The Issue of Dwell Time Charges To Optimize Container Terminal Capacity

IAME 2005 Annual Conference
23-25 June 2005, Limassol, Cyprus
THE ISSUE OF DWELL TIME CHARGES

TO OPTIMIZE CONTAINER TERMINAL CAPACITY
By Filip MERCKX*
* Research Assistant, Department of Transport and Regional Economics,
University of Antwerp, Keizerstraat 64, 2000 Antwerp, BELGIUM
Tel: +32 3 275.51.40, Fax: +32 3 275.51.50, E-mail: filip.merckx@ua.ac.be
Keywords: container dwell times, terminal capacity, storage yard capacity, charging
policies, port pricing, supply chain management
Abstract:
The capacity of a container terminal depends on a number of factors. One of these factors
- often disregarded in capacity planning - is the dwell times of containers on the stacking
area. The container dwell time is the average time a container remains stacked on the
terminal. The shorter the dwell time, the higher the potential utilization of a container
terminal (expressed in TEU per hectare terminal surface per year and for a given stacking
height). In theory, reducing the average dwell time of containers is to be considered as a
cost-effective measure to optimize terminal throughput. In particular, at terminals where
the available stacking area or storage yard limits the throughput capacity even marginal
dwell time reductions have a major impact on the storage yard capacity.
However, given the fact that stacking areas/storage yards of container terminals are
utilized by shippers/consignees (both for import and export cargo) as overflow nodes in
their supply chain, dwell times tend to be dictated by the shippers and have a tendency to
increase. Especially in the current market conditions of strong growth in the container
sector, these increasing dwell times of containers result in capacity bottlenecks on
terminals. With regard to import cargo a quicker landside removal of containers would
result in a reduction of dwell times, improving the level of terminal services and avoiding
capacity bottlenecks. A just-in-time delivery of export cargo to meet the intended vessel
on the other hand would also reduce container dwell times and improve the storage yard
capacity
The common practice to use terminal stacking areas as overflow nodes in logistics chains
can partly be explained by the absence of charging schemes to penalize excessive dwell
times. This paper deals with the issue of dwell time charges to optimize container
terminal capacity. The following aspects are dealt with:
An analysis of average dwell times based on cargo flow patterns (import, export and
transhipment);
The introduction of pricing mechanisms to reduce dwell times on container terminals,
based on an extensive literature overview of port pricing systems;
Assessment of the impact of dwell time charging schemes on the terminal capacity
and the future role of terminals as buffers in logistics chains.
As such this paper provides a theoretical background for the introduction of dwell time
charges on containers to improve the throughput capacity of container terminals. The
content of this paper is based on ongoing research and includes a road map of future
research on the issue of container dwell time charges.

THE ISSUE OF DWELL TIME CHARGES

TO OPTIMIZE CONTAINER TERMINAL CAPACITY
1. INTRODUCTION
The operations performed on a container terminal consist of a number of different
processes. In order to optimize the throughput capacity1 of a container terminal, these
processes are implemented in a logic sequence. As such, it is possible to represent the
layout of a container terminal for import, export and transhipment container flows as in
Figure 1.
Figure 1: Typical layout of a container terminal
Remark: the Ship Operation Area also includes barge and feeder operations
Source: Steenken et al, 2004, pp. 6
Sgouridis and Angelides (2002) define the different operational activities performed in
each functional area of an all-straddle-carrier container terminal. Important to mention in
this respect is the fact that the throughput capacity of a container terminal depends on a
rapid succession of the different terminal processes. Generally, the container flow through
a container terminal system (CTS) is split up in four subsystems/operations: ship-toshore, transfer cycle, storage and delivery-receipt area. Henesey (2004) provides a brief
description of these subsystems.
Figure 2: Schematic overview of a container terminal system (CTS)
Source: Henesey, L.E., 2004, pp. 5

1
Maximum number of containers which can be processed by the container terminal system. Hereby, the
throughput capacity of a container terminal system depends on various constraints

In this paper we will mainly focus on the influence of container dwell times on the
operational capacity of the terminal stacking area or storage yard2. In contrast to the
available set of simulation papers on container terminal capacity, the aim of this seminar
paper is to provide a theoretical framework to evaluate the impact of container dwell
times on the container terminal capacity.
2. PARAMETERS INFLUENCING CONTAINER TERMINAL CAPACITY

In order to define the capacity of a container terminal it is important to cover peak
moments. Given the definition of the National Ports Council the annual terminal
throughput capacity is defined as the maximum throughput of cargo which the operator
believes can be achieved on a continuing basis without incurring severe delays and
disruptions (NPC Bulletin, 1980:53). Winkelmans (2004) points out that this definition
deals with a specific value referred to as throughput which is influenced by the
assessment of the terminal operator and that it is determined for an activity on a
permanent basis without delays or interruptions.
In this respect the study of the National Ports Council defines two different types of
throughput/capacity: maximum attainable throughput (MAT)3 and the highest efficient
attainable throughput (HEAT)4 (see Figure 3). The distinction the National Ports
Council has made to indicate the port capacity can also be extended to the representation
of the intrinsic (CHI) and effective handling capacity (CHE) of a container terminal (NPC
Bulletin, 1980:53).
Figure 3: Schematic representation of MAT and HEAT of a container terminal
Throughput
MAT = CHI
HEAT = CHE
Over occupation
Under utilization
Time
Source: Winkelmans, W., 2004, based on NPC Bulletin, 1980 and Manalytics, 1976
2
In the remainder of the seminar paper we will refer to the terminal stacking area as the storage yard and in
our view this area comprises the land surface of the terminal, excluding the apron, the area dedicated for
administrative buildings and the area to perform hinterland operations.
3
The top limit at which the factor can be utilized even when the provision of every other factor is
favourable
4
Capacity to process a specific volume of cargo on a permanent basis without detrimental effects (e.g.
unacceptable waiting times)

MAT = CHI
HEAT = CHE
TROUGHPUT
SLACK CAPACITY
OVERCAPACITY SLACK CAPACITY
TROUGHPUT
SLACK CAPACITY
UNDERCAPACITY
Source: Merckx, J-P., 1991, pp. 2
A container terminal designed for a specific container throughput will only operate on a
fraction of his intrinsic capacity. This level of utilization depends on a number of
interrelated systems, critical components and strategic/operational considerations of the
terminal operator. The storage yard is influenced by four parameters of which the dwell
time is the primary factor focused on in this paper. As shown in Figure 4, it is obvious
that the throughput capacity of a container terminal (CHE or HEAT) is determined by
numerous components and thus can vary significantly from the intrinsic capacity (CHI or
MAT).
Figure 4: Different parameters/factors influencing the intrinsic container terminal capacity (in TEU)
Scope of this paper
Source: Lemper, B., 1996
Figure 2 presents the factors influencing the throughput capacity of a container terminal
as a continuous process, whereby each segment constitutes a certain operational capacity
constraint. Consequently, the final throughput capacity of a container terminal will be
determined by the segment with the smallest diameter or biggest capacity constraint. In
order to increase the throughput capacity it is vital to have a clear understanding on the
capacity constraints in other segments of the container terminal system.

In the remainder of this paper we will assume that the terminal stacking area (cf. storage
yard in Figure 2) is the bottleneck in increasing the throughput capacity. Moreover the
terminal stacking capacity5 is not only affected by technological/spatial constraints of
deployed container terminal equipment, but also by container dwell times. Given the fact
that terminal operators have no direct effect on container dwell times they are looking at
indirect measures to affect this parameter. In this respect, we will analyse the effect of
container dwell times on the storage yard capacity.
2.1. Storage yard capacity
Traditional measures to increase the storage yard capacity are rather space intensive.
Given the limited space available to expand terminal activities, this option nowadays has
also become increasingly capital intensive. As such container terminal operators are
looking for different possibilities to optimize their storage capacity: either by introducing
new stacking and/or handling technologies, by increasing the stacking height (e.g.
stacking 6 rows high instead of 3) or by improving the annual turnover rate6. As stated
earlier in this paper we will focus on the latter: how to reduce container dwell times and
improve cargo turnover rates?
2.1.1. Dwell time concept
In general terms, the container dwell time is the average time a container remains stacked
on the terminal and during which it waits for some activity to occur (Manalytics,
1979:31). According to this definition dwell time also refers to the efficiency of terminal
operations. The shorter the dwell time the more efficient the performed operation and vice
versa.
Important to highlight in this respect is that dwell times can be influenced by many
factors, some of which are unrelated to the service quality. For instance, commercial
customers often use the storage yard as an overflow node in their supply chain creating an
intentional delay. This situation distorts dwell time data since some of the commercial
customers place their export cargoes on the terminal well before the time required to meet
the intended vessel and may leave their import cargoes on the terminal yard for an
extended time after their arrival.
Another aspect of the dwell time is the amount of time required to process the paperwork
for the release/intake of a container. However, with the increasing level of information
and paperless documentation procedures in (maritime) transportation this specific element
is becoming less relevant. In order to analyse data on container dwell times it is important
to take these aspects into account.
2.1.2. Literature review on dwell times
The literature on dwell times mostly emphasizes operations research oriented issues of
container terminal capacity. The general framework of how to calculate port/terminal
5
In the remainder of this seminar paper referred to as storage yard capacity

The annual turnover rate is the complement of dwell time. For example, at full capacity utilization when
the average container dwell time is 5 days the cargo in these slots will on average turnover 73 times per
year (Manalytics, 1979:31)
6

capacity is presented in NPC Bulletin (1980), Manalytics (1979), De Monie (1981 and
1985) and Lester et al (1986). Watanabe (2001) analysed capacity constraints,
productivity, selectivity and flexibility of different container handling systems in function
of the type and size of the terminal. Steenken et al (2004) cover the different operational
aspects of a terminal structure, including the deployment of handling equipment.
Furthermore, this paper touches upon the different optimisation processes in container
terminal operations and different types of relevant simulation systems.
A second set of papers can be classified as simulation-based papers aiming to model the
sequential flow of operations to improve terminal performance. Hereby, a distinction can
be made between strategic, operational and tactical simulation models. Within this
research field Veenstra and Lang (2004) describe a conceptual approach and present a
framework for analysing the economic performance of a container terminal design, using
operational indicators.
In both streams, the subject of container dwell times is dealt with only from a capacity
restrictive point of view. To our knowledge, no academic publications look at dwell times
as an evaluation tool to improve annual turnover rates. In addition to the existing
literature, this paper presents the role of dwell times to optimize terminal capacity.
2.1.3. Mathematical framework of how to calculate the storage yard capacity
Table 1 gives an overview of how to calculate the storage yard capacity of a container
terminal. In this calculation the container pool is split up in four different types (FCL &
LCL7, empty, reefer and hazardous containers) which are stacked in designated yards
with specific characteristics. In practice, each of these stacking yards is furthermore
divided in import, export and transhipment containers. But this extra dimension is not
taken into account in the storage yard capacity calculation in Table 1. Adding up the
storage capacities of the above-mentioned yards indicates the annual storage yard
capacity of the container terminal.
Table 1: Mathematical framework to calculate storage yard capacity of a container terminal
Storage Yard Capacity Total (TEU) = StoreFull + StoreEmpty + StoreReefer + StoreHazardous
(1)
For each yard (FCL & LCL, empty, reefer and hazardous goods):
Storage Capacity (TEU) = Number of ground slots (TGS8)
Whereby:
Number of ground slots (TGS) = Slot Density (TGS/ha)
Resulting in:
Storage Capacity (TEU) = Slot Density (TGS/ha)
Stacking Height (TEU/TGS)
Yard Area (ha)
7
8
(3)
Yard Area (ha) Stacking Height (TEU/TGS*)
Storage Yard Capacity (TEU/pa9) = Storage Capacity (TEU)
365days / pa
MeanDwellTime( days ) Peakingfactor
FCL & LCL: Full Container Load and Less than Container Load
TGS: Twenty-Foot Ground Slot
(2)
(4)
(5)

Remarks:
1) The storage yard capacity of reefer containers is determined by the number of available connections and
less by the available space, whereby the average number of plugs is based on expected traffic flows.
Seasonality in reefer traffic is accommodated by diesel driven alternators to generate power supply;
2) All capacities in the proposed mathematical framework are expressed in TEU. When the capacities are
indicated in number of containers it is important to adjust these figures with a TEU factor;
3) By including the peaking factor in equation 5 it ensures the terminal operator that there will be sufficient
storage capacity available to accommodate peaks in container traffic. This peaking factor resembles a
safety factor and incorporates the difference between the MAT and the HEAT. The peaking factor
exceeds 1, e.g. a peaking factor of 1.20 represents a safety margin of 20% and seems to be realistic (Chu
and Huang, 2005 and Watanabe, 2001);
4) Dally (1983) elaborated Equation 4 with an additional parameter indicating the number of available
working slots per yard as a proportion of the total storage capacity;
5) Dharmalingam (1987) on his turn modified Equation 5 and introduced a slot utilization factor.
Source: adopted from OneStone Intelligence GmbH, 2003, pp. 90
In order to calculate the storage capacity of each yard a number of additional performance
data are required to perform some intermediate calculations. Given the fact that each
stacking yard resembles a rectangle, it is possible to calculate approximately the daily
storage capacity in TEU by multiplying the number of Twenty-Foot Ground Slots (TGS)
with the stacking height (TEU/TGS) (Equation 2). This calculation assumes that all
containers are stacked in the same way and have a similar density.
Containers can be stacked according to different stacking methods and various slot
densities. Consequently, a more fine-tuned method to calculate the number of ground
slots in function of a slot density per hectare for each respective yard is required
(Equation 3). Thus, the slot density of each yard depends on a number of strategic
decisions taken by the terminal operator, such as the type of infrastructure deployed on
the container terminal. For example which type of stacking method is applied: rubbertyred gantry cranes (RTGC), rail-mounted gantry cranes (RMGC), straddle carriers (SC)
or a combination of the aforementioned stacking methods. Next to stacking method the
terminal operator has also to decide on the level of automation of the container terminal.
Both decisions have a direct impact on the slot density of each stacking yard.
Figure 5 shows that the slot density in total ground slots per hectare (TGS/ha) of a
terminal equipped with rubber tyred gantry cranes or rail mounted gantry cranes is
generally higher than the density of an all straddle carrier (SC) container terminal. The
former stacking method makes it possible to stack containers in blocks, without leaving
any space in between the container rows. Nowadays RTGC and RMGC with a width of 9
rows are in operation. When a container terminal is deployed with straddle carriers a
wheel space of in between 1.5 and 2.0 meter in width between each row in a certain block
has to be provided in the terminal layout. Furthermore, each block should be separated by
an access aisle way of about 20 meter. This space allows straddle carriers to manoeuvre at
any time to the exact location (UNCTAD, 1985).
pa = per annum, on a yearly basis

Figure 5: Slot density for different types of stacking methods
Straddle carrier storage yard
Rubber tired gantry cranes/

Rail mounted gantry cranes
Source: own research
The final storage yard capacity (in number of TEUs per year, TEU/pa) is calculated by
multiplying the storage capacity for each yard with the annual turnover rate (Equation 5).
The annual turnover rate indicates how many times a twenty-foot ground slot (TGS) as
a unit of storage - has been utilized over a certain period of time. The annual turnover rate
is the complement of the mean dwell time (expressed in days) of the specific type of
container10. In order to anticipate sufficient terminal capacity a peaking factor has been
introduced in Equation 5. This peaking factor ensures the terminal operator that there will
be storage capacity available to accommodate peaks and seasonality trends in container
traffic.
2.1.4. Impact of mean dwell time on the storage yard capacity
According to Vickerman (2000) reducing the mean dwell time by one half doubles the
storage yard capacity of a container terminal. As such reducing the mean container dwell
time seems to be a cost-effective measure to optimize the potential throughput capacity of
the terminal without investing in new capacity.
Recalling the assumption that the storage yard forms the bottleneck in increasing the
throughput capacity indicates the importance to limit container dwell times. Table 2
shows the effect of varying container dwell times on the storage yard capacity of a
dummy container terminal. Hereby, applying Equation 5 of Table 1 for each of the
considered container types (FCL & LCL, empty, reefer and containers with hazardous
goods) the potential effect of dwell times on throughput capacity has been analysed and
acknowledges the assertion of Vickerman (2000) that reducing the dwell times by one
half doubles the storage yard capacity of a container terminal.
10
For example, at full capacity utilization when the average dwell time of full TEUs is 5 days the cargo in
these slots will on average turnover 73 times per year.

Table 2: Sensitivity analysis of mean dwell times on storage yard capacity of a dummy container
terminal
Assumptions:
FCL & LCL
Empty
Reefer
Hazardous goods
# of ground slots Stacking height

(TGS)
(TEU/TGS)
10,000
3,000
500
500
Slot density
(TGS/ha)
Yard area
(ha)
Mean Dwell Time

(# of days)
400
600
100
100
25
5
5
5
5
14
3
5
3
6
2
3
Storage capacity (TEU): (Equation 4 & Equation 1 in Table 1)
Corresponding peaking factors:
FCL & LCL

Empty
Reefer
Hazardous goods
Total
FCL & LCL

Empty
Reefer
Hazardous goods
30,000
18,000
1,000
1,500
50,500
1.20
1.10
1.00
1.10
Storage yard capacity (TEU/pa): (Equation 5 in Table 1)

FCL & LCL
Empty
Reefer
Hazardous goods
Total
1,825,000
426,623
121,667
99,545
2,472,835
Sensity analysis of mean dwell times (MDT):

MDT*3
MDT*2
Assumed MDT
MDT/2
MDT/3
15
42
9
15
10
28
6
10
5
14
3
5
2.5
7
1.5
2.5
1.67
4.67
1.00
1.67
FCL & LCL

Empty
Reefer
Hazardous goods
Adjusted storage yard capacity (TEU/pa): (Equation 5 in Table 1)

FCL & LCL
Empty
Reefer
Hazardous goods
Total
MDT*3
MDT*2
Assumed MDT
MDT/2
MDT/3
608,333
142,208
40,556
33,182
824,278
912,500
213,312
60,833
49,773
1,236,418
1,825,000
426,623
121,667
99,545
2,472,835
3,650,000
853,247
243,333
199,091
4,945,671
5,475,000
1,279,870
365,000
298,636
7,418,506
Storage yard capacity (in TEU, * 1,000)
6,000
FCL & LCL
5,000
Empty
4,000
Reefer
Hazardous goods
3,000
2,000
1,000
0
MDT*3
MDT*2
Assumed MDT
MDT/2
Source: own research, based on data of anonymous terminal operators
MDT/3

2.1.5. Data on container dwell times

Due to the different characteristics of each container terminal it is rather impossible to
present a general fact sheet on container dwell times. The dwell time on container
terminals depends on a number of terminal-specific parameters, such as:
in which region the terminal is located (with regard to the availability of land)
and which hinterland the terminal is serving;
the frequency of the sailing schedules calling at the terminal;
which mix of cargo flow patterns is handled on the terminal (split of import,
export and transhipment containers);
which type of containers form part of the cargo mix (FCL & LCL, empty, reefer
and hazardous goods containers);
for empty containers the dwell times are also related to the functional role the
terminal fulfils for the shipping companies (classic import-export container
terminal, terminal with empty container depot function or mixed container
terminal);
the modal split of hinterland connections (in other words by which transport
modes the containers are delivered to and retrieved from the terminal);
the openness and management structure of the terminal (dedicated terminal,
semi-dedicated terminal or public terminal).
Given this highly interactive character data on container dwell times is rather limited. The
few sources indicating some facts on this issue are consultants reports - e.g. Drewry,
OSC, ISL, Onestone Intelligence, Transystems, etc. - although this data is only partially
available. The data gathered in this section is based on contacts with various terminal
operators and shipping companies in the Hamburg-Le Havre range (see Table 3). Due to
the confidential aspect of this data the sources relied on will be kept anonymous.
Table 3: Average container dwell times (in number of days) for different container types on
terminals in the Hamburg-Le Havre range
Cargo flow pattern
Container type
FCL & LCL
Empties, dwell time depends on type of
container terminal:
- Import-export container terminal
- Terminal with depot function
- Mixed container terminal
Reefer
Hazardous goods
Import
Export
Transhipment
6,5
5,5
10
14-20
10-14
4-6
3
10
14-20
10-14
3-5
2
n/a
n/a
n/a
n/a
n/a
Source: own research, based on data of anonymous terminal operators
Table 3 shows the dwell times of different types of container (FCL & LCL, empty, reefer
or hazardous goods) on terminals in the Hamburg-Le Havre range taking into account
their cargo flow pattern. The cargo flow pattern indicates whether the container is in
import, export or transhipment on the container terminal.
10

Analysing the obtained information on average container dwell times for the different
container types, the empty containers have the highest dwell times (both for import and
export containers). Given the fact that hazardous goods and reefer containers have to be
treated specifically both by the terminal operator as well as the shipper can explain the
lower dwell times for these types of containers. The dwell times of FCL and LCL situate
in between the earlier mentioned container types. In general the import container dwell
times exceed the export container dwell times. Because of the above-mentioned terminal
specific parameters generalizing the data of Table 3 for all container terminals in the
world is impossible.
During the authors field research it has become obvious that container dwell times are
also determined by which transport mode the containers are delivered to or retrieved from
the terminal. Generally, containers which are shipped by road generate the shortest dwell
times. However, container terminals which are connected by rail or barge services often
faster distribute seaborne containers to and from the network of interconnected inland
terminals. To some extent the evolution of container dwell times also depends on the
availability of transportation means. Apparently, situations occur that containers cannot
be picked up or delivered to the container terminal because there are no trailers and/or
slots on a block or shuttle train available. In such conditions the container dwell times are
influenced by external factors on which the terminal operator has no influence.
The slow landside removal or early delivery of containers is contradictory to the faster
cycle times which are eyed by the terminal operators in order to increase the terminal
capacity. Current practice whereby container terminals are used as cheap (mostly free),
temporarily overflow nodes in the supply chain seems to be embedded in port logistics.
Because of the boom in container transportation and the consequent lack of storage
capacity terminal operators are looking at container dwell time charges to optimise their
throughput capacity.
3. IMPACT OF DWELL TIME CHARGES ON CONTAINER TERMINAL

CAPACITY
According to Table 2 reducing the container dwell times, thus improving the annual
turnover rate increases the storage yard capacity and vice versa. Given the fact that the
throughput capacity depends on capacity constraints in different segments of the container
terminal pipeline, an unremitting pressure to reduce dwell times will result in capacity
problems in other segments of the container terminal system (see Figure 2).
In this section we present a theoretical framework to optimize container dwell times
resulting in an optimal container terminal capacity. This theoretical framework is a supply
driven approach whereby the optimization process is looked at from a terminal operators
point of view. Hereby, we described some pricing policies to achieve the optimal dwell
time and thus increase the potential storage yard capacity. Furthermore, we will focus on
the future role of terminals as buffers in logistics chains.
3.1. Theoretical framework to optimize container dwell times
The proposed theoretical framework is a simplification of current practices in container
terminal management and is based on the following assumptions:
11

the container dwell time is the trigger in the optimization process of the storage yard
capacity;
in the analysis two capacity constraints determine the optimal dwell time: namely
the quay capacity and the gate capacity (reflected in function of the level of gate
utilization), whereby the quay capacity determines the gate capacity;
the waterfront of the terminal has no capacity constraints, meaning that all vessels
do arrive well distributed over time and sufficient berths are available;
the terminal operator has no financial constraints to invest in quay capacity (e.g.
gantry cranes), transfer-cycle capacity or horizontal transportation means (e.g.
straddle carriers, forklifts, reach stackers, etc.) and gate capacity to meet any
increase in storage yard capacity.
Figure 6 shows the optimal container dwell time (d) given a certain level of quay capacity
(qc) whereby the throughput capacity of a terminal is optimized. Any decrease of the
dwell time results in a capacity level which cannot be attained by the available quay
capacity (shaded area). An increase of the dwell time on the other hand will result in an
underutilization of the available quay capacity. Based on the results in Table 2 the yard
capacity (yc) is represented as a linear decreasing function of the dwell time. From this
starting point we will elaborate the theoretical framework, for the considered cargo flow
patterns: namely import (foreland-terminal-hinterland), export terminal traffic
(hinterland-terminal-foreland) and transhipment.
A decrease of container dwell times (from d to d) would imply a quay capacity
bottleneck. As such the eyed storage yard capacity cannot be attained without any
additional investments in quay capacity. In order to accommodate a decrease of dwell
times (d) and consequently to reach a higher level of storage yard capacity additional
investments should be made to increase the quay capacity from qc to qc.
Figure 6: Optimal dwell time given a constraint in quay capacity
Capacity
Capacity
yc
yc
Yard Capacity
Yard Capacity
qc
Quay Capacity
qc
Quay Capacity
qc
Dwell time
12
Dwell time

In Figure 6 we did not consider the effect of any quay capacity improvement on the gate
utilization. Logically, we can assume that with a decreasing storage yard capacity the gate
utilization level will also decrease (and vice versa). Supposing the quay capacity will be
expanded from qc till qc this means that the gates will be over occupied, resulting in gate
congestion. As such it would be sensible from the terminal operators point of view to
aim for a dwell time of d instead of d (whereby d>d) (see Figure 7).
Figure 7: Optimal dwell time given an additional constraint in gate capacity
Capacity
Utilization
Capacity
Utilization
yc
yc
Yard Capacity
gu
Yard Capacity
Gate Utilization
Quay Capacity
qc
qc
gu
Gate Utilization
Quay Capacity
qc
Dwell time
d dd
Dwell time
Combining the proposed theoretical framework represented in Figure 6 and Figure 7, we

can theoretically define a terminal equilibrium whereby the container dwell time is
optimized based on a given quay capacity and gate capacity.
3.2. Terminal equilibrium: in search of the optimal dwell time
The optimal dwell time (d) on a container terminal is the intersection of the constraining
parameters in the proposed model the storage yard capacity, the quay capacity and gate
capacity (reflected in function of the level of gate utilization). When the terminal operator
intends to decrease container dwell times, capacity improvements both on the ship-toshore segment (quay capacity) and delivery-receipt area (gate capacity) are required.
Given the quay capacity increase from qc to qc and the anticipated gate capacity increase
from gc to gc, the container dwell time of d remains optimal (see Figure 8).
As such for the terminal operator it is important to approach the terminal equilibrium as
close as possible, because at this point the throughput capacity is optimized. In order to
achieve this objective terminal operators are looking at different mechanisms to approach
the optimal dwell time.
13

Figure 8: Terminal equilibrium given a capacity increase in quay and gate capacity
Capacity
Utilization
Capacity
Utilization
yc
yc
Yard Capacity
Yard Capacity
gu
qc
gu
qc
Quay Capacity
gu
qc
Quay Capacity
Gate Utilization
Gate Utilization
Dwell time
Dwell time
In the case of a changing cargo flow pattern on the container terminal will also affect the
optimal dwell time. For example whenever a substantial amount of containers is no longer
handled as import or export cargo (e.g. a shift towards transhipment containers) this will
have an effect on the gate utilization. In our example the gate capacity would become
underutilized because a significant share of the containers will be handled at the
waterfront. As such the gate capacity can be decreased from gc to gc while providing the
same service level (see Figure 9). Together with the reduced gate capacity the optimal
dwell time increased from d to d. In this situation containers can remain stacked for a
longer period on the storage yard without creating a shortage on yard capacity.
Figure 9: Terminal equilibrium given a capacity decrease in quay and gate capacity
Capacity
Utilization
yc
yc
Yard Capacity
Yard Capacity
gu
qc
Quay Capacity
gu
qc
Quay Capacity
Gate Utilization
Gate Utilization
gu
qc
Dwell time
14
Dwell time

In the next section we will highlight the introduction of different pricing mechanisms to
reduce dwell times on container terminals. Furthermore, we will also refer to the existing
literature on port pricing and present some existing charging systems. Secondly, we point
out the potential role of inland terminals to reduce container dwell times on seaport
terminals.
3.3. Mechanisms to achieve optimal container dwell time
As mentioned above the terminal operator has some possibilities at his disposal to
approach the optimal dwell times. Hereby, we primarily focus on the effect of dwell times
charges. By introducing dwell time charges the terminal operator intends to realize an
impact on the container dwell times. The eventual impact of this measure will largely
depend on the height of the dwell time scheme, but also on some related aspects such as
the type of terminal on which the charge has been applied, the type of customers serviced
at this terminal, the value of the goods confronted with the dwell time charge, etc.. The
calculation of the price elasticity of dwell times is an important element is this respect,
but has not been included in the scope of this paper. This research question will be dealt
with by the author in future research on this topic.
Next to the dwell time charges imposed by terminal operators we will also highlight the
potential role of inland terminals to reduce container dwell times at seaport terminals. The
idea of satellite (inland) terminals as a local solution to hub congestion has been
suggested by Slack (1999) and this idea is applied to the issue of container dwell times.
3.3.1. Schemes of dwell time charges on containers
Before zooming in on the different dwell time charging schemes on container terminals a
relevant element in this respect are pricing theories and policies available to terminal
operators. Wiegmans (2003) analysed the selling power of public terminal operators and
concluded that their negotiating power vis--vis the carriers is limited. Given the
introduction of dedicated terminals their selling power is further curtailed. He concludes
that the prices terminal operators negotiate with the carriers are based on: firstly the
willingness-to-pay for these services and secondly, prices comparable to those of the
competitors. Thus, the buying power of the big shipping companies is the main driver in
contract negotiations with the terminal operators. In this setting terminal operators grant
discounts on handling prices based on the expected cargo volume of the customers.
The summarized pricing policies also reflect the usage of dwell time charging schemes by
terminal operators. Generally, a distinction can be made between two dwell time charging
schemes on containers: namely a flat charge (without any relation to the terminal costs)
and a variable dwell time charging scheme which approaches the real costs of occupying
a container slot. For the latter category a subdivision can be made on the type of
container.
Moreover, the benefits of reduced dwell times are primarily reaped by third parties (e.g.
the terminal operator himself because of the additional created storage yard capacity, the
port authority which witnesses an increase of the ports container capacity without having
to invest in any infrastructure and any future shipping customer benefiting from the
capacity made available) and not necessarily by those who are charged. This aspect also
15

makes it difficult for terminal operators to unilaterally oppose dwell time charging
schemes.
3.3.1.1. Flat dwell time charging schemes
In case the terminal operator is not contractually bounded to the shipper, it is rather
difficult to enforce a penalty for containers staying on quay too long. In this respect the
shipping company is the only party they have a direct contractual relation with. As such,
when the terminal operator intends to introduce a dwell time charge this scheme is often
based on a fixed amount, mostly irrationally diversified over time. In practice this type of
dwell time charges are not linked to the actual terminal costs of a container occupying the
terminal slot for a certain period of time.
Moreover, because the dwell time charges form part of the contract negotiations with the
shipping companies the height of this amount varies depending on the commercial
interests. The more traffic a certain shipping company/shipping line represents the more
flexible the terminal operator takes position on this issue in contract negations.
Consequently, the height of such fixed dwell time charges is often marginal and hardly
covers the real costs of occupying a container slot for a certain period of time.
Table 4: Flat dwell time charging scheme at MSCs Home Terminal11 (Antwerp, Belgium)
Period of occupation (in days)

0-7
8-15
16-30
> 30
Rate per day per container or part thereof

Up to 20
Above 20
Free
Free
5
10
10
20
15
30
Remarks:
1) The above-mentioned figures indicate which rental prices are charged to the shippers by MSC
2) This charging scheme is only applicable on import containers (import reefer containers and transhipment
containers are excluded)
Source: Van den Bossche, B., 15 April 2004
Shipping companies on their part often include container demurrages in their rates to
shippers. When a shipping company is confronted with a dwell time charging scheme
imposed by the terminal operator, this cost element can be set to recover the duty. Maersk
Sealand for example recently announced that as of May 1, the demurrage charges for dry
import containers at most US port, rail terminals and inland depots increased to USD 225
a day, and to USD 400 per day for reefers;, after the expiration of the free time. (Leach,
2005) This increase in demurrage charge is combined with a reduction of free time at
most port terminals and inland deports to four days for dry containers and two days for
reefers. (Leach, 2005) In the case of Maersk Sealand the higher charge has been
communicated to the shippers as a pass-through of the increased charges imposed by
(intermodal) terminal operators.
11
Joint-venture of PSA/HNN and MSC
16

However, some shipping companies include container demurrages in their tariffs even
when they are not charged for this cost or oppose container demurrages which are higher
than what they are charged by the terminal operator.
3.3.1.2. Variable dwell time charging schemes
When terminal operators have more direct relations to shippers dwell time charges can be
given their selling power and few substitutes available more easily imposed. In this
case shippers also have a clear view on the opportunity cost directly linked to the use of a
container terminal as overflow node in their supply chain. As such the height of the
variable dwell time charging schemes approximates the actual terminal costs of a
container occupying a slot for a certain period of time.
Shippers confronted with direct collection for stacking their containers on the container
yard will be urged to reconsider their supply chains to overcome the extra taxation.
Moreover they will use the imposed dwell time charge as a shadow price in negations
with other parties involved in their supply chain.
3.3.1.3. Dwell time charging schemes to optimize storage yard capacity
Before turning to the pricing structures in practice Figure 10 represents the different
parameters determining the financial viability of a container terminal operator. In order to
calculate the dwell time charge to approach the dwell time which optimizes the storage
yard capacity, we start from a basic model of terminal supply based on Strandenes (2004).
Figure 10: Flows of revenues and costs on a container terminal
Shippers/
Receivers
Container
lines
Sub-lessees
CFS/ others
REVENUE BASED ON TARIFFS

Concessionnaire
Terminal Operator
OPERATING
COSTS
Labour and
Staff Suppliers
CAPITAL COSTS
CAPITAL
RECOVERY
Contractors
Equipment
manufacturers
LEASE
RENT
FINANCIAL
COSTS
Banks
Other finance
providers
TAX
ROYALTY
ON
CHARGE REVENUE
Government/
Port Authority
Government
NET
REVENUE
Concessionnaire
T.O.
Source: De Monie, 2005
A company running a container terminal should cover his variable costs to operate the
terminal at optimum capacity. In terminal circles the net revenue per year is based on
negotiated tariff for various terminal operations with different customers, less the specific
17

terminal costs: such as operating costs capital costs, royalty charges, taxes on revenue
(see Figure 10). The net revenue is the objective value in this maximization problem.
As argued by Strandenes (2004) traditional infrastructure pricing and cost-based pricing
of terminal operations generally do not induce terminal efficiency. Referring to the
literature on port pricing she describes a number of pricing structures which may optimize
terminal utilization levels: namely congestion pricing, priority pricing and prices set by
auction procedures.
Given the ongoing research on this topic, the usage of the above-mentioned pricing
structures on the container terminal management will be subject of a forthcoming paper.
In this paper an in-depth analysis of the different pricing mechanisms available to the
terminal operator to optimize the container dwell times will be dealt with. The second
paper on this issue will also be part of the authors Ph.D. research track.
As mentioned above the shipper will look for alternatives to reshuffle the overflow nodes
in his supply chain. In addition some terminal operators are anticipating this general
trend. Some terminal operators are evolving towards freight integrators, offering related
logistics services to their customers. The potential role of inland terminals to reduce
container dwell times is assessed in the next section.
3.3.2. Potential role of inland terminals to reduce container dwell times at seaport
terminals
Given the recent investments of terminal operators in inland barge terminals (e.g. stakes
of ECT in TCT, Willebroek Belgium and DeCeTe, Duisburg Germany, stake of P&O
Ports in DIT, Duisburg Germany, etc.), these inland terminals can be incorporated in
their strategies to reduce container dwell times on seaport terminals. Next to the
investments made by terminal operators and the consequent expansion of the network of
inland terminals the recent success of inland container barging in the ports of Antwerp
and Rotterdam offers possibilities for dedicated shipments to and from their hinterland
hubs. Notteboom and Konings (2004) presented this evolution in a spatial development
model for a hypothetical port-linked container barge network. As such terminal operators
have to make the strategic decision whether their core business is to store containers or
to load, unload and forward containers fast and reliable (Ilmer, 2004:12).
As such the inland container terminals act as a bridgehead in order to reduce container
dwell times at seaport terminals. Within this seminar paper on container dwell times the
economic viability of the strategic option to include inland terminals in the portfolio of
terminal operators in order to reduce container dwell times at seaport terminals is not
worked out in detail yet and will form part of future research. The following issues will be
addressed in this respect: who will pay for the transport by barge, how will the extra
handling costs (two extra moves) be recovered, which strategic decisions have to be taken
by the terminal operator to succeed, is all information available to the terminal operator,
how much containers etc.?
18

4. FUTURE RESEARCH ON THE ISSUE OF CONTAINER DWELL TIME

CHARGES
The objective of this seminar paper is to indicate the importance of dwell times on the
throughput capacity of a container terminal. Given the limited attention which has been
given to this subject in the economic evaluation of container terminal management, we
believe that future research in this field would contribute to the existing literature on
container terminal management.
In order to get more acquainted with container dwell times and to gain more insights in
the issue of container dwell time charges interviews were performed with leading
terminal operators. In a second phase we foresee to perform an in-depth analysis of data
sets on container dwell times. Negotiations with leading terminal operators to secure this
data are ongoing.
Apart from the in-depth analysis of container dwell times, the elaboration of the concept
of dwell time elasticity is another subject. Future research on the concept of dwell time
elasticity is in the pipeline and will be performed from a logistics shippers - point of
view. This research will be conducted within the framework of the authors Ph.D.
research track.
5. CONCLUSION
This seminar paper dealt with the impact of dwell times on container terminal capacity
and provides a theoretical framework of which constraints a terminal operator has to take
into account in order to optimize the container terminal capacity by altering container
dwell times. As such the paper described the different dwell time charging schemes on
containers and summarized a number of pricing mechanisms available to terminal
operators to optimize the terminal capacity. In conclusion the general guideline is to
implement a terminal charge which affects the dwell time so that the available quay and
gate capacities are optimized. An in-depth analysis of the pricing structures to optimize
terminal utilization levels (including the price elasticity of dwell times and willingness-topay of terminal customers) is being researched and will be subject of a forthcoming paper
in the authors research track.
Next to the issue of dwell time charges to reduce the dwell times on seaport container
terminal the potential role of inland terminals has been included.
ACKNOWLEDGEMENTS
The author would like to thank all members of his Ph.D. Commission (Prof. Dr. Willy
Winkelmans, Dr. Theo Notteboom and Dr. Wout Dullaert) and Mr. Bert Vernimmen for
their comments and contributing remarks on this paper.
Furthermore, we would like to thank a number of unspecified leading terminal operators
and contact persons for supplying data and feedback on different economic aspects of
container terminal management.
19

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21

The Issue of Dwell Time Charges To Optimize Container Terminal Capacity

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