According to professor M. Stopford (2020), the tonnage of global maritime trade in 2018 was measured to be 600 times bigger than the relative figure in 1840. This shows that the developments in maritime transport systems and emerging changes in maritime technologies have fostered fundamental changes in human civilization. Accordingly within the end of the past century, Transport (and specifically maritime transport) has been acknowledged as one of the four founding element of global economy and an indispensible principal of the context of human's life on planet earth.
Exhibit 1 - Development of Maritime Transport within the past 20 centuries (Stopford,M.,2020-a)
The maritime transport system heavily relies on ports and terminals which provide the critical links of this system with other modes of transport. The innovations in the merchant shipping in 1960s and 1970s also led to significant changes in the port systems. Although ports have been evolving through generations, within the recent decades and under the globalization process forces the merchant shipping has always been ahead of the ports and demanding for haste in their following paces. This has led to development of highly regional competitive markets with greatly volatile, risky, and capital intensive businesses. Yet, as we will discuss the huge waves of change are still on their way to hit this sector.
The future of maritime transport systems will be greatly influenced by social and environmental concerns, geo-economics, and technology in the coming decades. These factors will bring fundamental changes to these systems that include merchant shipping and ports and terminals. In this sense the ports and terminals will have to respond to changes that will emerge in shipping, logistics, trade, technology, and society. The harbingers of such changes can be witnessed in reaction to trends like IMO 2020 sulfur cap, COVID-19 pandemics, surge of Ultra-Large Container vessels, Mergers and Acquisitions and Alliances in container shipping, undulations in the oil and energy markets, and many more. Yet, it seems that such groundbreaking changes are only the tip of the iceberg we are heading towards.
Let us consider the recent scenarios of professor M.Stopford for the outlook of maritime transport in the 2020-2050 horizon. He considers the COVID-19 and climate change impacts as two topmost phenomena that will configure the demand for maritime trade within the horizon and offers three scenarios in this regard. In outcome, the scenarios give diverse figures for global maritime trade that range from 28 billion to 12 billion tonnes in 2050. As the maritime trade can be translated into port traffic and multiplied into port throughput figures, these diverse figures imply the great uncertainty in estimation of future demand for port and terminal capacity in the years ahead.
(Exhibit 2 - Development of Maritime Trade within the coming three decades (Stopford,M.,2020-b)
The ports can also anticipate great changes in terms of cargo mix: as most of world is planning for decarbonization in response to climate change, it can be expected that the wet bulk market and specifically the oil and product tanker segments are gravely affected by the changes in the energy markets: this will have a colossal effect on the maritime transport systems as fossil fuels constitute near 37% of the existing maritime trade. Moreover, by emergence of more customized manufacturing technologies (e.g. 3D-printing) many researchers believe that in future there will be more demand for raw materials and less demand for finished goods. This can have many implications in the future of ports; for instance it may bring a boost to the bulk segments, and diminish the size of the container and general cargo segments. It can also lead to development and enlargement of peripheral industrial clusters around the ports that will transform the ecosystem of port and its businesses.
In tandem to the tendency towards regionalization of economies, the emergence of new manufacturing technologies can also transform the geography of transport in the coming decade. For instance the application of robotics or 3D printing in many developed countries will deteriorate the current competitive advantage of low cost labor force in many maritime forelands. This will lead to reshoring or near-shoring of maritime supply chains and bring a boost to shortsea shipping. These trends will annihilate the businesses of some ports and flourish the business of some others. Moreover in this novel architecture, the merchant shipping fleet will rely more on smaller ships rather than the bigger ones. Subsequently, the Shipping lines will demand more productivity in shorter port operations cycles and this will bring another series of challenges to the ports.
The ports and terminals market will also be deeply affected by political economy. The global economic powers are trying to establish and extend their strategic penetration in different regions of the world by participating and investing in the development and management of transport infrastructures in foreign states. Among the most significant instances of this, we can point to the 'Belt and Road Initiative' that involves in investment of between 1.2-1.3 trillion USD in 70 states in Asia, Europe and Oceania. This initiative that is often compared with US Marshall plan in the Second World War, will have a determining effect on the ports of Asia and Europe. It will certainly increase the economic penetration of China and balance the power and share of her competitors (e.g. US,and Japan) in the markets. This will have a certain effect on the significance of maritime trade routes and the arriving traffic in seaports in the global level. The initiative will certainly disrupt the existing hegemony in the regional port markets in different parts of the world. For instance, according to the investments and concessions of BRI in the Mediterranean ports, within the coming years we may witness a picking growth in their businesses and a slowing growth in the North-west European ports. Moreover, as the entirety of this initiative targets access to inland markets in the national and regional levels; it has special emphasis on intermodality of ports and their access and service to inland transport modes. Therefore, contrary to the current practice in development of mega-ports, the BRI ports are most seen as 'gateways' rather than 'transshipment hubs' and the relevant settings in design and operations will differ in them.
Exhibit 3 - The Belt and Road Initiative Map
The other determining factor that will shape the ports of future is the basic concern for sustainability. The ports shall commit themselves to function and serve the economic, social, and environmental development of human societies optimally. This means that in line with providing a context for facilitation of logistics and mobility, the port systems shall also concern their environmental and social impacts. The developers and operators of a seaport shall concern the pollutions, emissions, ecological protection, use and protection of natural resources (especially the energy resources). The port shall do its best to manage all of its activities to minimize its contamination and its use of natural resources, promote the use of renewables, and protect and recover the natural ecosystems and its resources for the future generations. It is essential to understand that preserving and enhancing the environment is a serious obligation that cannot be overlooked by anyone in this generation.
The ports must also consider the social impacts of their development and operations: within the coming decades, the labor relations will witness great transformations and the labor-intensive industries in the ports need to restructure themselves to avoid injustice in this aspect. They shall also concern for safety and health, security, welfare, and human development not only in the organizational level, but also among the great number of their stakeholders.
In spite of the significance of all mentioned factors, we should emphasize that the most important factor in the development of future ports is technology. In 2020, the world has already entered into the fourth industrial revolution era and it is expected that human life on the planet to be radically transformed by development of cyber-physical systems within the coming three decades. It is essential to understand that these speedy and universal transformations have already begun and as many futurists have opted, we are already living in the future. It seems that the time has come for the maritime transport systems to overcome its conservative delay and stagnation, and engage in this enormous transformation process.
It is a fact that maritime transport systems have not changed much for more than half a century: the dominant designs of ships and ports, the structure of markets, and even the process improvements have remained the same, and only enlarged or enhanced to develop savings or economy of scale in the subsystems. The existing architecture of these systems have endured for so many years due to its maturity and proven efficiency. But as a matter of basic paradigm shifts in the maritime transport systems, their current architecture can no more serve the entirety of their aims and purposes. Indeed, the maritime transport system are involved in extreme challenges to make a balanced tradeoff between investment, costs, revenue making, quality of services, environmental objectives, security, social impacts and many more. Although this may seem impractical in the first look, many experts believe that i-4.0 technology can serve as the needed change agent to achieve the impossible. We should be aware that the speedy development of agile and flexible cyber-physical systems acts like a springboard that will heave the maritime transport system into an ocean of changes and transformations. It is obvious that under the paradigm shifts, the emerging requirements, and the revolutionary technological developments, the existing architecture of maritime transport systems will not last more than some years and a new architecture will emerge in short time.
In order to keep pace with the supply chains and the merchant shipping industry, the port and terminals will need to renovate the technology of both their core businesses and the ancillary facilities in them. They shall adapt themselves to facilitate the emerging dominant designs in maritime supply chains (e.g. smart ships, LNG ships, fuel cell ships, autonomous ships, etc.). The results of noncompliance with such demands can be catastrophic for a port, especially in the more competitive segments of the market (e.g. the container segment). Also to keep themselves in the market, ports and terminals shall invest heavily in improving their productivity: the shipping firms and the cargo interests always demand and exert pressure for better service at lower prices. It seems that by evolving new patterns in the maritime supply chains (e.g. more concentration in shipping markets, and increasing demands for faster delivery of orders to cargo interests) , this controversial issue will find more significance. Moreover in terms of sustainable development, the ports will have to commit to principles (e.g. in terms of social and environmental aspects) that will burden huge economic costs to them: They will have to make purely cost-incurring commitments like decarbonization, supply of clean/renewable energy resources, investment in less energy-intensive systems, control of different types of pollution, and managing labor relations in terms of the coming changes in the labor markets. This means need to heavy investments, heightening costs, and diminishing revenues for the ports and terminals. We shall notice that all these are happening in a context where the ports will be encountering more serious constraints in their businesses and a great number of them will have to deal with lessening access to resources (e.g. land, finance, etc.) in spite of their urgent need to expansion and development.
Indeed, the ports and terminals need exclaiming miracles to bring the paradoxical picture that is drawn for their future into reality. Many believe that this miracle can come from i-4.0 cyber-machine technologies that are hyping to find massive use throughout different sectors and industries.This includes implementation of digitalization, industrial automation, Artificial Intelligence, Internet of Things, robotics and many other i-4.0 technologies. While there is a clue of truth in all of this, it is essential to understand that buying technological solutions will not bring forth the needed miracle for the ports and terminals: indeed, the marvelous features of i-4.0 technologies will work only if it leads to development of the needed capabilities for inaugurating the groundbreaking transformations in the sector.
Capabilities establish the economic firm’s ability to manage and use its resources effectively to serve its mission. They are developed by assemblies of people, processes, and technology within a firm. As D.Leonard (1995) explains, a core capability is established as a system of systems incorporating the physical-technical systems, managerial systems, skills and knowledge systems, and the values and norms of the firm. The core capability allows organizational learning, and knowledge creation and diffusion through a dynamic cycle of problem solving, implementation and integration, experimentation, and Knowledge import. This dynamic cycle develops a capability in the firm that can generate competitive advantages, agility, flexibility and responsiveness to business environment, and focus on customer needs within the firm.
The marvelous nature of i-4.0 technology will allow the firms to expedite the dynamic cycle of capability development in an unprecedented way. This will lead to extreme shortening of organizational learning cycles and ultimate acceleration of improvements and developments in both the processes and the products of the firm. This is a key point in the development and adoption of new technologies for the ports and terminals: the technologies that can enhance the capability development processes are the most important ones for the future of the sector. The rule also applies to managerial concepts, laws and regulatory instruments, financial instruments, etc.
Although capabilities are among the Intellectual Capitals of the economic firm, it is conspicuous that they are developed by the synergetic interplay of its intellectual capitals (i.e. knowledge, experience, relations, technologies, etc). Therefore, in order to enhance or augment capabilities of a port for future, it is critical to enrich and assimilate its intellectual capitals systematically.
The ports and terminal will have to focus on their Human Capital as the main engine for development of all other ICs. Ports should invest in developing creativity, systemic thinking, and soft skills in their human resources and prepare them for an era that every routine job will be done by machines. It can be foreseen that in near future many of blue-collared and white-collared jobs will join to history and the ports will mainly focus on attracting some gold-collared professionals. As mentioned, redefining the labor relations in ports will play a major role in managing the HC in them.
Within the coming decades, most of the ICs of economic firms will be embedded in the Structural Capital Category. The i-4 technologies will provide the firms with the needed Artificial Intelligence to learn, experiment, and enhance the value-creating knowledge and expertise from human resources, organizational procedures, Big Data, and any other resources. Yet in order to lessen the tensions of entry into the new era, the ports need to enrich their SC by working on their organization, culture, governance, management systems, processes, technologies, etc. Ports and terminals shall specifically strengthen their innovation capital in order to overcome the extreme challenges ahead of them. In this regard, ports and terminals should invest and engage in Research and Development, development of maritime clusters, enablement of knowledge based maritime startups, etc.
In terms of the Relational Capitals, the ports will have to use their best efforts to enhance their relations with their customers and stakeholders. The ports shall invest in boosting the level of facilitation and productivity to stay attractive to their customers. They must also invest heavily on sustainability of their activities to satisfy the great number of demanding stakeholders. They should also leverage on their brand value, their extended relations by means of i-4.0 connectivity technologies, and their good relations with customers and stakeholder to keep their businesses running. Obviously, the OC and the HC will play a significant role in developing and maintaining the RC in ports and terminals. The sector and its industries should also engage in development of coopetition and complementary cooperation in the marketplace. These approaches will enable them to unite their forces in tackling common issues like environmental management, improving security, standardization of processes, learning, research and innovation, etc.
For the past three decades, Knowledge has been accredited as the core element of modern businesses throughout the world. Interestingly, it seems that within the coming three decades and in terms of the fourth industrial revolution era, the i-4.0 technology will upgrade the common business core element and raise it from the level of knowledge (know-how) to the levels of Understanding (know-why) and Wisdom (what-best).In my opinion, this is the gist of fourth industrial revolution that can even lead to the technological singularity within the economic lifetime of a port and its terminals. Therefore as mentioned, the key to the miraculous survival and agile transformation of the ports and terminals in this tumultuous era relies in enrichment of their Intellectual Capitals and managing their effective interplay to supply the needed organizational capabilities.
In a nutshell, ports and terminal are heading towards a turbulent future that is full of uncertainty, complexity, ambiguity, and volatility. They will encounter myriads of extreme and paradoxical challenges that seem to be unsolvable within the existing architecture of the sector and its industries. Ports and terminals will also suffer from extreme tensions coming from their business environment where they have nearly no control on. In such a fierce context, the ports and terminals hope to perform miracles by adopting the i-4.0 technologies. It is essential for the sector and its industries to understand that i-4.0 technologies can only perform as enablers and accelerators for development of their organizational capabilities. The true origins of the organizational capabilities are the Intellectual Capitals of the firm. Therefore the preliminary condition of performing miracles by i-4.0 technologies is to enrich and enjoy the foundation of Intellectual Capitals. If such a foundation is not established and augmented, the i-4.0 technologies will only burden more complexity to the businesses of a port. In order to enter the new era, the ports and terminals shall invest in enrichment of their Intellectual Capitals and that is while time is the luxury they don’t have.
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