance and developing a shared vision towards this end.
At the global scale, the International Association of Ports & Harbors (IAPH) is also advancing similar initiatives in the context of its World Ports Sustainability Program that is in progress since 2017 and is developed with the strategic partnership of other associations. Among these initiatives is the port economic impact barometer that surveys and reports trends in world ports (i.e., vessel calls, hinterland connections, utilization of capacity, availability of workers, investments) and the development of a global port tracker.
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