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TRANSITION TO A NEW REALITY: THEORISING THE ORGANISATIONAL RESTRUCTURING OF PORTS

Constantinos I. Chlomoudis
School of Maritime Studies, University of Piraeus, Greece
40 Karaoli Dimitriou St, 18532 Piraeus, Greece,
Tel.: +30 (01) 4142548, Fax: +30 (01) 4142575, E-mail: chlom@unipi.gr

Apostolos V. Karalis
Freelance Researcher,
40 Karaoli Dimitriou St, 18532 Piraeus, Greece,
Tel.: +30 (01) 4142517, Fax: +30 (01) 4142575, E-mail: akarl@tee.gr

Athanasios A. Pallis
Research Centre, University of Piraeus, Greece
40 Karaoli Dimitriou St, 18532 Piraeus, Greece,
Tel.: +30 (01) 4142540, Fax: +30 (01) 4142575, E-mail: apallis@unipi.gr



ABSTRACT

The port industry has experienced a wide restructuring during the last decades. New dimensions of port production have become evident representing an across-the-board break with the conventional Mass Production System (MPS). This paper proceeds to a theoretical discussion that tackles the issue of port reorganisation. In the light of the changes in the world economy and the new competitive environment, it focuses on the new structures of the port industry and the characteristics of the contemporary port product within a more general analytical framework of 'Worlds of Production'. This conceptualisation suggests that neither the industrial model of mass production, nor any other model alone, can provide by definition an effective pattern of port production organisation. Within the new reality, modern ports must provide a greater variety of services to port users than in the past. The diversity and complexity of the contemporary port product demand the application of multiple organisational transformations incorporating elements of different possible frameworks of action. In this vein, the introduction of intra-port competition, the development of strategic or regional networks, and the reconsideration of the role of port authority turn to critical parameters of the essential restructuring.


1. Introduction

It is widely acknowledged that the port industry has experienced a wide restructuring during the last decades. For long, the organisation of the industry had been dominated by the post-war industrial paradigm of mass production, characterised by standardised port products and long production runs, and served as a motor of steadily rising productivity levels. Since the late 1970s new dimensions of port production systems have become evident representing an across-the-board break with the conventional mass production system. The main reasons being: technological changes (unitisation or containerisation, introduction of informatics), organisational changes (just-in-time manufacturing, logistics, multimodal transport operation), liberalisation of world markets (creation of the European Union, globalisation) and a shift of political attitudes in favour of less state intervention in the economy (i.e. privatisation in the case of public ports etc.). These changes have affected profoundly the port industry and have intensified port competition.

During an era of new and intensive competition ports are facing significant challenges that require both productive and organisational restructuring to secure a competitive edge. The traditional perceptions of port activities have been widely expanded to include a variety of new tasks and operations under a qualitatively new operational logic.

The main aim of this paper is to initiate a theoretical discussion by charting the new realities and proposing an analytical framework that explicitly tackles the issue of port reorganisation in the light of the diversity and complexity (a) of the new competitive environment and (b) of the port industry itself.

In order to achieve this aim the paper proceeds by briefly presenting the contemporary changes in the world economy and the port industry. Secondly, it details the new structures and characteristics of the port industry by focusing on the port product itself within a more general analytical framework of "Worlds of Production". In this vein, it discusses the implications of this approach to the productive and organisational restructuring of ports, and presents some concluding thoughts on the state of the debate along with some proposals from this new point of view.

Rather than suggesting a single new alternative model, the authors present several possible forms of restructuring under which the port production process might be effective in the new reality. Given the heterogeneity of ports around the world, those responsible for decision-making need to take into account the peculiarities of each port and decide which of the suggested forms fits best on a case-by-case basis.


2. Changes in the World Economy and the Port Industry: Challenges to the Existing Patterns of Port Production

The world economy during the last three decades has undergone a period of rapid change and transformation. These changes have had a significant impact on the way economists and other social scientists perceive the operations of an economy (cf. Piore and Sabel, 1984; Best, 1990). The certainties that prevailed until the early 1970's were strongly challenged by a plethora of new phenomena (a few examples would include: a fragmentation of markets, increased and unpredictable shifts in demand patterns, a general rise in the levels of risk and uncertainty concerning all aspects of economic action). Further, not only the previously mentioned scholars but also many more (for a reader: Amin, 1994), agree that various organisational forms, alternative to mass production and the 'market', are gaining a significant competitive edge; these include various kinds of network-like structures.

Industrial growth and success has been interpreted as a result of the adoption and widespread diffusion of mass production during a specific historic period (cf. Piore & Sabel, 1984). Mass production should not be understood in terms of simplistic references to size and efficiency but in terms of a system of markets, technologies, and scientific management, complemented at the institutional level by a comprehensive code of social ethics and economic regulations designed to stabilise and sustain demand. Thus, the creation of the large, vertically integrated, hierarchical corporation has been the outcome of strategies to balance supply and demand in mass production industries.

Rather than a consequence of any inherent supremacy of that model in terms of efficiency (i.e. economies of scale etc.), the rise and dominance of mass production (defined as Fordism complemented by Taylorism) was a result of conscious and/or strategic consideration and choice. The alternative was, and still is, a strategy based on craft principles of production, which might be termed flexible specialisation. The latter is "a strategy of permanent innovation: accommodation to ceaseless change, rather than an effort to control it. This strategy is based on flexible - multi­use ­ equipment; skilled workers; and the creation, through politics, of an industrial community that restricts the forms of competition to those favouring innovation" and not price (ibid: 17).

The system of mass production started to face a prolonged crisis whose origins can be traced in the early­to­mid 1970s. It was suggested that the system itself had reached its limits of growth under the particular institutional and regulatory framework.

The reasons behind this crisis have been attributed to both endogenous and exogenous factors. One of the most important exogenous factors was the emergence of some qualitatively new forms of industrial organisation (i.e. in Japan, Germany, Italy) whose competitive power put great pressure on the mass production firms/regions/nations. The apparent success of newly formed industrial agglomerations was attributable to the new and qualitatively distinct principles of productive and socio-political organisation. This, further, was interpreted as an event signifying the possibility, and not the certainty, of flexible specialisation becoming a dominant paradigm of industrial organisation.

Although the analysis, as well as much of the empirical evidence, tends to associate flexible specialisation with industrial districts of small and medium enterprises, it also do distinguishes between distinct organisational forms ("faces") of flexible specialisation, namely regional conglomerations or industrial districts; federated enterprises; solar firms; and workshop factories (ibid: 265-268). Thus, flexible specialisation is a theory of industrial organisation that applies to both Small and Medium Enterprises (SMEs) clustered in industrial districts and large firms that explicitly pursue a strategy alternative to vertical integration.

2.1 Changes in the Port Industry

At the same time ports around the world were facing new challenges, not least because the port product had undergone a great transformation. As ports are a mixture of industry and services that serve specific production processes (Suykens, 1986), these changes have been partially the result of the preceded fundamental changes in the production processes world-wide, and partially the result of endogenous technological developments.

Nowadays, ports are transformed into areas where highly sophisticated logistics activities are concentrated, largely due to fundamental modifications in the production and distribution of goods. The creation of functionally comprehensive 'industrial networks' and the implementation of logistics - that is, the management of physical and informational flows into, through, and out of a business - resulted in a new trading context and altered the industry-transport relationship. Transport services are developing to an integral part of production and marketing strategies. All types of seagoing trade, even cabotage, are becoming increasingly integrated into logistics chains. Foremost, the rapidly expanding feedering traffic requires its' integration into the individual links of the inland transport chain and the co-operation between short-sea and inland transport operators. Freight corridors should go further and ports develop the conditions for setting up networks dedicated solely to intermodal freight transportation.

Then, the increasingly widespread use of unitisation has led to the incorporation of further criteria in deciding the route of a cargo as well as in modal choice. Once the efficiency of port cargo handling and of ocean and inland transportation services have significantly increased, the geographical monopoly powers of ports have been eroded (Heaver, 1995). Nowadays the market powers of ports mostly depend on the provision of more specialised facilities. Ports compete to attract containers and/or traditional freights that are transported via novel transport methods. Port users, either shippers or shipowners, have assumed the role of multimodal operators and are increasingly demanding 'new' services. Capital-intensive terminals that serve few logistics systems, and the ability to provide value added services based on both economies of scale and variety, are becoming more important parameters of the selection of port routings. The provision of specialised warehousing, or other technological infrastructure and facilities that guarantee the uninterrupted multimodal transportation have become substantial income generators. Thus the importance of the traditional port selection criteria is in decline and the core business of ports no longer consists of loading/unloading activities. Port productivity is related to the improvement of the total transport chain, rather than maritime transport alone. Subsequently, port competitiveness depends on the other elements of the transport network (i.e. railroads, road transhipment), so port planning is becoming the focal point of a holistic planning of this multimodal transport network.

A vital consequence of these structural changes is the expansion of the port zone. Apart from the 'internal' geographical area, it includes cargo and passenger corridors determined by the requirements of the inland parts of the transport chain. To the extent that value added services are supplied by production units located in wider geographical areas and integrated through communication networks, two types of activities develop: (a) port specific activities, essential for the daily operation of the port and provided by production units located within the 'internal' port zone (i.e. vessels' loading/unloading); and (b) port related activities, which are essential for the transportation of goods but whose efficient supply does not necessitate the location of the production units within the port zone (i.e. warehousing). The decentralisation of production and the effective connection of the port with other semi-autonomous (in relation to the port) areas influence its' competitive position. In several European ports (i.e., Rotterdam, Hamburg, Marseilles) a number of complementary services are already supplied by enterprises located in the hinterland, and virtually co-ordinated via communication systems (BCI, 1996).

The transformation of the port industry has been accelerated by the advent of technological developments and informatics and their widespread application in ports. Through the application of technological developments, ports are able to supply specialised, 'clever', port services - based less in materials and more on innovation, knowledge, decentralised planning, and intra-industry support. The traditional port-gate is gradually replaced by the port logistic centre (a transformation realised in the early 1990s: Pesquera & De La Hoz, 1992), which provides complementary transport operations, logistics services and co-ordinates the integrated multimodal traffic. Along with conventional services, it provides innovative services such as integrated management systems and Electronic Data Interchanges (EDI) linking port authorities, shippers, stevedores, and shipowners, and facilitates multimodal transportation within the just-in-time requirements. In this respect it is possible to talk in terms of logistics polarisation.

Without ignoring the importance of modern infrastructure and superstructure, within this polarisation, high productivity levels can be achieved through the organisational restructuring of port production and the adoption of operational methods that respond to the new requirements of the port users. Until early 1970s ports operated as forces of regional and industrial development, within the principles of the aforementioned Mass Production System. This process incorporated linear production - the combination of specific operations and the harmonisation of the rhythms of various industrial operations (the 'assembly line') - and the standardisation of services. The direct result was the benefits associated with large-scale production such as the significant decreases of the average production cost per service. Port businesses had to be large enough to satisfy the demand for massive quantities of standardised services, generate sufficient returns to the substantial funds that were invested in ports, and achieve the steady employment of the production factors. The existence of huge and stable markets required (or was more efficiently served by) large-in-size, horizontally and vertically integrated, hierachical and labour intensive port enterprises.

The new trading context demands the adoption of a different orientation and organisational structure of port businesses. The main reasons are: (a) the stagnation of the demand for specific 'traditional' port services complemented by more rapid and unpredictable shifts in demand patterns (the MPS is characterised by an endogenous trend towards the homogenisation of the market and the standardisation of the produced services thus suffering from inflexibility and incapability to adjust to the structural demand changes); (b) the difficulty to synchronise the flow of the MPS huge markets when port operations perplex due to the expanding geographical disparity of the production functions (i.e. quay, warehouse, distribution centre); (c) the absence of integrated qualitative control mechanisms within the MPS model (in the manner it was applied in the port industry); and (d) the costly maintenance of the, essential to achieve economies of scale, port infrastructure and superstructure.

The traditional mass production model of port management and organisation has been significantly challenged since the late 1970's. Thus, the issue that needs to be addressed is how to implement efficiently the fundamental re-engineering and redesign of port activities. In other words, which characteristics should the organisational restructuring of a port incorporate in order to ensure competitiveness? Understanding the nature of the contemporary port product and the port production activities is critical.


3. The Nature of the Port Product in the New Reality

As presented in the previous section, ports face increasing levels of competition whose qualitative characteristics are entirely new to the industry. The challenges posed by the new competition have direct implications both to the organisational structure of an individual port and to the productive activities. Competition between ports, as is the case for most other industries, is centred on a range of products that are offered to the port users. Thus it is necessary to discuss the potential nature of the port product since a major criterion of an enterprise's success is whether the final users demand its' product. Especially as "the port product may be regarded as a chain of interlinking functions, while the port, as a whole, is in turn a link in the overall logistics chain" and "within the port itself, the respective significance of the constituting links has clearly changed in the course of time" (Suykens & Van de Voorde, 1998:252). When earlier definitions (i.e. Jansson and Shneerson, 1982; Goss, 1990) become obsolete or need adjustments, a clear understanding of "which product do ports have to offer" is critical to the future of port management. Conceptualisations regarding the 'product' in general can advance this discussion.

First, a product can be either generic or dedicated. A generic product has general applications and is defined through a process of "consolidation" by the producer (i.e. its' qualities and characteristics are classified and defined in advance by the producer without consideration of the specific needs of an individual consumer). On the other hand a dedicated product is the result of the producer's response to individual demands of consumers.

Second, the provision of a product can be achieved either through a process of standardisation or a process of specialisation. Both cases refer to the way various resources are mobilised in production. In the first case, standardised production involves the use of interchangeable and reproducible resources resulting in a product that does not reflect the individuality of it's maker. The product simply reflects general and objective characteristics. In the opposite side of the spectrum, specialised production involves the mobilisation of highly specialised, idiosyncratic and even unique resources whose characteristics are directly reflected on the observed qualities of the product.

Third, a production process can exhibit characteristics that favour increased volume or range of products. In the first case, which is closely related to productive standardisation, there are economies of scale at work. These economies of scale are associated with the production of long-series of standardised products in order to minimise unit costs since these products have to face strong price-competition. In the second case, which is closely related to productive specialisation, there are economies of variety (or scope) at work. These economies of variety are associated with the production of a relatively broad range of products by a single port enterprise. Competition in this case is not centred primarily on price but on a variety of strategic variables such as innovation and differentiation, design, promptness of response and various after-sales services.

Finally, the market structure of a product may be characterised by conditions of predictability or unpredictability. The first case refers to calculable risk, while the second refers to conditions of true uncertainty. Whether the market of a product exhibits characteristics of risk or uncertainty has direct and profound implications on both producers and consumers and their respective behaviours.

Table 1 represents an attempt to decompose the contemporary port product and classify, according to the conceptualisation developed in the previous paragraphs, the various products/services/facilities that might be offered by a port nowadays. This classification represented in this table is not exhaustive and is rather schematic. It nonetheless serves as an analytical tool to advance the theorisation of port organisational restructuring.

Thus, in the second column (nature of port product) port products are characterised as either generic or dedicated. The classification refers to whether a port product is conceived as being impersonal and having general applicability to all port users (generic), or whether it's conception and design takes into account the specific and individual needs of particular port user(s) (dedicated). In the third column (nature of productive action) there is a classification according to the principles governing the production of the respective product. These principles can be materialised and applied as either a process of specialisation or a process of standardisation of the activity of production. Apparently, as the products, services, and facilities that a port can potentially offer increase there is a variety of different possible combinations that lead to various forms of port organisation. These are discussed and theorised in the forthcoming section.

Table 1: The Contemporary Port Product

Port Product
Nature of
Port Product
Nature of Productive Action
Water Transportation Services
Pilotage Generic or/and Dedicated Standardised
Pilotage infrastructure Generic Standardised
In-port Vessels Traffic Management Generic Standardised
Waste management / bunkering Generic Standardised
Towing of ships Dedicated Specialised
Generic Standardised
Vessels Reception Infrastructure
(i.e.quays)
Generic or/and
Dedicated
Standardised
Other services to ships
(i.e. electricity, other utilities)
Generic Standardised
Cargo Administration
Loading/unloading onto the quay Dedicated Specialised
Generic Standardised
Transportation towards/from warehouses Dedicated Specialised
Generic Standardised
Warehouses Dedicated Specialised or/and Standardised
Generic Standardised
Goods processing in the warehouses
(i.e packing , crating)
Dedicated Specialised or/and Standardised
Preparation for distribution to the hinterland Dedicated Specialised or/and Standardised
Services related to inland transport modes
Transloading in inland modes Dedicated Specialised and/or Standardised
Generic Standardised
Inland mode networks Generic Standardised
Communication Services
Electronic Data Interchange Dedicated Specialised and/or Standardised
Generic Standardised
Vessel Traffic System Generic Standardised
Other Services
Security Services Dedicated Specialised and/or Standardised
Generic Standardised
Port Free Zone Dedicated Specialised and/or Standardised
Generic Standardised
Ship Repairing Services Dedicated Specialised and/or Standardised
Traffic management in inland port area Generic Standardised




4. Port Industry and the Possible Worlds of Production

4.1 Possible Worlds of Production

Each production activity represents a coherent action framework that shapes, and at the same time is conditioned by, the understandings, the expectations, the ways of action and interaction of all those involved in the production and exchange of a product (producers, labour, consumers or users and the various institutions involved).

Taking into account all the possible combinations of: a) products (generic or dedicated), b) production processes (standardised or specialised), c) the technology associated with each production process (economies of scale or economies of variety or scope), and d) the conditions characterising the market of a product (risk or uncertainty) four distinct action frameworks, or possible worlds of production, can be constructed. According to (Storper and Salais, 1997), these are: the "Interpersonal World", the "Market World", the "Industrial World" and the "World of Intellectual Resources". The world of Intellectual Resources refers to the research and development activities that lead to the creation of new products. Thus it has little or no direct significance to the port industry. The three other worlds of production are more relevant and are presented in more detail.

4.1.1 The Industrial World

The Industrial World is a framework of economic action that exhibits the following characteristics:

  • Production of generic-standardised products whose qualitative characteristics are defined in advance by the producer;
  • The production process is characterised by standardisation, using interchangeable and reproducible resources;
  • Inter-firm competition is centred around the price of similar products whose quality characteristics are codified;
  • Production technology often involves high levels of investment in fixed capital to reap the benefits of economies of scale;
  • In most cases labour is semi-skilled and is expected to perform according to pre-defined rules;
  • The market of the product is characterised by conditions of predictable risk, thus a firm's strategy usually involves practices such as risk management, production planning, strategies of market expansion and seasonal or temporary layoffs.

The organisational model associated with the Industrial World (the industrial model) corresponds closely to the 20th century mass production system (large, vertically integrated corporation, strict hierarchy, separation of conception and execution, Taylorism etc.).

4.1.2 The Market World

The Market World is a framework of economic action that exhibits the following characteristics:

  • Production of dedicated-standardised products in series for specific clients;
  • The production process is characterised by standardisation, using interchangeable and reproducible resources;
  • Inter-firm competition is centred around price and promptness of response to demand;
  • Production technology involves the use of flexible and multi-use machinery in order to achieve at the same time economies of scale and a degree of product differentiation (mass customisation) according to specific demands;
  • In most cases labour is semi-skilled but is expected to be able to perform several tasks;
  • The producers face conditions of market uncertainty since it is not possible to predict future demand and prices for their products.

The organisational model associated with the Market World (the Market model) corresponds to enterprises with variable sizes (small, medium, large), which may be order-takers (sub-contractors) or order-givers. These enterprises pursue a strategy of product differentiation and rely on their sub-contractors to achieve promptness of response to customers. Two broad organisational structures that correspond to the Market Model may be distinguished. The first refers to the case where medium or relatively large firms, with potential to exploit economies of scale, use the services of smaller companies on an input-output chain. The selection of input-providing firms by the order-giving firm is based on price and promptness of response within a biding-out framework. Such an arrangement provides the order-giving firm the necessary flexibility required when demand conditions are unstable. A major drawback of a system based on anonymous and impersonal inter-firm relations is that it is unstable and may lead to market failure in transactions due to conditions such as opportunistic behaviour, asymmetrical information etc.

A more sophisticated and durable manifestation of this model is represented by the various types of network markets that can be observed in virtually all sectors. A 'network' may be defined "….as a closed set of selected and explicit linkages with preferential partners in a firm's space of complementary assets and market relationships, having as major goal the reduction of static and dynamic uncertainty." (Camagni, 1991:135). The distinction between strategic and regional networks can also be found: A strategic network is a "long-term, purposeful arrangement among distinct but related for-profit organisations that allows those firms in them to gain or sustain a competitive advantage vis-à-vis their competitors outside the network" (Jarillo, 1988:32), while a regional network "is made up of small and medium-sized firms embedded in an industrial district." (Sydow, 1992:115). These definitions are limited to the description of networks as a form of dense inter-organisational relationships. But networks can also evolve out of personal ties, or market relationships among various parties (Powell, 1990).

A comparison between the (neo-classical or "free") market, the hierarchical and the network forms of organisation is summarised in Table 2, while Table 3 presents an alternative classification of various types of networks. Thus, the more sophisticated version of the market model incorporates the characteristics of strategic networks along with the characteristics of dynamic networks. In the case of ports the other two types of networks, stable and internal networks, can also apply.

4.1.3 The Interpersonal World

The interpersonal world is a framework of economic action that exhibits the following characteristics:

  • Production of dedicated-specialised products as a direct response to individual demands;
  • The production process is characterised by specialisation utilising highly specialised, even unique, resources and competencies;
  • Inter-firm competition is centred around product quality while the product's price directly reflects its' assessment by the users in terms of quality;
  • Production technology involves the use of flexible and multi-use machinery and tools with a view to reap the benefits of economies of variety;
  • Labour is skilled or even highly skilled, able to perform a wide variety of tasks;
  • Both producers and consumers face conditions of true market uncertainty since there is no way to assess a priori a product's quality, this fact makes the producer-user relationship the single most important element of tackling uncertainty.

The organisational model associated with the Interpersonal World (the Marshallian Market Model) corresponds to firms or units that pursue a strategy of diversified quality production, which is transactions- and information-intensive. In this case the producer-user relation is of paramount importance. Further, these firms are part of localised networks characterised by dense interpersonal relationships. In other words the Marshallian Market Model incorporates the characteristics of regional networks and dynamic networks.

Table 2: Stylised Comparison of Forms of Economic Organisation

Forms
Key features
Market
Hierarchy
Network
Normative basis Contract - Property rights Employment relationship Complementary strengths
Means of communication Prices Routines Relational
Means of conflict resolution Haggling - resort to courts for enforcement Administrative fiat-supervision Norm of reciprocity - reputational concerns
Degree of flexibility High Low Medium
Amount of commitment Low Medium to high Medium to high
Tone or climate Precision and/or Suspicion Formal, bureaucratic Open-ended, mutual benefits
Actor preferences or choices Independent Dependent Interdependent
Mixing of forms Repeat transactions Informal organisation Status Hierarchies
Contracts as hierarchical documents Market-like features: profit centres, transfer pricing Multiple partners
Formal rules

Source: Powell, 1990, p. 269



Table 3: Types of Networks

Type of Network
Stable
Internal
Dynamic
Operating logic A large core firm creates market-based linkages to a limited set of upstream and/or downstream partners. Commonly owned business elements allocate resources along the value chain using market mechanisms. Independent business elements along the value chain form temporary alliances from among a large pool of potential partners.
Primary Application Mature industries requiring large capital investments. Varied ownership limits risks and encourages full loading of all assets. Mature industries requiring large capital investments. Market-priced exchanges allow performance appraisal of internal units. Low tech industries with short product design cycles and evolving high tech industries (e.g. electronics, biotech, etc.)

Adapted from: Miles and Snow, 1992, p. 64.




4.2 Potential Organisational Patterns of the Port Industry

The theoretical concepts that were presented in the previous section constitute the tools of a new analytical framework that can be applied to the study of a port industry that faces new and significant competitive challenges. Under this prism it can be argued that the operational and organisational logic of port activities during the conventional era was conforming to the principles of the Industrial world. Most major ports had adopted the Industrial model of port organisation, which served efficiently the industry until the late 1970s. The period after the late 1970's is characterised by fundamental changes that cannot be addressed by ports solely operating according to the principles of this model. The restructuring and reorganisation of ports assumed various forms that reflected diverse strategic choices. Nonetheless the main issues that a modern port must address are the following: increased quality of services, high levels of flexibility and adaptability, closer integration with other transport modes, higher levels of product- and process-innovation, better management and marketing strategies, more efficient labour mobilisation and participation. The achievement of these goals requires the existence of ports that exhibit hybrid organisational structures that incorporate elements of all three possible Worlds of Production and of their corresponding models of production.

Table 1 is the result of an attempt to classify the characteristics of port products. These characteristics indicate which model of production is better suited to the production of the said product according to the preceded "world of production" concept. Port products can also be classified with reference to which world of production they belong in (i.e. which framework of action is particularly suited to the production of the said product). This classification is illustrated in the following Diagram 1.

This diagram illustrates the major transformation that has taken place: given their characteristics, there are relatively few port products that are exclusively suited to the industrial model of mass production. These include the traffic management of vessels in the port, pilotage infrastructure, traffic management in inland port area, Vessel Traffic Systems, waste management & bunkering, the supply of utility services to ships (such as electricity etc.), access to inland transport networks. In other words the production of these services is more efficient by a single firm using standardised production methods and exploiting economies of scale that result in low prices.

There is a second category of port products whose combinations of characteristics require production either within the industrial model and/or within the Marshallian market model. These are: towing of ships, loading/unloading at the quay, and transportation to/from warehouses. The production of these products is open to alternative organisational structures that correspond to the Marshallian market model.

The characteristics of a third category of port products, i.e. pilotage, vessel's reception infrastructure, favour their production within organisational models associated with the Industrial model and/or within the Market model. A fourth category of port products, including goods processing at the warehouse, preparation for distribution to the hinterland, and ship repairing services, favour their production within the Marshallian Market model and/or within the Market Model. Finally, there are products, namely transloading in inland transport modes, security services, activities in port free zones, EDI services, and warehousing, whose characteristics allow any of the three models of production.

The above conceptualisation suggests that neither the industrial model of mass production, which had been traditionally applied in the case of the port industry, nor any other model alone can provide by definition an effective pattern of port production. Within the new reality, modern ports must provide a greater variety of services to port users than in the past in order to be competitive. Many of these services cannot be efficiently produced by a single port enterprise. The provision of various port services can be more efficient when regional or strategic networks operate under the logic of the Interpersonal and the Market World respectively.

This fact opens the possibility of intra-port competition - defined as the competition between similar or complementary production units, which provide the same services in the context of the same port (Chlomoudis & Pallis, 1998) - and implicates the concept of flexible specialisation. The demand for specialised as well as new types of port services - which frequently represent only a small component of the total of the services that a port supplies - is profound. So, the introduction of specialised production units focused on the production of specific services, and involving decentralised management and various forms of employment and technologies, creates the potential to match rapidly, innovatively and effectively the demands of a port's current and potential users. These units can provide services integrated within a wider cohesive programme of port planning, whilst the responsibility for the effectively supply of the services remain to the executives of these units. Aiming to improve their competitive position they can act with greater autonomy and demonstrate the essential entrepreneurship and creativity.

In this context, the role of the central port authority is to control the rules of competition between production units offering the same but also multiple port services. Once a process of restructuring that incorporates elements of the interpersonal and market worlds is initiated, the role of the port authority should be significantly reconsidered. A system of many independent firms that are competing and co-operating requires an institutional framework that prevents potentially destructive ("cut-throat") price competition and favours competition based on innovation and other non-price parameters.

When the port product is offered within multiple frameworks of action, changes in the patterns of employment become essential as well. The structural modification of the qualitative characteristics of those employed in ports becomes part of the restructuring process. Chains of unqualified workers are replaced by skilled personnel, especially as the implementation of new technologies modify the demand for this production factor (Haralambidis & Veenstra, 1997; Chlomoudis & Pallis, 1999). With regards to the administration of this production process, the flexible co-operation of personnel along with new type of employee relations and management practices become essential, while the importance of the traditional hierarchical administrative structure faces its limitations.

The diversity and complexity of the contemporary port product require the application of multiple organisational transformations incorporating elements of the different possible worlds of production. The heterogeneity of the port industry in terms of size, geographical location, management practices, port operations - i.e. 'comprehensive ' 'service' and 'landlord' ports - and employment patterns, is remarkable (Pallis, 1997). This has several implications at the institutional and the operational level along with other market developments (Langen, 1999). Therefore the organisational strategy formulation for any particular port has to be supplemented by a specific analysis for this port and its competitive position. Each port attracts different users, depends on markets that are structurally different and characterised by divergent financial structure, hence each port might choose to offer a different range of products aiming to expand towards specific directions. There are many possible combinations of organisational forms available and it is a matter of strategic choice to pick the one that serves best the needs of a specific port.


5. Concluding Remarks

The substantial structural changes in the world economy, the trading context and the port industry itself, require the productive and organisational restructuring of ports. Within the new reality, the traditional perceptions of port activities have been widely expanded to include a variety of new tasks and operations under a qualitatively new operational logic. The new dimensions of the port production process observed during the last decades are not irrespective of these developments. Similarly to other industries, these developments can be interpreted as attempts to overcome the limits of the conventional mass production system, at least in so far as its application to the port industry is concerned, and represent a break with it.

Utilising the theoretical framework of the possible worlds of production, and an indicative analysis of the contemporary port product, it is clear that several of the products or services demanded by port users can be provided effectively by organisational forms responding either to the Market Model or the Interpersonal Model of production, The industrial model of mass production might remain the more effective organisational form for the production of another range of port services. Rather than expecting the MPS to fail and ultimately be abandoned because of its own endogenous problems, more complex and diverse forms of port organisation might arise, involving the development of concepts deriving from the implementation of the different frameworks of action. These concepts include the introduction of intra-port competition, the supply of services by several competing enterprises, a new role for the port authority, and the restructuring of the labour.

Any possible departure from the conventional MPS involves the introduction of network-like structures within a single port. Various port authorities may still favour the operation of a single port enterprise. In this case an organisational restructuring that introduces the principles of internal networking to the operation of the port enterprise is expected to result in significant competitive advantages (with regards to the former mass production structure). When port authorities favour the idea of allowing several independent enterprises to operate within a single port there is a wide variety of possible organisational forms. One might be the existence of few large firms and many small and medium enterprises (SMEs) who act as sub-contractors in a biding-out system. Other arrangements may involve the operation of strategic or regional networks. Although theoretically there is a wide spectrum of options available there are also specific limitations as to what organisational forms can be applied in a specific port. The most important limitation is the entrepreneurial and industrial culture that shapes the mentality of all those involved in production. When suspicion and distrust prevail among entrepreneurs along with militant employee relations then a strategic network (based on contractual relations) is more likely to be created (a regional network is impossible to develop under such conditions). On the other hand, when a port society exhibits characteristics of mutual trust and consensual employee relations the creation of a regional-type network within a port is possible. These remarks are nothing but the tip of the iceberg with regards to the importance of social, political, cultural, ethical and other parameters that influence the creation and development of any network-like organisational structure. They certainly require further research in the context of the port industry.

As there are many possible combinations of organisational forms available, and changes should take into account the peculiarities of each port, variations should be expected as the adjustment of the port industry to the new reality progresses. Given the heterogeneity of ports around the world, it is a matter of strategic choice to pick the one that serves best the needs of a specific port.


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