Seaport as a Logistics and Industrial Node in Global Supply Chains

 Seaport as a Logistics and Industrial Node in Global Supply Chains 

Quoting a study entitled ‘Institutions and Industrial Development in Sabah’, published in 2022 by Firdausi Suffian, Kasim Mansur, Ika Suzieana Jamluddin, Arnold Puyok , and Azmi Abdul Majid, I found several phrases that are of profound importance when discussing about economic reforms. These are that:

i.                Industrialization is the key to structural change.

ii.              The institutions embedded with political consideration and private interests somehow has constrained the state to implement effective industrial policy.

iii.             There is scant attention on the role of institutions to take centre stage in analysing in economic growth and development.

iv.             Institutions are widely known as “rules of the game” in a society.

v.               Industrial development has wide sectoral interlinkages that have the capacity to pull the rest of the economy in all sectors.

In the foregoing article, these phrases are of profound importance when discussing the role of ports in the economic development of any country. The port as an institution are critical enablers and catalyst of the speed and impact it makes to the state economy. The critical role of the port as an institution towards the management of the economy is what spurs me to introduce the subject matter for a better understanding of its roles and functions and eventual responsibility to the state.

Seaports are points of convergence between the land and the sea of passengers and freight activities. While the marine side can involve huge geographic coverage related to global trade, the land side is related to the region and locality of ports.

 

Ports handle high volume of freight, as against other type of terminal combined.

The emergence of civilisation saw the start of trade networks which later require ports as its outlets. Ports have played a crucial role in facilitating trade and commerce across the world ever since. Although maritime transport technology has much evolved, the role and function of ports basically remain the same. Ports serve as gateways for international trade, connecting countries and regions across the world. They play a vital role in the global economy by generating employment opportunities and contributing to the growth of various industries.

It’s fascinating to see how seaports have evolved over time, and it will continue to play a critical role in shaping the future of our world. 

 

A port is traditionally defined as a transit area, a gateway through which goods and people move from and to the sea. It is a place of contact between the land and the sea that is termed as a node where ocean and inland transport systems interact, and a place of convergence for different transportation modes. Since the sea and inland transportation modes have different capacities, the port assumes the role where cargo is consolidated or deconsolidated, known as a load breakpoint.

 

In general, ports are classified into two categories, seaports, and inland ports.

 

The ports are diverse in sizes and functions. Ports also have a geographical diversity in terms of the sites being used for port activities such as rivers, bays to offshore locations and now a truly port on land called inland port.

 

The ports can be described from a supply chain perspective as being, ‘A seaport is a logistics and industrial node in global supply chains with a strong maritime link with clusters of activities directly or indirectly linked to transportation and logistics processes within global supply chains.’

 

Defining the Seaport

A modern seaport is not solely considered as a load breakpoint in various supply chains but should be considered a value-adding transit point. As nodes within transportation and logistics networks, ports have a location, whose relative importance can fluctuate given economic, technical, and political changes. This location capitalises on the advantages of a port site characterised by fundamental physical features influencing the nautical profile, such as water depth, access channels, and availability of land.

 

Categorisation of Seaports

The diversity of ports can be ascertained by their classification into various types of ports according to their specific role and functions. Ports can be categorized based on many dimensions, such as:

 

Scale. Refers to port size in terms of its area, annual cargo throughput, the size of its hinterland, the number of shipping services it is connected to, or the number of customers. The scale of a port is commonly associated with its economic and commercial importance in the market it serves.

 

Geographical attributes. Refers to the main characteristics of the port site and situation. There are various locational setting of port sites, such as in a bay, along a coastline, on a river, or in an estuary. Many sites have natural advantages, while for others, the site needs to be improved with dredging and landfills. Although a port site is fixed, its situation is relative to the main shipping lanes and hinterland, or its proximity to and interactions with cities or urban areas it served.

 

Governance and institutional settings. Refers to the terms of land ownership and the roles of institutional arrangements between the public and private sectors. Many ports are publicly owned but have terminals operated by private organizations.

 

Port functions. Refers to the range of services offered by the port, such as cargo handling, logistics, and distribution, industry, and maritime services. They are subject to competitive elements since the services offered by one port can be offered by another port.

 

Specialization. Refers to the cargo handled, such as containers, conventional general cargo, liquid bulk, dry bulk, or roll-on-roll-off cargo. Some ports are specialized in handling passenger traffic, namely cruise ships and ferries. Another specialization is based on port-centric industries such as steel plants, energy plants, automotive, or chemical industries. Logistics activities are also an important contributor to port specialization.

 

Ports serve a derived demand that can be segmented into specific markets. These markets include cruise ports and terminals, the break-bulk market, ports as complexes supplying and distributing energy, the provision and management of containers, and the cold chain technology that has allowed ports to play an active role within these supply chains, particularly with refrigerated containers (reefers).

 

One of the main driving forces of change in the port industry emerges from globalization and the shift from supply-driven to demand-driven economies. The supply-driven economy was based on economies of scale in production, standardization, and mass consumption of standard products. This approach changed as a growing individualism began to have an impact on consumption patterns. This brought about a shift to a more demand-driven economic system, combined with global production networks on the supply side of the markets.

 

I hope this information has provided some insights into the characteristics of seaports and is intended for educational purposes in helping to disseminate knowledge and awareness of the important function of a port in any economic development. We shall explore how our local ports in Sabah fare within the context discussed above in a future article. Seaports play a crucial role in the economic development of Sabah and reportedly the port operations in Sabah generated 90.1% of the operating ports total revenue in 2020   END.

 

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