A Scheme on the Competitive Improvement of Port Hinterland in Busan Newport ? Based on the Measurement of Efficiency on North Container Hinterland

Gil Young Park

Department of International Commerce & Logistics,
The Graduate School, Pukyong National University

Abstract

This study first conducted Data Envelopment Analysis(DEA) on logistics centers using financial statements from DART(http://dart.fss.or.kr) of Financial Supervisory Service. The study secondly acquired competence factors and its order of hierarchy through factor analysis. These data then were analyzed using Analytic Hierarch Process(AHP) to further categorize them in the order of importance in improving competitiveness of logistics centers. Lastly, this study aims to provide a direction to improve competitiveness and expand opportunities for port hinterland which was developed as the part of major national projects.
To test efficiency of logistics centers in North Container Hinterland, using non-parametric DEA method, the study utilized financial statements of 19 logistic centers for the last three years. Efficiency level of annual average for logistics centers increased year by year. However, among the 19 logistics centers tested, 7 logistic centers are in need of improving their efficiency. Logistics centers which showed high level of efficiency in profitability index had better results in the DEA analysis as well. Among the 19 logistics centers tested, 40% needed to improve their efficiency. Revenue, profitability and net income peaked in year 2012 and hasn’t recovered until year 2014. This study implies to improve efficiency of port hinterland, pursuing economies scale through raising size of land and logistics facilities is necessary.
As for enhancing competitiveness of North Container Hinterland, this study can be summarized as follows. Firstly, for management and decision makers of logistic centers, marketing factor proved to be most important factor among first tier factors. Secondly, partnership with global company, which can provides cargo to logistics centers was ranked first place among the second tier importance order. Other factors such as port’s cargo volume, alliance with other logistics companies, and well-established infrastructure followed accordingly. Even for second tier, factors contributing to increase in cargo volume were ranked higher place. Third, considering the fact that “vicious cycle of insufficient cargo volume → fierce competition → drop tariff rate → financial difficulties” faced by logistics centers persists although considerable time elapsed.
From above mentioned study, following counter measures to improve competitiveness could be drawn. First, there is need to improve sales efforts as well as quality of service to ensure logistics centers are supplied with sustainable cargoes. In addition, there is need to seek long term partnership with customers. Second, strategic ties with related government organizations are crucial to induce global and big customers with large volume of cargoes utilizing governmental policy. Third, governmental policy should guide customers to frequently use port hinterland area. Fourth, there is a need to adjust supply plan of logistics centers by accurately forecasting goods being processed in port hinterland area to prevent fierce competition and sharp drop in rate. There also is a need for relaxed evaluation system on land rental fee and contract commitments failure which system is putting a strain on management of logistics center. Lastly, there is need to flexible policy for management of port hinterland area such as merging small logistics companies to create scale economies, acceptance of returning land lease, and change of business style etc.
World’s major logistics hubs are concentrating their competitiveness through combining production and logistics pursuing the goal of becoming green logistics clusters with the aid of large ports and airports. Turning port hinterland into the port clusters to add value, increase quantity of cargo volume in improving Busan New Port Hinterland’s competitiveness. Furthermore it also is an effective way to support nation’s plan of becoming hub for logistics hub in Northeast Asia.