Analysis of Random Disruptive Eventsin Shipping and Port Operations

INTERNATIONAL FORUM ON SHIPPING, PORTS AND AIRPORTS (IFSPA) HONGKONG, 24-27 MAY2009

Saut Gurning

ResearcherNational Centre for Portsand Shipping

Australian Maritime College

Dr Stephen Cahoon

Head of DepartmentDepartment of Maritime andLogistics Management

Australian Maritime College

WHEAT SUPPLY CHAININ AUSTRALIA AND INDONESIA

Farmers Handlers Processors DistributorsSub

Wholesalers Retailers Consumers

Farm Scale

Southern-Belt

Wheat Area

High Rain FallSpecial Area

AWB Limited

Grain Pool

Agra-Corp

PremiumGrain

Brooks Grain

ABB

Mortons

Aus-Wheat

Millers ForAnimalFeeds

Millers ForHumanFoods

ProcessorsFor

Beverage

ProcessorsFor Ethanol /

Bio-Fuel

IndustrialConsumers

Big Industry

SmallMedium

Enterprise

Household

EndConsumer

ExportMarkets

DomesticMarkets

Agents

Marketers

FreightForwarders

Storage and

Handling

Global Supply Chain Networking

National and Local Wholesalers and

Retailers Chains

Food Retail Services and Small Shops

Wholesalers

Third Party Suppliers

MARITIME POSITION IN THE WHEAT SUPPLY CHAIN

Farmers Handlers Processors

Maritime Distributors

& Handling

Wholesalers Retailers Consumers

Shipping

Ports

Forwarders

Shippers

Consignees

Effecting Factors / Affecting issues on three layers of upstream chain

Focal PointFocal Point

Effecting Factors / Affecting issues on three layers of downstre am

RESPONSE ON MARITIME DISRUPTIONS

Makassar

Banjarmasin

SurabayaSemarang

Jakarta

Singapore/Malaysia

Medan

Brisbane

Sydney

MelbourneAdelaide

Perth

Main shipping routeFeeder route toIndonesia

Makassar

Banjarmasin

SurabayaSemarang

Jakarta

Singapore/Malaysia

Medan

Brisbane

Sydney

MelbourneAdelaide

Perth

Main shipping routeFeeder route toIndonesia

Container (TEU)

Bulk (20 tons)

0

500

1000

1500

2000

2500

3000

3500

4000

Belawan Priok Perak Tj Emas Barito Makassar

Cost (US$)

Container (TEU)

Bulk (20 tons)

Supply-ChainRisks

Uncertainties Disturbances

Delay Deviation Disruption Disaster

Related to risks as Disruption Risks

Clausen et al.(2001a,p. 41)

“A state during the execution of the currentoperation, where the deviation from plan issufficiently large that the plan has to bechanged substantially”.

Yu and Gi (2004)

“Various unanticipated events caused byinternal and external factors which significantlydeviate original plans of a system andconsequently affect its performance severely”

Events in Supply Chain as Supply Chain Disruption

Craighead et al. (2007,p.132)

“Unplanned and unanticipated events thatdisrupt the normal flow of goods and materialswithin a supply chain and, as a consequence,expose firms within the supply chain tooperational and financial risks”.

Disruptions in Maritime

Bearing-Point &Hewlett-Packard(2005, p.2)

“The maritime industry is directly

impacted by a variety of disruptions

to the flow of legitimate trade and

travel. These range from minor

weather disruptions to hurricanes

and typhoons, from workforce

shortages to work stoppages andfrom security breaches to potential

Terrorist attacks”.

ImpactFrequency

DirectIndirect Major Minor

Stages of maritime disturbancesand recovery periods

Time

Serv

ice va

riabl

ede

terio

ratio

n

Delay Deviation Disruption Disaster

D2

D3

D1

D4

D5

Summary of factors identified in major studies ascauses of maritime disruptions

Aka

ha 1

986

Ros

e et

al.

1997

Cha

ng

2000

Ram

age

2001

Wat

anab

e 20

02C

onn

olly

200

4A

lexa

nde

r and

Irw

in 2

005

Bea

ringP

oint

200

5C

hu a

nd H

anse

n 2

005

Coy

et a

l. 20

05D

avis

et a

l 200

5E

arly

-War

ning

200

5F

ritte

lli 2

005

Kle

indo

rfer a

nd S

aad

2005

Arn

old

et a

l. 2

006

CS

A 2

006

Shu

ltz 2

006

Auc

klan

d 20

07B

usi

ness

Lin

e 2

007

CB

C 2

007

Con

rad

et a

l 200

7D

rum

200

7H

eger

200

7M

ahb

ub 2

007

Pe

ttit 2

007

Reu

ters

200

7Y

ank

2007

Bro

wn

200

8G

urni

ng

2008

Hor

lock

200

8R

ober

t 20

08S

aidi

200

8S

eba

2008

Str

atfo

r 20

08

Tod

d 20

08T

suki

mor

i and

Juk

wey

200

8W

right

200

8N

ight

inga

le, 2

008

N O D is ru p tiv e E v e n t s1 S e c u rity is s ue s • • • •

2 P o litic a l e v e n ts • • •

3 R a il re la te d op e ra t ion • •

4 P o rt s t rik e s • • • • • • • •

5 C us tom s & a dm inis t ra ti on • • •

6 S e v e re w e ath e r c on dit io n • • • • • • • • • • • •

7 E a rthq u ak e s • • • •

8 E le c t ric a l ou ta g e s • •

9 E q uip m en t do w n / s h orta ge • •

1 0 E m pty c o nta in er s •

1 1 S h ip a c c id e nts in po rt a r ea s • • •

1 2 S h ipp in g-P or t d is pu te s •1 3 P o rt c o n ge s t ion • • • •

1 4 S h ip s h or ta g e s • • •1 5 F ue l a n d b un k e rin g C o sts •

1 6 In la nd a c c es ib ilt y p rob le m s • •

1 7 Te le c o m u n ic at io n s y s te m •

1 8 S h orta g e o f s e rv ic e de m a nd •

R e s e a rc h e r s a n d F a c to rs Id e n t if ie d / D is c u s s e d

Maritime Disruptions and its impacts

TYPE OF MARITIME DISRUPTION RISKS

DIRECT INDIRECTSecurity and safety Market

- Ship accidents - Shortage of Demand

- Ship pollution - Shortage of ships

- Political events - Financial Crisis

- Terrorist attack - Trade imbalance

Service related factors Organisation and relationship

- Operational and equipment - Employment / Port Workers

- Competition - Legal and policy

- Fuel and bunkering - Resource

- Electrical shortage - Customs process

- Congestion - Ships inspection

- Infrastructure related factors Environmental

- Communication facility - Severe weather

- Lack of development - Earthquakes

- Inland transport connections - Flood

Maritime disruptions in theAustralia-Indonesia wheat supply chain

In Australia

Drought

InsufficientRail-linkage

Queuing andCongestion

at ports

Limited draughtat ports

Shortage ofContainers

Imbalance marketof global dry bulk

fleet over thedemand

Temporarychange from dry-

bulk tocontainerised

Inland Congestion

Port Congestion

Problems with Inter-Island networks

Lack of inlandaccessibility

Higher costs andlonger time

Lack of terminal storages, limited draught ofberth, higher terminal charge, exhausted

customs’ procedures

Severe wave and windin ocean environment

Stoppage of ferry /domestic services to

Inter-island points

Contribute toHigher price 38-76 per cent of

250-260 percentof total selling

price

Longer lead timemaximum 30

days

In Indonesia

RESPONSE ON MARITIME DISRUPTIONS

Makassar

Banjarmasin

SurabayaSemarang

Jakarta

Singapore/Malaysia

Medan

Brisbane

Sydney

MelbourneAdelaide

Perth

Main shipping routeFeeder route toIndonesia

Makassar

Banjarmasin

SurabayaSemarang

Jakarta

Singapore/Malaysia

Medan

Brisbane

Sydney

MelbourneAdelaide

Perth

Main shipping routeFeeder route toIndonesia

Container (TEU)

Bulk (20 tons)

0

500

1000

1500

2000

2500

3000

3500

4000

Belawan Priok Perak Tj Emas Barito Makassar

Cost (US$)

Container (TEU)

Bulk (20 tons)

Year Disruption Application Researchers Objectives MethodsDisruption management

strategies

Management topics in maritime operation ISM CR BCM RP

2001 Security on supply Terrorist attack at port SheffiPropose postponement delays andimported inputs Risk Pooling Analysis √ - √ -

chain risk assessment Input limitation

2003 Business Continuity Multimodal application Depak Developed business continuty scenario Continuity cycle - - √planning of maritime services of a firm facing disruptions

2004 Formal risk assessment Inbound supply after Zsidisin, Carter, Propose formal risk assessment Agency theory √ √ - -

maritime services & Cavinato procedures and techniques

2005 Disruption visibility Port stoppages Blackhurst et al. Propose actions related to disruption Focus group interview √ √ - √discovery, recovery and redesign Telephone interview,

2005 Analytical framework Port closure Kleindorfer and Measure the implications of Risk Standard logistic √ - √ -

of disruption response Saad Management program data for disruption regression model

management system

2006 Resilient supply chain Stoppage of maritime

operation because ofsevere weather

Tang Robust strategy of mitigation process Lesson learned from √ √ - -

disruption cases of Nokia, Dell,

Li and Fung.

2006The quantification of

mitigation andcontingency strategies

Blockages of one particular

shipping routes

Tomlin Proposed flexible scenarios of optimal Optimal ordering Policy √ √ - -

disruption-management strategies under Markov chain

2007 Disruption severity Port Strike Craighead et.al Develop warning and recovery planning Complexity analysis √ √ - √

2008 Risk Monitoring system Supply chain port entry Handfield et al. Mapping the high critical nodes Incident report system - √ - -

Supply Chain risk Port Strike event McCormac Develop procedures to estimate Risk Probability Index √ √ - -

assessment event the probability supplier attributes and multi-use matrix

and environment risk Index

STRATEGIES TO RESPOND TOMARITIME DISRUPTIONS

1. Inventory and Sourcing Mitigation 3. Business Continuity Mgt Planning2. Contingency Rerouting 4. Recovery Planning

Understanding Maritime Disruptions on Wheat -Trade

Natural Hazard

Operational

Maritime DisruptionManagement

Model

Discovery

Basic drivers Stages

Goals

IndustryCharacteristics

Disparitiesbetween trade

Pre-DisruptionsEnvironment

Wheat ChainStructure

MaritimeOperations

Existing PracticesOf SC operators

Market / EconomicsDevelopment

Initial reactions

Response group/Chain responses

Options available

Decision made

RecoveryPerformance

Wheat-ChainRedesign

Readiness /Mitigation

INTERNATIONAL FORUM ON SHIPPING, PORTS AND AIRPORTS (IFSPA) HONGKONG, 24-27 MAY2009

CONCLUSION

• Maritime leg of supply chains require more

attention

• Further research required on maritime disruptions

• In particular the wheat supply chain

• Types of disruptions

• Direct and indirect

• Who is affected

• Mitigation and contingency strategies

14

Thank you

Saut Gurning

ResearcherNational Centre for Ports andShipping

Australian Maritime College

Dr Stephen Cahoon

Head of DepartmentDepartment of Maritime andLogistics Management

Australian Maritime College