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CONFIDENTIAL. Lessons for Kenya’s Port Congestion . 25/26 th September 2008 . AGENDA. South Africa’s Experience in 2001. Lessons learnt in South Africa . Where are we now ?. Ports challenge in Kenya. THE TRANSNET STRUCTURE . There are many views on the definition of CONGESTION ….

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Lessons for kenya s port congestion l.jpg

CONFIDENTIAL

Lessons for Kenya’s Port Congestion

25/26th September 2008


Agenda l.jpg

AGENDA

  • South Africa’s Experience in 2001

  • Lessons learnt in South Africa

Where are we now ?

  • Ports challenge in Kenya


The transnet structure l.jpg

THE TRANSNET STRUCTURE


There are many views on the definition of congestion l.jpg

There are many views on the definition of CONGESTION …

Is it a back log in vessels waiting at outer anchorage for a berth ?

What is congestion?

Congestion is defined as the inherent lack of infrastructure, both on the landside and the waterside, that constrains the flow of freight

or

Is it poor operational performance of the port operator where vessels are not leaving on time ?

or

Is it the lack of capacity to match the demand which leads to stack congestion

Factors that influence congestion

or

  • Inadequate port infrastructure

  • Insufficient road and rail infrastructure

  • Poorly integrated supply chains

  • Low productivity levels, including low productivity

Is it the erratic calling of shipping lines to a port that causes bunching of vessels ?


Background to what happened in the south african ports in 2001 l.jpg

Background to what happened in the South African Ports in 2001

  • 2001 :

    • Volume growth outstripped available capacity

    • Anti-privatization strikes

    • Compensation for delays by the Shipping lines– Pre & Post 2001

  • 2002 :

    • Imposition of the $100 surcharge in South Africa by the shipping lines

    • South African Chamber of Business (SACOB) facilitates meeting between shipping lines, cargo owners & Transnet

    • Ministers and Director Generals intervene

    • Establishment of Interim Advisory Board (Name later changed to South African Container Terminal advisory Board - SACTAB)

  • 2003 :

    • SACTAB began its work. . .


  • Challenges we experienced in 2001 02 l.jpg

    CHALLENGES WE EXPERIENCED IN 2001/02

    • Business performance

    • Low profitability

    • High gearing at a Transnet level

    • Capacity constraints handicapped growth

    • Investment

    • A history of underinvestment

    • No coordinated Transnet investment plan

    • People

    • The need to establish a performance culture

    • Uncertainty regarding concessioning of ports

    • Industry wide skills shortage

    • Efficiencies

    • Low productivity levels. DCT was operating at under 14 container moves an hour

    • Poor ETA compliance by shipping lines

    • Shipping lines imposed a US$100 surcharge

    Source:Team analysis


    What led to the congestion in south africa in 2001 l.jpg

    What led to the Congestion in South Africa in 2001 ?

    • Primary

      • Arrival patterns (Capacity vs. Demand)

      • Equipment failure

      • Delays

      • Third party issues (Addressed in following slide)

  • Secondary

    • Not enough infrastructure

    • Lack of inadequate equipment e.g.. Straddle carriers & Cranes

    • Poor terminal design


  • Problems we experienced with the different supply chain partners l.jpg

    Inaccurate ETA’s

    Inaccurate discharge and load information

    Late submission of stowage plans by lines

    Changes in stowage plans

    On geared cellular vessels ships cranes obstruct gantries from working productively in certain stow positions on vessel

    Overbooking of vessel’s capacity results in cargo being short shipped and/or rolled over

    Poor planning of tranships

    On-berth repairs

    Bunkering where it affects the operation

    Not packing exports timorously to meet stack dates

    Exporters book the same cargo with different lines. Lines therefore submit incorrect export volumes to terminals

    Not getting import documentation through in time

    Importing more cargo than can be handled by the importer, results in containers being left beyond the allowed 3 days

    Unwillingness to work extended hours of production to have export cargo ready within stack times

    Amending export documentation without informing the shipping line (changing POD, vessel, etc)

    There is mis-declaration of weights for both imports and exports

    Last minute requests for COD’s on imports

    Last minute requests to change port of destination

    Problems we experienced with the different supply chain partners

    Shipping Line Issues

    Importer / Exporter Issues

    Freight Forwarder Issues

    Road Haulier Issues

    • Not processing import documentation timorously including taking release of cargo from Lines / Customs documentation

    • Use of haulers with non-roadworthy trucks that break down continuously - resulting in late delivery /collection of cargo - both import and export

    • Submitting CTO’s at the last minute for processing and then handing in 100 CTO’s and wanting them back in 5 minutes

    • Errors made on CTO’s - incorrect data capture

    • Illegible writing on hand-written CTO’s

    • Use of incorrect reference numbers - not the reference given by the Shipping Line - Lines can solve this by carefully checking references before stamping CTO’s

    • Collecting containers that have not been discharged

    • Not accepting/packing cargo 24 hours a day 7-days a week creating peaks in traffic arrival at the terminal

    • Arriving at terminal without necessary documentation

    • Truckers using false number plates - registering one truck and then sending 3 trucks to the terminal with the same registration plates

    • Trucks not registered to collect import containers - coming to terminal to collect and then delaying things while their problem is sorted out

    • Truckers using non-roadworthy vehicles

    • Unauthorised parking in terminals and in Langeberg Road (Durban) causes congestion

    • Truckers abandon their vehicles while they attend to other business

    Source: SACTAB Workshop. 2003


    The media had a field day and impacted on the reputation of the sa ports system l.jpg

    The media had a field day and impacted on the reputation of the SA ports system

    Sunday Tribune

    17 Nov 2002

    Business Report

    15 Oct 2002

    Mercury

    29 October 2002

    Mercury

    13 Nov 2002

    Star

    13 Nov

    2002

    Business Day

    18 Nov 2002

    Mercury

    16 Oct 2002

    Mercury

    14 Nov

    2002

    Mercury

    4 Nov 2002


    Slide10 l.jpg

    = Transnet operating divisions

    Working with government, customers, Ports users and Transnet was the only recipe that would yield positive results

    INTERIM ADVISORY BOARD

    Co-chaired by Transnet

    and the Shipping lines

    SAAFF

    (Road haulers)

    Technical

    Task

    Team

    TPT

    TFR

    CLOF

    (Shipping Lines)

    Shippers

    Council

    (Cargo Owners)

    NPA

    Landlord

    & Marine

    Services

    Port

    Operator

    Rail

    Operator

    Shipping

    Lines

    Freight

    Forwarders

    Operations

    Audit

    Team

    Cargo

    owners

    • This team met every 2 weeks for 2 years

    • The board defined and set KPI’s of what we wanted to measure each supply chain partner

    • We had a media black out – Nobody spoke to the media except for the 2 chair persons


    The advisory board used the analysis tool enabling blocks methodology l.jpg

    The advisory board used the Analysis Tool: Enabling Blocks Methodology

    ORGANISATIONAL STRUCTURE

    AND FACILITATION

    COSMOS

    FUNCTIONALITY

    EQUIPMENT MAINTENANCE, STRUCTURE, DE-

    PLOYMENT, PROCUREMENT AND CONTRACTS

    EB 1

    EB 2

    EB 3

    HOUSEKEEPING STRATEGY

    AND DISCIPLINE

    EB 4

    TRAINING

    OPERATIONAL STAFFING LEVELS, SHIFT

    PATTERNS AND PROCEDURES

    INCENTIVE

    SCHEMES

    EB 6

    EB 7

    EB 5

    OPERATIONAL SUPPORT AND

    FACILITATION

    OPERATIONAL

    STRATEGIES

    Rail

    INTERFACE

    EB 10

    EB 9

    EB 8

    OPERATIONAL

    INFRASTRUCTURE

    THIRD PARTY

    EB 12

    EB 11

    EB

    = enabling blocks


    Agenda12 l.jpg

    AGENDA

    • South Africa’s Experience in 2001

    • Lessons learnt in South Africa

    Where are we now ?

    • Ports challenge in Kenya


    What was actually done in the south african ports between 2001 to 2007 l.jpg

    Additional Capacity

    Existing general cargo berth in Durban was converted to a container handling facility which is now a fully fledged container Terminal

    Re-configured vessel calls to other ports in South Africa by using ports of PE & Cape Town

    Operational Infrastructure

    Purchased 6 cranes (3 Liebherr and 3 Impsa cranes) initially, and later placed an order for 24 cranes

    Purchased over 225 straddle carriers over a 3 year period

    Enhanced vessel change over from 4hours to under 2 hours by planning better with marine services

    Increased rail capacity from 3 trains to 5 train from Gauteng to Durban

    Systems enhancements

    COSMOS re-configuration (Planning modules)

    Introduced SAP Maintenance Module

    People

    65 Sri Lankan trainers were brought in to train & development our Operator skill levels through a best practice programme

    Introduced a bonus system for operational staff

    More open license pilots were introduced to cater for increased demand on larger vessel sizes

    Build a cohesive team for a greater team spirit with intensive and continuous communication strategies

    Organisational design

    Reconfigured integrated organisational structure of DCT

    Workshop structures were revised & shift patterns changed to meet customer demands

    Commercial

    Introduced Container Terminal Operations contract (CTOC) which guaranteed berthing on arrival

    Reward and penalty clause embedded in the contract for higher productivity performances

    Penalized poor customer behavior in CTOC to ensure compliance to ETA and planning information before vessel arrivals

    What was actually done in the South African Ports between 2001 to 2007

    Initiatives and programmes that were put into place during the period of congestion


    Lessons learnt in south africa l.jpg

    Lessons learnt in South Africa

    • Commitment to resolve issues without assigning blame to any particular supply chain partner, but work in the interest of the country

    • There must a common platform e.g.. an advisory board or a forum where all shipping lines, port operators, cargo owners etc that can debate and make decisions to help ease the situation. Ideally the forum should be co-chaired to maintain impartiality

    • To resolve the congestion you will have to work intimately with shipping lines, cargo owners, port, road and rail operators whom you still want to retain as customers

    • Involve Unions at an early stage

    • Agreeing a common set of KPI’s is an important milestone to measure all partners in the supply chain

    • There must be measurements taking place regularly by the advisory board/forum at least every 2 weeks and thereafter monthly once the system sees improvement

    • South Africa had the benefit of using other ports in the system (Cape Town & Port Elizabeth) which eased the problem in Durban Container terminal

    • Creating capacity ahead of demand is crucial to maintain a fluid port system


    Agenda15 l.jpg

    AGENDA

    • South Africa’s Experience in 2001

    • Lessons learnt in South Africa

    Where are we now ?

    • Ports challenge in Kenya


    Results from the effieciency improvements and colloborative work l.jpg

    186.4

    • Monthly volume at DCT increased from 102,000 TEU’s a month in 2001/02 to 180,000 TEU’s a month in 2007/08

    • Investment increased from R131m in 2001/02 to R1.9bn in 2007/08

    RESULTS FROM THE EFFIECIENCY IMPROVEMENTS AND COLLOBORATIVE WORK

    • TPT capital investment prior to Transnet’s turnaround strategy

    • TPT capital investment since Transnet’s turnaround strategy introduced

    • 1 976

    • 1 740

    • 2001/02

    • 2002/03

    • 2003/04

    • 2004/05

    • 2005/06

    • 2006/07

    • 2007/08

    • DCT throughput prior to turnaround strategy

    • Monthly TEU’s (Jun 01-Dec 04), ‘000

    • DCT throughput after turnaround strategy

    • Monthly TEU’s (Jun 05-Dec 07), ‘000

    Surcharge introduced

    • Jun 01

    • Dec 01

    • Jun 02

    • Dec 02

    • Jun 03

    • Dec 03

    • Jun 04

    • Dec 04

    • Jun 05

    • Dec 05

    • Jun 06

    • Dec 06

    • Jun 07

    • Dec 07

    Source:Team analysis


    Tpt performance trend at dct l.jpg

    52

    TPT PERFORMANCE TREND AT DCT

    Average vessel productivity distribution

    Percent

    • October 2002

    • March 2004

    • 81%

    • 72%

    • <12

    • 12-14

    • 14-16

    • 16-18

    • 18-20

    • >20

    • <12

    • 12-14

    • 14-16

    • 16-18

    • 18-20

    • >20

    • May 2008

    • 81% of vessels performed below 16-18 container moves per hour (CGH) in 2002

    • In May 2008, 80% of vessels performed above 16 container moves (CGH)

    • Average performance at DCT for 2007/08 was 22.5 container moves (CGH)

    • Target for 2008/09 is 25 container moves (CGH)

    • 80%

    • <12

    • 12-14

    • 14-16

    • 16-18

    • 18-20

    • >20

    Source:Team analysis


    Breakdown of target times for vessel changeover l.jpg

    0.15

    BREAKDOWN OF TARGET TIMES FOR VESSEL CHANGEOVER

    Breakdown of vessel changeover duration for different target times

    Hours

    • Stevedores

    • TPT

    Target: 4 hrs

    • Vessel

    • TNPA

    Finished unlashing to first crane move

    • 0:05

    Stevedores boarding to finished unlashing

    • 0:50

    Target: 3 hrs

    Gangway ready to stevedores boarding

    • 0:10

    • 0:03

    • 0:15

    Berth arrival to gangway ready

    • 0:40

    Target: 2 hrs

    • 0:07

    Marine operations (excl. no demand & no space at 109)

    • 0:13

    • 0:00

    • 1:25

    • 0:25

    • 0:05

    • 0:10

    • 1:10

    Requested sailing time to berth departure

    • 0:15

    • 0:50

    Finish lashing to requested sailing time

    • 0:40

    • 0:15

    • 0:15

    • 0:15

    • 0:00

    Last crane move to finished lashing

    • 0:20

    • 0:17

    • 0:15

    Source :Vulindela team


    Performance against plan significant operational efficiencies across operating divisions l.jpg

    620,204

    PERFORMANCE AGAINST PLAN: SIGNIFICANT OPERATIONAL EFFICIENCIES ACROSS OPERATING DIVISIONS

    2003/04

    2005/06

    2007/08

    Growth in key commodities

    Key Performance Indicators

    Rail

    Total freight (billion vol.km)

    Net ton km per wagon (GFB)

    106

    9.9%

    105

    105

    105

    103

    681,684

    100

    620,204

    2002/03

    03/04

    04/05

    05/06

    06/07

    2007/08

    2003/04

    2007/08

    Ports

    Containers (Thousand TEUs)

    Container moves per crane hour – ContainerTerminals

    3,717

    Currently 25

    3,400

    3,010

    2,864

    2,528

    2003/04

    04/05

    05/06

    06/07

    2007/08

    Durban

    Cape Town

    Port Elizabeth

    Pipe-lines

    Refined (million Ml/km)

    Percent capacity utilization

    3.4

    3.1

    2.8

    2.8

    2.5

    Refined

    Crude

    Gas

    2003/04

    04/05

    05/06

    06/07

    2007/08


    Corridor approach is essential for serving south africa s customers l.jpg

    CORRIDOR APPROACH IS ESSENTIAL FOR SERVING SOUTH AFRICA’S CUSTOMERS

    Benefits from corridor approach

    NOC

    • Transnet as a network business needs to operate in an integrated manner throughout the logistics corridor

    • Provide a common transformation and long-term planning backbone

    • Maximise growth opportunities across all operating divisions (rail, port, pipeline)

    • Capture operational and functional synergies across operating divisions through integrated solutions

    • Improve efficiency and effectiveness of logistics supply chain

    • Providing an end-to-end logistics service to customers

    • Provide optimal capital base for network infrastructure evolution

    • Focus on key commodities and aligning capital investment to high-growth potential corridors

    Procure-ment

    Mainten-ance

    Functions

    Yards

    Projects

    Sentrarand

    Yard

    Kaserne

    Depot

    Corridors

    Newcastle

    Example

    Port

    Danskraal

    Durban

    DCT

    Beit Bridge

    Messina

    Louis Trichardt

    Soekmekaar

    Ellisras

    Thabazimbi

    Pietersburg

    Drummondlea

    Vaalwater

    Chroomvallei

    Phalaborwa

    Zebediela

    Hoedspruit

    Naboomspruit

    Middelwit

    Nylstroom

    Steelpoort

    Northam

    Graskop

    Marble Hall

    Roossenekal

    Rustenburg

    Plaston

    Cullinan

    Komatipoort

    Witbank

    Belfast

    Mafikeng

    Pretoria

    Rayton

    Ogies

    Machadodorp

    Krugersdorp

    Lichtenburg

    Baberton

    O/fontein

    Welgedag

    Sentrarand

    Welverdiend

    Coligny

    J’burg

    Hawerklip

    Breyten

    B/plaas

    Vermaas

    Bethal

    Lothair

    Potchestroom

    Ottosdal

    Orkney

    Klerksdorp

    Wolwehoek

    Standerton

    Hotazel

    Schweizer-Reneke

    Vierfontein

    Makwassie

    Pudimoe

    Charlestown

    Ancona

    Newcastle

    Vrede

    Westleigh

    Erts

    Golela

    Utrecht

    Kroonstad

    Hlobane

    Warden

    Sishen

    Manganore

    Naroegas

    Warrenton

    Vryheid

    Arlington

    Whites

    Nakop

    Glen H

    Palingpan

    Postmasburg

    Glencoe

    Harrismith

    Virginia

    Upington

    Bultfontein

    Bethlehem

    Theunisen

    Ladysmith

    Kimberley

    Marquard

    Kakamas

    Winburg

    Bergville

    Empangeni

    Nkwalini

    Douglas

    Eshowe

    Bloemfontein

    Kranskop

    Richards Bay

    Moorleigh

    Ladybrand

    Sannaspos

    Koffiefontein

    Greytown

    Maseru

    Belmont

    Prieska

    Howick

    Stanger

    Hilton

    Network

    Copperton

    Underberg

    Richmond

    Donnybrook

    Mid Ilovo

    Springfontein

    Durban

    Mandonela

    Matatiele

    Bethulie

    Franklin

    Kelso

    De Aar

    Aliwal North

    Kokstad

    Harding

    Simuma

    Sakrivier

    Port Shepstone

    Bitterfontein

    Dreunberg

    Barkley East

    Jamestown

    Noupoort

    Maclear

    Kootjieskolk

    Calvinia

    Rosmead

    Schoombee

    Hutchinson

    Hofmeyer

    Umtata

    Queenstown

    Tarkastad

    Qamata

    Beaufort West

    Seymour

    Klawer

    Somerset East

    Amabele

    Cookhouse

    Blaney

    Klipplaat

    Porterville

    Fort

    Beaufort

    Saldanha

    East London

    Prins Alfred

    Hamlet

    Touwsrivier

    Kirkwood

    Ladysmith

    Atlantis

    Calitzdorp

    Alexandria

    Worcester

    Uitenhage

    Oudtshoorn

    Patensie

    Port Alfred

    George

    Avontuur

    Franschhoek

    Port Elizabeth

    Riversdale

    Cape Town

    Stellenbosch

    Knysna

    Mosselbaai

    Protem

    Simonstad

    Strand

    Bredasdorp


    Significant investment across all divisions to replace assets and create capacity l.jpg

    2

    SIGNIFICANT INVESTMENT ACROSS ALL DIVISIONS TO REPLACE ASSETS AND CREATE CAPACITY

    Transnet historic

    consolidated Capex (excl. SAA)

    Key projects

    Investment

    R bn

    2009-

    2013

    Growth strategy

    • Cape Town container expansion

    • Port of Ngqura construction

    • Ngqura container terminal development including rail link

    • Durban entrance channel widening

    16

    NPA

    Ports

    2008

    10

    TPT

    2007

    Investing 4 times more than 3 years ago

    2006

    38

    • Coal export /iron ore line expansion

    • Acquisition of 405 locomotives for GFB, iron ore and the coal line

    • Maintenance/upgrade of rolling stock and infrastructure

    TFR

    Rail

    2005

    2

    TRE

    2004

    Pipelines

    12

    • New multi-product pipeline

    2003

    2002

    Specialist

    Units

    2

    • Business intelligence and building upgrades

    2001

    80

    Total investment =2009-2013


    Agenda22 l.jpg

    AGENDA

    • South Africa’s Experience in 2001

    • Lessons learnt in South Africa

    Where are we now ?

    • Ports challenge in Kenya


    The kenya ports challenge l.jpg

    456 000

    The Kenya Ports Challenge

    • 22% increase in container traffic from 479355 teus (2006) to 585367 teus (2007)

      • There has been no injection of terminal capacity

  • Automatation of the cargo handling system

    • Users resisting due to redundancy or potential retrenchment

  • Dwell time is high as shippers not collecting their cargo in time

  • Rail service needs improvement

    • Considering increasing of speed of loco’s

    • Investing in new gauge rail lines

  • Lack of space within the Port area

    • Plans to acquire new land from the industrial commercial & development corporation have failed

    • Dwell time might be high

  • All the above will lead to vessels delays which will cause an increase in freight costs for the end user

  • 3 year container volume for Kenya

    +16%

    +22%

    585 367

    479 355

    Container traffic

    In TEU’s

    436 671

    2005

    2006

    2007

    Source : Containerization yearbook, 2008


    Vessels expected between 23 rd sept 2008 4 th oct 2008 l.jpg

    850

    Vessels expected between 23rd Sept 2008 – 4th Oct 2008

    Container exchange volumes

    0

    200

    400

    600

    800

    1 000

    1 200

    ARNIS

    TRAVE TRADER

    DESPINA P

    FLORA DELMAS

    PROVIDENCE

    HELVETIA

    KOTA ANGGUN

    • Dwell time of boxes in stack

    • Collecting of cleared cargo

    • Moving containers to ICD’s/Bonded warehouse

    • Bulk runs at night and off peak periods

    MSC SIERRA

    MSC NORMANDIE

    SAFMARINE CONCORDE

    H&H WAVE

    TERRA LUMINA

    SAFMARINE BANDAMA

    1 050

    MSC HIMALAYA

    1 100

    SAFMARINE EUROPE

    MSC EMILIA S

    MOL ULTIMATE

    = 5335 containers to be discharged

    and loaded on the 4 October 2008

    SAFMARINE BIA

    1 200

    LISSY SCHULTE

    1 140

    Discharge

    Load

    Source : Business daily, Wednesday 24, 2008, page 17


    Some recommendations l.jpg

    • Establish a forum or an advisory board where issues can be discussed with all supply chain partners

      • Create an agreed set of KPI’s

      • Measure bi-weekly all the agreed KPI’s

      • Use an independent operations audit team if necessary

    1

    • Choose the high impact problems to be resolved first

      • Agree with port users on the problem to be resolved and that there will be pain during this time (reducing the dwell time of cargo in the port)

      • Bring in additional experienced resources to help if necessary

      • Collaboration with other ports in the region whilst KPA fixes the problem

    2

    • Communication internally and externally

      • Keep customers and port users informed and involve them to be a part of the solution

      • Assign one talking head as the ports reputation can be at stake – Consider a media black-out period

      • Keep government and customers informed of progress

    3

    Some recommendations


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