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INTRODUCTION
In all markets and business in the world today, the expansion of customer base
to achieve this, certain factors are put into consideration. All but two of these
resources while at the same time reduce cost to its barest minimum to make
profit. Even business competitors gain advantage over the other through cost
many instances, they take the form of developing new products that deliver
what customers need more cheaply. Therefore, product development can have
the same ultimate effect as direct cost reduction. In fact if one thinks of the
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among port operators and privatization of our ports have increased the desire to
attract port users. Therefore, port operators will have to optimize the cost of
their operations if they must benchmark good productivity and performance for
their terminals.
There is no doubt that the maritime sector, ‘the key to the world’s economy’
especially the port system is vital and instrumental to the national economic
nation, renowned for her international nature of business with her enormous
natural resources like crude oil, iron ore, coal, etc. Quality customer service is
the measure for the maritime professional and customer care techniques.
customers at a lower price and also be able to make profits. With regards to
costs emanating from the vessel, it can be affirmed that port costs, above all are
the most significant, since they depend on the gross tonnage of the vessel and
Bulk carriers are those which tend to spend most time in port as well as being
the greatest in size. The costs of towing, which depend on the circumstances of
the movement, tend to represent approximately 10% to 15% of the cost scale of
the vessel (Valverde, 1995). More so, other costs due to the vessels stay at port,
including agency fees average approximately 5 or 10% of the total. The port
tariffs on the merchandise are situated at less than 50% of the total. Where all
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costs of unloading are considered in relation to port costs, the former are
situated at about 70% of the total where all costs are also included storage,
weighing etc. With a clear tendency to drop when using cranes of greater
efficiency and capacity, about 30% would correspond to port costs (Asiegbu &
Nze, 2013).
It is evident that Nigerian ports operate at very low optimal capacity, in spite of
the expected large volume of cargo traffic that passes through it. It is very
pertinent to note that vessel delay period is a very serious problem that
contributes to over 60% of our ports low productivity problem in recent times.
(Ndikom, 2008) further confirms that regrettably, at Lome port, dock workers
load 700mts per day as against less than 250mt per day at Nigerian ports. The
five days difference in loading arrangements between Nigerian ports and other
ports in terms of ship delay rate billings of US$4,000 is rather too staggering
and unfortunate. In clear terms, this is enough to deny Nigerian ports cargo and
revenue that would ordinarily have come our way. (Kaspi, et al, 2006) looked at
turnaround time and port cost which was highly related with allocation of port
facilities. (Beatriz et al, 2004) argues that the optimal organization of the
reviewed the literature on econometric ports’ structure and propose that the
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calculation of key cost indicators (economics of scale, scope and so forth) is
best in determining optimal port structure in order to minimize the cost of port
operations.
In the light of the above, this study attempted bridging the gap by offering an
It is evident that Nigerian ports operate at very low optimal capacity, despite the
expected large volume of cargo traffic that passes through it. It is quite pertinent
to note that vessels delay period is a very serious problem that contributes over
60% of our ports low productivity problem in recent times as mentioned above.
dock workers load 700mts per day as against less than 250mts per day at
Nigerian ports in terms of ship delay rate billings of US$4,000 rather too
ports cargo and revenue that would ordinarily have come our way. Over the
operations especially on the six major ports in Nigeria, which are Lagos
(Apapa) port, Tincan Island, Rivers, Onne, Calabar and Delta port.
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1.3 Objective
The broad objective of the study is to analyse and achieve optimum cost of port
operations, optimize cargo flow and reduce terminal unit costs which positively
objectives include:
operational efficiency.
The following research question was used to extract needed facts from the
respondent.
operational efficiency?
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1.5 Research hypotheses
This study attempts to optimize the cost of port operations in Nigeria. With
regards to costs emanating from vessels, it can be affirmed that port costs,
above all are the most significant, since they depend on the gross tonnage of the
vessel and the time it spends in the port. Bulk carriers are those which tend to
spend most time in port as well as being the greatest in size. As aforementioned,
this study attempted bridging the gap by offering an optimal cost to port
operations in Nigeria.
For the purpose of this study, emphasis will be solely placed to minimize the
cost of port operations. The analysis will be based on the data gathered from
secondary source by the researcher and analysis will purely be based on linear
programming model.
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1.8 limitations of the study
i. Problem of Data Findings – Finding reliable and accurate data has always
been a major challenge. I had to travel far and source deep on the internet before
ii. Financial constraint - Insufficient fund tends to limit the efficiency of the
iii. Time constraints - The researcher will simultaneously engage in this study
with other academic work. This consequently will cut down on the time devoted
iv. Epileptic power supply – Inadequate power supply has also greatly
hindered efficiency, as a bulk of the work is done over the internet and typing
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CHAPTER TWO
LITERATURE REVIEW
The global financial crisis, which started with sub-prime mortgages in the U.S.
in late 2007, has spread like a ripple effect across all businesses leading to a
severe liquidity crunch. The severity of this can be seen in GDP numbers per
cent to about 7 per cent in 2008-2009 and the estimates for 2009-2010 are at
about 5 per cent. During the boom period, several businesses pushed for high
revenue growth with consequential increase in costs. As burn rates soared and
the market plummeted, businesses became conscious about their failed thoughts
optimization of product and strategies that may last longer than what was
understanding first what cost is actually. ‘Cost’ is the price paid or required for
time, or energy; expense or expenditure; loss; penalty. Cost is the amount paid
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Cost optimization is finding an alternative with the most cost effective or
reducing the baseline costs of the business while maintaining acceptable service
levels. It reduces the target cost by a systematic approach and giving the
customers good if not better value for their money while reducing cost of
production. Cost optimization must be done in such a way that it does not
changing the number of indicators used, or simply taking away what doesn’t
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Cost optimization is one of the four fundamental methods of improving
profitability and sometimes the only way open to companies for profit making.
Raising of price, increasing of sales volume, and improving the product size are
other ways of increasing profit. However, these later three ways are usually
external to firms and as a result beyond their control. For instance, increase in
e.g. price control policies. Therefore, cost optimization is the only safe and
simple way of increasing profits since it does not depend much on external
According to E.J. Broster, there is only one objective peculiar to all firms and
i. By expansion and
immediate aims subservient for the ultimate one of making more profit. He
production by one percent. All things being equal, it will have a commensurate
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achievement of a realized and permanent reduction in unit cost of goods
manufactured or services rendered without impairing their suitability for the use
intended.
windfalls change in market prices etc, does not fall in the purview of
cost optimization.
services for the intended use. In other words, cost optimization should
services. The term therefore is used for planned and positive approach
to improve efficiency.
Wild (1980) states that: it is the attempt to manufacture goods of low cost
through minimizing the materials used. Both Arora and Wild are of the
opinion that the reduction should come from an organized and planned
that if a supplier gives cash discount because he wants to attract more sales,
though it is a fact that overall cost of the product will be decreased as a result
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Recognizing such discount is against official cost optimization program.
This however does not prevent firms from looking for suppliers that have
not practicable to develop fully the areas in which it can be applied. Cost
Effort therefore should be made to minimize cost right from the top level to
finance are also areas where minimization strategy can be adopted. The most
effective strategy is one which embraces all aspects of the firm’s operation
system and products, and those which have full top management support and
Difference between cost control and cost reduction: the two most important
the management that actual costs are aligned with the budgeted costs or not.
2.1.3 Cost Reduction is a technique used to save the unit cost of the product
without compromising its quality. Now, you can see the differences between
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2.1.4 Why cost reduction programs fail?
Programs to reduce costs are the most difficult form of organizational change to
when head counts are cut. The heart of any business’s strategy is efficiency and
trimming the fat. Many businesses are seized of growing cost base and their
behaviour but also in their mindset or thinking to gear up for high performance
economic cycle. The higher a firm’s cost is above those of close rivals, the more
well it manages its value chain relative to competitors. Costs of performing each
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b) executional cost drivers such as continuous improvement, quality, cycle
take a holistic look at their organizations to ensure that any changes have
Typically, cost reduction programs deliver short-term tactical gains and do not
team to perform. Mistakes and surprises are inevitable in any cost optimization
regulatory processes, costs can be reduced and time freed up for the
management to play a more strategic role. In finding solutions, there may be the
technologies.
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2.1.7 Need for cost optimization strategy
budget to support innovation and Merger and Acquisition expenses. There are
profitability and stakeholder’s value, it also releases scarce resources that can be
processes and systems. The larger and more sophisticated an organization is, the
greater will be the drag on implementing change within required timescales and
costs.
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2.1.8 Steps in cost optimization
Some six critical steps are outlined that can enable companies to deliver
significant and lasting cost reductions. These steps executed consecutively, can
be carried out separately for various categories of costs, including personnel and
non personnel costs. However, the time frame devoted to each steps depends
heavily on the level of urgency to reduce costs. If costs have to be cut right
away, the first steps can be taken rapidly, and efforts to reduce costs in different
Ensuring that company leadership and top management are in agreement about
the need for change is probably the most crucial point for the success of the
whole program. Before they begin, company leaders should clearly state what
they hope to achieve with firm, measurable targets whenever possible and then
rank these goals by level of importance. The aim is to ensure that the cost
The scope of the effort- the business units or functions that will be included
must be clear and spelled out, at least among senior managers. In some cases,
such an effort may cover every facet of the company, while other programs may
target only certain business units, cost items, or specific functions such as HR or
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should be outlined. At the same time, the areas that are off limits have to be
It is helpful to keep a couple of things in mind when defining the scope of the
program. First, the largest cost categories should be included in the effort unless
there is a very compelling reason to exclude them. And focus is critical: if there
is a small division with a separate organization and cost structure, for example,
it may make sense to leave that unit out of the program to avoid unnecessary
complexity.
Once the scope and goals are clear, management must decide when and how
employees will be involved in and informed about the program, and how their
participation will evolve over time. This means establishing clear rules for how
the process will move forward, making sure all managers are in agreement, and
providing a steady flow of information about the program’s progress. This does
not mean however, that everyone will have access to the same level of
In addition, a compelling message describing why the efforts is critical for the
and customers. Since many organizations suffer from fatigue from prior cost-
cutting efforts, this step should explain what will be different about this
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from management. If management’s firm commitment is not made clear from
the start and not reinforced over time, chances of success are slim.
In order to sort out exactly how cost reduction opportunities will be identified
methodologies on the basis of the goals and scope of the program. Pulling
together the right group of methodologies is not a simple task. There is a well
variety of tools available for executing each of them. The trick is to tailor that
major factors in this determination are the industry sector and the type of
expenses that are on the table- which might include personnel and non
service, the cost of goods sold, working-capital costs, and capital expenditures.
The company’s culture, the urgency with which cost savings need to be
achieved, and the way in which management wants to drive change through
centralized or decentralized effort, for example will also lead to the selection of
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or against other business units within the company can be a particularly
effective way of identifying strengths and weaknesses. The goal of all these
2.1.8.3 Determine how efficient and effective the organization is and set
With the methodology and tools selected, the in-depth diagnostics starts. Take
the case of personnel costs. One of the most common methodologies for
determining what tasks people actually do in their jobs, a process that gives
A bottom-up process is the best way to generate ideas about how to deliver the
and employees further down in the organization outline concrete initiatives and
programs that will allow them to hit the set targets. Sometimes, however, people
within the organization believe that their targets are not achievable. In that case,
they need to prove why they cannot hit their goals and outline what level of
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Creating concrete initiatives to hit the targets is often best achieved through a
series of workshops during which managers and employees work out the details.
The teams should consist of the individuals who know the processes or
stream mapping, a technique used to analyze and design the flow of materials or
information across multiple groups, which involve employees from all affected
Once the program measures are outlined and have been kicked off, it is critical
the plan. Early wins and success stories in implementation generate cost savings
to fund investments that will make the changes sustainable and build real
when the whole effort stretches out over a period of years. To ensure that
progress continues, all these measures and milestones should be put together in
one comprehensive execution plan so that each one can be tracked over time
and steps can be taken to address setbacks, shortfalls in cost savings and delays.
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A central project-management office (PMO) frequently monitors the
implementation of the measures. This ensures that there is one central group
that has the right tools to keep the effort on track and a process for correcting
problems that threaten successful execution. The role of the PMO however is
PMO should take an activist stance, continually looking for new opportunities
providing early insight into the impact that the cost efforts is having on the
company’s financial results. In this way, the PMO becomes more of a partner of
management and not just a unit tasked with executing one plan.
Just as important as the execution, of course, is the effort to make changes stick.
After all, old habits are often cemented in a company’s processes and can
The overall process outlined here certainly goes a long way to prevent
backsliding. But there are additional steps that can be taken to make the changes
Manufacturing and service units can establish mechanisms for closely tracking
certain critical KPIs, and processes can be continually studied for improvement.
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benchmarking against competitors can maintain the necessary focus on
efficiency. Processes can be created for filling new or vacant position to avoid
can be changed to drive higher quality. These steps along with many other
proven tactics can embed the new, more efficient processes deep into a
process that allows a reversion to old behaviours. That can be achieved only if
in the US Air force during the world war 11 and the areas he emphasized at the
developed and formulated the Simplex method as a basic solution of the Linear
extended to business organizations after the Second World War and has since
working with the planning of optimal transportation of ships back and forth the
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Kuhn and Tucker (1950) developed further the technique of linear programming
independently in the United States of America. They were the first to use linear
paper and oil industries and in the minimization of freight or transport costs.
and the price system. Assar (1957) extended the work of Kantorovich to deal
with more than one commodity and can also provide a measure of the
procedure that may speed up the routine handling of problems by business and
government agencies and also make it possible to tackle problems that can be
telephone calls over long distances, or whenever time must be allocated most
efficiently among competing users. The above trend has continued with varying
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degree of studies going on in the area of and application of linear programming
systematically choosing input values from within an allowed set and computing
Time – cost optimization: using GA and Fuzzy sets theory for uncertainties in
cost is also reviewed. This theory fully embeds the fuzzy structure of the
http://dx.doi.org/10.
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2.2.1 Implementation of cost optimization strategy
Technology can play a critical role in securing long term competitive advantage
borne by the users of shipping services of which this study is more concerned
with.
Costs borne by ship operators are factors which determine the price for shipping
services. In shipping services and operations, there are four groups of cost and
they are:
i. Overhead expenses
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2.2.3 Cargo or Direct costs
These are variable costs, as their amount vary with the quality and nature of
cargo handled to or from ship. The direct cost include the following items; cost
These are the prices required by any port authority for services rendered, which
are distinct from facilities provided in connection with the handling of cargo.
Major port charges, which form the main sources of income for a port, are
According to Iheanacho (2005), rates are prices required for different services
performed, while dues are broadly divided into two main classes – dues on
vessels and dues on goods. Dues on vessels are otherwise known as tonnage
dues or duties on tonnage, the usual basis of payment being a certain sum per
a. Port dues on ship are calculated on the basis of the ship’s characteristics such
as gross registered tonnage (GRT), length of overall draft of the ship. The port
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b. Port dues on cargo, which normally covers the utilization of port
a. A tariff for the utilization of berth, mostly calculated as the function of the
vessel’s characteristics.
d. Dockage tariff.
e. A pilotage tariff.
f. A towage tariff.
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j. A tariff for penalties on demurrage, double handling, cancellation of
Port handling rates depend on the type of cargo served. They are high for bulk
cargo than for break bulk cargo. Cargo utilization (containers, pallets, etc) has
led to considerably reduced unit handling cost and therefore increased labour
port reform implementation, revenue in improved form will accrue to both port
especially the introduction of large container vessels in most routes. These very
large container carriers (VLCCs) and Ultra large container Carriers (ULCCs)
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has improved ship and port productivity immensely. This has allowed ships to
achieve low prices. They observe that container vessels capable of carrying
more than 6000 TEUS are serving most trading routes especially developed
countries ports.
presently on the drawing boards of naval architects. It could take just nine (9) of
such vessels to serve a trading route between Europe and North- America.
quality of services rendered to customers mainly ships and cargo owners will be
inconsistent.
Management control of time especially among other port resources will ensure
Cost control measures in port lead to efficient and cost effective port
effectiveness occur concurrently for the port user to admit that the port is user
friendly (Prebir De and Chosh, 2001). To the port user, efficiency and cost
effectiveness in port will enable him predict and forecast the outcome of certain
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decisions taken with certainty. He could predict in advance the output of certain
input resources such as time, fund and labour. Mostly, time efficiency and
more new customers, fewer lost of customers and more insulation from price
competition.
return on investment. It cost about five times as much in time, money and other
business environment such as the port. The only way to ensure customer
ship operation involves a very labour intensive process. This has been the
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Congestion is a chronic problem that raises the cost of transportation to
countries whose ports experience it. It hinders the growth of international trade
Shippers and ship owners must choose those ports where their cargo and ships
increased cargo handling rates at the port will help remove congestion in the
ports.
Yuan and Chih-Wen (2002) advocated for the introduction of hub ports. The
carriers. Here, full economies of scale in port operation are enjoyed by calling
ships. Typical examples of hub ports are Singapore, Hong Kong, Rotterdam,
Antwerp etc. The hub port operates a kind of complex system known as ”hub
and spoke network”. The system enables big cellular vessels to call at the hub.
With the availability of feeder services, the huge surges of containers are
forwarded to regional and local ports and, economically efficient. The system
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shipping to various local and regional ports on the hub network has been
reduced.
Improved cargo handling rate will positively affect turnaround time of ship in
ports as well as improve port viability. The discussion so far has revealed that
increased cargo handling performance leads to reduced shore and berth costs.
This will definitely lead to reduction in freight rates and overall maritime
transport costs.
Nigeria port systems before early 2006 was a public investment run by
budgetary allocation, which in most times are released very late and in some
spread across vast locations within and outside the ports is obsolete.
He also decried the situation whereby the nation depends on trucks rather than
rail transport for mass movement of hinterland bound goods from the ports. The
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Uzoanya (2000) is of the view that the presence of so many government
agencies in the port, all performing the same duty of physical examination of
cargo causes delay in cargo clearance as well as high cost of doing business in
escalating the cost of clearing goods in port. He compared the delay witnessed
in clearing goods in both Cotonou and Lagos port. Uzoanya concludes that no
obtain quicker and cheaper services for where he would waste time. Hence, the
a significant inducement in both monetary cost and time which makes Cotonou
port preferable to Lagos port. Cotonou port, he said has all necessary equipment
Apart from the over twenty six (26) government regulatory agencies operating
in the ports, the customs inclusive, Uzoanya identified the splitting of the
customs staff into various units such as federal operations unit, custom
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officials make indiscriminate and unreceipted monetary demands. However, the
customs department claimed that the setting up of the various units is a measure
headache the ports in Nigeria have to tackle in order to remain relevant to the
all her foreign trade through her ports and playing a leading role in maritime
industry in the West and Central African sub-region can only be achieved in an
operational standard in terms of port costs and operational delay in the ports. In
a world faced with the challenges of growing competition and globalization, the
way a port industry could meet the customer’s desire is by ensuring satisfactory
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operates with minimum delay, utmost efficiency and at a reasonable cost to
users.
Gwandu, in his submission has listed the following as reasons why corruption
relevant revenue.
gratifications.
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8. Vandalization of port and navigable facilities e.g. buoys plants and
equipments.
accidents whose wreckage deter ships from accessing the entry channel
vessels at the berths, thus delaying incoming vessels and prolonging the
15.Faking the port authority’s receipts of payment, indicating that bills rose
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Adequate logistics are not often out in place for the adoption of the new system
often scare shippers who divert their shipment to neighbouring ports. Also, the
incoming ships may not be pleased with the sudden changes in policy hence
moves to other alternative ports outside the country to discharge their cargoes.
This leads to dwindling fortunes to Nigerian ports and the entire economy.
These changes in policy often put custom officials as well as importers into
confusion and before they could realize themselves, congestion may result at the
port. This above scenario may aid smuggling, which proves unpalatable to the
economy. This also prompted calls for reform in the port industry.
congestion and delays that impede port efficiency in Nigerian ports, the NPA
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government for the support of port sector and attract private participation so as
of the impact of the concession exercise on port efficiency, they found the
concession exercise was not fulfilling its objectives as there still seems to
appear problems of inefficiency at the ports with a 45% charge imposed without
being tied to any services rendered due to corruption; cost of port services to
users increased, turnaround time has not significantly improved, same as berth
security. They are view that this is due to the government and concessionaires
not working in consonance with the terms of the concession so as to bring about
(2013) carried out a similar study but with Onne seaport as a case study with
aim to ascertain the impact of the reforms on port performance i.e. increasing
efficiency and raising cargo throughput volumes found out that, reforms have
been beneficial to the ports and invariably the economy, has also significantly
improve cargo throughput, dropped berth occupancy rate and achieved faster
vessel turnaround time. This she attributed to better cargo handling equipments
and ships with larger drafts visiting the ports due to the dredging activities
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1. Provision of integrated intermodal transport system.
operations.
4. Stoppage of sitting oil despot (Tank Farms) in port areas as they take up
of Nigerian ports since inception against the port concession era, found that
there was higher cargo throughput in the industry in the post concession era
and the concession exercise has led to the emergence of very large vessels
technology and reduced unit freight cost, but showed that ship turnaround
time in the ports is still high at average of 5.22 days against the international
46.6%in the ports. This implies an under capacity utilization of the ports.
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2.3.5 Optimization of costs of Port Operations in Nigeria: A Scenario For
Asiegbu B.C. and Ibeawuchi Chibueze Nze from the research work with the
above title deduced that the optimal cost of port operations is given as
231.3835 US dollars per ton handled in a Nigerian port. This means that for
$231.3835 as charge for handling a ton of cargo. They also found out that
685.7727 US dollars can be paid in hiring a unit of the gang time while 0 US
dollars can be paid in hiring a unit of ship turnaround time and warehouse time
to continue to remain optimal. The resources which are the available time for
gang labour, ship turnaround and warehousing will continue to remain optimal
as long as gang time lies between negative infinity to 1357.773 hours; ship
time between 0.3143 hours to infinity. They concluded that for effectiveness of
really is. It should therefore make profit, maintain itself and provide reliable
and efficient services for the revenue it receives. Asiegbu, B.C. and Ibeawuchi
Chibueze Nze: West African Journal of Industrial & Academic Research Vol.6
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2.4 Summary of Reviewed Literature
optimization and need for cost control and cost reduction. It further lays
performance.
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CHAPTER THREE
This section of the project presents a description of the procedure used. The
research approach, the variables definition and the chosen data analysis method
employed are explained. It also unveils validity and reliability used in the study
from empirical observation using Nigerian ports as the basis for the study.
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3.4 Study Area
The study area for this research project is all major ports in Nigeria. These are
Lagos port complex, Rivers port, Onne port complex, Calabar port and Delta
port.
In the course of carrying out this project, data required for this study were
existing documents and published materials such as the NPA Simplified Tariff,
NPA Handbook, NPA Annual Reports, Current Publication, Journals and from
the internet.
profit or to minimize costs. The program is designed to help the production and
linear programming model enables the manager to make optimal use of limited
money, materials, skills, time and facilities etc. The decision maker then aims at
finding the best decision or outcomes with the scarce resources. The decision or
general welfare of the society etc. The technique involves formulating a given
problem as a linear programming model with the variables clearly identified and
of the variables X1, X2, X3, X4 X5, X6………., Xn that satisfy the constraints:
Against the above backdrop, the objective of this study is to expose and arouse
techniques in real life situations just like the purpose for this research. The
techniques with the benefits derived therein. The technique assumes a linear or
produce solution which is improved upon until the optimum solution is reached.
To capture all the issues involved, our discussion will focus on the following
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key areas: The historical origin of linear programming techniques, basic
will also take more than a cursory look at formulation of linear programming
To solve some problems using the linear programming approach, some basic
conditions must be met. These requirements can be grouped into two main
model. The components can be grouped into 4 major categories. They are the
objective function, the decision variables, constraints and the parameters. These
profit, costs etc. This is done by either maximizing or minimizing the objective
function. The objective of the problem must first be identified and then
effectiveness of the system. The aim is to find the optimal value of the objective
function.
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3.6.2.2 Decision Variable: These are the unknown variables to be computed in
the models. Decision variables, represent choices that are available to the
etc .If XI, X2…….. Xn are decision variables and P is the profit to be
+…… an Xn
Theory and Modelling. The constraints limit the value of decision variables in
linear inequalities.
I. Marine service costs denoted as X1: includes cost paid by the shipping
line for compulsory marine services such as pilotage, berthing and tug
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assistance. It is usually incurred when entering and leaving the port, and
II. Port Dues denoted as X2: this are charges levied by the port to all
of the ship based upon its tonnage certificate. It reflects the provision and
aids.
III. Cargo dues (also known as wharfage) denoted as X3: fee levied by the
port authority to the users (exporters, importers or shipping lines) for the
movement such as quays, access roads, railway lines etc. This fee is
IV. Terminal Handling Charges (THC) denoted as X4: the fee collected by
terminal operators from shipping lines, who in turn to recover from the
containers and other related costs borne by shipping lines at the port of
shipment or destination.
V. Bunkers Cost denoted as X5: includes the cost of oil, water and other
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VI. Government Requirement Cost denoted as X6: includes cost paid to
associated cost.
VII. Supplies Cost denoted as X7: includes the cost of Chandler and
cost.
VIII. Loading and Discharge Cost denoted as X8: Comprises the cost
and fitting, Equipment rental, Agency fee and other related costs.
IX. Storage Cost denoted as X9: includes cost paid for Yard Handling,
3. Warehouse
4. Berth Occupancy
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port is 12days in a month multiplied by 24hours = 288hours. Warehouse is
the average time a cargo can stay in storage without accumulating excess
occupancy rate is gotten from the averages of each of the Nigerian sea ports
for the 5year study as computed from NPA annual report and statistics.
Time allocated for the various port activities are obtained by multiplying the
fraction of the cost of the port activity relating to the constraint by the
available time for each constraint. It is observed that the various constraints
loading and discharge, and storage. Ship turnaround time is related with
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CHAPTER FOUR
This study identified the major cost variables in port operations and the
model which was used to provide minimum cost of port operations in Nigerian
ports. Data in Table 4.1 – 4.9 are ship and port activities which are marine
their expenses generated in a year for a period of 5 years (2011-2015) for the
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Grand Total 14.0 14.37 13.94 12.82 12.82
Average 13.59
Statistics.
Data in Table 4.1 is Marine service costs, its grand total and the resulting
Average 130.4
statistics
Data in Table 4.2 is Port dues, its grand total and the resulting averages
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Table 4.3: Cargo Dues (millions)
Average 25.08
Statistics.
Data in Table 4.3 is Cargo dues, its grand total and the resulting averages
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Table 4.4: Terminal Handling Cost (million)
Average 4.35
Statistics.
Data in Table 4.4 is Terminal Handling Charges, its grand total and the resulting
53
Table 4.5: Bunker Cost (million)
Average 9.604
Statistics.
Data in Table 4.5 is Bunker costs, its grand total and the resulting averages
54
Table 4.6: Government Requirements (millions)
Average 3.016
Statistics.
Data in Table 4.6 is Government requirements, its grand total and the resulting
55
Table 4.7: Supplies (millions)
Average 2.596
Statistics.
Data in Table 4.7 is Supplies cost, its grand total and the resulting averages
56
Table 4.8: Loading & Discharge (millions)
Average 30.56
Statistics.
Data in Table 4.8 is loading and discharge, its grand total and the resulting
57
Table 4.9: Storage (millions)
Average 9.96
Statistics.
Data in Table 4.9 is Storage, its grand total and the resulting averages
58
Table 4.10 Ship Turnaround Time and Table 4.11 Berth Occupancy are used as
Average 35.12
Statistics
Data in Table 4.10 is Ship Turnaround Time, its grand total and the resulting
59
Table 4.11: Berth Occupancy Rate (%)
Average 244.36
Statistics.
Data in Table 4.11 is Berth Occupancy, its grand total and the resulting
60
Table 4.12: Ship/Port Operations and Expenses Generated Based on
cost
discharging
Total 229.16
61
4.2 The linear programming model is then obtained as follows:
Min
Z=13.59x1+130.4x2+25.08x3+4.35x4+9.604x5+3.016x6+2.596x7+30.56x8+9.96x
Subject to:
67.59x1+152.8x8+49.8x9≥672
125.40x3+15.08x6+19.8x9≥144
67.59x1+48.02x5≥288
67.59x1+152.8x8≥244
X1 = N12.56
X2 = N 87.4
X3 = 0 Naira
X4 = N 1.086
X5 = N16.1
X6 = 0 Naira
X7 = 0 Naira
X8 = 0 Naira
X9 = 0 Naira
62
Table 4.13: Linear Programming Model
Time
THC (X4) - - - -
(X6)
Supplies (X7) - - - -
(X8)
- - - -
63
Table 4.14: Ranging Table
X1 13.59 12.56
X2 130.4 87.4
X3 25.08 0
X4 4.35 1.086
X5 9.604 16.1
X6 3.016 0
X7 2.596 0
X8 30.56 0
X9 9.96 0
64
Table 4.15: Variable definition table – Table Solution List
X1 Basic 12.56
X2 Basic 87.4
X3 Non basic 0
X4 Basic 1.086
X5 Basic 16.1
X6 Non basic 0
X7 Non basic 0
X8 Non basic 0
X9 Non basic 0
4.4.1 Question 1
From the solution offered by the software used (Excel solver) shown in table
4.3, the optimal cost is given as N137.346 (million) per ton handled in a
65
Nigerian port. This means that for optimal cost of operations in Nigerian ports,
the cost should be kept at N137.346 as charge for handling a ton of cargo.
4.4.2 Question 2
What are the optimal time frames of the decision variables for port operation?
The optimal time frames computed using the model developed (Excel solver) is
given as:
4.4.3 Question 3
The reduced Terminal cost =1.086. The optimum cargo flow is the summation
Z = N101. 046
66
4.4.4 Question 4
What is the optimal terminal and port performance required to achieve high
operational efficiency?
The optimal terminal and port performance required to achieve high operational
efficiency is to maintain or reduce costs of the under listed port and terminal
operations;
67
CHAPTER FIVE
The results above show that Nigerian ports are not operating at an optimal level.
Thus, there is an excessive cost of services of port operations and wastage and
The study further more proves that the application of optimality analysis on the
model shows the extent to which the cost and the resources can vary while the
this research work whose main aim is to determine the optimal cost of port
5.2 Conclusion
Nigerian ports have the resources and capability to operate efficiently if cost of
discussed above. Thus, reinstating the objective of this research title; Analysis
68
5.3 Recommendations
From the above discussion, it is evident that for a port to become and maintain
i. Cost.
ii. Quality.
iii. Throughput.
models.
ii. Port authorities should strive to maintain the resources and decision
69
which can be used to develop more models for use in optimizing
and facilities for cargo handling and other related port operations.
assignments.
70
REFERENCES
71
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