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October 2005
Selection of Optimum
port comparing cost and service exports:
It is essential that all cost elements be reviewed
periodically when making export shipments on a
regular basis. There are a very surprising large
number of cost elements, which differentiate each of
the ports and these can change from time to time.
The comparison measures also vary substantially from
port to port. All are extremely critically
important! Some of these are:
Ø Distance from shipping point to Port –
transit days to destination.
Ø Distance to destination port- Transit days to
destination.
Ø Frequency of sailings.
Ø Balance of inbound volume versus outbound to
the specific foreign destination.
Ø Facilities and ancillary services, i.e.
number of free storage days, container handling
efficiency etc.,
Ø Number of truck or rail carriers serving the
port and the willingness of carrier managers at the
various ports to new innovative approaches to
reducing costs and the sharing of such benefits.
Ø Union relationships with management. Not
surprisingly, there are significant variations
between the ports on this issue, and taking the
proper approach, this issue can result in beneficial
results to all parties.
Ø Receptivity of port management to new
approaches for reducing costs.
Ø Receptivity of union management to the same
thing. This is critical in the event of a threatened
strike or an actual strike developing. (But don’t
START these negotiations AFTER the strike begins! –
It’s too late!)
Ø Reducing the ports to be used to the lowest
number of ports to increase importance of
concentrated volume.
Ø Whether ports are affected by severe or
seasonal weather should be considered. Example:
Great Lakes ports for navigation season in the
summer time should be considered BUT do not forget
to check ALL OF THESE COSTS BEFORE MAKING THIS
DECISION. Case in point: If imports or exports
originate from or are destined to the Far East.
Consider re-negotiating all rates or charges
including temporary storage, handling and loading or
unloading fees or extra savings if packing &
packaging is improved. Total transit time from
origin port to final destination is a critical
element, because of the difference in inventory
carrying costs associated with the alternative
transit times. Using the West Coast ports for ALL
season movements through those ports increases total
volume will also give you a greater negotiating
clout.
Ø Congestion of general area, which can affect
the efficiency of transportation and causes delays
in departures of product from the port area.
Ø Product handling costs vary greatly from port
to port and a comparative analysis must be done. I f
volume is changed or there are significant
improvements in the manner your shipments are being
shipped, then negotiations for improvement in
charges for specific packaging or handling cost
improvements should be initiated and are
appropriate.
Ø Temporary storage costs and minimum number of
free days are often negotiable but always negotiate
before the final selection of a port has been
determined!
Ø In making port cost comparisons be sure to
include the inventory carrying costs of the total
time from arrival of the product at the port to
delivery at inland destinations. Reducing this time
factor can have some very positive results in
savings of inventory dollars, reduction in
warehousing and handling costs and of course
transportation costs.
Ø Consider pooling of volume products of
similar handling characteristics through partnering
with some sort of shippers’ association. Be sure
that the association is cleared by the Department of
Justice to avoid any shippers’ potential anti-trust
problems.
Most of these items have some impact on costs (of
various kinds and magnitude) or service or both.
Most ports continuously vie to attract volume
shipments through their facility and are receptive
to discussions that will increase the tonnage
throughput of their particular port. In particular,
do not forget to evaluate total transit time from to
and between all origins & all destinations ports
being evaluated, as TIME in-transit translates to an
important element in setting inventory levels, and
safety stocks to determine replenishment frequency.
But most critical is the value of the product and
inventory carrying costs associated with inventory.
All of these are important cost elements to be sure,
but are the prime responsibility of the Logistics
Team. One day’s delay in the routine movement of
imports in a study reported an assigned value of
$22.00 per day in inventory carrying costs for the
imported or exported product that was being imported
and exported by the millions every year. So TIME is
the valuable commodity to protect in making any
evaluation of your operations. The key actor in this
analysis and recommendations and final
implementation has to be the Logistics group, but
others shown in “Team Group A” has many very good
reason for input and participation in the review and
sign-off on the selection process and
recommendations. (See also No. 11). |
