PERTINENÇA, COMPROMÍS I PARTICIPACIÓ

 Port Metro

Vancouver (PMV)

 Port of Seattle (POS)

 Port of Tacoma (POT)

 Port of Portland

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

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

terminals beyond the existing quotas becomes revenue that goes directly to the bottom-line. 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

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

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

* 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

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)

 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.

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

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

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-fits-all. 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,

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

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

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,

While the development of container terminals has always required a team of sorts,