Chapter Two

Review OF LITERATURE
INTRODUCTION

This chapter provides a comprehensive review of the existing literature relevant to the
operational efficiency of container terminals, with a specific focus on the Berbera Port Container
Terminal in Berbera, Somaliland. The review encompasses theories, models, and empirical
studies that inform the understanding of port performance, highlighting gaps in the current
research and establishing a theoretical and conceptual framework to guide the present study.

2.1 Theoretical Framework

Operational efficiency in container terminals is a multifaceted concept that involves various

theoretical perspectives and models. These frameworks help in understanding the factors that
influence the performance and productivity of container terminals.

2.1.1 Productivity and Efficiency

Productivity in the context of container terminals is often defined as the ratio of output volume
(e.g., number of containers handled) to input volume (e.g., labor, equipment). Efficiency,
however, goes a step further by evaluating how well resources are utilized to achieve outputs.
This distinction is crucial in the container terminal efficiency theory, which encompasses both
productivity and efficiency as core elements (Budria-Martinez et al., 1999; Gonzalez & Trujillo,
2008). These concepts are essential for assessing the performance of ports and identifying areas
for operational improvements.

2.1.2 Port Performance Indicators

Port performance indicators are critical in measuring the efficiency and productivity of container
terminals. These indicators typically include:

 Throughput: The total volume of cargo or containers handled by the port over a specific
period.
 Turnaround Time: The time taken for a vessel to complete the unloading and loading
process.
 Berth Utilization: The ratio of time that berths are occupied to the total available time.
 Crane Productivity: The number of container moves per crane per hour.

These indicators provide a quantitative basis for evaluating the operational performance of
container terminals (Cullinane et al., 2004).
2.2 Analytical Framework
To assess the performance of container terminals, various analytical frameworks have been
employed. One of the most prominent methods is Data Envelopment Analysis (DEA).

2.2.1 Data Envelopment Analysis (DEA)

DEA is a non-parametric method used to evaluate the efficiency of decision-making units

(DMUs), such as container terminals, by comparing the ratio of multiple inputs to multiple
outputs. DEA is particularly advantageous for evaluating the operational performance of
container terminals due to its ability to handle multiple input and output variables
simultaneously, providing a clear efficiency score (Sharma & Yu, 2009; Talley, 2006).

2.2.2 DEA Models

The two basic models of DEA commonly used are:

 DEA-CCR (Charnes, Cooper, and Rhodes) Model: This model assumes Constant
Returns to Scale (CRS), meaning that output increases proportionally with inputs.
 DEA-BCC (Banker, Charnes, and Cooper) Model: This model assumes Variable
Returns to Scale (VRS), allowing for the possibility of increasing or decreasing returns to
scale.

This study utilizes the CRS model with an input-oriented approach, which focuses on
minimizing inputs while maintaining a given level of output (Allen et al., 1997).

2.2.3 Stochastic Frontier Analysis (SFA)

SFA is another method used to assess the efficiency of container terminals. Unlike DEA, which
is non-parametric, SFA is a parametric method that estimates the production frontier and
measures the efficiency of DMUs relative to this frontier. SFA incorporates a stochastic term to
account for statistical noise, making it particularly useful for assessing the impact of random
shocks on port performance (Cullinane et al., 2004).

2.2.4 Empirical Review

The empirical literature on container terminal efficiency provides extensive insights into the
factors that influence port performance. Numerous studies have analyzed the operational
efficiency of container terminals using various methodologies, including DEA and SFA.

2.2.5 International Case Studies

Research on major international container terminals offers valuable benchmarks for assessing the
Berbera Port Container Terminal.
  Belawan International Container Terminal (BICT), Indonesia: The operational
performance of BICT has been extensively studied using DEA. Factors such as
equipment utilization, facility management, and throughput have been analyzed to
evaluate efficiency. These studies provide a comprehensive model for similar analyses in
other ports (Onut, Tuzkaya, & Torun, 2011).
 Asian Container Terminals: Studies on major container terminals in Asia have used
both DEA and SFA to assess efficiency. These studies highlight the importance of
administrative and ownership structures in influencing port performance, providing
insights that are relevant for developing ports like Berbera (Cullinane et al., 2004).

2.2.6African Context

Research on container terminals in Africa is limited but growing. Studies on ports in South
Africa and Nigeria have highlighted the challenges and opportunities unique to the African
context, such as infrastructure constraints, governance issues, and economic factors. These
studies underscore the need for tailored research that considers the specific conditions of ports in
developing regions (Cheon, 2007).

2.3 Research Gap

Despite extensive research on the operational performance of container terminals globally,
several research gaps persist, particularly in the context of emerging and under-researched ports
such as Berbera Port Container Terminal in Somaliland. Addressing these gaps is crucial for
developing a comprehensive understanding of port efficiency and guiding policy and operational
improvements.

2.3.1 Context-Specific Analysis

Most existing studies focus on well-established ports in developed regions, such as those in
Europe, North America, and parts of Asia (Cullinane, Song, & Gray, 2002; Notteboom &
Rodrigue, 2005). There is a dearth of research on ports in developing countries, particularly in
Africa, where infrastructural and operational contexts differ significantly. The unique challenges
faced by ports like Berbera, including political instability, limited technological infrastructure,
and different trade patterns, require tailored analytical approaches and solutions.

2.3.2 Technological Integration and Innovation

Technological advancements, including automation and digitalization, have been widely adopted
in leading container terminals to enhance efficiency and sustainability (Vis & De Koster, 2003;
Vacca, Bierlaire, & Salani, 2007). However, there is limited research on how these technologies
can be effectively implemented in ports with constrained resources and varying levels of
technical expertise, such as Berbera Port. Understanding the prerequisites, challenges, and
potential impacts of integrating advanced technologies in such contexts is essential.
2.3. 3 Environmental and Social Sustainability

While the environmental and social dimensions of port sustainability have gained attention in
recent years (Lam & Notteboom, 2014; Wang, Notteboom, & Pallis, 2017), research often
overlooks the specific environmental impacts and social challenges faced by ports in developing
regions. For instance, ports in these areas may deal with higher levels of pollution, limited waste
management facilities, and significant social issues related to labor conditions and community
relations. Comprehensive studies addressing these aspects in the context of Berbera Port are
needed to develop sustainable operational strategies.

2.3. 4 Efficiency Measurement and Benchmarking

The efficiency measurement models, such as Data Envelopment Analysis (DEA), have been
extensively used to benchmark port performance (Cullinane & Wang, 2007; Sharma & Yu,
2009). However, there is a lack of research applying these models to smaller or emerging ports
with different operational scales and performance metrics. Applying DEA and other efficiency
measurement techniques to Berbera Port can provide valuable insights into its operational
performance and highlight specific areas for improvement.

2.3.5 Policy and Governance

The role of policy and governance in shaping port operations and efficiency is another
underexplored area, especially for ports in regions with complex political and economic
environments. Studies often emphasize managerial practices and operational strategies but fail to
adequately consider the influence of local, national, and international policies on port
performance (Bichou & Gray, 2005). Research focusing on the policy landscape affecting
Berbera Port could shed light on how governance frameworks impact its efficiency and
development.

2.3.6 Comparative Studies

Comparative studies of port performance typically involve ports within similar regions or with
similar operational characteristics (Gonzalez & Trujillo, 2008). There is a need for comparative
research that includes Berbera Port and other similar ports in developing countries, which can
help identify best practices and common challenges. Such studies would contribute to a broader
understanding of how different contexts influence port efficiency and could inform more
effective regional and global port strategies.
3.4 Conceptual Framework
The conceptual framework for this study is built on the integration of productivity and efficiency
theories with the DEA analytical model. The framework guides the assessment of Berbera Port's
operational performance by examining key input variables (quay length, cranes, yard capacity,
equipment) and output variables (throughput). This approach aims to provide a holistic view of
the port's efficiency and identify key areas for improvement.

3.4.1 Components of the Conceptual Framework

Efficiency

INPUT OUTPUT

 Inputs: The resources utilized in port operations, including quay length, number of cranes, yard
capacity, and other equipment.
 Outputs: The results of port operations, primarily measured by throughput.
 Efficiency Measures: Calculated using the DEA model, focusing on the ratio of inputs to outputs.

This framework is designed to capture the complexity of port operations and provide actionable
insights for enhancing the operational performance of Berbera Port.

3.4. 2 Container Terminal

A container terminal is a designated area within a port where cargo containers are transshipped
between different transport vehicles for onward transportation. The efficiency of container
terminals is critical for the overall performance of the port. Container terminals serve as nodes in
the global logistics network, enabling the transfer of goods across various modes of transport,
thereby facilitating international trade (Notteboom & Rodrigue, 2005).
3.4.3 Berbera Container Terminal

The new terminal was officially opened by the President of Somaliland, Muse Bihi Abdi, and
Sultan Ahmed bin Sulayem, Group Chairman and CEO of DP World and included a symbolic
ground-breaking for the new Berbera Economic Zone, the first phase of which is under
construction.The new container terminal, with a draught of 17m, a quay of 400m and three STS-
gantry cranes, can handle the largest container vessels in operation today and increases the port's
annual capacity from 150,000 teu to 500,000 teu. The terminal features a modern container
yard with eight gantry cranes (RTGs). A new One Stop Service Centre is under construction, set
to be completed by the third quarter of this year. DP World is investing up to $442 million to
develop and expand Berbera Port. Sultan bin Sulayem announced ongoing work for a second
phase of expansion, which includes extending the quay from 400 to 1,000 meters and adding
seven STS gantry cranes, increasing the total to ten. This expansion will enable the port to handle
up to 2 million TEUs and accommodate multiple large container vessels simultaneously. M.L.| J.
(2021) DP World

4.5 Container Terminal Facility

Container terminal facilities encompass all the physical infrastructure and equipment necessary
for handling containers. These facilities include quay walls, container yards, and handling
equipment, each playing a vital role in the efficient operation of a container terminal (Gonzalez
& Trujillo, 2008).

4.5.1 Quay Wall

The quay wall is a critical structure in a container terminal where ships are berthed for loading
and unloading containers. Its design and capacity significantly impact the terminal's operational
efficiency. The length of the quay wall determines how many vessels can be serviced
simultaneously, and its structural integrity affects the safety and speed of cargo operations
(Vacca et al., 2007).
4.5.2 Container Yard

The container yard is the area where containers are stored before loading onto ships or after
unloading. The layout and management of the container yard are crucial for maintaining smooth
operations and minimizing handling times. Effective yard management systems optimize space
usage, reduce container handling times, and improve overall terminal efficiency (Murty, Liu,
Wan, & Linn, 2005).

4.5.3 Container Handling Equipment

Container handling equipment includes cranes, forklifts, and other machinery used for moving
containers within the terminal. The efficiency of this equipment is essential for quick and safe
handling of containers. Advanced equipment such as automated guided vehicles (AGVs) and
automated stacking cranes (ASCs) can significantly enhance terminal operations by reducing
labor costs and improving handling speeds (Vis & De Koster, 2003).

4.5. 4 Container Terminal Operational Performance

The operational performance of a container terminal is measured by its ability to handle

container traffic efficiently. Key performance metrics include turnaround time, berth utilization,
and crane productivity. These metrics reflect how effectively the terminal utilizes its resources to
manage container flows and meet service demands (Cullinane & Wang, 2007).

4.5.5 Efficiency of Operational Performance in Container Terminal

The efficiency of operational performance in a container terminal is determined by how well

resources are utilized to achieve high productivity with minimal waste and delays. Efficient
operations ensure that containers are handled quickly and accurately, reducing turnaround times
and improving customer satisfaction (Cullinane, Song, & Gray, 2002).

5.6 Indicators of Efficiency Performance Measurement

Indicators for measuring efficiency performance include throughput, turnaround time, berth
utilization, and crane productivity. These indicators provide insights into areas where the
terminal can improve. For example, high berth utilization rates indicate effective use of docking
space, while low turnaround times suggest efficient handling processes (Bichou & Gray, 2005).

5.6.1 Sustainable Development

Sustainable development in container terminals involves integrating economic, environmental,

and social goals to ensure long-term viability and minimal ecological impact. This includes
adopting green technologies, optimizing energy use, and implementing policies that reduce the
environmental footprint of port operations. Sustainable practices also enhance the reputation of
ports and can lead to economic benefits through increased efficiency and compliance with
international environmental standards (Wang & Notteboom, 2015).
5.6.2 Environmental Impact

The environmental impact of container terminals includes emissions from ships and terminal
equipment, water pollution, and waste management. Efforts to reduce these impacts involve the
use of cleaner fuels, electrification of equipment, and implementation of waste reduction
strategies. Environmental performance indicators, such as carbon footprint and energy
efficiency, are crucial for monitoring and improving the sustainability of terminal operations
(Wang, Notteboom, & Pallis, 2017).

5.6.3 Economic and Social Dimensions

Sustainable development also encompasses economic and social dimensions. Economically,

sustainable practices can lead to cost savings and increased efficiency. Socially, ports need to
address issues such as labor conditions, community relations, and occupational health and safety.
Ensuring fair labor practices and fostering good relationships with local communities are
essential for the long-term sustainability of port operations (Lam & Notteboom, 2014).

6.7 Theoretical Analysis

Theoretical analysis in the context of container terminal efficiency involves the application of
various models and frameworks to understand and improve port operations. This section delves
into specific analytical methods used to assess and enhance the performance of container
terminals.

6.7.1 Data Envelopment Analysis (DEA)

Data Envelopment Analysis (DEA) is a widely used method for evaluating the efficiency of
container terminals. It compares the performance of multiple terminals by examining the ratio of
multiple inputs (e.g., labor, equipment, quay length) to outputs (e.g., throughput, turnaround
time).

6.7.2 DEA Models in Port Efficiency

 Input-Oriented DEA Model: Focuses on minimizing input usage while maintaining output levels.
This model is particularly useful for ports looking to reduce resource consumption and improve
operational efficiency (Charnes, Cooper, & Rhodes, 1978).
 Output-Oriented DEA Model: Aims to maximize output given a set level of inputs. This approach
is beneficial for ports seeking to increase their cargo handling capacity and overall throughput
(Banker, Charnes, & Cooper, 1984).

6.7.3 Applications of DEA in Port Studies

Numerous studies have applied DEA to evaluate the efficiency of container terminals worldwide.
These studies provide insights into best practices and areas for improvement. For example, a
study on European container ports revealed significant efficiency variations and highlighted the
importance of managerial practices in achieving high performance (Cullinane, Song, & Gray,
2002).

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future directions." Annals of Operations Research, 73, 13-34.
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seaports." Transportation Research Part A: Policy and Practice, 39(1), 75-92.
 Budria-Martinez, S., Coto-Millan, P., & Pesquera, M. A. (1999). "Economic Efficiency in
Container Ports." International Journal of Transport Economics, 26(1), 105-116.
 Charnes, A., Cooper, W. W., & Rhodes, E. (1978). "Measuring the efficiency of decision
making units." European Journal of Operational Research, 2(6), 429-444.
 Cheon, S. H. (2007). "World Port Institutions and Productivity: Roles of Ownership,
Corporate Structure, and Inter-Port Competition." University of California, Berkeley.
 Cullinane, K., Song, D. W., & Gray, R. (2002). "A stochastic frontier model of the efficiency
of major container terminals in Asia: Assessing the influence of administrative and ownership
structures." Transportation Research Part A: Policy and Practice, 36(8), 743-762.

  Cullinane, K., & Wang, T. F. (2007). "Data Envelopment Analysis (DEA) and
improving container port efficiency." Research in Transportation Economics, 17, 517-
566.