Selecting Performance Indicators

Selecting performance indicators is an important part of the process of measuring port performance. A performance indicator is not only useful for a port as a parameter to measure its own performance but also to compare it with the performance of other ports. The selection should be undertaken properly due to the fact that there are a number of indicators which vary depending the categories of cargo (UNCTAD, 1976). Performance indicators for a container terminal may differ from those used by a bulk or passenger terminal.

Talley (1986) indicates two methodologies to select performance indicators, i.e. the criteria specification methodology and the operating objective specification methodology. The criteria specification methodology specifies criteria that selected performance indicators must satisfy (Fielding & Glauthier, 1976). The operating objective specification methodology requires specification of port’s operating objective(s) for the purpose of then selecting performance indicators (Talley, 1988). Performance indicators are choice variables (whose values are under the control of transit management) for maximizing or minimizing the port’s operating objective(s).

The operating objective specification methodology seems to be suitable to be adapted in selecting port performance indicators. That is because the methodology is expected to address criteria that would likely be specified under the criteria specification methodology and it specifically addresses the conciseness criterion. The criterion is important for limiting the redundancy and overlap among selected indicators, which means to limit their numbers.

Talley and Anderson (1981) classify operating objectives of public transit firms, including ports, as either effectiveness or efficiency objectives. Effectiveness is concerned with how well the transit firms provide service to users or clients. Efficiency refers to how well the firms utilize their available resources. An example of effectiveness objective is maximizing cargo worked. Minimizing cost in the provision of service is an example of efficiency objective.

According to UNCTAD (1976, 1987), the most important indicators to measure and evaluate port performance are financial and operational performance indicators. Financial indicators are concerned with costs generated by port operations and revenues resulting from the operations. In other words, the financial indicators are to answer two fundamental questions: what revenue is produced from a service, and what the cost of the service is.

It is suggested that the port area should be divided into berth groups (or terminals) where each group handles a different cargo class. The primary financial indicator for a berth group is the contribution per ton of cargo handled over a

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specified time period. To arrive at this indicator, the costs and revenues produced at the berth group are first calculated to indicate the portion of each element to the contribution. The elements to be considered for each berth group are:

a. Ship revenue related to the berth group (terminal)

b. Cargo revenue related to the cargo handling; services of the berth group c. Labor costs

d. Capital equipment costs (including amortization, maintenance and operating costs).

The operational indicators are the second performance indicators which are of more direct concern to port management than financial ones. The quantity of cargo handled per ship hour in port with a high figure being desirable is an excellent indicator to maintain port effectiveness. To maintain this indicator, information on the arrival time, departure time and tons loaded/discharged for each ship must be recorded. The time of berthing, ship length and location of berthing should also be noted. In order to permit measurement of the intensity of working, data on the total hours at berth during which the ship was worked and on the total gross gang-hours worked should be recorded as an addition to the above information.

The following averages that obtained from those records can be calculated on a monthly basis for each berth group servicing a cargo class:

a. Arrival rate b. Waiting time c. Service time d. Turn-round time e. Tonnage per ship

f. Fraction of time berthed sips worked

g. Number of gangs employed per ship per shift h. Tons per ship hour in port

i. Tons per ship hour at berth j. Tons per gang-hour

The above discussion shows that labor is an important element of either financial or operational performance indicators. Does it mean that the performance of the terminal could be judged by evaluating its workforce performance? Could workforce performance be solely measured apart from other terminal resources’ performance?

In answering these questions, Dowd and Leschine (1990) highlight the fact that the terminal productivity measurement is a means of quantifying the efficiency of the use of labor, equipment and land. Since the most general sense of terminal productivity is measuring output per unit of input, it would be worthwhile to link terminal productivity to labor cost. But instead of only using a quantitative measurement, a performance evaluation is also using a qualitative analysis. The purposes of using the both methods are to measure the level of the terminal labor performance and to evaluate the performance management system adopted by the terminal.

Talley (1994) identifies four indicators to measure labor performance used by Australian container terminal operators, namely number of employees, average age of total labor force, average hours worked per week and idle time percentages (the percentage of time employees are available for work but are not required to work). In addition, the Australian operators also adopt other indicators that mainly concern the utilization of resources, the amount of resources and port throughput (productivity).

As a conclusion, the indicators that will be used to evaluate labor force performance in this paper are:

1. The availability of workforce, 2. The utilization of workforce.

Another problem after selecting performance indicators is how to use those indicators to evaluate labor performance of the terminal. For the purposes of this paper, those indicators will be used to compare how significant the relationship between changes in labor force matters and its impact in improving terminal

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performance is. The analysis will result in determining whether the labor performance is improving, stable or deteriorating (Talley, 1994).