Review of Developments in Maritime Transport and their Impact on Human Resource Development in Ports. A Personal Perspective by Brian Thomas

Review of Developments in Maritime Transport and their Impact on Human Resource Development in Ports A Personal Perspective by Brian Thomas

Review of Developments in Maritime Transport and their Impact on Human Resource Development in Ports Section 1: Background Section 2: Developments in maritime transport Section 3: Implications for seaports Section 4: Training strategies in ports Section 5: Conclusion

Background In 1970, at the first IPTC, the maritime world was on the cusp of a major technical revolution in shipping that was to have an enormous impact on the global port transport industry. Specialisation in shipping has been the main driver for change in the intervening period. In the last 40 years we have seen unbelievable changes in the ways cargoes are packaged, handled and transported a revolution in every respect. It is not just the extent of the technological change in the maritime sector that has been spectacular - but the speed of change. This has presented formidable challenges to global human resource managers and trainers in the port transport industry. This presentation gives a personal perspective of how the global port industry has managed the training of employees in this unprecedented period of change.

Developments in Maritime Transport Drivers For Change Developments that have shaped our industry in the past 40 years include: Sustained and significant growth of world seaborne trade Spectacular growth of containerised trades and port throughput A new geography of liner shipping and service strategies Reform of liner conferences Consolidation in shipping and emergence of major lines Growth of ship size Port reforms and private sector involvement in operations leading to the emergence of global terminal operators Growth of logistical services Re-emergence of shipping companies in terminal operations Greater competition in the port and terminal business Growing importance of health, safety and environmental issues and their impact on terminal costs

Developments in Maritime Transport World Seaborne Trade (million tons) YEAR TANKER CARGOES MAIN BULK DRY CARGO OTHER TOTAL 1970 1 442 448 676 2566 1980 1 871 796 1 037 3704 1990 1 755 968 1 285 4 008 2000 2 163 1 288 2 533 5 983 2002 2 139 1 352 2 629 6 120 2003 2 226 1 475 2 799 6 500 2004 2 318 1 587 2 941 6 846 2005 2 422 1 701 2 986 7 109 2006 2 674 1 828 2 914 7 416 2007 2 681 1 997 3 344 8 022 Source: UNCTAD

Developments in Maritime Transport Containerized Trade Growth (million tons)

Developments in Maritime Transport Evolution of Seaborne Container Trade YEAR SEABORNE TRAFFIC (million full TEUs) ANNUAL GROWTH % 1990 28.9-1995 46.5 +10.0% 2000 69.1 +8.5% 2001 71.7 +3.8% 2002 80.1 +11.7% 2003 91.9 +14.7% 2004 105.3 +14.6% 2005 115.5 +9.7% 2006 127.0 +10.0% 2007 142.4 +12.1% 2008 forecast 154.6 +8.6% Source: Drewry Container Forecast Q3 2008

1980 1982 1984 1986 600 500 400 300 200 100 0 Developments in Maritime Transport Container Port Throughput Growth (TEU) 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source: Drewry

Developments in Maritime Transport Breakdown of Container Port Throughput (TEUs) YEAR WORLD TRAFFIC WORLD THROUGHPUT FULL EMPTY TRANSHIP 1990 28.7 88.0 70.2 17.8 15.5 1995 46.0 145.5 118.7 26.8 31.4 1996 49.1 158.3 127.8 30.5 35.5 1997 54.0 176.5 142.2 34.3 41.0 1998 56.3 190.9 149.7 41.3 45.7 1999 61.6 210.5 166.0 44.5 52.7 2000 68.4 236.2 186.1 50.1 60.9 2001 70.8 248.1 193.9 54.3 64.6 2002 79.3 277.3 218.9 58.4 74.3 2003 91.9 315.0 249.3 65.7 82.7 2004 105.3 362.2 287.5 74.6 96.9 2005 115.5 397.9 315.4 82.5 106.6 2006 127.0 441.2 348.4 92.8 119.4 Source: Drewry Container Forecast Q3 2008 2007 142.4 496.6 392.6 104.0 136.4 1 st Half 2008 73.8 258.0 203.9 54.2 71.2 Source: Drewry Container Forecast Q3 2008

Developments in Maritime Transport Regional Container Port Throughput (million TEUs) Region 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Asia 94.4 109.0 105.9 114.5 125.1 144.9 166.6 186.9 208.6 229.6 North Europe 27.5 29.0 31.8 32.9 35.1 38.4 43.2 47.2 50.6 55.9 North America 26.5 28.3 31.3 31.2 34.1 39.3 40.9 44.0 46.6 44.2 Med (Inc North Africa) 18.6 20.1 22.8 24.1 26.9 30.5 33.6 35.9 39.3 38.8 South America 10.3 10.9 10.9 12.4 13.0 15.2 18.1 20.7 23.7 21.2 Middle East 6.7 8.0 8.9 9.9 11.6 14.2 17.9 19.7 21.3 20.9 Indian Subcontinent 4.6 5.0 5.5 6.4 6.0 7.6 8.8 9.9 12.5 11.7 Australasia 3.8 4.2 6.2 4.9 5.7 6.2 6.6 6.8 7.4 6.2 Caribbean 4.2 3.8 4.8 5.2 5.0 5.5 5.9 6.5 7.2 4.6 Africa (exc North Africa) 3.9 3.6 6.7 5.6 6.4 7.6 7.8 8.3 8.4 3.5 Pacific 0.8 0.7 0.8 0.8 0.8 1.0 0.9 0.9 0.9 0.7 Grand Total 201.4 222.6 235.5 247.9 269.7 310.3 350.2 386.8 426.6 437.4 Source: Containerization International

Developments in Maritime Transport New Geography of Liner Shipping Main Line service deploys larger vessels Feeder services deploy smaller vessels Benefit of economies of scale Transhipment at Hub Ports of call Direct Port Calls Port Port Feeder Service Feeder Service Port Hub Port Hub Port Calls Hub Port Main Line Service Port Feeder Port Calls Port Feeder Service Feeder Service Port

Developments in Maritime Transport Consolidation in Liner Shipping Most significant recent development in shipping has been concentration on the supply side Shipping companies have a history of cooperation in providing services through: Liner Conferences Consortia & Partnerships Alliances Mergers and Acquisitions (Consolidation) Stock Market Listings (CSCL, CP Ships, DP World, Hapag Lloyd) Consolidation has a significant impact on shipping companies purchasing power of port and terminal services Alliance Membership

Developments in Maritime Transport Reform of Liner Conferences 2006 EU repealed exemption of liner conferences Exemption from EU Competition laws removed from October 2008 Consortia exemption not affected by repeal yet! EU believes conferences in non-eu trades will be unaffected by repeal of Reg 4056 2007 Competition Commission of India urged shipping lines to stop operating in cartels Japanese government indicated strong opposition to the elimination of conferences. European Liner Affairs Association requested an liner association should be allowed to: Give cost transparency (bunkering, canal dues, port charges, currency exchange) Record aggregated price indexes by trade lane direction Monitor port-to-port cargo flows based on data from each carrier Provide independent supply and demand forecasts Changes in the structure of Liner Shipping has impacted terminal operators

Developments in Maritime Transport Merger and Acquisition Examples CP Ships Canmar CAST Lykes Lines Contship Container Lines Ivaran Lines ANZDL TMM CMA CGM Australia National Line NOL APL Evergreen Lloyd Triestino Uniglory NYK Lines Nippon Liner System Hanjin DSR Senator Lines CP Ships Hapag Lloyd CMA - CGM NOL/APL Evergreen NYK Lines Hanjin

Developments in Maritime Transport Consortia and Alliances CONSORTIA Created to maximize frequency & optimize fleet deployment Formed for specific route & trade requirements = similar size & speed of vessels deployed To spread risk of investment & capacity management Operation on a single trade route All participants in a consortia are members of the conference Not created to provide multimodal & logistics services ALLIANCES Created frequency & regularity of services Member fleets allow for different characteristics Share resources & facilities Forged on global basis, to offer greater worldwide based co-operation Created on a variety of combinations with respect to the conference status Provide multimodal & logistics services essential reason for setting up alliances Source: Policy Research Corporation

Developments in Maritime Transport Impact of Consolidation (as at November 2008) Data Source: Containerization International Top 25 in Jan 2000 = 75% Market Share Top 25 in Jan 2005 = 81% Market Share Top 25 in Jan 2007 = 84% Market Share Top 25 in Jan 2008 = 90% Market Share Maersk, MSC and CMA CGM control over 30% of the market Further consolidation is considered inevitable

Developments in Maritime Transport Top 10 Lines March 2008 2000000 1500000 1000000 500000 0 AP Moeller MSC CMA CGM Evergreen Hapag Lloyd Cosco CSCL APL NYK Hanjin TEU 1966320 1246837 910584 624299 497930 441014 431718 402857 398277 359802

Developments in Maritime Transport Ship Size Evolution

Developments in Maritime Transport Fleet Development 2000-2010

Developments in Maritime Transport Trend Setter Emma Maersk 14,300 TEUs

Developments in Maritime Transport Evolution of Vessel Technical Specification 1984 1994 2004 2007 Ratio 2007/1984 TEU capacity 3 000 4 500 8 000 14 300 4.80 Deadweight 50 000 55 000 100 000 160 000 3.20 L.O.A. 290 275 350 400 1.38 B.O.A. 32.26 39.00 42.80 55.00 1.70 Draught 13.0 13.0 14.5 16.0 1.23 Required depth 14.5 14.5 16.0 17.5 1.21

Developments in Maritime Transport Overview of Port Reform Programs LIBERALISATION DEREGULATION INSTITUTIONAL REFORMS LABOUR REFORMS GOVERNMENT CONTROLS CORPORATISATION COMMERCIALISATION DEVOLUTION PRIVATISATION REDUCTION in LABOUR FORCE DECASUALISATION NEW LABOUR AGREEMENTS REDUCED TRADE UNION POWERS PLANNING CONTROLS CONTROL OF PORT TARIFFS NEW LICENCING AGREEMENT

Developments in Maritime Transport Top Players Deregulation was catalyst for emergence of global operators in the early 1990s. These operators changed the face of terminal operations around the world Top 10 Players HPH PSA APM Terminals DP World China Merchants (SIPG) Eurogate Cosco Evergreen SSA APL The emergence of global terminal operators has greatly increased the level of competition in the terminal business.

Developments in Maritime Transport Shipping Companies Interest in Terminals The resurgence of interest in terminal operations by shipping companies Major shipping companies now see terminal operations as an essential, often core, business developing major terminals at strategic locations Shipping lines have become more involved in terminal operations in numerous ways: Ownership Concessions Leases Shareholdings Management contracts with exclusive or preferential berthing agreements Consequently terminal operators main customers are also their competitors a new dynamic.

Developments in Maritime Transport Ports and Global Logistics Model Buyer Traders/ Manufacturers Shippers Store 1 Vendor 1 Factory 1 Distribution Centre 3PL s/ Forwarding Carriers 3PL s/ Forwarding Store 2 Distribution Centre Port of Destination Carriers Loading Port Warehouse Vendor 2 Factory 2 Store 3 Destination No End to End and Real Time Visibility System Vendor 3 Origin Factory 3

Developments in Maritime Transport Terminal s Value Chain Global Freight Business US$2.7 trillion Global Freight Logistics spend: ~7% of global GDP US$ (billions) 2800 2600 2400 2200 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Total Size ~ US$ 734 billion Distribution / Warehousing Total Size ~ US$ 1.2 trillion Transportation Inventory Carrying Costs Total Size ~ US$ 750 billion 25% of Total Source: IBM BCS analysis Freight Logistics Segments

Developments in Maritime Transport Terminal s Value Chain New Developments in Maritime Logistics Can the terminal add value to logistics and supply chain efficiency in the context of the new service demand?

Developments in Maritime Transport Summary More complex and volatile global markets Frequent changes in ship operators service strategies New groupings of ship operators Increases in ship size Shifts in customer preferences and loyalty Rapidly changing technology The emergence of global terminal operators Ship operators greater involvement in terminal operations Demands for greater cargo handling productivity Extensive capital investment in new port capacity Development of logistics and value added services New safety, security and environmental regimes

Implications For Seaports Changing Customer Demands Our customers now demand: Extensive infrastructure capacity (quays, yard, gate operations) Over-dimensioned equipment, yard and gate inventories (high availability) Consistently high operating performance Predictable and reliable service levels 24/7 Lower prices/ more services for their money (value for money) Better quality services (on time, no damage, no loss, accurate information) Personalised and professional service (customer intimacy) A flexible and responsiveness workforce Constant innovation

Implications For Seaports Greater Inter-Port Competition This has generated intense competition at several levels: Intra-port competition Inter-port competition Intra-range competition Competition at the regional level Competition has greatly increased the strategic, financial, operating and hazardous risks of ports and terminals.

Implications For Seaports Greater Commercial Risk Competition and the scale of investment in fixed assets has led to greater commercial risk for ports and terminals: Strategic risks (e.g. new competitors; deteriorating customer relations; negative media coverage; labour disagreements) Financial risks (e.g. financial market instability; fuel prices; currency changes) Operating risks (e.g. loss of key equipment; shortage of skills; IT system failure) Hazard risks (e.g. accident damage; fire; sabotage) Our people have a profound and direct impact on the management of port and terminal risks

Implications For Seaports New Facilities and Services Technological change has resulted in: Major new investment in port infrastructure (dredged channels; deep berths) Development of specialised terminal facilities and the emergence of megaterminals Dependence on mechanisation and automation (increased importance of operating and maintaining equipment) Total dependence on IT systems (e.g. TOS; EMIS) Over-dimensioning of facilities to meet demand for greater output Demand for greater efficiency (cost-effectiveness)

Implications For Seaports Changes in Organisational Culture Changes in organisational and management culture have been just as dramatic: Unity of purpose (integration of landside and marine operations the terminal concept) 24/7 working on terminals (e.g. opportunity maintenance) New paradigm on customer service (cargo follows the ship) Change in commercial focus (dominance of ship operators in commercial negotiations) Introduction of service contracts and performance targets Discipline of the market (new sources of funding for port development) Organic replacing mechanistic management cultures Multi-skilling and flexible working arrangements Developing employees skills and changing their attitudes were essential to meet and support these challenges.

Training Strategies in Ports New Skills and Competencies In response to these developments port employees have had to acquire: Knowledge of specialized trades and a range of new planning, managing and operating skills (IT; EDI). Private sector values a change in attitude and behaviour. Mind-sets that are open to change. Leadership skills Customer service skills Innovative/creative skills High safety standards Security consciousness In brief, port employees have had to acquire a completely new skills set! How effectively has the port transport industry accomplished this?

Training Strategies in Ports New Skills and Competencies Key developments and initiatives in training in the port transport industry in the past 40 years can be briefly summarised as follows: 1960 s Acknowledgment of the need for specialized training in the port transport industry (Netherlands began with its apprenticeship schemes in 1948). Supported by decasualisation policies. Establishment of dockworker training centres at the port or national level. Formal safety programmes introduced in selected European countries for dock workers. 1960/70s Emergence of recognised training schemes and higher qualifications in the industry (supervisory programmes; university degrees etc.).

Training Strategies in Ports New Skills and Competencies 1970 s and 1980 s Global expansion of port training largely through public sector funding with the support of the United Nations Organisation (UNCTAD; ILO; IMO) and The World Bank. Formal management and supervisory schemes introduced by national port authorities and major port authorities. Executive development programmes established for developing countries by UNCTAD with SIDA finance. Establishment of regional training centres in developing countries (e.g. Arab Maritime Academy in Alexandra, Egypt.) ILO global policy of establishing national or regional portworker training centres in developing countries.

Training Strategies in Ports New Skills and Competencies 1980s/1990s Extension and upgrading of the quality of port training materials through the adoption of good principles of educational technology and the development of distance learning programmes (e.g. IPP; Trainmar; PDP). 1990s The wasted years port reforms and the closure of public sector funded training centres; greater reliance on on-the-job training. Lack of support for training from the private sector. 1990 s Shift in balance and the emergence of new maritime educational and training centres, notably in Asia. 2000s Renaissance of the private sector and the introduction of structured company based training schemes using high quality training materials (e.g. P&O Ports Institute (now the DP World Institute); APMT global training programmes (e.g. Magum: Magnet; GTDP;)

Training Strategies in Ports Our Aspirations At The Outset Our initial beliefs: Employees welcomed and wanted to embrace change. We could resolve, in a generation, the lack of appropriate skills and knowledge in the global ports industry (too ambitious). Organisational change could be achieved through training alone. Too much emphasise on the how - not the why. We could establish global training programmes and schemes. Establish regional or global training standards. Raise the status of the portworker in the industry.

Training Strategies in Ports What Were Our Failings? To acknowledge the extent of the need for training. To recognise the SKA demands of modern portwork a highly skilled occupation. Failed to tackle the lack of commitment to training on the part of port authorities and terminal operators (divide between espoused values and values in use ). Displayed naivety, believed the skills and knowledge gap could be resolved in a generation. Placed too much reliance on on-the-job training. Failed to appreciate the need to change employees attitudes. Under-funded human resource development and training. Failed to establish global training standards Given these failings I wonder how training managed to support the technical revolution!

Training Strategies in Ports What Have Been Our Main Achievements? Contributed to gaining global recognition of the discipline of port studies. Influenced government and international agencies training policies. Promoted HRD and training policies and practices in the industry. Established a benchmark and standards for training materials production. Generated global cooperation and support in training in the industry through the exchange of knowledge. Paved the way to the development of excellent company based training schemes that are well structured and systematic (DP World Institute; APMT s GTDP;) Made vast improvements in safety training.

Conclusion Employee Talent Market in Ports in 1970 Senior Management Deficit Middle Management Frontline Managers Surplus Matched Surplus Port Workers Talent Pool 1970 Demand Supply

Conclusion Employee Talent Market in Ports in 2009 Senior Management Deficit Middle Management Deficit Frontline Managers Surplus Matched Surplus Port Workers Matched Talent Pool 1970 Talent Pool 2009 Demand Supply

Conclusion There is much to thank members of the IPTC (past & present) for: Gaining recognition of the need for training in the port industry Establishing appropriate training arrangements in ports Setting appropriate standards for the development of training materials However, there is much still to do: Many port employees still do not receive adequate training to perform their tasks safely and efficiently as required under Article 38 of ILO Convention 152. As a consequence there is a significant shortage of management and technical talent in the industry and a huge demand for training going forward. We have a long way to go to change the old dockworker mentality in the business and to foster a philosophy of customer service amongst employees ( modern terminal employee ). We have only just begun the process to create quality customer service. There is a shortage of instructional designers and facilitators with appropriate background and experience to support the business going forward. Still a long way to go to establish effective HRD policies and practices (with recognized career patterns and management succession processes) in the industry. This is the challenge to the next generation of IPTC members.

Review of Developments in Maritime Transport and their Impact on Human Resource Development in Ports A Personal Perspective by Brian Thomas