The Automation Market for N.A. Container Terminals 1

The Automation Market for N.A. Container Terminals 1 The Automation Market for North American Container Terminals John Nichol California Maritime Academy

The Automation Market for N.A. Container Terminals 2 Abstract This paper investigates the trend in automation within the container terminal industry within North America. With one automated terminal in operation and four more in development, the North American automated container terminal market is rapidly developing. And, while there are many potential benefits to automation such as reduced costs, environmental improvements, energy efficiency, and improved safety, terminal automation is not a one-size-fits-all scenario nor would it benefit every container terminal in the North American market. The goal of determining which North American terminals would be candidates for automation turned out to be a difficult task. However, certain common justification factors for terminals considering a conversion to automation are discussed and outlined. For those port authorities and terminal operators considering automation, a thorough investigation of the market forces driving the trend as well as an inventory of existing automated equipment and systems is necessary to better understand what options exist and which automation model may best suit a particular terminal. Likewise, and most importantly, a dedicated plan for properly establishing a business case and an implementation program for conversion of a terminal from a manned operation to an automated one must be established and carried out by a prime team capable of delivery the dynamic services needed to accomplish such a complex endeavor. Key words: automation, container terminals, business case, operations, team

The Automation Market for N.A. Container Terminals 3 The Automation Market for North American Container Terminals The container terminal industry has changed significantly over the last two decades as goods are increasingly being containerized for shipment. These higher container volumes are pushing the limits of the capacities of both vessels as well as terminals within heavily utilized corridors. To address rising fuel costs, an emerging trend among the shipping lines has been the increasing of the size of the container vessels in their fleets and slow steaming, slowing their system s sailing speeds to 12-19 knots from the previous industry standard range of 20-24 knots (Sanguri, 2012). Whereas just 10 years ago, the predominant work horse of the fleet was a 4500 TEU vessel, today that number is somewhere closer to 8000-13,000 TEU vessels. Moreover, the larger shipping lines are now utilizing vessels with capacities as large as 16,000 TEUs and have placed orders for vessels with 18,000 TEU capacities: truly gargantuan ships are coming (Wallis, 2013)! These larger vessels address the issue of growing volumes while lowering the cost per box moved utilizing economies of scale. In essence, through the practice of slow steaming, the amount of fuel used per box is diminished on account of more boxes being hauled on one ship as opposed to multiple faster sailing vessels with an equal sum volume. However, while the shipping lines have increased their capacities, the marine terminals receiving and loading these boxes may find handling these larger volumes per vessel difficult to manage on account of a lack of infrastructure needed to service larger ships. These challenges at the terminals must be faced in order to retain and gain the

The Automation Market for N.A. Container Terminals 4 business of the shipping lines. One solution that has arisen to accommodate such large volumes is the automation of marine terminal infrastructure; however, the technical challenges of appropriately selecting among proven automation technologies as well as substantial costs to automation infrastructure conversion are difficult undertakings. Hence, the future market potential for automation within the North American market remains opaque. Major shipping lines, terminal operators, and port authorities are among the primary groups affected by terminal automation. The shipping lines are seeking to consolidate their fleets and their sailings. Through their larger vessels, the shipping lines seek to minimize their port calls as much as possible. Optimization would involve reduction of port calls per voyage as opposed to multiple stops involving partial unloading and loading at each stop, requiring the reorganization of boxes upon the vessel. At the end of the day any means the shipping lines have to reduce their fuel costs is better for their bottom line, and less sailing means less fuel used. Were a terminal able to accommodate such a full unloading and loading at a single stop, the shipping lines would find this very attractive and favor that terminal over others unable to provide a similar service. And, since they float, they may go where they wish, hence container lines may be fickle with their loyalty to terminals. Clearly, the terminal operators stand to benefit from handling higher volumes provided by these larger vessels, and terminal automation may be one way these higher volumes could be realized. However, the capital costs of the equipment needed are staggeringly high ($1.31 billion for Port of Long Beach s Middle Harbor project

The Automation Market for N.A. Container Terminals 5 according to the Port s website), so any such investment must be made only following a clear business case arguing for such an investment. The port authorities, like the terminal operators, would benefit from larger volumes moving through their ports. However, also like the terminal operators, certain infrastructure improvements and the costs incurred as well as re-structuring of terminal footprints would almost certainly be necessary to accomplish this kind of conversion. In jumping into infrastructure improvements to accommodate for automation, many port authorities and terminal operators could run the risk of going into debt to make such changes only to find their volumes nowhere near high-enough to pay off the debt accrued. The terminal equipment suppliers, the planning and design firms, and the railroads comprise some of the secondary industries affected by terminal automation. All terminal equipment is expensive but just how expensive is subject to relativity. Automation equipment sits comfortably at the higher end of costly terminal equipment. Nevertheless, were automation to catch on, the terminal equipment industry would inherit a new product market and a new generation of technology development. The planning and design firms associated with container terminals are looking towards terminal automation with great anticipation. In North America, the container terminal industry has reached a plateau of maturity. Were terminals to automate en mass, the amount of planning and design required to do so would be tantamount to redesigning all new terminals. Deeper berths, wider-boomed cranes, complete reorganization and planning of stacks, new pavement design, as well as intermodal transfer facilities would

The Automation Market for N.A. Container Terminals 6 all be needed. However, because of the variability of terminal needs and demands and the technical complexity of conversion strategies, ubiquitous conversion to automation is unlikely within the market. So, there is risk for such firms associated with such planning and design work. Those firms with successful first entry into automation stand to dominate. This capstone project will investigate existing examples of automation technologies and infrastructure available for such terminal conversions and seek to identify key drivers within the North American container terminal market and the services terminals will demand in order to deliver automation projects. Literature Review Literature Review Introduction Over roughly the last six decades, the containerization of goods has revolutionized global trade allowing for goods to be produced in low cost regions and conveniently boxed and shipped to various consumption zones around the world. Apart from perhaps the invention of the Internet, no other single technology has allowed for a greater increase in connectivity for the world s markets. Containerization, at its essence, is simplistic in its utility and functions on a unit-load-concept allowing for ubiquity within terminal infrastructure the world over (Steeken, Voß, & Stahlbock, 2004); however, as the global intermodal container transport system continues to mature, the methods employed to decrease costs and increase efficiencies become increasingly complex and technically challenging. Container terminal automation is at the center of this endeavor to improve the system through maximizing efficiency and reducing costs

The Automation Market for N.A. Container Terminals 7 within terminal operations. This literature review will first outline the basics of existing container terminal systems and operation practices in order to provide the necessary background for then examining the emergence and functioning of automation within the container terminal industry. Ultimately, this study will help to uncover the driving factors behind any trend towards automation and the likelihood of continued automation within North America s container terminal industry. Container shipping Much of the utility of the intermodal container is achieved through its applicability to a unit-load-concept. In order for containerization to provide easier, cheaper, and more profitable transport of goods, substantial investment into comprehensive changes in infrastructure and operations in order to handle containers had to be made by the various stakeholders within the shipping industry, namely the shipping lines, trucking lines, railroads, terminal operators, and port authorities (Donovan & Bonney, 2006). Intermodal containers are nearly uniform in their dimensions apart from slight variations for specialty units and are typically measured in units of one 20 long 8 wide section or twenty-foot equivalent units (TEUs). The most common container utilized today in intermodal shipping is a 40 long corrugated steel container, which would be measured as 2 TEUs or 1 FEU. These containers both protect the goods from pilferage and the elements while allowing for easy scheduling and controlling of the transfer of goods within the unit from one mode of carrier to another, train, ship, truck, barge, etc. (Steeken, Voß, & Stahlbock, 2004). Container Terminal Basics

The Automation Market for N.A. Container Terminals 8 Since the emergence of containers, the strategy and configuration of container terminals has been in a constant state of change towards improving operational flow. These improvements center on creating increased efficiencies in transshipment. Steeken, Voß, & Stahlbock (2004) define transshipment as the transfer or change from one conveyance to another with a temporarily limited storage on the container yard. (p. 4) As a rule, the faster the turnover of the containers through a terminal, the more efficient that terminal s operations are, and thereby, the more attractive a terminal becomes to its customers, the shipping lines, trucking lines, and railroads (Steeken, Voß, & Stahlbock, 2004). Container terminals consist of three main sections utilizing infrastructure for the movement and storage of containers: the quayside interchange, the container yard, and the landside interchange. However, from a logistics perspective, terminals consist of two components: stocks and transport vehicles. Stocks refer to any infrastructure used for the storage of containers, examples of which are the container yard, ships, trains, and trucks. While it is true that ships, trains, and trucks do move containers, these movements do not occur at a terminal, therefore, they are considered as stowage only while at a terminal. Transport vehicles are the infrastructure that is used to move containers in either two dimensions in a horizontal move from one point to another or in three dimensions both horizontal movements across the terminal as well as vertically onto or off of a container stack. A basic order of operations between the three sections of a container terminal are as follows: cranes load or unload containers from a vessel, the containers go from the crane to a transport vehicle that carries the container to the container yard to be placed in

The Automation Market for N.A. Container Terminals 9 a stack where it is stored until it is moved to its next transport, which could be a vessel or a truck or rail car. The same process occurs from the landside interface s truck gates, truck slots, and rail yards to the vessel (Steeken, Voß, & Stahlbock, 2004). Quayside Interface The quayside section of a container terminal consists of a berth or a series of berths where vessels are secured while calling at a terminal. Gantry cranes are used to move containers onto and off of vessels secured to a berth. These cranes have a technical performance (design specification) of 50-60 moves per hour and an average operational performance of 22-30 moves per hour. These gantry cranes can be either single-trolley or dual trolley. A single-trolley crane is manually operated from the vessel to the ground/ground transport or vice versa. A dual-trolley crane has a manually performed movement between the vessel and a set platform upon the crane body where a second automated trolley retrieves or delivers containers from the ground/ground transport. Both single and duel-trolley cranes are equipped with spreader devices for picking up either one to four TEUs or one to two FEUs (Steeken, Voß, & Stahlbock, 2004). Horizontal Movement Vehicles Horizontal movement vehicles move the containers between the quayside interchange or the landside interchange and the container yard. These vehicles consist of two types of carriers, passive vehicles, or vehicles unable to lift containers, and vehicles capable of lifting the containers. Passive vehicles consist of tractor-pulled containerladen bombcarts, chassis, or dual-chassis as well as Automated Guided Vehicles (AGVs). Horizontal movement vehicles capable of lifting containers consist of reach stackers, forklifts, and straddle carriers. The straddle carrier is the most versatile of these vehicles

The Automation Market for N.A. Container Terminals 10 as they can also function as cranes. However, unlike most cranes, they are not locally bound and can therefore travel throughout a terminal. Their spreaders allow them to carry a single TEU, 2 TEUs, or an FEU (Steeken, Voß, & Stahlbock, 2004). The Container Yard Within the container yard, the containers are divided into blocks comprised of container stacks of various heights and widths depending on the terminal and the equipment used. The containers are strategically positioned into these stacks in a sequence to optimize their positioning for their transfer between carriers. Terminals may use different systems of cranes to perform this positioning of the containers within the stacks. The three primary systems of cranes used are rail mounted gantry cranes (RMGs), rubber tire gantry cranes (RTGs), and over-head bridge cranes (OBCs). The choice between these systems of cranes is largely driven by the footprint or shape of the terminal space; however, capital costs, terminal volumes, and labor traditions may also influence which system a terminal employs. RMGs are stable gantry cranes moving along set rail lines. Steeken, Voß, & Stahlbock, 2004 note that one advantage of RMGs is that by using two cranes of varied height and width within the same block of stacks, simultaneous movements can occur without interference at a handshake area (p.8). Another advantage offered by RMGs is that because they are mounted on rails, there is less wear on the terminal top. However, because of the rail components being set and unchangeable, RMGs offer less flexibility than other options. Furthermore, RMG systems have relatively high initial capital costs because of the necessary rail infrastructure. RMGs may be manned or automated (Steeken, Voß, & Stahlbock, 2004).

The Automation Market for N.A. Container Terminals 11 Alternatively, RTGs are gantry cranes mounted on rubber tires allowing them to be more flexible and capable of repositioning if the terminal layout needs to be changed. However, because they are driven upon the terminal top, they tend to cause wear to the paving, which leads to more need for maintenance within the terminal. RTGs can be manned or automated (Steeken, Voß, & Stahlbock, 2004). OBCs move along set bridge pieces. This crane system requires large capital cost and, like an RMG system, because of the fixed bridge infrastructure is less flexible than an RTG system. Furthermore, unlike RMGs, because of the set height of the bridge, OBCs may not have varied heights and widths, causing it to be less flexible, still. For these reasons, OBCs are an increasingly less common system amongst new terminals. OBCs can be manned or automated (Steeken, Voß, & Stahlbock, 2004). Ideally, all container terminals would choose a certain operations system with perfectly complementary horizontal transport vehicles and crane styles. However, the reality is that there are many container terminals that utilize mixes of various equipment types, some working better together as part of a system than others. Summarily, while certain container handling equipment systems have advantages over others, all of the equipment accomplishes the same tasks of sorting, storing, and moving of containers. And, no matter what infrastructure is in place, without appropriate operations and communications, no terminal will function appropriately, regardless of the infrastructure s quality. Terminal Communications Systems All terminal operations are supported by various communications systems driven by information from external parties with interests in the positioning and routing of each

The Automation Market for N.A. Container Terminals 12 container. These external groups represent both public and private interests. On the public side, governmental authorities such as police and customs can influence a container s movements. On the private side, shipping lines, freight forwarders, beneficial cargo owners (BCOs), truck and rail companies all have an interest in the positioning of the containers. While in the past, this communication was all performed manually by delivery of hardcopy, over time the process has largely become electronic. Electronic communications within terminals today are based on international standards called Electronic Data Interchange For Administration, Commerce, and Transport (EDIFACT). Steeken, Voß, & Stahlbock, 2004 note that among the most important messages to the terminal operators are the container loading and discharging lists specifying which containers are to be loaded or unloaded onto or off of a ship, the bayplan identifying the position of those containers on the vessels, the stowage instruction describing the positions where exports are to be placed within the ship, and the container pre-advices for delivery from trucks and trains as well as the schedules and loading instructions for trucks and trains taking containers away (p. 11). All of these data sets are critical in determining how the operators store the containers within their yards. Hence, a viable communications network is paramount in facilitating fluid communication between external parties and terminal operators as well as the communications within a terminal itself. Any breakdown of this communication network results in less-than-optimal operations. Various technology advancements have supported the improvements of these communications systems over time. Beginning in the 1980s and still in use today, radio data communication began supporting terminal communications to tremendous benefit in

The Automation Market for N.A. Container Terminals 13 average terminal dwell time (how long a box stays in a terminal) reductions. Then in the 1990s, Global Positioning Systems (GPS) as well as differential GPS began to be used, first to track containers positioning within the terminal and later to track the terminal equipment. In automated terminals, the AGVs and automated gantry cranes utilize transponders and electrical circuits to automatically route themselves. All of these communication technologies facilitate the ability to verify a terminal s terminal operating system s (TOS) data to the physical realities in the terminal scape. Before reliable communication and positioning technology, if containers or terminal equipment became misplaced, the TOS continued to function without knowledge of this misplacement, resulting in further disruptions. However, with the advancement in communications technology, the TOS s output is more easily verifiable (Steeken, Voß, & Stahlbock, 2004). Without efficient electronic communications systems, the container industry would not have been able to handle the huge growth in volumes it has steadily experienced over the last half century. Container Terminal Optimization Growth in global container volumes has affected higher demands on container terminals. Largely speaking, however, container terminal footprints have struggled to expand in-step with this increased demand on their services. In other words, the space they began with is more or less all the space they have to work with. In order to accommodate these higher volumes and optimize their terminals, container terminal operators have had to make adjustments to both their terminal equipment and its utilization as well as to their overall approach to operations. As Steeken, Voß, & Stahlbock, 2004 point out, the ability to optimize container operations is becoming

The Automation Market for N.A. Container Terminals 14 increasingly technical in nature as most of the common sense better-practices have long been enacted. (p.13). With so many moving pieces to account for, highly technical optimization strategies involving high-level simulations allow for operators to encode real-time improvements in their terminal cycles. In other words, through discrete event simulation, terminal operators can assess and create protocols for multiple scenarios virtually. Then, the operators can implant those protocols into their operations procedures should such scenarios occur within their actual terminals thereby avoiding serious delays to the operational flow. Furthermore, system communications are programed to quickly alert the operators should there be any unforeseen complications within the operations. It is these kinds of improvements with nearly automated reactions and decision-making that have helped increase terminal capacity and utility. And, while not the sole factor, the potential for these kinds of optimization strategies has revealed to the container terminal industry the possibilities of automation. Terminal Automation Why Automate? There are both external drivers as well as internal goals on the parts of the operators and port authorities considering automating aspects of their operations. Examples of external drivers are increasing volumes and expansion restrictions, environmental concerns, labor availability and reliability, and emerging equipment and technology options. Internal drivers are improved safety, lowering costs, reduction of equipment damage and maintenance, increased reliability, and increased terminal density (Kasiske, 2011). Volume Growth & Efficiency

The Automation Market for N.A. Container Terminals 15 Over the last six decades, global trade volumes raised at roughly double the rate of global GDP (Kemmsies, 2008). This statistic is suggestive of several probabilities. First, people, on the whole, want to trade. Second, steady growth in global container volumes and the percentage of goods being containerized suggests that containers help to make trade more viable. Sparing some radical revolution in the nature of goods production, global trade will continue to grow resulting in further globalization of the world economy and the containerization of goods. With increased container volumes comes the challenge of both accommodating these volumes as well as finding ways to further optimize container terminal efficiency. Various automation technologies have developed ways of accomplishing these goals. Along with growing global volumes, individual vessel volumes are likewise greatly expanding. While only a few years ago the larger vessels were capable of carrying up to 8000 TEUs, in 2012 Mediterranean Shipping Company (MSC) as well as CMA CGM deployed the first vessels capable of handling 14,000 TEUs. These vessels are capable of discharging and reloading 10,000 TEUs in a single call and regularly generate 5000 moves in a single call. Port authorities and terminal operators see automation as a means to adequately manage such tremendous volumes generated by this new enormous class of vessels at the same terminal sites that had been originally planned to accommodate the 8000 TEU class (Mongelluzzo, 2014). Safety The waterfront has always been an extremely dangerous work environment, injuries resulting in loss-of-life in the worst cases and at a minimum operational downtime. Regardless of severity, injury is terrible for morale, human welfare, costs, and

The Automation Market for N.A. Container Terminals 16 productivity. While the safety record of container terminals has improved over time, automation offers multiple areas for great improvements in terminal safety records by eliminating human presence within the operations area. For example, through the introduction of AGVs or automated straddle carriers, these functions on a terminal will no longer be manned, removing humans from the quayside and landside interfaces. Moreover, automated stacking cranes within the container yard will also remove humans from the process, thereby eliminating injuries in this area, as well. However, as no current technology exists for automating the ship to quayside lifts performed by quay cranes, this is one area that will likely remain manned for the time being (Sisson, 2011). Labor and Maintenance Costs Savings In areas with high labor costs, such as the Europe and the U.S., terminal automation, through the reduction of man-hours, reduces the costs-per-move within terminals. This cost savings is a tremendous incentive for automation (Edmonson, 2007). Furthermore, as automated equipment is, by design, more controlled and therefore gentler in its movements, there is less damage and wear to equipment, resulting in maintenance costs savings as well as fewer maintenance-related injuries (Sisson, 2011). As many terminal operator firms are corporately held companies controlled by shareholders as in the case of Maher Terminals, which is owned by Deutsche Bank, they are largely driven by profitability. So, if automation can affect these kinds of savings that in turn can be passed to their customers, resulting in more business and revenue growth, reduction of labor costs may be the single greatest driver behind automation within U.S. terminals. Environmental Benefits to Automation

The Automation Market for N.A. Container Terminals 17 As mentioned, through automation, terminal optimization can be achieved that improve equipment s utility through a reduction of redundant moves. Because of these efficiencies, the same volumes can be achieved by fewer automated components than would be necessary for in a manned operation. For example, at Middle Harbor in Long Beach, 3 automated service vehicles have been allotted per each quay crane where 7-8 man vehicles had previously been allotted (conversation with L. Nye, January 28 th, 2014). These new vehicles are being designed to be efficient electric vehicles generating zero direct emissions. Also, while emissions from idling queuing trucks are a regular occurrence at many container terminals, automation may alleviate this trend. With the greater advanced scheduling allowed by automation, the pick up and delivery times for trucks coming into and out of the terminals become easier to predict. The trucks can arrive within a shorter window of time than previously possible, park in their appointed slot and turn off their engines while they await loading or unloading (AECOM, 2012). Some combination of these benefits has driven most of the existing automated terminals towards the investment necessary to convert their operations. Further still, as more terminals face these internal and external pressures, they must invest tremendous time and effort into determining which, if any, of the existing automation strategies is appropriate for their terminal and can be implemented without detrimental impacts on their current business. Survey of Current Automated Container Terminal Types While there is not one single definition for an automated terminal, AECOM s 2012 report for the Port of Los Angeles defines automated terminals as terminals with at

The Automation Market for N.A. Container Terminals 18 least some container handling equipment operating without human interaction for 100% of the duty cycle of the equipment. (p. 2). According to AECOM s 2012 study, there are 5 types of automated container terminals around the world, two of which have emerged as the primary types: The two primary examples: Automated Stacking Cranes (ASCs). ASCs employ RMGs over stacks that are aligned perpendicular to the berth. These stacks interface with the terminal at the end of the stacks with one end dedicated to the quayside and the other to the landside. ASCs can be served by automated or manned horizontal transport vehicles. Cantilever RMGs. This system uses large cantilever RMGs that can run either parallel or perpendicular to the wharf and can handle containers in an extremely high-density layout. Unlike the ASCs, there is no fixed number of RMGs and they interface with the terminal at the sides of the stacks as opposed to the end. Cantilever RMGs are typically serviced by manned horizontal transport vehicles. Less common automated terminal types: Automated Rubber Tired Gantry (ARTG). Only one terminal in the world employs ARTGs, the Tobishima Terminal in Nagoya, Japan. While AECOM, 2011 points out that there are extreme technical and safety challenges (they have run over staff on the ground) involved in automating RTGs, Gylling, 2013 points out that these challenges are not insurmountable, and that new advancements in safety planning (dedicated truck lanes fenced off from human traffic) and automated navigation are making them

The Automation Market for N.A. Container Terminals 19 increasingly feasible. Furthermore, because of the versatility and flexibility offered by RTGs over RMGs, they could become more favorable to manned terminals utilizing RTGs looking to convert to automation. ARTGs interface on the sides of the stacks and are serviced at the Tobishima Terminal by AGVs. Automated straddle carrier (Autostrad). The Patrick Autostrad Terminal in Brisbane, Australia is the only autostrad terminal in the world. An autostrad terminal utilizes only automated straddle carriers as both horizontal transportation vehicle as well as stack crane. This system requires relatively greater space than other terminals on account of needing lanes for the autostrads to operate. Also, due to the height limitations on autostrads, the stacks cannot be as high as other terminal styles. For these reasons, this design style is unlikely to be repeated (AECOM, 2011). Bridge Crane Terminal. The Pasir Panjang Terminal in Singapore is the only terminal in the world that utilizes this style of automated terminal. The crane is mounted on substantial concrete pillars and allows for stacks up to eight containers high. However, due to the high cost of the fixed infrastructure compared to the other systems, the design will not be utilized again at that terminal and is unlikely to be used again at other terminals (AECOM, 2011). Most new terminals under development are ASCs on account of the relative ease ASCs offer in accommodating the introduction of automated horizontal transport vehicles. Furthermore, at their landside interface area at the end of the stacks, the trucks can turn off their engines giving them an added environmental advantage.

The Automation Market for N.A. Container Terminals 20 Current Automated Terminals APMT Virginia Terminal Portsmouth (ASC) TTI Algeciras Spain (ASC) Euromax Terminal, Rotterdam (ASC) DPW Antwerp Gateway Terminal (ASC) Port of Hamburg Container Terminal Altenweder (ASC) Port of Hamburg Container Terminal Burchardkai (ASC) Pusan Newport (Cantilevered RMG) Hong Kong International Terminal 6-7 (Cantilevered RMG) Kaohsuing Evergreen Terminal (Cantilevered RMG) Patrick Autostrad Terminal, Brisbane (Autostrad) Pasir Panjang Bridge Crane Terminal, Singapore (Bridge Crane Temrinal) Tohishima Terminal, Nagoya, Japan (ARTG) Currently Under Development Global Terminal, Bayonne, NJ (ASC) Middle Harbor Terminal, Long Beach, CA (ASC) APL Pier 300 Expansion, Los Angeles, CA (ASC) TraPac Expansion, Los Angeles, CA (Cantilevered RMG) Investigation of the Market Drivers Creative Project

The Automation Market for N.A. Container Terminals 21 Automation is not for everyone and undoubtedly, some successful manned terminals in North America will continue to function and prosper in their current model. However, with one automated terminal in operation and four more in development, North American terminals are beginning to see automation as a logical next phase in their development. What is driving these decisions? In the North American market, there are several key drivers deserving of further discussion that dictate whether or not investigation into automation is warranted or desirable. Per-vessel volume growth As vessels increase in size, their relative container volumes likewise increase. Servicing these mega ships results in higher peak volumes for terminal operators; that is to say, a terminal must move relatively more boxes in a shorter amount of time to accommodate a larger vessel. Increased peak container handling volumes may be achievable through automation. If a terminal is anticipating servicing markedly larger vessels than they are currently servicing, automation may be worth investigating as a solution. High cost of labor and safety In Northern Europe, much of the automation was undertaken as a means to reduce costs through the elimination of manned labor. Labor costs are a huge portion of a manned terminal s operating cost in North America. Furthermore, by removing the people from the operating space through the automation of equipment, automated terminals also reduce human exposure to the hazardous environment of the terminal. Through automation, many of the currently manned portions of terminal moves such as stacking and retrieving as well as horizontal movements across the

The Automation Market for N.A. Container Terminals 22 terminal space become automated. The automation of these moves greatly reducing the labor force needed to operate the terminal reducing labor costs. Furthermore, the operating space of the terminal is a dangerous environment, so removing people from the space will result in fewer injuries and injury related downtime. If labor costs or injuries are hampering profitability and productivity in a terminal, automation may be worth investigating as a solution. Terminal densification- Not to be confused with per-vessel volume growth, terminal densification refers to instances where a terminal becomes pressed by growing volumes on limited acreage. If their current configuration and equipment is, for example, a widely spread RTG system requiring dedicated lanes for the rubber tires of each crane unit, replacement with a densely configured ASC system could increase the terminal s capacity. If a terminal is anticipating substantial volume growth but does not have space sufficient to accommodate this growth on their current footprint, automation may be worth investigating as a solution. Energy efficiency, equipment longevity, and environmental impact reductions Much of the automation in Asia is on account of the lower electricity demands of an automated terminal and the ability to electrify the automated equipment. Automated machinery is programed to be as efficient as possible with its movements; so, while human operations can experience unnecessary movements on account of user error, within an automated terminal, the amount of total movements is reduced to the minimum moves

The Automation Market for N.A. Container Terminals 23 required and therefore is more energy efficient. Also, manned operations can be hard on equipment depending upon the operator s style. For example, some crane drivers are less careful than others with the spreaders and the picking up and setting down of boxes. Moreover, some transport drivers can be careless with the vehicles, resulting in breakdowns and accidents that can result in equipment damage, injury, and downtime. Once automated, the equipment is completely controlled by programming. This programming ensures safe and gentle operation of the equipment, resulting in less equipment breakdown and subsequent maintenance. Finally, with automated equipment increasingly being battery driven, reductions in direct emissions at terminals are achievable. If high energy costs, high levels of required maintenance, or environmental concerns are considerable issues at a terminal, automation may be worth investigating as a solution. Market Stakeholders: Port Authorities & Terminal Operators Having explored the existing and developing automated facilities within North America in the literature review, the process begins of exploring the remainder of the container terminal market for viable candidates for terminal automation. Port Authorities 22 North American Port Authorities with dedicated container terminals Port Metro Port of Seattle Port of Tacoma Vancouver (POS) (POT) (PMV)

The Automation Market for N.A. Container Terminals 24 Port of Portland Jacksonville Port Port Authority of (POP) Authority (JAX) New York and Port of Oakland Georgia Ports New Jersey (POO) Authority (GPA) (PANYNJ) Port of Los South Carolina Massachusetts Angeles (POLA) State Ports Port Authority Port of Long Authority (MASS Port) Beach (POLB) (SCSPA) Port of Montreal Houston Port North Carolina (POM) Authority (HPA) State Ports Port of Halifax Port of New Authority (POH) Orleans (PNO) (NCSPA) Prince Rupert Port Tampa Bay Virginia Port Port Authority (PTB) Authority (VPA) (PRPA) Port of Miami Maryland Port (PortMiami) Administration (MPA) The list above gives the port authorities in North America with terminals dedicated to container-only operations. Most of them do not possess terminals that are viable candidates for automation for various reasons. For example, some of them currently have excess capacity or unutilized acreage with no need for expansion of their current operational footprint while others may not be in a significant container gateway on account of a lack of population or poor rail or road connectivity. This type of container

The Automation Market for N.A. Container Terminals 25 terminal would never experience the volumes necessary to justify the large investment necessary to convert to automation. It is noteworthy, however, that despite efficient inland rail and road distribution networks capable of delivering containers from the major container gateways to markets throughout North America, the container terminal business remains attractive enough for 22 port authorities to have dedicated portions of their real estate to container terminal operations. Port Authority Models Within North America there are two primary types of port authority business configurations as concerns container terminals. The first and most common is where the port authority serves as the landlord for the terminal site turning over the operations of the terminal through a leasing agreement to a third party terminal operating company under set terms of a negotiated contract for a set time period (Rodrigue, 2014). Under this model, the landlord port authority is typically responsible for the waterside and topside heavy infrastructure s maintenance and upkeep including the terminal bulkheads, mooring systems, quay cranes, and berths while the terminal operators are responsible for the purchase and upkeep of the terminal top and yard equipment including horizontal transport vehicles as well as the stacking cranes and operating systems. These contracts typically set a primary rent payment from the terminal operator to the port authority and a minimum guaranteed throughput quota generating revenue for the port authority either per container or based upon the value of cargo passing through the port, depending on the contract terms. However, any extra throughput volumes above the minimum guarantee also generate fees to the port authority. So, as Richard Steinke, former executive director of the Port of Long Beach, noted, any volumes the port authority can accrue through their

The Automation Market for N.A. Container Terminals 26 terminals beyond the existing quotas becomes revenue that goes directly to the bottomline. If the port can facilitate these higher volumes, they should (Conversation with R. Steinke, January 29 th, 2014). Mr. Steinke went on to note that with many of the shipping lines utilizing larger vessels, many port authorities are finding it in their best interest to make the investments necessary to deepen their berths drafts and the length of the booms and capacities of their quay cranes to attract these larger vessels. Furthermore, as noted earlier, the increased capacity and efficiency achievable through terminal automation can likewise increase incentive for the ocean carriers to favor a terminal. However, these investments in larger infrastructure as well as terminal automation capabilities are typically capitally intensive with conversions running between $200 to $300 million so far in North American examples (Conversation with D. Stoker, February 7 th, 2014). So, under the landlord model, port authorities may elect to enter into a form of public-private partnership with a single or multiple third party entities (port operators, investment groups, ocean carriers, etc.) in order to generate the capital needed to make these improvements to their terminals. Mr. Steinke cited the Port of Long Beach s Middle Harbor Terminal project as such an example of a cooperative effort between a port authority and third parties, in this case the terminal operating company Long Beach Container Terminal (LBCT) and the ocean carrier Oriental Overseas Container Lines (OOCL), to pay for the initial capital investment of the project. The project involves the joining of two existing terminals, Piers E and F, both operated by LBCT and serviced by OOCL, into one fully automated terminal. The new terminal will more than double the

The Automation Market for N.A. Container Terminals 27 current capacity of the two existing terminals to 3 million TEU a year making it one of the highest volume terminals in North America. The second less-typical port authority model in North American container terminals is the owner-operator model where the port authority serves as both the landlord as well as the operator for their terminals. The owner-operator model is largely dependent upon the labor laws of the state where the port authority is located. This model can be tremendously successful as in the case with the Georgia Ports Authority s Garden City Terminal. At 1200 acres, the Garden City Terminal is the largest container terminal in North America by land size and experienced tremendous volume growth year-on-year for the last decade (Savannah Chamber, 2014). Other port authorities in North America with owner-operator container terminals include the North Carolina State Ports Authority, the South Carolina State Port Authority, and the Houston Port Authority. In these cases, the port authorities themselves would be the primary decision makers for any terminal automation considerations. After taking into consideration the main driving factors for automation demand mentioned above as well as comments made by Dustin Stoker, 20 year container terminal operations veteran, former Chief Operating Officer of Kalifa Port Industrial Zone s automated terminal in Abu Dhabi, and current Director of Operations at the Port of Tacoma, when he stated that any new container terminal developed in North America would likely be automated (Conversation with D. Stoker, February 7 th, 2014), the primary marketing target list for port authorities may be refined to the following 9 port authorities below. Some of these port authorities either have the potential to experience volumes that would justify conversion to automation. Others have existing automated

The Automation Market for N.A. Container Terminals 28 terminals that could create a disparity of service with the same gateway pushing other terminals towards automation in order to remain competitive. While others have potential greenfield terminal developments in the future that would likely be automated: Prince Rupert Port of Los Port of New Port Authority* Angeles York and New Port Metro Port of Long Jersey Vancouver* Beach Port of Port of Seattle Virginia Port Montreal* Port of Tacoma Authority* * Indicates a port authority with potential or planned greenfield container terminal developments. Container Terminal Operators Terminal operators are in the business of handling the movement of containers into and out of container terminals. For the terminal operators, their revenues and profits are driven by container volumes and operations efficiency, respectively. As with all heavy-machinery dependent business, efficient machinery utilization is a primary goal. Moreover, efficient equipment utilization on the part of the terminal operator more often than not translates into high levels of service and quick turn times for the ocean carriers calling at a terminal. Consistent high service levels experienced at terminals are obviously favorable to ocean carriers as they in turn translate into increased reliability built into ocean carriers scheduling processes. So, the better service a terminal operator can provide to their ocean carrier clients, the better their client loyalty is. These client

The Automation Market for N.A. Container Terminals 29 relationships are vital to terminal operators in that unlike port authorities, terminal operators are privately held for-profit businesses, many of which are held by larger publicly traded corporations. As such, profit margins and return on investment drive much of terminal operators decision-making processes. For all of these reasons, a terminal operator must create a concrete business case before taking on a terminal automation process. The business case will be explained in greater detail below, but primarily, the terminal operator must first account for the market demand from their ocean carrier clients (vessel sizes, vessel volumes, projected terminal volumes). Second, they must negotiate a lease agreement with their landlord port authority that entitles them the fee structure and length of contract that would enable them to generate enough revenue to pay for necessary improvements. Third, they must be able to fine-tune their operations and equipment planning to gain a solid understanding of their operating system and terminal operating capacity as well as operation and labor budgets. Forth, they must understand how their current operations can be maintained during a conversion process from a manned to an automated system. While there are other prominent terminal operators that may enter into the automation market in North America, the list below includes the terminal operators currently operating terminals at the nine port authorities listed above: Maher Terminals (PRPA, PANYNJ) TSI-Global Terminals (PMV, PANYNJ) Dubai Ports World (PMV) Eagle Marine Services (POS, POLA) SSA (POS, POLB)

The Automation Market for N.A. Container Terminals 30 TTI (POS, POLB) Ports America (POT, PANYNJ) Husky Terminal and Stevedoring, Inc. (POT) Washington United Terminals (POT) West Basin Container Terminal, LLC. (POLA) TraPac (POLA) YTI (POLA) Seaside Transportation Services, LLC. (POLA) APMT (POLA, PANYNJ) California United Terminals (POLA) PCT (POLB) International Transportation Services (POLB) LBCT (POLB) VIT (VPA) Montreal Gateway Terminals Partnership (POM) Tremont Montreal Inc. (POM) Building the Terminal Team At this point, it is important to note that while the port authorities and the terminal operators make up the primary terminal stakeholders for an active container terminal, a successful automated terminal development project must be undertaken by a terminal team made up of different groups including owners, operators, and consultants capable of addressing all the myriad considerations that make up such an undertaking.

The Automation Market for N.A. Container Terminals 31 To wit, any terminal team considering automation must align the project s core components in order to justify the investment and coordinate all the integral pieces of the process. While the goals of automating a terminal could include improving service levels, lowering cycle costs, improving the environmental impact of operations, increasing the longevity of equipment, and improving safety, it is not always clear if a specific terminal site is amenable to a conversion to automated operations (Kaisiske, 2011). In order to establish their case for automation, the terminal team must: Establish a business case Determine their terminal footprint s amenability to automated operations Test and optimize through simulation and emulation the integration of an automated system (planned operation, equipment selection, terminal operating system (TOS) selection) Phase the conversion and oversee construction The Business Case As noted above, the terminal team must include consultants capable of performing commercial analysis to support the development of a business case for automation. The team s economists must perform goods movement analysis, ship size forecasts, cargo flow analysis, container volume forecasts, and gateway competition analysis. These services are necessary in order to establish that market demand and volumes exist to justify proceeding to the next phase. Moreover, should the studies performed determine that automation is not warranted on account of a lack of volume, the terminal team can

The Automation Market for N.A. Container Terminals 32 then abandon the pursuit knowing that it would not have been successful, thereby avoiding proceeding down a dead end towards a failed venture and an expensive and underutilized facility. However, if the studies do determine a favorable market demand for automation, they can also establish a base line volume the team can work with in order to produce revenue forecasts and a project budget. Investigating the Terminal Footprint Having established a business case for automation, the terminal team must next investigate their terminal infrastructure and footprint to determine the applicability of an automated operation in such a space. With the ocean carriers increasingly utilizing larger vessels for Asia-West Coast North American services, these larger vessels require deeper drafts and wider crane booms at the quay. So, a terminal must be able to achieve the channel and berth draft requirements as well as have the infrastructure at the berth capable of handling the heavier loads while mooring these larger vessels. Furthermore, while the vessels are getting larger, the bathymetry of the terminal basin remains the same, so the impact of these larger vessels traversing within the basin on other adjacent terminals must likewise be taken into account. Likewise, the terminal must be able to accommodate the loads of these larger cranes and their wider rail gages. The terminal team must include a coastal engineering group capable of assessing the navigation issues surrounding draft depth and dredge design as well as evaluating the wave action that passing vessels will have on moored vessels during port calls. These steps are vital to ensuring a terminal and its surrounding environment are ready to handle larger vessel traffic. Further, the team must include a marine structures group capable of establishing a terminal s structural ability to handle larger loads, design structural

The Automation Market for N.A. Container Terminals 33 improvements where necessary and establish the terminal bulkhead s ability to accommodate a draft deepening without loosing structural integrity. The size and shape of the land portion of the terminal will be a significant factor in determining the optimal orientation of the container handling facilities. For example, the acreage of the California United Terminal (CUT) in the Port of Los Angles is 91 acres while the Virginia Port Authority s Norfolk International Terminal (NIT) is 693 acres. Hypothetically, if both intended to automate, CUT would have a great deal more land constraint to consider and therefore may select a more dense terminal system such as CASCs while NIT would not have such constraints and could potentially use ARTGs. Hence, these size variations would affect their layouts and operation. Also, while Pier T at Port of Long Beach is a nice rectangular shape, Pier J has an awkward S shape to it requiring two separate berth orientations. So, the layouts of the operations at these facilities would have to be taken into consideration when planning the operations orientation. This is not to say that one is good while the other is bad ; but rather, that each terminal warrants carful consideration and expert planning exercises when determining their layouts. In other words, container terminal layouts are not one-size-fitsall. With all these considerations vital to success, the terminal team must include a prime planning group specializing in the disciplines needed to properly assess these scenarios. Testing and Optimizing an Automated Operation through Simulation and Emulation Having established the business case and the terminal s viability for conversion to automation, the terminal team s task becomes the planning of the terminal s operational layout, selection, specification, and manufacturing oversight of terminal equipment,

The Automation Market for N.A. Container Terminals 34 selection of the terminal operating system (TOS), and the testing and optimization of the full system through software-supported simulation and emulation. As noted above, the terminal s size and orientation will largely determine the appropriate selection, orientation, and spacing of container handling equipment for the operation. (Kaisiske, 2011) Also, the volume forecast will likewise support these decisions as more equipment will be required to handle larger volumes. The equipment selection will, in turn, support the decision of which TOS is selected, as certain equipment aligns better to particular TOS software (Kaisiske, 2011). However, once these decisions have been made, testing these decisions through modeling and simulation of the operations becomes vital to the success of any such project. The reason simulation is so important is because of the increasingly fixed nature of an automated system. Unlike a manned operation, the automated system has little flexibility to it once in place. In other words, there is no easy way to make adjustments once the component parts have been built and installed. So, any flaws in operations or failure in the various components abilities to integrate into the larger system and communicate with one another at transfer points can have a crippling effect on operations. For these reasons, simulation software using virtual GIS modeling of the terminal is employed to run discrete event simulations of the terminal s operations analyzing capacity and equipment performance. The software affords the terminal team the ability to model thousands of scenarios, from the likely to the improbably, to test the limits of their terminal operations and the successful integration of the various components comprising the entirety of the system. Furthermore, at this stage, before

The Automation Market for N.A. Container Terminals 35 anything has been built, fatal flaws can be avoided and small improvements made in order to optimize the system s performance parameters. A practical example of why terminal simulation is so vital in this phase comes when examining the Middle Harbor Terminal at the Port of Long Beach. The terminal has a planned performance of 3 million TEU s per year. These volumes will be handled at two berths each servicing one large ship per week. With this kind of schedule, there is no room for variation of service levels as the ocean carriers are not able to change their sailing schedule nor are they able to enter a third ship into the rotation should something delay the terminal operations, as the ocean lines cannot deploy another ship into their system in time to make up for delays and even were they able to there would not be room at the terminal for a third vessel. Through simulation, the team was able to prove that their terminal could perform the necessary moves to service these vessels within the set time frames. This kind of technology provides OOCL the reliability of service they need within their sailing schedule. In this case, as pointed out by Larry Nye, head of planning for the Middle Harbor Terminal project, it shows that reliability and not speed is of greatest value to the ocean carriers as concerns terminal operations (Conversation with L. Nye, January 28 th, 2014). Once the simulation process has been completed, terminal emulation must be performed before moving onto detailed design, phasing, and construction of the automated terminal. Terminal emulation, like simulation, utilizes software to create a virtual operating terminal; however, the key difference is that terminal emulation runs in real time by direct communication with the TOS as if it were the actual equipment within the terminal. Through emulation, the TOS believes it is actually performing the moves

The Automation Market for N.A. Container Terminals 36 within the terminal. In this way, successful emulation of various discrete events allows the terminal team to prove their findings from the simulation process, and thereby allows greater confidence in the plan and design of the terminal before construction begins. In essence, emulation is a final test for the TOS and confirms that the terminal team has selected the right system for their terminal. This phase is highly complex with tremendously varied demands. The terminal team must have a dedicated planning and design group with knowledge of automated equipment, terminal communications, TOS systems, and most importantly simulation and emulation software. Furthermore, the team s leadership must be able to coordinate between these various niche expertises in order to bring them all together. Phasing and Construction Apart from a limited number of possible greenfield terminal developments, any new automated terminals in North America will likely be conversions from existing terminals as opposed to new built terminals on greenfield sites. For this reason, a major concern for the terminal team will be the appropriate phasing of construction in order to maintain operations at the terminal throughout the conversion process. It is vital that the terminal continue to both service their ocean carrier clients while generating revenues throughout the conversion process. The terminal team must include construction management experts capable of foreseeing the potential conflicts of use of space between the construction group and the operations group throughout the process. While the development of container terminals has always required a team of sorts, the increased complexity of an automated terminal project demands larger teams than ever before reflecting in their make up the very complexity they seek to order.

The Automation Market for N.A. Container Terminals 37 Summary The nature of the container, like its design, is relatively basic. As long as it gets from its origin to its destination on schedule, it doesn t care about which route it takes in getting there. Cost and reliability are the leading concerns for container shippers in booking the carriage of their goods. Terminal stakeholders are constantly striving to keep their volumes up by being as attractive as possible to their clients. The best way to build this business is with good service at competitive pricing. However, if another terminal can offer a better service at a comparable or cheaper price, the containers have no loyalty to the terminal. After all, ships float and the boxes are simply passing through on their way to somewhere else. For all these reasons, terminal interests are always searching for competitive advantages, and container terminal automation has become a potential means to achieving this. The difficulty, however, is determining which terminals would benefit from automation and which terminals will not. Competition certainly breeds innovation within the container industry, and as competitors automate, this may spur further automation on account of volumes shifting throughout the entire system. Nevertheless, with port authorities and terminal operators rather guarded about their financials, costs, pricings, and operations, most of the available literature and reporting about automated terminals praise the innovation and describe the technology without delving deeper into the performance. The best way around this gap in the data is to reach out directly to the various terminal interests and inquire of them their thoughts on automation. If there is a terminal that could be ripe for automation, reach out to the port authority and the terminal operator to begin dialogue. Or, were there questions about

The Automation Market for N.A. Container Terminals 38 the successes and complications of an existing operation or an existing technology, seek out the terminal team that brought it together or the operator running the terminal. Their experience will be invaluable for achieving successes and avoiding failures moving forward. While not destined to be ubiquitous any time soon, container terminal automation is a growing business and the window of opportunity to get involved and help guide the process is closing. As technological advancements yield more options for terminal automation, increased automation within North American container terminals becomes a strong likelihood. Nevertheless, the task of determining a clear case for benefit from automation remains challenging and must be performed on a terminal-by-terminal basis. In summation, were a terminal to experience operational challenges in accommodating their volumes or controlling their costs, dedicated investigation into an automated alternative should become their priority until they have ruled it out as either unbeneficial or untenable. However, where the investigation indicates strong benefits, they should proceed to building a competent terminal team capable of delivering an automated solution to their challenges.

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