Multimodal Transport Connectivity in Jebel Ali Port: Enhancing Supply Chain Efficiency

...

Integration and Connectivity in the Supply chain

A supply chain is a network of processes moving goods from the raw material stage through supply, production, distribution and eventually to the end customer (Nagurney 2006). Managing the series events in the chain constitutes effective supply chain management.

According to Porters value chain model (1985) the linking of suppliers and customers vertically will improve collaboration and enhance efficiency of the supply chain. An ideal supply chain consists of series of well integrated value chains with communication between every entity in the chain to provide the best product and service to the customer. Supply chain collaboration resulted in organizations having better flexibility, better inventory management and realizing profit margins (Basu n.d.). The concept of supply chain collaboration led to increased levels of integration in the supply chain extending beyond traditional organizational boundaries. Integration and connectivity across the entire supply chain helped improve end-end efficiency and visibility (Mangan, Lalwani & Butcher 2008).

In today’s dynamic business environment it is imperative to maintain strong linkages between suppliers and the end customer to ensure smooth flow of information, goods and services. Integration involves coordination and collaboration of logistics activities both with other functional areas within an organization and also across trading partners (Kersten, Blecker & Luthje 2010). As Simatupang & Sriram (cited in Kersten, Blecker & Luthje 2010, p. 230) stated there are three forms of integration strategies in the supply chain namely, vertical, horizontal, and lateral. Vertical integration entails linkages between different levels of the supply chain, while horizontal integration is linkages between unrelated and rival organizations at the same level of the supply chain. Lateral integration draws on the benefits of both the vertical and horizontal forms. Integration in the supply chain helps improve efficiencies, performance standards and competitiveness (Kersten, Blecker & Luthje 2010). These are some of the reasons why contemporary organizations focus on integration and collaboration at various levels of the supply chain.

The goal of integration is to achieve end-end connectivity that will allow the supply chain to function as a seamless entity (Flynn, Morita & Machuca 2010). Connectivity in the supply chain covers facilitation of trade, physical infrastructure people to people exchanges and networks (Chipongian 2015). In global trade with goods being moved frequently across the value chains, connectivity helps achieve economic development and seamless freight movements. Moreover the connection of business processes across organizational boundaries helps achieve strategic advantage through cost reductions, enhanced quality and flexibility (Pateman, Cahoon & Chen 2015). Thus it is evident that connectivity across organizations enables facilitation of trade and its network flow.

With due regards to the importance and benefits of connectivity and integration in supply chain management, the integration and connection of seaports (a vital node in the global supply chain) into supply chains has become a critical strategy. In the present day, the taxonomy for ports must be devised through a supply chain management approach since their duties and functions in the supply chains have diversified and expanded (Woo, Pettit & Beresford 2013). Therefore the following section focuses on the emerging role of seaports in the global supply chain.

Role of Seaports in the Supply chain

Historically ports acted as a facility for transhipment of cargo from sea to shore and as an interface between the maritime and inland transport systems (Carbone & De Martino 2003). However the changes in port ownership structures, development strategy and scope of activities over the years has led to change in a ports objective from just being a regions gateway to a critical link that captures and delivers value in value-driven chain systems (Loh & Thai 2014). Figure 1 shows the increasing and evolving role of ports in the overall supply chain from the 1960’s to the present particularly in providing global logistics and other value added services.

Figure 1

[pic 4]

Source: Pettit & Beresford (2009, P. 256)

Supply chain management has gathered importance as a major business practice and competitiveness in the industry is measured between the different enterprises as opposed to individual bodies traditionally. As an integrated element of the supply chains, the value proposition of ports can be synergized with terminal operators, shipping companies, and also logistics providers. The process of enhancing the value of the supply chains they are part off helps them achieve competitive advantage (Zhang, Lam & Huang 2014).

Furthermore, according to Pettit and Beresford (2009) today’s ports are considered a vital part of an organizational cluster in which various logistics and transport operators work towards providing value to the customer. Overall the rising transport costs and the increased necessity for ports to be a cost effective and value adding node in the supply chain has led to the growth of port centric logistics and development of multimodal transport infrastructure (ATN 2012).

Growth of port centric logistics and multimodal connectivity

Port centric logistics is a concept of combining various elements of a supply chain in close proximity to the port facility. This practice of locating warehouse/distribution centre’s close to the port as opposed to inland, brought companies nearer to the market they serve, greatly reduced freight miles, road congestion, transport costs and environmental pollution. The growth of port centric logistics subsequently contributed towards an increased demand for multimodal logistics services (Evans 2014).

Multimodal transport involves moving of cargo with more than one mode of transport using a single transport document. To attain a seamless and coherent transport network it is important to not view the various transport modes in isolation from one another. Ports, airports, rail and road networks must be viewed as key logistics centre’s providing value added services and uninterrupted linkages between each other (Baird Maritime 2009).

From a logistics perspective ports are viewed as bi-directional logistics systems because they receive incoming cargo which needs to be distributed inland