Pushing Port Development in Indonesia

A World Bank project in Indonesia is seeking to reduce costs and improve supply-chain reliability – but are ports the chokepoint in the system, asks Gordon Feller

A largescale World Bank project in Indonesia wants to reduce the costs and improve reliability of the country’s logistics chain. Underlying the project is one key assumption - enhancing the movement of goods within and across this large country’s borders is the key to furthering the mediumterm economic development and poverty reduction goals.

SO, WILL IT WORK? This new US$400 million project is the first in a planned series of two such projects, both of which are designed to support critical reforms that address bottlenecks at various points in the supply chain.

SPENDING THE MONEY The World Bank and Indonesia’s national government is using the funds to focus on strengthening port governance and operations, enabling a competitive business environment for logistics service providers and trade processing being more efficient and transparent.

This ambitious project is structured around three sets of objectives, each one being aimed at a specific area of reform:

1) Enhancing port performance: Strengthening port governance and operations by better clarifying the role of Port authorities vis-à-vis port operators. It means that the emphasis is on facilitating the entry of port services operators and enhancing the coordination of documentary and container examination in ports. These actions are expected to increase in the share of Pelindos’ ports with internationally certified management systems, raise the number of applications for the Build-Operate-Transfer scheme for port development and reduce the average turnaround time in Tanjung Priok and Makassar ports.

2) Dramatically improving logistics services: Enable a competitive business environment for logistics service providers by increasing competition in freight forwarding services, storage and distribution services. Also, increase competition in auxiliary shipping services and reduce inventory costs of imported materials for producers. This project is expected to help increase the number of new foreign licenses for freight forwarders, warehousing and cold storage services, support new shipping agents’ (SUKK) and foreign maritime cargo handling licenses and raise the amount of logistics bonded centres.

8 World Bank wants to reduce costs and improve supply-chain reliability in Indonesia

3) Strengthening trade processing: To make the processing of trade flows more efficient requires many chang¬es, including a greater degree of transparency that comes from reducing licensing requirements for imports. The main aims are to reduce licensing requirements for imports, facilitate traders’ compliance with trade regulatory requirements, expedite the submission of trade documentation and improving risk management by border agencies. These actions are expected to help reduce preclearance time in Tanjung Priok port, increase in the share of

relevant regulations included in the Indonesia National Trade Repository, reduce dwell time in the two main ports at Tanjung Priok and Tanjung Perak and lower pre-clearance time for food and drugs imports in Tanjung Priok.

EXPOSING STRUCTURAL WEAKNESSES Over the last decade, Indonesia has seen strong growth and job creation, and this has resulted in poverty reduction. But the end of the commodity boom has exposed the economy’s deep structural weaknesses, with other sectors not able to take up the slack of commodity exports. As a result, growth slowed.

The need for efficient logistics is now seen as a vital element of Indonesia’s overall effort to boost competitiveness in all of the country’s trading sectors. In the opinion of both the government and World Bank, smarter and cleaner logistics can help to reverse the slowing of poverty reduction, especially in the country’s more remote regions.

THE NEED TO REBALANCE Indonesia needs to rebalance the economy away from commodity production, since those prices are declining. The shift must be towards manufacturing and modern services. Efficient logistics is one vital tool to make that happen, since smoother logistics move cheaper products from the source to those who should use them, whether it be the producers or the final consumers.

Large inefficiencies plague the logistics sector in Indonesia, which acts as both a drag on growth and a contributor to inequality. Logistics costs (transport, warehousing and inventory) are higher in Indonesia (25% of manufacturing sales) than in neighboring countries, including Thailand (15%) and Malaysia (13%). A large share of these costs is connected to carrying high inventory levels, due to a lack of predictability and due to the logistics chain’s chronic unreliability. On average, 19 out of 100 orders will either be late or (with some units) missing, which is a higher share than countries enjoying a similar level of income.

Almost two thirds of Indonesian manufacturers have inhouse, as opposed to outsourced, logistics activities - a clear signal of the lack of trust in the capability of local logistics service providers. Traders who wish to have their freight sent from Java or Sumatra to other islands are likely to be confronted with long supply chains, uncertainties in delivery time and high costs needed to compensate for at least 70% empty volume on the return voyage (backhaul).

Indeed, it is cheaper to ship a container of Chinese mandarin oranges from Shanghai to Jakarta than to send similar freight from Jakarta to Padang in West Sumatra, despite the distance between the former cities being six times further than the latter.

In a relatively remote archipelago such as Indonesia the logistics supply chain is typically long and fragmented. This project is trying to address the main chokepoints along the chain. At the port of entry the aim is to facilitate more efficient investments and port services, while at the border the focus is on improved clearance procedures and before/beyond the border the emphasis is on the final destination of goods through better logistics services.

Consider, for example, imported inputs used by a manufacturer in South Sulawesi. Inputs produced in a third country are first shipped to an Indonesian international port, often Jakarta, with the shipment typically managed by a logistics service provider (e.g. a freight forwarder) responsible for contracting the shipping service via a shipping agent.

The shipment has to be offloaded at the port and go through trade processing, which verifies its compliance with Indonesian regulations. This may involve as many as 12 ministries/agencies and multiple inspections for one product. Once the goods are “cleared” they may be loaded on another vessel for carriage to the Port of Makassar.

The container is then offloaded and loaded on to a truck inside the port, which may deliver it to a warehouse from which the consignment to the final destination would be arranged. Again, the delivery process may be organised by a third-party logistics service provider, which arranges the services of various other providers.

Bottlenecks in this chain, whether in terms of inefficient port operations, restrictions on core logistics services or delays in trade facilitation, have a particularly negative impact on manufacturing productivity both internationally and within Indonesia.

Inefficient port operations

Inefficient port operations, uncompetitive logistics services and lengthy trade procedures are at the core of the country’s inefficient logistics activities. Ports are often a bottleneck in the Indonesian logistics chain, hampered chiefly by inadequate infrastructure, although both burdensome regulations (in trade processing and investments) and low labour productivity do play a role.

The quality of port infrastructure, across the entire country, is a weak factor in the overall country’s competitiveness. Detailed work on 18 ports throughout Indonesia by the World Bank confirmed numerous infrastructure gaps. A key reason behind under-investment in the country’s port infrastructure is the lack of clarity on the respective roles of the port landlord and the port operator. Cumbersome regulatory requirements and inefficient procedures make trade processing a further weak link in the logistics chain. Indonesia ranks 105 out of 189 national economies in the “Trading across borders” indicators which are assessed within the World Bank’s “Doing Business” project, a successful global effort to benchmark countries against each other’s performance vis-à-vis ease-of-business.

The national government’s Medium-term Development Plan for 2015-2019 (aka “RPJMN 2015-2019”) includes “efficient logistics” as one of the priorities of its economic development strategy. The effort is guided by two high-level strategies, i.e. the national logistics blueprint (aka “SISLOGNAS”), and the implementation of the Indonesian National Single Window (INSW), which aims to facilitate trade flowing into and out of the country. Improving logistics performance, especially maritime, can have important poverty reducing effects in an archipelago like Indonesia. More efficient logistics would also allow greater domestic market integration. As poverty is relatively higher in remote regions, especially in Eastern Indonesia, lowering prices there would have a particularly important poverty reduction effect. Unemployed and poor workers can have access to greater income earning opportunities and small and medium enterprises are able serve a larger number of clients and have greater access to inputs. T wo national priorities are under intense scrutiny - reducing container handling time in selected international and domestic terminals and lowering travel time f or selected links to the ports. Both are clearly needed.

SPREADING THE LOAD FASTER AND BREAKDOWN LESS

John Bensalhia looks at notable recent trends and developments for container-handling spreaders and talks to equipment suppliers about their activities

“Put simply, the trend for spreader use in container terminals, now and forever, has been to lift more boxes faster and have less breakdowns.”

So says Cameron Hay, Head of Sales & Marketing, RAM Spreaders, in outlining the major crane spreader industry trend and one which holds true for all container terminals around the world. Yet he adds that greater capabilities are being introduced to meet modern requirements of container handling, resulting in a number of additional recent trends can be seen – all of which help boost reliability, easy maintenance and lifting of heavier weights.

One notable trend is the progression of single to twin and now to tandem spreader. The tandem spreader allows for a number of benefits in container handling, especially greater speeds in loading and unloading multiple containers simultaneously from large scale vessels. “All major ports will operate tandem in five years,” says Cameron Hay. “The technology is mature, and the flexibility of the RAM design means we have now 150 units delivered or in production.” Bromma’s Tandem telescopic 40’/45 spreader is also capable of handling different kinds of container sizes. It can twin lift 20´, 40´ or 45´ containers side by side in tandem mode, without having to change.

POTENTIAL SAVINGS BLOK Container Systems’ spreader works on the same principle, with the ability to lift and transport four empty shipping containers as a single block. As Selwyn Rowley, BLOK’s director of sales and marketing explained, this spreader hastens the container handling process while reducing congestion and emissions – and saving money. “Ports around the world handle 679 million containers

8 Spreaders have to lift more, faster and breakdown less

annually of which around 24% are handled empty. Container terminals charge at least £100 and often much more per lift, so the potential savings created by being able to move four at a time rather than one unit can run into the billions.”

Bromma introduced its new Spreader Monitoring System, SMS at TOC Europe in June 2019. “Bromma SMS is a Cloudbased application that helps the terminal operators to understand the health of each spreader in their fleet,” explains Lars Meurling, Vice-President, Marketing, Bromma. “Monitoring fleet data, analysing performance and providing real-time dashboards with detailed information to operations and maintenance functions in the container terminal. The first commercial agreement is signed and a terminal in Europe is now starting to see the power and the benefits with the system.” Elsewhere, Swedish Spreader manufacturer ELME Spreader launched 817 INNOVATION, its New Generation Spreader for laden container handling. The new design implies a lighter spreader with enhanced durability, increased life expectancy for structural parts, optimized hydraulic system and numerous other improvements. With the unique combination of 16% reduced weight and increased structural strength the spreader is estimated to have an increased life expectancy of 30 %.

Niklas Lefévre, Head of Sales and Marketing at ELME explained, “In general 817 INNOVATION is a stronger spreader when it comes to torsional stiffness. When we say we have a 30 % increased life expectancy, we relate that to fatigue resistance in standard load case conditions.”

Lefévre outlines further. “The reduced weight also enables opportunities for the reach stacker. One possibility is to increase the lifting capacity in second and third row and another to keep the same capacity but reduce the counter

weight and enable reduced axle load, tyre wear, fuel consumption and lower strain on the chassis.”

The spreader also brings forth another innovative item since 817 INNOVATION is equipped with lubrication free twist locks – a solution that will reduce the need for, and time spent on, maintenance.

NEED TO BE READY FOR THE ROUGH Increases in container weight, crane hoist speed and acceleration can all affect spreader usage. Pieter Verdonschot, Product Manager, Spreaders, VDL Container Systems, comments: “The spreader is one of the most vulnerable parts of the crane and is also the most heavily abused parts. This is not a good combination. However, our customers are aware of this and act accordingly. The robustness of the spreader is a heavily rated spreader topic.” “The environment for port lifting equipment is getting rougher,” says Lars Meurling, adding, “Over the past 10 years, the average weight of a container has increased at the same time as crane hoisting speed and acceleration. This results in extra forces and strain on the equipment and especially on the spreader. Bromma continuously monitors and checks lifting classifications, given any new circumstance.

RAM has come up with a solution to combat the heavy impact that the spreader is subjected to with its RAM ShockAbsorb product. This is an Impact Suppression System that prevents spreader damage, increases the longevity of the spreader, and reduces impact noise.

HIGHER LEVELS OF WEIGHT Modern spreaders are designed to accommodate higher levels of weight. Modulift’s adjustable lifting/spreader beam has the ability to lift up to 27 tonnes. This includes a new clamp system which allows for lifting from different points, as well as a redesigned safety mechanism that makes it simpler for one person to perform the job and to slide and safely lock into place.

The right choice of spreader can make all the difference to crane operations. Selecting a cheaper spreader may save money in the short-term, but in the long run, it ends up costing far more. A sub-par spreader could potentially result in damage to the crane – causing a far heftier bill for either repairs or investment in a new model. As well as this, it is important to spend the money on maintaining the spreader. Cutting corners with spreader investment and maintenance results in far more problems. Bromma clearly understands the financial implications.

Lars Meurling says that the cost of a spreader is less than 2% of a quay crane, but the impact of a sub-standard spreader can be dramatic. “A common figure used is that 30-50% of quay crane downtime is related to the spreader. An investment in a high-quality spreader may be one of the most important decisions to take when investing in crane equipment.”

Cameron Hay concurs, explaining that the cost of a spreader is a tiny fraction of the cost of a crane breakdown and lost revenue and productivity. “Yet many terminal operators will opt for low cost spreader specifications or choose to not maintain them to the required standards.”

Hay says that this is counter-productive, and the breakdown of a crane will be detrimental to a port’s productivity, leading to a loss of revenue. “Though it is essential that ports maintain their cranes, they do overshadow a key ally to the container handling operation. A reliable and robust spreader is important for any port operation. If anything goes wrong with the machinery, this will inevitably cause a chain reaction that slows down operations.”

INTEREST IN HYBRID PIGGYBACK SPREADERS Spreader demand continues to grow for global container handling. Last year, VDL Container Systems supplied a hybrid piggyback spreader, which “combines the advantages of a fully electric spreader with the possibility of handling trailers.” “Only when the spreader is in piggyback mode (handling trailers), then the powerpack is active,” explains Pieter Verdonschot. “When in Twist lock mode, the spreaders are operating fully electric, resulting in less energy consumption as well as less maintenance costs on the spreader.”

Bromma reports a sales and order intake increase from 2018 to 2019. Lars Meurling says that orders for crane spreaders grew by 32% and sales growth was even higher at 41%. “The magnitude of the growth is higher than market growth in general, which means that market share has increased.”

During the second half of 2019, Bromma won five large orders for green-field or capacity expansion projects. Meurling explains that each of these orders has been for between 10 and 30 all-electric YSX40E or YSX45E single-lift yard crane spreaders.

In addition, two major orders for respectively 10 and 12 STS45 quay crane spreaders were received for new capacity projects. In December 2019, Bromma received a major replacement spreader order of a total of 46 spreaders from a terminal in North America.

BLOK has continued to see demand for its products this year, with more trials for its spreader at a London container terminal. The BLOK spreader will be used to double the speed of loading and unloading the terminal’s empty containers.

FUTURE IS REMOTE DIAGNOSIS With regards to the future, Pieter Verdonschot says that remote diagnosis will become more and more important in order to monitor the status of the spreader continuously. “This will enable doing predictive maintenance in time and will reduce downtime.”

“Developments in the spreader market over the years has seen the progression from the standard single lift spreader, to the twin lift spreaders of today,” concludes Cameron Hay. “With the introduction of the tandem headblock, it represents one of the biggest developments in container handling since the introduction of the twin lift spreader.”

He concludes, “The natural progression is that within 10 years, all cranes in big terminals will be tandem as standard. We have seen the benefits of introducing tandem as part of our product portfolio, with a large number of units in operation and on the order books.”

8 The right choice of spreader can make all the difference to crane operations