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Hamburg Port
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The global port industry is already heavily affected by the Covid-19 pandemic. As reported by our customers, there have been numerous blank sailings to and from ports around the world. Terminals are facing significantly reduced export volumes, while import containers are not picked up by the consignee resulting in longer dwell time, congesting the yard capacities.

The anticipation is that the pandemic will continue for some time. Exactly how long is uncertain and equally no one knowns when and how fast the global economy will recover.  This means that not just the port handling volumes are likely to be affected by the global downturns, but also the viability of its terminals own clients; the shipping lines as well as shippers, receivers and logistics service providers are likely to be equally affected, leading to a higher risk of payment defaults for the terminals.

Against this background, terminals around the globe are preparing for reduced volumes and revenues. Development projects are re-evaluated or even stopped. Most of our terminal operator clients are reporting that they are either already in the process or planning to set up cost-cutting and rightsizing programs.

The cost saving potential of equipment rightsizing

As recently pointed out by simulation specialist Maxim Neiser, taking quay cranes temporarily out of operation might be one of the most effective immediate cost-cutting measures, reacting to revised vessel schedules with reduced vessel calls and/or moves per call. It leads to direct savings of operating costs for labour, energy and maintenance. Depending on the cost and wage levels, between USD 250 and 350 can be saved per operating hour, with labor costs accounting for 80% of the running costs in high-labor-cost countries.

This cost saving potential does, however, not only apply for quay cranes, but also for other container handling equipment. For example, also a rubber-tyred gantry (RTG) operating hour may account for more than USD 100, and even a terminal tractor has operating costs of about USD 70 per operating hour. Hence, over multiple shifts, weeks and months there is a huge saving potential for any container terminal. For example, removing one quay crane, two RTGs and five terminal tractors from operations, will save about USD 7,000 per shift and more than USD 300,000 over a month.

Despite this huge cost saving potential, some terminals are reluctant to take these simple cost cutting measures as to not impair their operational performance and the resulting service levels for the shipping lines. In fact, this is not an easy decision as terminals are complex systems with several dynamic interdependencies between quay, yard and transport operations, making it difficult to accurately predict the effects of equipment reductions by simple rule of three calculations.

For example, taking an RTG out of operation would at first glance have no effects for the performance of the remaining cranes. However, in practice this could also lead to higher productivities as a result of reduced interferences among cranes or reduced productivities as a result of longer gantry travel distances, depending on terminal-specific framework conditions. Hence, an equipment reduction that seems feasible at first glance may turn out to cause unexpectedly high performance reductions. As a result it could lead to default of agreed performance levels with shipping lines, or the other way around, the performance implications are smaller than expected allowing for even higher equipment reductions than initially planned.

How to cover operational risks

Responding to these operational risks, I fully agree with Maxim Neiser that simulation is the one and only tool to provide detailed and highly accurate insights into the effects of equipment reductions on terminal performance and service levels. At a fraction of the monthly saving potential, a proper quay simulation tool can precisely determine how many quay cranes are needed in which situation, and how many can be taken out of operation while still complying with service level agreements.

In addition, although not being a crystal ball that can predict future container volumes, a simulation lays the foundation for the flexibility that terminal operators are looking for under currently volatile volume expectations. It helps to prepare for alternative future volume and vessel traffic scenarios (i.e., alternative vessel schedules) before becoming reality. Based on the simulation results, an operator can decide for a stable equipment setup that requires no modifications under different future volume scenarios, or determine at which volume trigger points the equipment can be stepwise reduced in order to save as much operating costs as reasonably possible. In this way, simulation helped my team for a project in South-East Asia to determine optimal trigger points for adapting the quay crane numbers for a most efficient development in line with container throughput and vessel schedule.

In summary, simulation facilitates optimal cost saving decisions and flexibility, providing terminals with required insights into vessel service levels in response to equipment fleet size under volatile volume expectations und vessel schedules. Hence, simulation lays the foundation for reducing deployed container handling equipment over shifts, weeks and month to a required minimum while still fulfilling contractually agreed service levels with shipping lines. Starting at USD 25,000, a quay simulation will already pay back with identified saving potential for equipment operating costs after a few days.

What is your cost saving potential?

About the author

Nils Kemme is Partner and port operations consultant at HPC Hamburg Port Consulting GmbH. He has almost 15 years of experience and extensive knowledge in the field of planning, realising and optimising ports and logistics systems. Combining first-hand operations experience from Hamburg’s container terminals and in-depth simulation know-how, where he also earned his PhD degree, Nils is now heading HPC’s simulation team. As of now, he has over the last eight years planned and optimised port design and operations in more than 35 simulation projects on six continents, including multiple traffic optimisation studies.

 

On May 1st, 2020, Suheil Mahayni joined the management of HPC Hamburg Port Consulting. Suheil comes from Lufthansa AG, where he established a system partnership with Frankfurt Airport as project manager. Before that, the graduate industrial engineer worked in various management functions in purchasing and sales at Lufthansa Technik AG.

HPC’s management team also includes Dr. Felix Kasiske and, since April 1st, 2020, Dr. Christian Langer. The latter most recently worked as Managing Director of the Lufthansa Innovation Hub. At HHLA, Christian assumes responsibility for corporate development as CDO and will also focus on digital projects at HPC.

"With Suheil and Christian, we have additional expertise in the areas of sales, strategy and digitization on board to meet the requirements of a consulting service geared towards future viability and growth," says Felix Kasiske. “We are pleased to be able to offer our customers an important added value with this increase in experience and knowledge. We wish them both every success for their tasks.”

As a logistics consulting company, HPC specializes in the planning, simulation and implementation of a wide range of transformation services for ports, sea and inland terminals and intermodal rail transport. Since its founding in 1976, HPC has successfully carried out more than 1,600 projects in 120 countries along the entire development cycle of port projects, including numerous IT integration projects.

In recent years, HPC has strongly invested in expanding strategically important know-how. The internationally operating consulting firm currently employs a team of around 100 specialists, including terminal operations experts, engineers, software engineers, logistics managers, mathematicians and transport economists.

Other vacancies are to be filled even in times of Corona. Please look into https://www.hamburgportconsulting.com/jobs-en/vacancies

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Ninety or so days from when the Financial Times mentioned "China has reported the first death resulting from a virus that has infected more than 40 people", we are facing a radically different world; one that is changing so quickly that it is hard to even imagine the final size of Covid-19's impact and its consequences, let alone describe them. 

The International Monetary Fund, which predicted 3.3 percent[1] economic growth globally for 2020 in January, revised its April forecast to reflect a 3 percent contraction, significantly worse than the financial crisis of 2008/09, provided that the pandemic fades in the second half of the year, then forecasting a quick rise of 5.8 percent for 2021 as activity normalizes. Shipping analyst Drewry's forecast is significantly more conservative and gives this scenario only a 5 percent chance of actually happening. 

Drewry's favored baseline scenario sees recovery starting in the fourth quarter with an extremely volatile freight market through 2020 on the base of an overall 6 percent decrease in rates. 

As they report, "Ocean carriers' finely tuned skills in the art of capacity management are going to be sorely tested in the coming months", which is to put it mildly. This will be the same across the fleet, because, while the above statement is aimed at container lines, it is equally true for owners and operators of the world's multipurpose vessels that will be challenged by erratic cargo flows and sharp changes in cargo availability. However, as always, challenges breed opportunity, and the bigger the challenge, the bigger the opportunity, so 2020 will truly be the year of opportunity. 

One of the opportunities that is likely to present itself is in the breakbulk market, where for years the container lines and roll-on, roll-off operators have tried and often succeeded in making inroads, and the shrinking number of multipurpose operators indicate there are some serious considerations and challenges with the current business models generally being used in this market. This may well be the time that sees the container and ro-ro operators grab their chance at this potential market, and grow their portion of the market, or that sees the multipurpose operators re-evaluate how they operate commercially to realign and come back stronger. 

At HPC we are asking what this would look like for both container lines and multipurpose operators, and how we can help overcome these challenges. We believe the answer lies in reviewing commercial and planning processes. We think it is the realigning of these processes through digitalisation that will allow an optimal and speedy workflow for both price setting and booking acceptance.  

For breakbulk bookings, all the parties, from container or multipurpose lines, through forwarders and project shippers, even the planners, operators and owners, all need to ensure a smoother process flow for breakbulk, from quotation to execution, to gain a level of speed and flexibility. This is challenging, yet would ensure better commercial viability and accuracy from enquiry to documentation to invoicing that is often the major source of conflict. 

The big questions to ask are:

  1. How can we provide more accurate data? 

  2. How can we avoid nasty surprises both on the cargo descriptions as well as on freight invoices, due to deviations?  

  3. Can we fit more cargo on a vessel, and load more efficiently? 

  4. Most importantly, how can we improve the information flow between all parties involved to avoid costly waiting time and short shipments?

​We invite you to share your views on these questions as well as any others you may have. Together let's try and find some solutions that can make a difference.

[1] WORLD ECONOMIC OUTLOOK REPORTS
World Economic Outlook, April 2020: Chapter 1

About the author

As an innovative shipping and logistics executive with proven success in consulting, planning and the optimization of logistics processes for 500 international companies and EPCs, Lars has experience in liner and non-liner shipping. His focus is driving logistics and supply chain strategy through innovation and continuous improvement processes. Lars is driven by a passion for logistics and transport, and the future development of international trade and transport. He has represented multinational corporations in a variety of roles internationally and continues to strive to improve the industry's development. You may contact Lars at .

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The Covid-19 pandemic is increasingly affecting the cargo trade volumes, forcing shipping companies to adapt their service lines constantly. As a result, vessel shipping routes are being frequently changed. Cargo volumes have aggregated, and container vessels are being taken out of operation. How can the cargo terminal operators react to the temporary reduction in cargo terminal throughput volumes and reduced number of vessel calls? How do they reduce operating cost while retaining required flexibility to quickly adapt to new situations?

During discussions with our customers and partners, one measure came up repeatedly - temporarily taking quay cranes out of operation. This measure, firstly, reduces running cost of the quay cranes directly. Secondly, it enables the terminal operator to ascertain other follow-up measures, such as taking other equipment out of operation (RTG, AGV; trucks), reassigning work force or closing whole berths.

Such measures offer huge cost savings potential. Depending on the cost levels of labour, energy, and maintenance, operating just one quay crane costs about USD 250 – 350 per hour. Taking a single quay crane out of operation for one month can thus save up to USD 150,000.

Despite the obvious saving potential, it is not a simple decision to take for terminal operators. Whilst deciding the number of required cranes and berths is a common business on a daily and weekly basis, assessing the requirements on a longer period is a complex task, which relies on numerous assumptions. The quest at hand for the terminal operator is- How to ensure that the agreed service quality covering the resulting vessel waiting time, port stay time, quay crane productivity, vessel productivity or quay crane intensity are met with reduced equipment capacity for a longer period?

One of the best tools to provide reliable information on the quay performance is a quay simulation. It is a powerful instrument to analyse the unique quay crane behaviour for many different container volumes and vessel berth schedule situations, whilst considering all relevant influencing and terminal-specific factors. Quay simulation is not a crystal ball, but its results come with an average accuracy of about 98% percent, a figure pretty close to reality. That is why quay simulation is so attractive to the decision-makers.

In my work so far as a container terminal simulation specialist, I have been requested to investigate the quay performance for ever growing container volumes forecasts. Now the situation has changed, and the question has diverted more in the direction of what happens if vessels are not calling the port anymore. And luckily, the quay simulation is still applicable to this new situation in the same way as before. Only the waterside influencing factors and investigated scenarios need to be changed.

In my opinion, this is exactly where a detailed modelling and thoughtful selection of investigation scenarios will provide a sound basis for analysis and ultimately enable fully informed decision making. Besides answering the question of interest, going through the process of a simulation study provides a deeper understanding of interrelations between vessel calls and quay operations or the quay operations itself for situations and times that are yet unchartered land to many operators.

Let us have a closer look on some used cases for quay simulation.

Use Case 1: Determining the requirements of quay cranes and berths for different vessel traffic scenarios

Different vessel traffic scenarios consist of different container volumes, different vessel call patterns at the quay or a combination or both. In Use Case 1, these vessel traffic scenarios are defined as input for the simulation and tested in response to the number available quay cranes and berths. By comparing the resulting KPIs of the simulation runs for each scenario, the required number of quay cranes can be determined.

Use Case 2: Determining the maximum quay handling capacities

The maximum quay handling capacity is the overall volume of container which can be loaded and discharged within a defined time period. In Use Case 2, specific sets of available quay cranes, berths and vessel call patterns are defined and tested in response to a stepwise increase of cargo throughput volumes. Once the resulting simulation KPIs (Berth Occupancy Rates, Vessel Waiting Times, or Vessel-In-Port Times) exceed predefined limits, the maximum quay handling capacity per set can be identified. Furthermore, this use case informs about the volume related flexibility of the quay.

Use Case 3: Quantifying the achievable service levels for different traffic scenarios

Getting a picture of resulting customer service levels for different traffic scenarios is mandatory to ensure high service quality in times to come. Consequently, Use Case 3 provides an overview of inter alia resulting vessel waiting times, vessel port times, vessel handling times, and vessel productivities in response to quay crane and berth quantities for each traffic scenario.

Use Case 4: Quantification of the savings potential imposed by temporary shutdowns of quay crane

This Use Case is a combination of the quay simulation and a subsequent cost calculation assessing the savings potential. At first, the number of required quay cranes is determined by testing defined vessel traffic scenarios in response to reduced quay crane quantities. The minimum number of required quay cranes upholding the service levels will be considered as lower boundary. In the next step, the related costs are calculated for all tested quay crane quantities, thus estimating the potential savings for reduced number of quay cranes. Besides the number of quay cranes, the cost calculation is enriched by insightful simulation results such as vessel operating times, quay crane operating times, vessel waiting times and other utilization rates, drawing a complete picture of operations.

Long story short, quay simulation provides you the first and foremost answers on how your quay operations and set up must look like in different scenarios to come, with a proven level of accuracy. With this knowledge at hand you can prepare an action plan for different materializing situations, that is in line with fulfilling your quay side obligations, ultimately increasing your resilience significantly.

I would like to encourage you to be brave, and not to avoid this complexity. And see it more as a battle for erasing the fog of uncertainty around future quay handling requirements, using quay simulation as the brightest spotlight of all.

For more details about HPC's simulation services please visit: https://www.hamburgportconsulting.com/our-expertise/simulation

 

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About the author

Maxim Neiser is a Terminal Planning and Simulation Specialist at HPC. During his career, he has been involved in more than 30 terminal planning, optimization and/or simulation projects. Maxim holds a Master of Science in Logistics with specification in Maritime Logistics and Simulation. He is deeply convinced that applying advanced tools such as simulation in answering first-hand operations questions is one of the most exciting jobs. If you ask him what he likes about his job, he will most likely reply: “I am especially fond of modelling realistic terminal operations with an eye for detail, pushing it to the edge of accuracy and credibility. It is all about mastering the extensive complexity and surprising the customers with eye-opening insights.”

Even in exceptional situations such as the Corona crisis, we bring running projects forward. HPC was commissioned to develop a standardised customs process for the import of consolidated air freight for Frankfurt / Main Airport and to organise workshops with the stakeholders involved. Based on the customs process, standardised interfaces for the necessary data exchange will be derived.

With this project, Frankfurt Airport is responding to a change in customs regulations that apply to the so-called 1:1 referencing for the provision of consolidated import freight from the second half of this year. Accordingly, there is no time to be lost here.

Due to the current situation, the FRA Air Cargo Community moved the workshop to the Internet. The workshop participants met in two video conferences last week, moderated by HPC. They were commissioned by Fraport in cooperation with two German logistics / air cargo associations, SLV and VACAD to compile the requirements for a common import platform. HPC will use this to design a process specification, which will be coordinated with the stakeholders.

Our Challenge

In times of coronavirus, HPC shows flexibility and has thoroughly prepared the workshops with 15 participants online, so that the implementation via video conference and screen sharing went smoothly and successfully for everyone involved.

With more than two million tons of cargo in 2019, Frankfurt Airport (FRA) is one of the leading freight hubs in Europe and the world.

 

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As Project Manager in charge, HPC's Senior IT Consultant Bernd Mau led the workshops                                                 Interior view of a cargo aircraft

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