How to Create Operational Competitive Advantage - Assignment Example

Abstract In the modern day globalised business world of intense competition, ports may play an important role in creating value for the port users and especially shippers through the development of their supply chain management that passes through the port. It is imperative for ports to nurture relations with various players within the supply chain that comes under the business-to-business or b-2-b framework for providing maximum value to the users. Together with developing relations, the ports are also required to provide a secure environment for facilitating trade in an efficient manner. After the terrorist attacks of 9/11, security concerns have also become a major issue for the maritime trade. However, providing port and trade security also requires huge investments due to factors such as increased focus on supply-chain security and hike in logistics costs. Although, investing huge amount during the initial phases might be negative in short-term but would help a country to secure its ports from a long-term perspective. Further, the roles of the port authorities are also being redefined frequently due to rapid changes at the social, economic, technological, environmental and institutional levels. Some important changes that have been witnessed in the maritime trade over the few years include growth in demand for raw materials, increase in energy-usage, development of the concept of global commodity chains etc. This paper focuses on the changed roles of the Port Authority of New York and New Jersey and Latin American ports. In the context of ports as elements in value driven chain systems, illustrate how ports can create operational competitive advantage and contribute to the creation of competitive advantage for shippers whose supply chains pass through the port. [20 Marks] In the contemporary world of intense competition and increasing complexity in business relations, the ports may help in contributing towards creating value for the port users, especially shippers by enhancing their supply chain management that passes through the port. In order to achieve this, ports would be required to develop relations with various players within the supply chain which falls under the ambit of business-to-business or b-2-b framework. However, it is the development of such relations that would be crucial in deciding the customer’s satisfaction level. Thus, the first step towards contributing for enhancing the shippers business is by identifying the members within the supply chain and thereby establishing a well-knit network with them. Such relationships with the players of the supply chain would ensure creating not only relational value but also functional and operational value for the ports as well as the shippers. Therefore, the emphasis should be on creating port value chains, in which efficient networking and positioning would contribute immensely towards the total value proposition for the varied players involved in the supply chain. Further, the ports may also help the shippers by co-creating value through providing equivalent resources to various downstream and upstream entities and developing interdependence with key supply chain players (Notteboom & Rodrigue 2005). Trade systems changes have also resulted in effecting the marine freight transportation. Due to the integration of supply chains into the ports, it has resulted in the expansion of various port-related activities, especially focusing on spatial and functional expansions (Notteboom & Rodrigue 2005). All international ports work towards attracting large companies, earning bigger revenues, exploiting optimal resources and attaining substantial efficiencies in its operations. However, often users complain about the efficiency level of these ports as well. Thus, the ports are required to measure their performance on a regular basis to understand whether their services are helping in fulfilling the needs of the users effectively and efficiently (Magala 2008). However, it should also be kept in mind that the interactions within the supply chain only form a part of the entire transactions that take place within a port, which consists of various entities with different strategies and goals. Further, these entities due to their varied goals may not be concerned with the port’s value or the supply chain on the whole. However, most shippers prefer to select a provider that gives integrated ports services and not just focus on value chain. Thus, it is required for the port users to be cautious about the value provided by the port by studying the relationships between various members involved throughout the chain. Thus, the total value offering of the supply chain has become a prime importance for the shippers and thus, the ports need to provide various added offerings to its users (Bennett and Gabriel 2001). In order to formulate value by building relationships, ports may have to establish relationships with suppliers, customers and alliance partners. Although, suppliers and customers may be referred to as similar entities, their positions vary as per the services offered to them. For instance, in an export scenario, the shipping company would be a services supplier for a freight forwarder. On the other hand, in case of an import scenario, the freight forwarder becomes the one offering services for the shipping company. With regards to alliance partners, shipping lines focus on combining various resources for offering high-value services. Such alliances help in increasing the number of port calls and providing enhanced service portfolio. Even, the logistics providers are also entering into alliance partnering. For example, logistics providers often share the capacity in block trains for enlarging their destinations range. Alliance partnering helps in providing opportunities to the involved players to decrease costs as well as aid in offering services at lower cost (Ferrari et al. 2006). Firms that work together under the relationships of buyer and seller create inter-organisational relationships, which helps in creating financial resources, developing skills and enhancing network position. These firms mostly look for partners who could provide them with matching resources. Such relations are developmental, integrative or facilitative in nature (Kothandaraman and Wilson, 2001). With regards to integrative relationships, the partners need to develop collaborative partnership with each other on future as well as present services. Such a partnership needs to be based on the premises of long-term association, efforts to solve issues and creating mutual panning. Thus, it can be stated that port may help the various players and especially shippers to provide port value chain by developing deep-rooted relationships and networks with the shippers and help them in optimising their supply chain. The value that the port offers to its users are not just determined through the abilities shown by each of the players involved in the port, but also by those involved in downstream and upstream work as well. For increasing the value associated with the services provided by the port to the shippers, the port is required to select not only the right partners but also would be needed to establish meaningful relationships as well. Such kind of relationships helps in creating value as well as enhances the value proposition of the services offered. However, it is the type and level of involvement between the partners that determine the extent to which value co-creation could take place (Farrell 2009). Three kinds of interdependences could be established between the port and shippers to help the shippers in deriving maximum value. These include pooled, serial and reciprocal interdependencies. However, together with these interdependencies, it is also to be understood that power imbalances between the various players within the supply chain and the port authorities might also lead to issues for the shipping companies. It might be difficult to create close relationships between the port and the shippers and create value co-creation in case of any issues erupting within the supply chain or port authorities (Gunasekaran et al., 2001). Further, due to the fragmented nature of the port, many players involved in the port often exploit the strategies of integration and miss out on opportunities to enhance value for their customers and suppliers. Also, value needs to be created through reciprocal interdependence between the shippers, freight forwarders and the port. However, establishing such a relationship is often difficult due to the disparate nature of the work of each of the players. It is however should be understood that in case the different players providing port services directly or indirectly combine together they might be able to provide specialised services to the shippers. In such cases, the lone services of a freight forwarder might not be sufficient for the customer and it may require symbiotic relationship with the port as well (Farrell 2009). Thus, the shipping companies and freight forwarders need to create a mutual relationship based on collaboration for promoting each others’ interests. However, such a process requires various changes and major operational adjustments as well at the end of both the parties, while trying to enhance the current interdependence. Question 2 a. Differentiate and explain the roles of major participants involved in providing port and trade security measures. [5 Marks] Security in the present day scenario has become a major driver to facilitate trade in an efficient manner. Almost all the elements in port and trade require a secure environment through which traders are able to ship their products and conduct business in a seamless manner. Since the terrorist attacks of 9/11, security has been made a major concern area for maritime trade, in order to ensure high growth economic performance. In order to provide efficient security system, various techniques have been developed which help in overcoming various unforeseen events by using various preventive measures (Dulbecco and Laporte 2003). The issue of security has become one of the major determinants for companies all over the world while conducting international trade through the maritime route. Due to the bulk of goods handled by the ports and the immense labour required to manage the resources, ports are often seen as vulnerable to unforeseen threats such as terrorist attacks, sabotage and thefts. Thus, protection of the ports should be one of the major concern areas for the ports authorities as well as the government of the country wherein the port operates, as ports also form a part of the international borders. Security therefore is a part of the traditional shipping and trade industry, enhancing which would result in greater trade facilitation. Thus, it is important for the ports to focus on maritime security by securing the logistics, supply chain and hub centers and protect them against possible physical harm or data theft, which may provide sensitive information and result in sabotaging or destruction (Dulbecco and Laporte 2003). Logistics is one of main component in maritime trade, which includes various related activities such as inventory management, store keeping, order processing and materials handling. The process of managing logistics is termed as an integrative process wherein the flow of supplies and materials are optimised from suppliers within the organisation for providing client satisfaction. Supply chain management therefore forms a major part of logistics management wherein the entire chain of the good being received, packed and transported needs to be handled carefully. Due to the labour intensive nature of this job, logistics management also becomes one of the crucial areas where security needs to be tightened (Dulbecco and Laporte 2003). Implementation of security in logistics would also help in improving the service level related to providing ports services as well. It would help in reducing the lead-time, increasing frequency, reliability, providing information, reducing the risks associated with damaging the cargo, while providing security of the goods shipped. The security of the logistics or supply chain within the framework of a port not only includes the security of the physical goods but also of the protection of the information emitting from the port to the customers or the information related to the goods to be shipped to various locations (Henstra and Woxenius 1999). As the supply chain requires synchronization and collaboration with each other, the security level in each player of the supply chain also needs to be mutually dependent. Thus, the security conditions within each of the players of the supply chain should be met with so that the goods may move without any hindrance within the supply chain (Henstra and Woxenius 1999). Due to the growing and changing nature of the business in the contemporary world, the ports are also consolidating their services by emerging as hub centers. These centers help in the economic development and growth of the country of its operations as well. Thus, these centers require trans-shipment infrastructures of high-capacity. This also raises the question of security issues and the security of such centers therefore has become one of the major concerns for the ports as well. Thus, with the increase in trade, security of ports and maritime trade has also become a matter of prime importance, which can be achieved by focusing on the security aspects of various players within the supply chain, logistics, hub centers and other such players within the port’s infrastructure (Wang 1998). b. Analyse options available for financing port and trade security measures. [5 Marks] Port and trade security however requires huge investments. Due to increased focus on supply-chain security, the logistics costs have also increased, which may put pressure on the growth of the economy of the country as well. Although, the short-term impact of such costs might be negative, if viewed from a long-term perspective, such investments would help a country to secure its ports from future treats and unforeseen events. The emphasis on supply-chain management and supply-chain processes would not only help in creating efficient good transportation system but would also ensure security of the goods as well (Christopher 1998). However, all these require financing, which might be fulfilled from the following options: Financing by the users: Relevant authorities may levy a fee or a tax on the services provided by the port. This fee might be either for specific services or services on a whole and could be collected for buying security equipments, improving processes or investing in technology. However, while deciding on levying fees to the users, it is important to understand whether the fee would be paid by the importer or the exporter (Carter and Ferrin 1995). Public sources: Security is also a concern for the entire nation, and therefore the security of the port also falls under the ambit of the government of the country. Ports also act as borders for the country and therefore needs to be secured against any threat, which is a major job for the government. Thus, the government may sanction certain budget for protecting the ports and securing it against unforeseen threats. However, such a funding also has its loopholes as most developed nations would have sufficient funds to secure the ports, while the under-developed countries might not be able to fulfill such requirements (Carter and Ferrin 1995). International financing: Financing to secure the ports might also be attained through international support as well, wherein the importing countries may provide aid to ensure that goods shipped from their country or received in their country are safe. Soft loans might be provided by the international bodies to help under-developed nations to secure their ports. However, such soft loan may also lead to creating debts for the under-developed or developing nations (Krugman 1995). Countries may also utilise bilateral financing to secure the ports. However, the feasibility of such financial assistance also needs to be understood before being initiated. Although, securing ports and trade requires considerable financing, it is an important component of providing secure trade passage and receiving secure products from outside. Thus, despite the fact that ports and trade security requires added budget and financing, it is important to provide secure ports and one may choose from the many financing options discussed above (Krugman 1995). Question 3 Port reform programmes over the last 20 years have resulted in significant changes in port ownership, management and operations in many countries. Explain how the role of port authorities has changed under these reforms. Use examples from different parts of the world to support your views. [20 Marks] Due to the rapid changes witnessed in the social, economic, technological, environmental and institutional levels in the ports, it has become imperative for the port authorities as well to redefine their roles. Some of the important changes that could be witnessed in the maritime trade in the last few decades include the increasing demand for raw materials and energy because of long-distance transportation of the goods, growing consumption and distribution of goods also resulted in growing maritime trade and surfacing of the concept of global commodity chains wherein the various function of consumption, production and distribution become inter-dependent on each other for providing optimal services. Another important change in maritime trade is witnessed in the growth in technical changes in the port operations as well, which especially emphasises on intermodal transportation and containerization (Brooks 2004). Ports are viewed as important component in the structure of production, consumption, distribution and trade between different locations, be it local, regional, national or on the international level. Thus, ports play an important part in the competitiveness and productivity of a country and especially in the content of globalisation. Due to globalisation, the competition between various products has become intense and often the supply chain becomes a crucial point for companies to compete with each other. Thus, in most cases ports have become a major determinant for providing cultural, economic and political relations with various countries as well as an interaction point for meetings and coordination. Therefore, ports can be witnessed as concentration of power and help even in the development of the communities as well (Brooks 2004). Therefore, the governance structure being implemented by the ports has also undergone changes in the recent past. Due to the changes in the contemporary business environment, there is a considerable shift in the role being played the port authorities as well. The port authorities for instance are required to create various exogenous and endogenous changes which could help in molding it as per the requirements of the modern businesses. For instance, the Port Authority of New York and New Jersey, which is also known as one of the world’s largest port authorities, has been facing various developmental issues related to ports, which makes it an interesting case to study to understand the relationship between the technical and economic changes in the contemporary world and the changing role of the port authorities in such a scenario. For the perspective of the regional development, the port authority helped in considerable economic development of New York in the past eight decades of its establishment through the creation of various transportation modes. However, with the growth in trade the port is also demanded to address various challenges such as containerisation. Therefore, the port authorities in New York and New Jersey had to address various issues related to expanding and upgrading the existing facilities and by creating new access channels to help in the development of the business and facilitate greater trade between the US and other countries. Together with focusing on international challenges, the port authority is also looking at regional development as well through the improvement of terminal access and creating inland networks as well (Brooks 2004). Similar changes could also be seen the Latin American port systems as well, which adopted various technical and security-related changes to make it at par with the economic requirement of the country as well. Further, these changes were also based on the global maritime guidelines also. In fact, the Latin American port systems is creating several operational and institutional changes which help in providing access to various activities to the private sector and thereby developing the economy of the country as well (Robinson 2002). Therefore, the Latin American ports mostly focus on going through the process wherein the emphasis is on improving two specific elements. These being improving the under-developed port facilities such as the infrastructure of the ports to bring them at par with the international standards and the other being increasing the quality, efficiency and quantity of the services delivery as demanded by the global companies (Robinson 2002). Thus, due to the changing times and business requirements, most port authorities throughout the world are also changing their operations and functional needs as well as being showcased through the examples of the Port Authority of New York and New Jersey and Latin American port systems. 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