The container terminal as a buffer

In my career, I have met a lot of very capable consultants who commit a fundamental error in how they view a container terminal. Often, people compare a terminal to a production line, and try to make it work more like one, when, in fact it is a service. The purpose of a production line is to get something produced, finished and shipped out the door as quickly as possible. Optimisation is all about eliminating delays, delivering components just in time, and minimising any redundant capacity in the system.

Yes, we are also looking to optimise the performance of a container terminal, and a lot of our work is about improving productivity through small incremental gains in speed, reliability and fluidity of processes. But, it is very easy to adopt the wrong metaphor here. A container terminal is not a linear industrial process, nor can it be optimized like one.

A container terminal is always a single part in a larger supply chain. At its core, the role of the terminal is to be a flexible converter between various modes of transport. The container terminal is thus essentially a buffer. Thinking of a terminal in this way – and not as a linear industrial process – can be slightly counterintuitive, but it is essential for understanding the value generation of the entire logistics chain.

A container terminal is a service, not a production line. The service that it provides is to link different modes of transportation, each with radically different container handling patterns. On the quayside, the terminal needs to process thousands of containers from a single vessel within a tight, precisely defined weekly or daily schedule. On the landside, the service need is very different, with thousands of road trucks arriving at different times to pick up individual containers. By contrast with the regular timetables of shipping lines, this nearly chaotic yet carefully fine-tuned landside schedule is based on innumerable variables from the length of the entire supply chain, encompassing inland logistics, factories and distribution.

The role of the terminal is to balance these modes of transport and provide value through the service it offers. This means that delays and waiting times are essential to the functioning of the entire system, and it is an error to attempt to dampen or eliminate them.

This buffering – the delays, the storage, the endless picking and placing – is the value that the terminal provides to its customers. Think about it: If everything becomes 100% seamlessly connected, there is no need for a terminal… or is there?

Theoretically, with an intelligent logistics chain that knows the real-time position, contents and destination of every container and road vehicle, at some future date we could just queue up the road trucks on the quay and have the ship-to-shore cranes load the right container directly onto the truck. The container stack as we know it might be obsolete one day, but even in this futuristic just-in-time scenario, we would still need a terminal. We would also need container handling equipment, perhaps a lot more of it than today. We would still need to link modes of transport as smoothly as possible, and the equipment and processes to accomplish this would need to be more reliable and efficient than ever.

Does this sound like a far-fetched scenario? Perhaps not. After all, think about an airport. An airport is essentially a just-in-time transport operation with no storage capacity. There is no equivalent of the container stack at an airport (at least when the system is functioning correctly). Airports have been doing this – quite successfully – for decades. When will the container shipping industry demand something similar?