Port Operations

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Port Engineering 1

Port Engineering

Planning, Design and Analysis

Prepared by:

Jeremy Molayem

CE 589 Port Engineering: Planning and Operations

Professor Hanh Le-Griffin

Submittal Date:

24 June 2014


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Table of Contents

Abstract 3

Introduction 3

Demand ForecastingA Trilogy of Scenarios 4

Capacity AssessmentMethodology and Assessment 5

ImprovementsInfinite Scenarios 8

ImprovementsA Reasoned Approach 10

ImprovementsFinancial Motivations 12

Simulation and Summary of Results 13

Citations 14

Appendix 15


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Abstract

Port capacity planning is an increasing crucial task in an economy continuing to globalize. This

paper addresses three components to planning: demand forecasting, capacity analysis, and

potential capacity improvements. Furthermore, these components assert the following three

questions: 1) where is the bottleneck in the system? 2) what are the physical and operational

improvements? 3) how should these improvements be implemented to minimize cost and

increase utility? In addressing these questions, Microsoft Excel is used to both model and

simulate various demand scenarios, conduct sensitivity analysis due to parameter adjustment,

and optimize capacity parameters to minimize cost.

Introduction

With scattering supply chains, increasingly connected populations, and maturing markets in

developing countries, international trade is and will continue to undergo a new level of change.

While technology has not necessarily been a cause for a global market, it has certainly been an

accelerant. For example, the internet is increasingly separating traditional supply chains. A

United States car company can operate a factory in Germany, ship its metals from West Africa

and utilize a technical team from South Korea. And, this is simply the beginning. In five years, 5

billion people, 70% of the worlds population, will have permanent access to the internet for the

first time (Schmidt, et al). The central part of this paper is to attemptto plan and design a port for

this unpredictable and global future.

Certainly, the degree of future variability due to technology is immense. One such

scenario for a new manufacturing world is the rise of the household 3D printeran increasingly

affordable technology that allows a person or business to printalmost any object such as a cup

or bicycle wheel. Simply through downloading the cup file from the internet, anyone from

anywhere in the world such as Nigeria or Ecuador can print a cup. This can fluidize and

revolutionize manufacturing, especially in regions that must use outsourced manufacturers (Chen

2012). How will this future look for cup factories in China? Will they go out of business and the

international trade for cups decline? This is unforeseen, and that is the point of this anecdote.

There has never been a more difficult and exciting time for port planning in history.


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Demand Forecasting A Trilogy of Scenarios

The Port of Panama will progressively become a hub for traffic between the Pacific and Atlantic

spheres. Demand for trade is reaching astounding levelsworld container distribution is

growing at three times world GDP growth (Melford, 2008). From the year 2012 to 2020, the

terminal is expected to increase its handling from 400,000 TEUs to 568,000 during a low growth

scenario and 824,300 TEUs during a high growth scenario (Fig. 1). By 2030, demand will reach

a maximum of 1.754 million TEUs and a minimum of 1.0015 TEUs. The modelling of this

growth consists of two parts. For component one, from FY 2012 to FY 2020, a low forecast

gives 4.5%, a high of 9.46%, and a median of 6.98%. For component two, 2020 to 2030, both

initial and final values are known. Therefore, a growth curve can be extracted. An example of the

low demand growth is shown below:

Solve for X

X = 0.058 or 5.8%

Similar calculations yield X= 6.8% and 7.8% for median and high demand, respectively.

Figure 1. Forecasting various demand scenarios from FY 2012 to FY 2030

In calculating demand, the data allows for analysis of container type as well. The demand is

expected to be distributed of 50% import, 25% export, and 25% empty.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2010 2015 2020 2025 2030 2035

TEUs

Millions

Year

Demand Forecast

Low

Median

High


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Capacity Assessment Methodology and Comparison

Assessing the capacity is disaggregated into four main componentsberth, container

yard, gate, and rail. The purpose of a capacity assessment is to determine the bottleneck of the

systema determination which will guide the process for improvements and recommendations.

Before calculating the capacities, two considerations must be made. First, in analyzing potential

bottlenecks, the capacities of both gate and rail are addedsince one mode can support the other

and vice versa. Second, capacities are artificially decreased due to a bottleneck constraint

where capacity at 80% of demand constitutes a bottleneck. The following figure shows an

accurate description of all capacities in relation to demand growth.

Figure 2. Capacity thresholds in relation to growth demand from FY 2012 to 2030

The optimizing of berth operations has received considerable research over the past few years

particularly the berth allocation problem (BAP). Several researchers contend that that the berth

allocation problem and the quay crane scheduling problem are in fact one single problem that is

tied together. Berth scheduling is a function of the crane that is assigned for the ship. (Park et al.,


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Liu et al.). For practical purposes in this analysis, berth allocation is separated from berth

capacity planning. Our analysis of berth capacity focused on three main factors: 1) crane

productivity, measured in moves per crane-hr, 2) working hours, and 3) the number of cranes.

The port has made the following improvements already: namely, the replacement of three older

cranes with two Post-Panamax cranes in 2013. Currently, there are nine ship-to-shore gantry

cranes (QCs). Berth capacity was calculated as follows:

( )

Furthermore, there are three more considerations in calculating capacity. First, total lifts is

converted to TEUs by multiplying a factor of 1.7 to yield for TEUs (twenty-equivalent units).

This process is used to account for the presence of FEUs (forty-equivalent units). Second, toattain work hours, the holidays were considered as follows: 52 weeks/yr with 1 weeks(5 days)

worth of holidays. Third, capacity is reduced by 20% to ensure the following constraint:

bottleneck exists when capacity is 80% of demand. The following is current berth capacity:

( )( ) (

)(

) (

)

The capacity assessment of the container yard is separated into two components: an area

based approach and an equipment based approach. In regards to an area based approach, the

following formula is used:

Total ground slots is given as 3650 TEUs. To acquire stack height, total throughput is divided by

total stack height. In this case total throughput is given as 11,680 TEUs. Stack height yields the

following:

Finally, turnover rate is a function of average dwell time, calculated as 5.33 days. Turnover rateyields the following:

()

Therefore, dynamic capacity using an area approach yields:


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Using an equipment based approach, different parameters apply: 1) the number of RTGs in the

container yard, 2) the productivity of an RTG, and 3) the hours of operation per year. The

following expression shows this relationship.

( ) (

)

( ) Since equipment capacity is far greater than the calculated area capacity, the bottleneck analysis

will used the area calculated through area (0.65 million TEUs).

In calculating the rail capacity, the port exists with the following characteristics: a) 20%

of the terminal throughput is through rail transportation b) a train can handle 250 TEUs c) it

takes seven to eight hours to load an entire train d) operation is 2 eight-hour shifts. The following

is methodology behind determining rail capacity:

( ) ()

The following figure shows rail capacity,

Figure 3. Rail Capacity with respect to a 20% throughput of current demand

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2010 2015 2020 2025 2030 2035

TEUs

Millions

Year

Rail Demand and Capacity

Capacity

20% Demand


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Although it may appear that rail capacity is a bottleneck in the system due to low capacity, gate

capacity also plays a role in offsetting rail loading during peak times. The two capacities can and

should be considered. Gate capacity is determined as follows:

The following yields an actual calculation:

( )(

) (

)

The following table illustrates a summary of capacity calculations and results.

Type Berth Container Yard Rail Gate

Parameters Work hours

ProductivityNumber of Cranes

Dwell Time

UtilizationStack Height

TGS

Turnover Rate

Work hours

ProductivityHandle Number

RTG Lifts

Work hours

Productivity

TEUs (Million) 1.65 0.65 0.14 0.66

Bottleneck (Year) 2028 2017 2018 2018

Table 1: A piece by piece approach to capacity analysis for the port

Improvements Infinite Scenarios

With forecast projected and capacity determined, the implementation of improvements is perhaps

the most difficult yet creative task for planning and design. In this endeavor, over 15

permutations of plans and horizons were tested. Three scenarios were ultimately finalized for

high, median, and low outcomes. The following figure illustrates an attempted approach at

formulating a sound strategy for cost savings, efficiency, and practicality.

There are two reasons why this strategy ultimately failed:

1. The option for Rail Mounted Gantry cranes (RMGs) was exhausted before considerationsfor land purchases. RMGs represent an inflexible and high capital cost. Financial analysis

(page x.) indicates that this warrants further decision analysis.

2. Gate productivity was increased simply through maximizing shifts. However, automationas an option was not considered.


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Figure 4. Test trial without consideration for gate automation and importance of land

Figure 5. Suggested improvement for high demand scenario


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While a side by side comparison of the improvements is crucial to illustrate the infinite number

of improvement scenarios, analysis of improvements will primarily focus on the latter case,

figure 5.

Improvements A Reasoned Approach

Container YardPhase 1

The first bottleneck and therefore, the first area for improvement is the container yard in FY

2017. The initial improvement options were as follows: increase stack height, improve

productivity with replacement of RTG, increase the number of total ground slots, or increase the

average dwell time. The latter three improvements were postponed for longer term adjustments

because a) they represent a high, inflexible capital cost (RMG), b) drastically affect the ability to

retain clients (dwell time), or c) introduce newer layers of bureaucracy (land acquisition).

Therefore, the most sensible conclusion was to first increase stack height utilization.

Gate AdjustmentPhase 1

The second bottleneck occurs for the inland transportation capacity (gate and rail) at FY 2019. It

is important to note that rail capacity was considered fixed because improvements to the system

only represented negligible changes. This is illustrated in figure 3. In focusing on gate

improvements, the primary driver for optimization is an automation system which can improve

productivity from 10 to 30 moves/lane-hr.

Point of Discussion: The decision for a partial implementation of this system went through

considerable review. Ultimately, the team eventually came to a full position reversal after

hearing an opposing opinion. A full implementation of automation now makes financial sense for

the following reasons:

1. The benefits of waiting and partially installing automation on gates are minorconsidering a) hardware capital cost is relatively low and b) software is a one-time

purchase which would incentivize a full hardware installation to maximize the purchase.

2.

A partial gate automation system would present problems for the standardization ofpractices. Two separate systems require different protocols for truck drivers, security,

data management, and a host of other parameters.

Our team initially viewed partial implementation to be superior for flexibilitywith a justifiable

convincing strategy. However, full automation offers slightly better benefits.

Container YardPhase 2


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Around year 2023, the container yard presents an additional bottleneck. However, this bottleneck

requires a high capital investmentpurchases of RMGs or land implementation. Additional land

implementation ultimately is a sound strategy demonstrated in Table 2.

FY 2023 Improvement RMG Option Land Acquisition

Advantages a) No additional land needed

b) Limited bureaucratic or

community barriers

c) RMG may ultimately be

required in the future

a) Land expansions will be

increasingly difficult as

Balboa City, Panama grows

b) Appreciates over time

c) Immune to technology

Disadvantages a) New yard foundation

necessary

b) Construction interrupts port

operations

c) Depreciates over time

d) Outdated by newer

technology

a) Bureaucratic barriers (EIR,

community support required)

b) Additional development

required

c) Consideration needed for

effect on terminal operations

Table 2: Comparison between RMG and Land Acquisition

RMG represents a high capital cost. The future twenty years and beyond will present a) RMGs at

a substantially reduced rate and b) possible new technologies that could drastically make an

RMG outdated. Furthermore, equipment depreciates over time and a newer, stronger foundation

is needed to support a rail system. This implementation could severely limit port operations.

However, the decision between land acquisition and RMG use warrants further investigation

specifically with an eye towards a) bureaucratic barriers, b) community support, c) proposed site

placement, d) land usability, and e) projections for the growth of Balboa City around the port.

Such specificity is outside the scope of this recommendation for land expansion. However, if

feasibility permits, acquiring additional land as soon as possible presents a strong position for

future growth.

Berth CapacityPhase 1

Berth capacity reaches a bottleneck in FY 2028. Therefore, two feasible improvements are to

increase productivity or to increase the working hours. The construction of an additional crane

may not be feasible due to a) land constraints, b) ship constraints, and c) high capital cost. The


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recommendation is to increase productivity with operational improvements to the crane. One

such improvement is the double cycling technique which allows for the loading and unloading of

containers simultaneously. Research has found that this process can induce a 10% reduction in

operating time and 25% reduction in chassis requirement (Goodchild et al.).

Improvements Financial Motivations

The proposed plan takes an adaptive approach to growthplanning for a future that is neither

too great nor too small in demand. The port reserves its capital investments to a later date while

maintaining a competitive port. Early improvements, I1 to I5, represent low cost additions:

container yard utilization increases, gate automation, and land expansions. These improvements

constitute all improvements until 2028. This yields a significant delay, 14 years, before higher

level investments, shown as I6 to I8 in the figure. These high investment improvements

namely, the addition of RMGsis not required until the year 2028. If demand falls short of

expected forecasts, investments I6 to I8 will not be even exercised.

Figure 6. An overview of an adaptive financial strategy for a dynamic market

0 5 10 15 20 25

I1

I2

I3

I4

I5

I6

I7

I8

Cost ($ Millions)

ImprovementMeasure

Improvement Measures

Inexpensive

(Target low cost measures for

early improvements)


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Simulation and Summary of Results

In the event of different demand scenarios, the above recommendation shown in figure 6

significantly changes. For the purpose of report brevity, simulation results are included in the

appendix. However, the main differences in proposed improvements in highlighted in figure 7.

Figure 7. An action plan for various demand scenarios

Demand in the low scenario falls low enough that the port need not make any physical

improvements or expansions to any of its systemszero capital costs. However, the demand

scenario still justifies operational improvementsincreased stack height utilization and increase

in the number of gate shifts. Finally, it is important to distinguish that as demand scenarios

signal higher volume, the ports capital investments will inevitably increase as well.


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Citations

Chen, Baizhu, Yes, We Can Make iPhones in America.Forbes Magazine. 1 Sep. 2012.

http://www.forbes.com/sites/baizhuchen/2012/09/07/yes-we-canmake-iphones-in-america/

Goodchild, A.V., C.F. Daganzo, Crane double cycling in container ports: planning methods and

evaluation

Y.-M. Park, K. Kim, A Scheduling method for Berth and quays cranes, OR Spectrum 25 (2003)

1-23.

J. Liu, Y-M Wan, I. Wang, Quay crane scheduling at container terminals to minimize the

maximum relative tardiness of vessel departures, Naval Research Logistics 53 (2005) 60-

74

Melford International Port, Container Port and Intermodal Logistics Park Project,

www.toledoportauthority.org/docs/Melford%20Presentation.pdf ,2008 (accessed on June

13, 2014)

Schmidt, Eric and Jared Cohen. The New Digital Age: Reshaping the Future of People, Nations

and Business. Alfred A. Knopf. New York 2013
http://www.toledoportauthority.org/docs/Melford%20Presentation.pdfhttp://www.toledoportauthority.org/docs/Melford%20Presentation.pdfhttp://www.toledoportauthority.org/docs/Melford%20Presentation.pdf


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Appendix

Low Demand Scenario and Action Plan

Median Demand Scenario and Action Plan

Port Operations

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