CHAPTER ONE

• Background to the study

Container ports and terminals form an essential component of the modern economy. Containerization since the middle of the 20th century has dramatically reduced the transport cost of international trade: before the container, the transport of goods was so expensive that few items were shipped halfway across the country, much less halfway around the world, but in the present day, an American brand car might be designed in Germany, the components are produced in Japan, Taiwan and Singapore, it is assembled in Korea, and the advertising campaign is delivered by a British company. The largely reduced transport cost derived by containerization means that handling goods has become highly automated and efficient between most transport modes and transport goods from anywhere to anywhere therefore become a feasible operation for many enterprises. Once isolated factories have become integrated into a global network, and more multinational and international companies are present in many markets since they are able to choose the cheapest location in which to produce. As a result, today’s economy is formed by the offshoring, outsourcing and extensive use of global supply chains, to which container handling and transport have contributed significantly, (Levinson, 2008).

Maritime transportation has become an important role in global trade and economic growth. It is shown by more than 90% of world trade in seaborne trade. In 2016, world seaborne trade reached 10.3 billion tonnes, an increase of 2.6%. This growth is in line with the growth of world Gross Domestic Product (GDP), which is 3.6% in line with economic growth in developing countries. Related to the growth of world trade volume through sea lane, maritime transportation demand during 2016 has increased by 3% (UNCTAD, 2017). In line with this increase, container transportation is experiencing very significant growth; due to it has many advantages over other traditional transportation. In 2016, international seaborne trade using containers experienced a very significant growth of 3.1% or reached 140 Million in TEU (UNCTAD, 2017).

Containerization was first introduced in 1965, which aims to reduce the cost of shipping cargo through sea transport and cargo handling costs at ports or terminals (Cooper & Levinson, 2006). The usage of container dramatically reduced the cost of international trade transport. Reduced transportation costs by using container mean that the handling of goods will be more efficient. Therefore, the container terminals have a vital function, namely as a gateway of economy and trade, the interface points between the flow of goods by sea and land. Container terminal has a strategic function in the country’s economic development. Thus, the container terminals will experience several challenges and restructuring, to deal with the increasing flow of goods trade through the sea route by using containers. As a result, container terminals become complex systems part which operates in an uncertain global logistics environment that requires efficiency in terms of operational performance. They are also placing where several port stakeholders provide products and services and create shared value, (Qianwen, 2010).

Based on data released by the United Nations Conference on Trade and Development (UNCTAD), in 2017 there are 5 countries control the world’s voyages, namely Greece, Germany, Japan, Singapore, and China with a market share of 49.5% of cargo carrying capacity (dwt). Container vessels have various advantages in terms of transport, such as sailing time, loading capacity, and loading speed, therefore it can reduce the waiting time of the vessel in the port which will have an impact on the low cost of transportation than other vessel types. The safety level of the goods transported using container vessels are also very good which can prevent damage or loss during shipping. Therefore, the trust level of the shipper and the receiver is higher. On the other hand, container vessels require particular ports or terminals that can serve their loading and unloading activities, and not all ports or terminals can be visited by container vessels. Therefore, the role of container terminals is very important to serve the loading and unloading activities of container vessels.

Currently, Belawan Port is the third largest port in Indonesia and operated under the management of Pelindo I. Belawan Port has strategic location and function as it is in international shipping line in Malacca Strait. Maritime traffic across the Malacca Strait continues to grow each year consistently. Looking closer to Malacca Strait, the transit value in 2017 reached the highest number of 84,456 transits. The number of transits will continue to increase every year. As a feeder port, this increase becomes an opportunity for Port Belawan to capture some of the volume of the container that across the Malacca Strait. Furthermore, the flow of the logistic distribution of export and import goods in Belawan Port will increase every year. It makes the Port of Belawan become the most important port and the economic gateway for western Indonesia (Seanews, 2018).

Belawan International Container Terminal (BICT) is a container terminal at the Port of Belawan and the third largest container terminal in Indonesia after Tanjung Perak, Surabaya and Tanjung Priok, Jakarta. The domestic terminal has the quay length of 350 m and the international terminal quay length of 500 m. In 1987, BICT development was inaugurated by the President of the Republic of Indonesia. Since 2012, the quay length has been added to 400 m at the domestic terminal and 550 m at the international terminal. This addition will make the quay capacity to serve the container vessels, and container loading and unloading activity will be higher. Currently, BICT is the only terminal that provides container handling activities for western Indonesia. On the other hand, the Kuala Tanjung container terminal still in the same province as BICT is still under construction. Therefore, BICT becomes the main choice of port users in using sea transportation services with container facilities. Besides that, it also causes container loading and unloading activities through BICT tend to increase every year.

In 2017, BICT has been serving container loading and unloading activities of 526,039 Teus. And over the last 5 (five) years showed an increase in traffic average of 3.7% per year. Syafaaruddin (2015) revealed that BICT throughput decreased in 2013 due to the inefficiency of Container terminals operational performance. By looking traffic conditions in 2017, there is a gradual increase in throughput from the previous year. Hence, BICT needs to perform the efficiency and optimize the handling performance of container loading and unloading activity to accommodate the growth of container traffic.

With regard to the growth of container traffic and technology innovations in the maritime industry, it requires container terminals to provide the advanced technology in order to confront these developments. The container terminal is also forced to increase terminal efficiency in order to attract more container traffic. It will be a challenge for terminal operators in order to secure traffic flow and prevent the transfer of container loading and unloading activities to other terminals. Therefore, container terminals need to increase speed in handling containers, reducing turnaround time of the vessel, providing adequate equipment, enabling large storage capacity and ensuring integrated inland transportation connections (Nyema, 2014).

Container Terminal plays a strategic role in ensuring the smooth flow of containers inout in a region. Operational efficiency is an essential part of the service. Container terminal efficiency can be reflected from shipping rates charged to shipping companies. The lower turnaround time of the vessel and the container dwelling time will make the shipping cost lower. This condition will provide more attractiveness for container terminal users. The fast performance and efficient services will also enhance the competitiveness of the terminal and provide added value to the company. (Castro, 1999).

Currently, BICT is experiencing an increase in container traffic every year. To manage this increase, BICT is expected to perform the efficiency in its operational activities to prevent overcapacity in the terminal. The high growth of container flows forces BICT to evaluate the productivity and performance efficiency of terminal infrastructure, equipment, facilities and operating systems. Efficiency analysis of operational performance at container terminals is necessary to obtain information on efforts to improve future performance or maintain current efficient performance to attract more vessels to arrive and to maximize container terminal business (Syafaaruddin, 2015). To perform the analysis, it requires input indicators to produce the most efficient level of output from the operational performance of container terminal BICT. By knowing the efficiency of operational performance, BICT is expected in the future to provide maximum service to customers and provide added value for the company. Eventually, this increase will have an impact on national and global economic growth.

Douala Port in Cameroon has been used as a trading port for Cameroon and its neighboring landlocked countries since the mid-19th century, and due to increases in cargo volume, various kinds of improvements have been carried out to its port facilities, mainly through assistance from the World Bank. All through the first half of the 1980s, Cameroon showed favorable economic development at an annual rate of 7.5%, and the volume of cargo handled at Douala Port reached to 3.92 million tons in 1983. Given this situation and the background in which ports were increasingly moving toward containerization with their significant economic and safety advantages, there was a growing need for Douala Port to upgrade its container facilities, in order to be prepared for increases in cargo volume. Although the volume of container cargo handled at Douala Port reached 70,857 TEU in 1982, due to the fact that cargo handling operations were carried out with only ship gear and fork-lift trucks, handling capacity was expected to reach its limit (160,000 TEU) by 1999, even when taking into account the effect of the World Bank’s Port upgrading project. At the same time, ports such as Apapa (Nigeria), Mombasa (Kenya) and Abidjan (Cote d’Ivoire) were moving forward with the installation of container cranes and so forth. Therefore, in order to keep up with the expected increase in container handling volume, it was considered that there was an actual need for Douala Port to upgrade its cargo handling system through the installation of container cranes. It is against this background that this study engages in an investigation of the impact of container management on port performance.

1.3 Problem of Study

There is an array of problems related to container management, port infrastructures on the performance of the Port Authority of Douala.  The port authority of Douala is continuously facing dredging problems and the width of rivers is strongly limiting their capacity since it provides constraints to navigation. Since Douala ports is old, and responsible for urban growth, it is located nearby central areas. This is creating congestion of containers at the port; this problem has a great effect on the performance of the port of Douala since it has limited capacity to accommodate the available containers.

Despite the importance of this port to the economy of Cameroon and its neighbouring landlocked countries, the port is faced with numerous difficulties when it comes to container management, accessibility and the quality of it infrastructure. Because of these difficulties, vessels turn to spend long waiting time at anchorage and long service time at berths hence discouraging vessels from calling at the port.

Should these difficulties persist, the Port Authority of Douala may not be able to achieve its vision and this will negatively affect the economy of Cameroon and its neighbouring landlocked countries. A need therefore arises to carry out an investigation on the impact of container management on port performance with specific reference to the port Douala.

1.4 Research Question

1.4.1 Main Research Question

The main research question of this study is; what are the impacts of container management on port performance?

1.4.2 Specific Questions

1. How does port infrastructure influence container management at the port of Douala?
2. What are the factors that can enhance the operational performance of container management at the port of Douala?

• What are the the challenges of container management that affects port performance at the port of Douala?

1.5 Research Objectives

1.5.1 Main Objective

The main objective of the study is to investigation the impact of container management on port performance with reference to the Port Authority of Douala.

• Specific Objectives

1. To evaluate how port infrastructure influences container management at the Port Authority of Douala.
2. To investigate the factors that can enhance the operational performance of container management.

• To examine the challenges of container management that affects ports performance.