Terminal operating systems developers use economic downturn to focus on new technologies.
By Eric Johnson
During the depth of the economic recession in 2009 came an inflection point for investment in container terminal operating system (TOS) technologies.
Rather than use a downturn in volumes as a reason to retrench on investment and development, North America’s key players in the TOS space decided to double down, focusing on new innovations that would bear fruit when economic conditions recover.
That strategy yielded returns almost immediately for Navis, a major global third party TOS developer.
“The economic downturn has resulted in pent up demand in a couple ways,” Scott Holland, Navis’ vice president for product management, told American Shipper. “It’s resulted in a step function in demand. During a downturn, (a terminal might) take time to plan a project, but maybe not execute that project. So it created a lot of demand for Navis during the downturn. It also allowed us to pursue a lot of optimization and automation talent.”
There’s also the fact that terminals were seeking more efficiency for competitive reasons when container volumes rebounded.
“When there’s a downturn in container traffic, you end up with more competition from the terminals for the business that’s there,” Holland said. “There’s more interest in operational efficiency. What I’ve seen is more of a desire to improve operational efficiency and analyze the impact of the terminal on an ongoing basis.”
That differs from five to 10 years ago, when terminals tended to avoid taking such a methodological and analytical approach to automation and the handling of major vessels.
Claus Svendsen, chief process officer for the terminal operator Ports America, tells a similar story. He said the company saw an opportunity to upgrade its TOS in the aftermath of the financial downturn.
“With the crisis in 2008, development was put on hold,” Svendsen said. “But in late 2009 and into 2010, we started realizing the way to get out of the crisis was to put in more investment. We’re in an interesting position. In 2008, most competitors ducked down and we saw opportunities in 2009 and 2010 which required us to invest in our TOS. That gave us an advantage in 2010 when we got out of the crisis.”
There’s crossover when it comes to Ports America and Navis, mostly a result of the constituent terminal assets Ports America acquired over the years. The terminal operator’s network broadly falls under one of two scenarios when it comes to terminal operating systems.
Its East Coast terminals use Navis, while its West Coast terminals are managed with its internally-developed system M21, a platform initially developed by Marine Terminals Corp., one of the legacy stevedores that’s part of Ports America’s existing portfolio.
Some smaller Ports America container, bulk and breakbulk terminals use a system called DockWorks. Svendsen said the company’s goal is to move toward one TOS.
“The issue when you’re using so many different TOS is that you don’t have the economy of scale,” he said.
That scale is what makes Navis such a force in the TOS space. Holland said the focus is on creating a broadly applicable system that can be customized to account for differences in operations, like yard configuration, or transshipment or import/export orientation, or heavier use of rail.
“Are there different operational scenarios that create different functional requirements?” Holland said. “Transshipment versus import/export creates different layout or decking operations.
“The end result is that the TOS has to be really flexible and extendable. That’s something a custom software group can’t manage. On the other hand, there are a lot of things that are common across facilities, like rail gantry crane operations. There is a lot of commonality. As long as you build technology that recognizes that you will have local and regional flavors, you can accommodate it.”
Holland said Navis’ development is now aimed at yet more customization.
“We have taken an extremely open approach to development, so that if a terminal has a four-stage gate or two-stage gate, it enables them to have the ability to customize and extend the product,” he said. “Even our optimization engine will allow customers to customize those modules.”
Over the past year and into 2013, Holland said Navis’ innovation focus is on three core areas: optimization, rail, and migration enablement. The last of those relates to swiftly and smoothly migrating customers to Navis’ latest system, SPARCS N4.
“We’re really intent on enabling migration to the next generation system,” Holland said. “Most of the TOS used in North America are based on systems developed back in the 1990s, they’re based on legacy systems. We are therefore trying to get customers onto N4.”
The focus on migrating customers to Navis’ latest iteration also includes providing access via mobile devices, as well as providing it to sites that don’t have state-of-the-art connectivity.
“Lots of sites don’t have broadband and we still have to support those,” Holland said.
The rail focus is driven by ports’ increased efforts to build intermodal capacity. Navis is taking part in six projects worldwide (including two in North America) for semi- or fully-automated terminals. It’s no accident that automation and greater rail connectivity are intrinsically linked.
“With the scope of automated terminals, one of the things that happens is determining how we’re going to bring all this container volume inland,” Holland said. “That created a lot of impetus to create something on rail movement in and out of the port, to make the TOS more efficient to handle that. A lot of things around spatial modeling, handling truly decoupled operations. We are investing in a more operationally efficient rail module in support of much more complex rail operations.”
The driving factor behind increased optimization, meanwhile, is a more open framework. Terminal operators have performance demands of 40 container moves per hour. The demands per berth can reach 500 per hour in order for terminals to handle the larger class of vessels arriving in North America.
“As we saw the automation wave, we began to study the market externally,” Holland said. “We talked to potential customers about where they were going with automation and determined what their needs would be. We determined we needed a new framework for optimization.”
In North America there are four sites currently live on SPARCS N4 and eight more have licensed the solution and are in the process of implementing it.
Navis has to constantly consider the impact ever-larger ships are having on its ports and terminals customers.
“The larger ships demand better productivity and capacity,” said Oscar Pernia, Navis’ director of product management and automation. “With an 18,000-TEU vessel, you need to take off 300 to 400 boxes per hour. The challenge is huge. With these vessels, you need new ways of vessel planning. The shipping lines that have these vessels need capacity to make these vessels profitable.”
While cognizant of carrier requirements, Navis’ customer relationship is still with the ports and terminals that use its system.
“Where there’s crossover (carriers and terminals in the same group), it’s organic,” Holland said. “So if we’re talking about Maersk and APMT, we talk to APMT, but there is some background input from the carrier. In general, we know what the carriers are looking for.”
Svendsen, meanwhile, suggested TOS is really only the foundation of a terminal – it’s what the operator does with the TOS, and what complementary systems and expertise it provides that sets it apart.
“The TOS is just the brain,” he said. “The ancillary services are what allow you to differentiate. To a certain extent, you can use any TOS. It’s basically what you do around that that allows you to differentiate yourself from competitors. It’s not so much the technology. It’s more about improving the process around it, then building technology that allows you to improve the process further, that enables you to handle larger volumes then you were in the past.”
To that end, one needs to only look at Advent Intermodal Solutions, a former TOS developer that in 2012 acquired the eModal brand and is now focusing on those ancillary services to which Svendsen referred.
“eModal is more complementary to TOS products, with interfaces to the TOS products on the market,” said Mike Mayhew, Advent’s senior business development manager.
Advent is focused on amplifying investments terminals make in hard and soft infrastructure through systems that enable, for example, fee collections or drayage registries. eModal emerged last decade as a platform for truck appointments and matchback opportunities.
Mayhew said Advent is focused on enhancing eModal’s appointment functionality, bolstering it with interfaces for import availability and dispatching.
“We have a large population of truckers on eModal,” Mayhew said. “It’s heavily used along the West Coast. We’re looking at this opportunity to tap into mom-and-pop truckers and give them the ability to create appointments and to dispatch trucks. More along the lines of one-stop shopping. If you have a trucker that wants an appointment, they should be able to dispatch trucks, but also should be able to go into a drayage registry.”
Other eModal programs include RFID (radio-frequency identification) tag distribution in the Port of Seattle and registry for the Port of New York and New Jersey’s clean truck program. Advent, through eModal, is also prominently involved in the changing chassis environment in North America, offering billing and management solutions.
Like TOS providers, Advent still markets to ports and terminals, meaning operators have options when it comes to incremental innovations in container terminal management. That’s crucial when one considers that implementing a new TOS is not exactly like flipping a switch.
The timeframe is one to two years for a greenfield terminal and six months to two years for an existing terminal, depending on what’s needed, Svendsen said. He pointed out that Ports America got its TOS implemented in its Oakland terminal in six months.
“Off the shelf, you’re talking one to two years at the absolute minimum,” he said. “Greenfield is always easier. You cannot close down a terminal in the year or two while you upgrade, so you have to do the upgrade in phases, where you might close off part of the terminal.”
Holland said Navis is in a virtually constant development cycle.
“Navis is a very structured software developer,” Holland said. “We use that to set the cycle. Major release cycles vary from 6 to 12 months, and there can be numerous point releases. It’s really about ensuring you get the right content into the right releases. That’s the process and the timing.
“We’re talking about step function change. It’s not just maintenance,” he said. “It’s more keeping up with technology progression and the operational progression, so there’s a continually iterative process of innovation. You pick your points to productize that innovation.”
