EXECUTIVE SUMMARY

Port Klang was first conceived in the late 20 th century as the national gateway for exportation

of rubber and tin. The port was managed by the Malayan Railway Administration until June

1963 when Port Klang Authority (PKA), a statutory corporation was established to take over

the administration of Port Klang. Due to its rapid growth and high demand for service

efficiency by the port community, the government finally decided to privatize its major

container port facility to a private terminal operator, Klang Container Terminal (KCT) in 1986

and followed by Klang Multi Terminal (KMT) in 1995.

Under the leadership of Chairman, Tan Sri Gnanalingam, Klang Multi Terminal later changed

its name to Westports (M) Sdn Bhd and since inception has seen tremendous growths and

achievements. Westports continuously grow as a transshipment hub and concentrated on its

core competency which is efficient terminal handling operation for faster vessel turnaround.

With manpower strength of more than 3000 employees coupled with the state-of-art

facilities has allowed Westports to be world ranked at number 11 th in terms of capacity and

3rd in terms of productivity as of 2009.

However, the volume for transshipment container was affected due to the world economic

downturn in 2008 and management finally realized the opportunity lost from local volume

to neighboring ports. This paper is intended to study specifically on Westport’s CFS

operation and make recommendations to refine its strategy to develop the local volume and

rebound distinctive competitive values over other rivals in the industry.

1.0 INTRODUCTION
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1.1 Port Overview

Port Klang has seen tremendous and encouraging growth. As of 2007, the total volume of

containers being handled in Port Klang amounted to 7.1 million twenty-equivalent-units

(TEUs) compared to only 770,000 TEUs in 1993. For the same duration, the transshipment

volume was also impressively increased from only 0.2% to 57% of the total volume handled

in Port Klang. The success of Port Klang thus far is attributed to the policies, strategies and

measures that were implemented over the years by the Malaysian Government together

with the private sector and other related agencies.

Encouraged by the government initiative, a supply-driven policy was introduced to attract

shipping lines to call local ports directly. As a result, the total container handling capacity

among major ports in the country is in excess of 22 million TEUs against a prevailing demand

of 13.6 million TEUs in 2006. Collectively, Malaysia ports handle close to about 337.45

million tons of cargo, a large percentage of which consists of non-liner, or bulk cargoes such

as LNG, petroleum, palm oil and others.

Port Berth Depth No of Cranes TEUs Total Traffic FWT (Mil)

Bintulu 450 14 3 199,704 36.51
Johor Port 759 15 5 881,000 27.47
Kuantan 400 11.2 2 124,834 10.67
Kuching 613 7.6 - 152,394 7.20
Penang 1,231 9 9 795,289 22.86
Port Klang 5,492 15 22 6,356,000 122.00
PTP 2,880 15 27 4,772,986 68.77
Sabah 1,200 10 - 227,084 28.14
Exhibit 1.1: Container Volume Handled by Federal Ports in 2006

1.2 Company Background

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 Exhibit 1.2: Location Map of Westports

Westports is situated in Pulau Indah along the coast of Selangor which makes-up half of Port

Klang. With the current berthing capacity of 3.2km and 16m depth, it can accommodate the

largest fleet in the world with capacity of up to 19,000 TEUs vessels. Its chairman, Tan Sri

Gnanalingam has made his name as a marketing whiz after successful stints with Malaysian

Tobacco Company. Through his virtues, Westports has made waves in the sector challenging

for new rules and higher benchmarks for the port industry. In 2009, Westports managed to

break the world’s record of 734 moves per hour (mph) with 9-cranes deployment on CSCL

Pusan with a total of 5,244 moves across vessel.

Mode Accessibility
Road Connected by KESAS and NKVE to major highway networks.
Rail Connected to the national rail grid right up to Southern Thailand and Bangkok.
Air Just 45 minutes away from the Kuala Lumpur International Airport (KLIA).
Sea Direct access for convenient exportation or importation of goods.
Exhibit 1.3: Accessibility Factors at Westports

1.3 Milestones

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1994: Handling over of the port by Klang Port Authority to Kelang Multi Terminal Sdn Bhd
1995: Commenced liquid bulk operation with Mobil Sdn Bhd
1996: Commenced 1st container operation, officiated by Tun Dr Mahathir
1997: Integration with Customs Gate Control System for container auto-clearance
1998: 1st terminal in the region to operate feedering service from PEN – JHR – WSP
1999: Lifted its 1st 1 million TEUs and set new ‘Fastport’ standard of 20k MT/HR for dry-bulk
2000: Signed terminal agreement with CSCL and conferred FIABCI award for Public Sector
2001: Invested RM80 million for CAPEX (2 additional berths of 350m length each)
2002: Introduced Smart Card Security System to tighten control over haulage and FA
2003: Broke own world record of 368 mph on MV Peninsular Bay (previous 342 mph)
2004: Achieved average haulage turnaround time of 19 minutes gate-to-gate transaction
2005: Reached highest container throughput in a single month for July at 267, 023 TEUs
2006: Set a new world record of 421 mph on MV Rossini, 1st port in PKG to reach 3 mill TEUs
2007: Acquired 2 more post-Panamax twin-lifters to boost productivity (total 26 cranes)
2008: Sultan Sharafuddin Idris Shah, officiated the Toyofuji’s 15 acres car terminal in WSP
2009: Recorded RM950 mill operating revenues and RM300 mill net profit
2010: Achieved 5.5 million TEUs, expanded 3.2km berths in total

1980: 57th
1990: 35th
1995: 26th
2006: 16th
Exhibit 1.4: Port Klang’s World 2009: 11th Ranking

Port / Year 1995 2005 2007 2009

Northport 1.50 2.63 2.74 2.75
Westports - 2.91 4.30 4.50
Total 1.50 5.54 7.04 7.25
Exhibit 1.5: Port Klang’s Container Market Share in Million TEUs

1.4 Vision and Mission

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Westport’s vision is to be a successful gateway for the nation trade inventory and the pride

of the nation in terms of employee relations, customer satisfaction, and corporate

citizenship. In order to achieve the vision of the company, the employees are guided by

below missions and objectives:

 To achieve 10 million TEUs and 10 million tons of cargo by 2015 with excellent

returns for the employees, shareholders and customers.

 To provide world class customer service in the port industry and continuously

embark on effective cost and time management.

 To embark on comprehensive knowledge center thru collaboration and integration of

information sharing with higher educational institutions by 2015.

 To be certified by OSHA with ISO 14001 and 18001 by 2012.

Exhibit 1.6: Westport’s Objectives

1.5 Company Culture

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Facilitated by the best equipments and infrastructures, employees are guided by generically

formulated 7 tenets that keep them motivated to continuously deliver world’s class values to

customers. Through their intensive human resource initiatives, Westports was conferred

with the Human Resources Minister Award by Human Resource Ministry in 2007.

Exhibit 1.7: Westport’s 7 Tenets

Along with the rapid development, the total number of workforce also increased particularly

amongst the non-executives level due to increasing operational needs as below:

Year Executives Non-Executives Total

1995 95 140 235
1997 93 437 530
1999 150 780 930
2001 165 1035 1200
2003 193 1900 2093
2005 249 1820 2069
2007 308 2255 2563
2009 345 2690 3035
Exhibit 1.8: Manpower Growth in Westports

1.6 Business Concept

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Westport’s main business is on the terminal handling service to facilitate discharging and

loading of containers from and onto vessels. Their main customers comprises of 32 major

shipping lines who mostly covers direct long-distance hauls around the world and almost 70

over feeders that serves short-to-mid haul services within the regions. Westports always

believes in delivering world’s class services to their customers and has been prolong

practicing below simplified concepts to facilitate their business needs:

I. Fast Port – To ensure vessels berth on arrival and deploying optimize cranes

utilization across vessels for faster turnaround and reduce cost for liners on the

wharfages and harbor dues.

II. Flexi Port – To be able to accommodate various types of cargo for easy

transportation thru multimodal modes i.e. rail, road and air. Flexible approaches to

cater customer needs and requirements and providing dedicated berth to liners

based on the SLA.

III. Garden Port – Setting conducive and healthy environment for employees to work by

ensuring current infrastructures and future capital expenditures are built in

accordance to the “Green Concept” i.e. Port within the garden.

IV. Continuous Improvement – Continuously embarking on system automation in IT and

MIS processes to facilitate operation and cater customer needs. To induce port

community with e-Services to help eliminate manual human intervention processes

and closing the geographical distance barriers.

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 V. Customer Growth – To ensure good quality services are provided by the operation,

finance, IT and other related departments towards catering customer’s needs and

requirements. To facilitate any issues in regards to customs and other government

agencies to ensure smooth operation and clearance process to help boost up

customer’s trust and reliability towards the port and induce more volumes.

VI. Total Logistics – To provide door-to-door logistics solution for corporate and

individual customers by providing state-of-art facilities and services including

terminal handling, warehousing, transportation, freight and documentation to cater

their needs and requirements.

2.0 TOTAL LOGISTICS SOLUTION

2.1 Logistics Service Providers

Shipping Consolidator Consignee/Shippe Forwarding Haulage ODD

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 Agent /
Lines r Freight Operator
Forwarder
CMA CGM Freight Sunchirin Advance ILS Marine
ANL Management Logistics Handling SB.
OOCL Trimode MITCO ATAMA Delta Infinity
Container
Depot.
MOL Sankyu Panasonic Top VM Container
Forwarding Connection
(M) SB.
Exhibit 2.1: 6 Main Groups of Logistics Service Providers

There are 6 main players in the distribution channel as depicted in the above exhibit 2.3.

Each organization plays a significant role in the industry. For instance, shipper or consignee is

the manufacturer or recipient of the goods to be imported or exported. They will make

enquiries for vessel schedules and booking through the freight forwarder whom will liaise

with the shipping lines for the best rate and shortest travelling time to the desired

destination. Besides providing sea-transportation, shipping lines normally will also own

containers and reposition them at their appointed inland depot facility.

The depot operator (ODD) will manage the inventory and responsible for the maintenance

and repair of the containers under their custody. They will exchange a document known as

the ‘Container Movement Order (CMO)’ to verify the releasing party and recipient of a

particular container. In case of Less-Container-Load (LCL), consolidator is the party

responsible to gather smaller lots of shipments from different shippers to optimize the full

container load capacity. They are sometimes referred as the Non-Vessel Operating Container

Carrier (NVOCC).

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Customs brokerage or normally known as forwarding agent will be responsible for the

documentation and clearance activities with respective agencies. Nevertheless, haulage

companies will provide the land transportation to deliver the container based on customer’s

request. Another party that is not covered but yet has significant impact on the whole

supply chain process is the customs and other government agencies i.e. MITI, MIDA, SIRIM,

MAQIS, MOA that impose certain authority over various types of commodities being

imported or exported.

2.2 Relationships between Various LSPs in the Supply Chain

All of above parties will perform cross-functional activities and may appear to have direct or

indirect relationships with other parties involved in the supply chain. For instance, shippers

will communicate information of the products to be shipped thru their appointed freight

forwarders who will then book a slot with the shipping line. Liner will then issue a document

known as ‘Original Bill of Lading (OBL)’ to shipper to confirm shipping information who will

then exchange it with the consignee based on the payment terms being agreed upon.

Consolidator will engage a warehouse operator to perform the stuffing activity into

container and engage haulage to deliver the container to terminal. Forwarding agent will

then do necessary declaration with customs at the port of loading for export clearance.

Terminal will perform the container handling for loading onto vessel and discharging upon

arrival at destination port. Forwarding agent will once again do necessary declaration with

customs at the destination port for import clearance. They will then appoint haulage to pick-

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up FCL containers directly from the terminal to deliver to consignee’s premises or they could

engage a third-party warehouse operator for LCL deconsolidation to multiple consignees.

2.3 Westport’s Role in the Supply Chain

Westports plays the intermediate role in the global distribution of cargo by providing facility

for shipping lines and their customers to consolidate and break-bulking their cargoes within

the free zone. Westport’s existence is vital in the supply chain to cater for below services:

 Transit point for global cargo distribution plying international shipping routes.

 Value added services i.e. Warehousing, Container Freight Station, Open Yard.

 Bonded service facility for cargo consolidation hub and break-bulking.

 Trans-loading due to restriction by receiving countries on the Certificate of Origin.

 Convenience in terms of documentation for cargo consolidation and distribution

activities within the free zone.

 Combination of transshipment cargo and local cargo for re-export and faster

turnaround and connection to second carrier.

Most of the facilities in Westports are leased out to private operators who run the operation

independently within the terminal but subjected to the normal free zone regulations. As

landlord, Westports is only obligated to provide basic infrastructures and services to

facilitate the needs and requirements of the tenants.

Type of Warehouse Space (Sft)

General Warehouse (non-racking) 450,000

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 Container Freight Station (CFS1-4) 120,000
Vehicle Terminal + Open Yard 2,000,000
Distribution Park 470,000
Total 3,040,000
Exhibit 2.2: Warehouse Facilities in Westports

Container Freight Station II (CFS2) was established in January 2009 as a new sub-business

division with capacity of 25k sqft to grow local volume and cater the needs and

requirements to provide strong base for regional cargo consolidation and distribution center.

Maltaco (M) Sdn Bhd was appointed as the main contractor for cargo handling and

Westports has sourced internal employees to manage the general administration of CFS2.

The first half of the year was used to resolve the day to day issues in terms of operations and

documentations to facilitate LCL cargoes. During this period, almost everything was

manually operated and the only consolidator that wanted to collaborate was Freight

Management (FM). Initially, they faced several teething issues and only managed to

consolidate selected export boxes direct from shipper which does not require co-loading.

Later the same year, CFS2 managed to induce another player, Panavision India Private

Limited to transfer their fertilizer distribution center from Northport to Westports.

2.4 Problem Statement

Westports has been established more than 15 years in the port industry but has far only

concentrated on the terminal handling operation for discharging and loading of containers

from and onto vessels as their primary flywheel. Recently, the management has realized the

intermittence opportunity lost from local volume to neighboring ports and decided to

rebound competitiveness and dominates at least 50% of Port Klang’s local market share by

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2011. In order to achieve this target, Westports has to have an increase of at least additional

20k TEUs per month to remain competitive as Northport.

Year Northport Westports Total Northport Westports

2006 1.70 1.07 2.77 61% 39%
2007 1.76 1.24 3.00 59% 41%
2008 1.80 1.43 3.23 56% 44%
2009 1.75 1.24 2.99 59% 41%
2010 1.92 1.51 3.43 56% 44%
Average 1.79 1.29 3.08 58% 42%
Exhibit 2.3: Port Klang’s Local Market Share in Million TEUs

The subsequent chapters of this paper will study the viability of Westport’s current value

added services in terms of providing total logistics solutions for their customers. Emphasis

will be given on CFS operation to identify what are the issues faced by warehouse operators

that restrain them from developing more volume. Recommendations will be made to help

develop strong base for regional cargo consolidation and distribution center in Westports to

increase their local market share.

3.0 SITUATIONAL ANALYSIS

3.1 SWOT Analysis

STRENGTHS
 Located in the prime area highly
accessible by road, rail and sea
connected by more than 35 main liners
and 75 feeder operators to 500 ports
worldwide.
 Minimum documentation required for
movement of cargo within free zone is
required by Port Klang Authority.
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WEAKNESSES
 Geographical distance of 35 km away
from the city center where most of the
shippers are located in Port Klang.
 Hassle in terms of customs regulations
for dutiable cargo collection from
multiple points outside the terminal to
be consolidated within the free zone via
bonded truck.
  Less transportation fee for movement of
containerized cargo within the port and
drayage services are provided 24 hours
daily.
 Most of the shipping lines have own
appointed depot operators that operate
within the terminal as their preferred
regional hub for storage, cleaning and
maintenance of empty containers.
OPPORTUNITIES
 Good repot with customs and other
government agencies (OGA) hence
better chances for coordination and
streamlining of processes to improve
current services provided to customers.
 Implementation of National Single
Window and Free Trade Agreement will
encourage higher trading capacity
between participating countries.
 Adjacent to PKFZ hence better chances
to promote Westports as transit point.
3.2 Porter’s Five Forces
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 Decentralization of various processes
and manual inventory record caused
discrepancy in terms of actual cargo
tallying and delay for invoicing to
customers for completed jobs.
 Insufficient co-loaders located within the
terminal to make full-load of LCL cargo
consolidation.
 Most of the warehouses are leased out
to private operators hence lack of
control over the ways they conducted
the local business.
 No dedicated warehouse to store
dangerous goods and the current
fumigation bay is underutilized by
warehouse operators due to its location
is isolated too far away from the main
cargo operation.
THREATS
 No master consolidator in Westports to
attract the freight forwarders which are
mostly concentrated in Northport i.e.
Globelink, Asian Groupage Service,
Quanterm Freight, and Interocean.
 New Market Entrants

- High barriers to entry, threat of

new entrant is low.
- Westports has high competitive
advantage in terms of productivity
and faster vessel / haulage
turnaround time.

Supplier Power Competitive Rivalry Buyer Power

- Warehouse operators have low-to-
mid bargaining power.
- Infrastructures and facilities are
provided by Westports.
- Good relationship, incentive
schemes for top performers.
- High competition.
- Economy of scale.
- Supply chain management is easily
replicated.
- Price wars will result in lower
profit margin.
- Bargaining power of buyer is high.
- Low switching cost due to price
wars amongst consolidators.
- Customers have low mobility;
transportation is dominated by 3rd
party logistics provider.

Substitutes

- Low threat of substitutes outside

the terminal
- Similar services are offered by
external warehouse operators.
- Documentation hassle caused
customers to prefer internal
warehouse operators

Exhibit 3.1 Porter’s Five Forces

New Market Entrants – Almost difficult to penetrate this market as mostly dominated by

master consolidators who have long been in the industry and gained trust amongst loyal

customers and other logistics service providers. Westports has the competitive advantage as

a transit point for cargo consolidation and distribution center by providing efficient and

responsive terminal handling operation for faster vessel and haulage turnaround time.

Buyer Power – Buyer has high bargaining power as the switching cost is very low amongst

those offered by market players. Due to the recent economic crisis, master consolidators had

to go on price wars to attract cost-sensitive customers to engage their services. However,

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transportation is still dominated by 3rd party logistics provider as it is costly to operate and

manage own fleet for cargo distribution.

Substitutes – There is low threat of substitute as the services being offered by internal and

external warehouse operators are similar. Customers are encouraged to engage internal

warehouse operators due to documentation hassle impose by customs for movements of

cargo thru and fro free zone (FZ) and primary customs area (PCA). It is easier to consolidate

transshipment and local cargoes within the free zone.

Supplier Power – Primary services for stuffing, unstuffing and transloading of cargoes are

provided warehouse operators as the cargo handler. However, they have low-to-mid

bargaining power as the infrastructures and facilities are provided by Westports as the

landlord. Incentives are given by Westports on the container drayage movements for

selective warehouse operators who reached or exceeded their Guaranteed Throughput (GT)

in order to boost up more volume and maintain good business relationships.

Competitive Rivalry – High rivalry exists amongst players in the market to secure continuous

long-term business deal with respective customers. Customer’s information secrecy is vital

to shield away potential rivals from pinching their share. Marginal profit is intensively relying

on economy of scale. Supply chain model can easily be replicated by others thus important

to keep operating cost minimal to sustain competitive price for customers.

3.3 Financial/Operational Analysis

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 Jan-Sep 2009 Jan-Sep 2010 Growth Overall 2009 Forecast 2010 Growth
ITEMS
(RM) (RM) (%) (RM) (RM) (%)

STORAGE 17,764,453.70 17,703,545.00 (0.34) 22,127,213.30 23,604,726.67 6.68

REMOVAL 3,027,959.75 4,972,014.00 64.20 4,282,979.75 6,629,352.00 54.78

REEFER 11,790,702.00 12,043,296.00 2.14 15,708,931.00 16,057,728.00 2.22

EMC 9,338,464.38 11,283,139.00 20.82 12,410,764.12 15,044,185.33 21.22

ODD 860,409.59 213,063.00 (75.24) 1,087,396.91 213,063.00 (80.41)

CFS 5,363,497.29 5,371,549.00 0.15 6,944,346.91 7,162,065.33 3.14

HATCHCOVER 3,899,470.00 4,354,740.00 11.68 5,212,080.00 5,806,320.00 11.40

GEAR BOX 1,496,370.00 1,998,440.00 33.55 2,056,930.00 2,664,586.67 29.54

DEM.COM. 647,280.71 1,174,565.00 81.46 1,145,754.52 1,566,086.67 36.69

MISC 629,418.30 642,020.00 2.00 761,485.00 856,026.67 12.42

TOTAL 54,818,025.72 59,756,371.00 9.01 71,737,881.51 79,604,140.33 10.97

Exhibit 3.2: Revenue from Value Added Services, 2009 – 2010.

Exhibit 3.3: Contribution Percentage of Each Value Added Services, 2009 - 2010

The overall revenue forecasted for Value Added Services (VAS) for 2010 is expected to

increase approximately 11% compared to overall revenue generated in 2009. The biggest

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 contributions are mainly from storage, reefer and EMC activities which dominated almost

69% from the overall forecasted revenue. Despite the forecast increment for the overall

collection, the revenue from ODD has completely stopped with the termination of profit

sharing clause when Westports renewed the agreement with Al-Marine (M) Sdn Bhd for

ODD 6 & 7. The revenue collected was previously obtained from depot activities such as

trucking, washing and repair works.

CFS is the next potential area that should be look into for future imbursement. This is in line

with company’s objective to increase the local volume and capture 50% of Port Klang’s

market share by 2011. The overall volume achieved from January to September 2010

experienced a decrease of 8% compared to 2009. Even though, the revenue collected for

same period showed an increase of 0.15%, the contribution per TEU has dropped from

RM105 in 2009 to RM96 in 2010.

The recent intermittence throughput experienced by most of warehouse operators is due to

“hold back” action by some shippers to stock pile for festive seasons. Furthermore, the

inland delivery was badly affected by truckers’ refusal to service during the long holidays. In

addition, some of the warehouse operators concurred having a ‘space issue’ in regards to

limited container staging area for transloading activities because their designated space

could not cope up with the current and incoming volume. Some of the warehouse operators

almost reached maximum allowable quota for re-export especially to Europe and USA.

No Operator Jan - Sep Jan - Sep Growth Overall Forecast Growth

'09 '10 (%) '09 '10 (%)
(TEUs) (TEUs) (TEUs) (TEUs)
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1 Westport Distripark 869 526 (39) 1,227 701 (43)
2 Real Handlers Sdn Bhd 9,884 9,405 (5) 6,972 12,540 80
3 Pyrammid Liner Sdn Bhd 1,705 1,200 (30) 2,298 1,600 (30)
4 Multisheild (M) Sdn Bhd 602 1,810 201 967 2,413 150
5 Tri-Mode Logistics (M) Sdn Bhd 0 259 100 0 345 100
6 Westports Console Center 769 330 (57) 901 440 (51)
7 Interocean Freight Services 0 283 100 0 377 100
8 Regional Synergy (M) Sdn Bhd 2,527 4,788 89 4,075 6,384 57
9 Marine & Cargo Handling Svc 10,052 10,361 3 14,389 11,252 (22)
10 Sdn Bhd
Nova Logistics Sdn Bhd 3,026 3,310 9 4,263 4,413 4
11 Westport Handlers Sdn Bhd 3,934 4,897 24 5,122 6,529 27
12 Trade Technology & Logistics 4,010 4,876 22 5,899 5376 (9)
13 Sdn Bhd Sdn Bhd
FZ Services 0 271 100 183 361 97
14 Baiduri Dimensi 0 192 100 0 256 100
15 SAL Consolidator 550 552 0 978 736 (25)
16 Advantage Warehouse Logistics 6,385 5,054 (21) 8,443 6,254 (26)
17 Toll Integrated 0 747 100 0 996 100
18 Jasa Export 0 90 100 0 120 100
19 Imvex Management Sdn Bhd 384 608 58 453 811 79
20 SP CFS Sdn Bhd 0 981 100 0 1,308 100
21 Ikhlas Muhibah 0 328 100 0 437 100
22 Indah Grains Logistics 0 59 100 193 79 (59)
23 Teguh Cemerlang 6,972 4,864 (30) 5,490 6,485 18
24 FS Shipping (M) Sdn Bhd 0 199 100 0 265 100
25 Saanash Warehouse Sdn Bhd 1,873 342 (82) 2,896 456 (84)
26 Jetty Services 1,004 145 (86) 1,349 193 (86)
27 Ekajaya 0 3 100 0 4 100
28 OOCL Logistics 1 0 (100) 1 0 (100)
29 Steinweg (M) Sdn Bhd 5,868 0 (100) 5,871 0 (100)
Total 60,415 55,791 (8) 71,970 71,100 (1)
Exhibit 3.4: Total Volume (TEUs) Handled by Warehouse Operators, 2009-2010.

3.4 Competitive Analysis

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There is no specific competitive strategy that has been undertaken by Westports targeted to

boost up the local volume. All these whiles, Westports only concentrated on transshipment

volume and thus the strategies and approaches rendered are totally different and direct

towards the shipping lines. Only recently the management realized the opportunity lost to

neighboring ports and the importance to significantly tackle the freight forwarders and

consolidators to ensure stable and continuous growth for local volume direct from the

manufacturers.

Northport in comparison has long been established in Port Klang and has strong supports

from manufacturers and forwarding associations due to its proximity in terms of

geographical distance and business approaches. Various incentive schemes were introduced

to induce local shippers to ship their cargoes thru Northport with the support of good

infrastructure for storage of general and dangerous goods, fumigation services, online

inventory and invoicing system to ensure smooth flow of operation and connection with

inland facility.

Westports had only seriously looked into the local market with the inception of CFS2 Sub-

business division in 2009 with the main objective to study the needs and requirements to

facilitate the value added services such as warehousing, freight management, consolidation,

documentation, trucking etc to serve as a one stop center providing total logistics solution

for the port community and individual users as a whole.

4.0 RECOMMENDATION

4.1 Console Customers

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Currently there are only two master consolidators i.e. Trimode and Interocean are operating

in Westports. Other warehouse operators are still relying on full-box back-to-back operation

which are straight forward and normally have secured long-term business deal with the

shippers. Below issues have been identified vital in order to facilitate the local volume

growth as below:

 To induce more co-loaders to send their cargoes into Westports thru introduction of

the new incentive scheme based on guaranteed throughput.

 To get a blanket agreement (General Bond) with Customs for movement of console

cargoes from multiple external pick-up points via bonded trucks to replace the

current requirement for a bank guarantee.

 To simplify the clearance procedure for console export containers thru automated

process online to help customers have saving on runner cost.

4.2 Regional Distribution Center

SONY is collaborating with APL Logistics to manage their distribution center in Westports

and currently they are doing around 100 TEUs per week and forecasted to increase to 250

TEUs per week by November 2010. This is due to Sony’s intention to close down their Multi

Country Console Office (MCC) in Singapore and transfer to Malaysia, Westports CFS4. Apart

from the transfer, Sony is also moving out their NVOCC Office (PKLC) in Port Klang to be

centralized in Westports. They are also opting to refurnish the current condition of CFS4 to a

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more conducive place to showcase their products. In view of this, they had requested to

further expand their tenancy which is currently only at 20k sqft to probably the entire CFS4.

On top of that, Westports had also secured stable volume approximately 300-400

TEUs/month from Noble Cotton in collaboration with FZ Services as their appointed

contractor at PKFZ. Looking at the opportunity to grow further, they should study on other

feasible businesses that have potential to imitate similar arrangement. Amongst others

including inducing Landon Mega steel Exchange (LME) Cargoes from Pasir Gudang (which is

bound to close their container business) to be consolidated and redistributed at Westports

since they have strong connectivity and supports from liners.

4.3 Container Freight Station II (CFS2)

With the shifting of Mitsui OSK Line (MOL) from Northport, Westports managed to capture

more Import LCL boxes and new Japanese customers i.e. Sankyu, Alps Niagai, HTS

Forwarding, Hoerudin & FNZ Shipping. Besides that, FS Shipping had also shifted their steel

coils and plywoods shipments to be consolidated at Westports with additional 50-75 TEUs

per month. Westports need to further study on the feasibility to perform own cargo

handling to eliminate high contractor’s cost and leverage back on the marginal profit for

various types of shipments handled.

In addition, Malaysian Quarantine and Inspection Services (MAQIS) had highlighted their

intention to stop supplying container seal after inspection has been conducted due to

insufficient budget from the government. They had totally stopped providing seal in

Northport thus shipping lines are taking this opportunity to increase the price of replacing
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 the seal. Yearly, there are approximately 10k TEUs of containers being inspected by MAQIS

alone and not to include other government agencies such as SIRIM, MTIB and CIDB. The cost

of a bullet seal is around RM2/unit and thus proposes to increase the current carpentry rate

for removal/replacing a seal from RM10 to RM15 per container inclusive of the seal.

4.4 Dangerous Goods Warehouse

Month Volume Collection Tent Space Electricity Cargo Revenue Contribution

(CBM) (RM) Rental Rental (RM) Handling (RM) (RM)
Actual Jul 72 4,042.60 (RM)
7,000.00 (RM)
3,000.00 240.00 (RM)
0.00 (5,957.40) (82.74)
Jul-Sep Aug 66 4,568.30 7,000.00 3,000.00 240.00 0.00 (5,431.70) (82.30)
2010 Sep 96 10,630.40 7,000.00 3,000.00 240.00 0.00 630.40 6.57
Outlook Oct 100 8,120.00 7,000.00 3,000.00 240.00 0.00 (1,880.00) (18.80)
Oct-Dec Nov 105 8,526.00 7,000.00 3,000.00 240.00 0.00 (1,474.00) (14.04)
2010 Dec 110 8,932.00 7,000.00 3,000.00 240.00 0.00 (1,068.00) (9.71)
Total 549 44,819.30 42,000.00 18,000.00 1,440.00 0.00 (15,180.70) (27.65)
Exhibit 4.1: Revenue from DG Warehouse, Jul – Dec 2010.

Westports had just obtained a conditional approval from PKA to operate own DG Warehouse

in July 2010. Generated volume for the past 3 months was only 549 cbm compared to the

total area which can accommodate up to 3,000 sft of cargoes at any 1 time. As a port

operator, Westports need to provide this facility in order to support base for console

operators who mostly have mixture of general and DG consignments. This also helps as a

marketing tool to promote Westports’ capability to handle multiple types of cargoes. In the

long run, proposed to convert to a permanent structure which is more viable in terms of

ROI. The cost to build a permanent structure derives as below and should be able to re-

coupe within 2-3 years based on the average monthly collection.

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 Exhibit 4.2: Estimated Cost to Construct a Permanent DG Warehouse

4.5 Overall CFS Operation

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  Dedicated Staging Area – To redesign proportionate allocation of staging area for

each warehouse operators with the introduction of Total Ground Slot (TGS) System

for easy planning and monitoring of containers movements by both drayage planner

and warehouse operators. Minor enhancement needed in the Planning Work Bench

(PWB) to link with Smart Card Security System (SCSS) for auto-billing of long laying

containers exceeding the free storage period. By doing this, all truck operation will be

diverted to operate from the back entrance of CFS facing towards yard and indirectly

the congestion issue at container staging area could be reduced.

 Royalty Fee for Transloading Area – In case the above proposed dedicated staging

area allocated for each individual warehouse operator is fully occupied, thus

warehouse operators are able to request for additional space for transloading

operation. Alternative bays have been identified at 13D, Clean Sea, Block RG, and

Open Area at the back of CFS4. For additional movement for container stacked at

warehouse operator’s designated area to the alternative bays to be charged 1 EMC

and Royalty Fee of RM 30/20’ and RM45/40’ for the usage of this area.

 Reefer Substation – Currently there are only 7 reefer points at the substation next to

CFS3 and 3 more active points at CFS1. Proposed to install additional points at Block

12D near the current substation and shall be locked and monitored by Westports

staffs. Propose to start charging for electricity usage base on meter reading and look

into the possibility to provide plugging / unplugging and reefer monitoring services to

customers upon request.

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  Car Terminal Open Yard – Currently, Westports do not have any designated area for

temporary storage of import/export vehicles for warehouse operators. There are

several requests from warehouse operators to temporarily stage their vehicles which

having difficulty to obtain AP before collection by consignees. Propose to utilize

remaining space at Block 12D for this type of shipments and charge minimal fee of

RM8/unit/day based on the market rate.

Exhibit 4.3: New Operation Layout Plan for CFS1-3

4.6 Logistics Management System (LMS) Automation

Currently, various players in the supply chain may have their own in-house systems that

caused decentralization of various processes including (1) Shipping & Manifesting, (2)

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Packing Order, (3) Checking & Inventory Control, (4) Invoicing & Reporting. The Logistics

Management System (LMS) is meant to integrate all these subsets (processes) throughout

the total supply chain for ease of recording, planning, executing, monitoring & exchange of

information between various players in the industry towards a more efficient paperless

environment.

Westports need to form a task-force committee in order to study the need to have a

universal integrated Logistics Management System and come out with the best proposal to

overcome the system gaps between various parties. This system is expected to cater cross-

functional processes by the shipping lines, forwarding agents, freight forwarders, warehouse

operators, customs and other government agencies in the context of importation and

exportation of cargoes consolidation within the terminal.

Exhibit 4.4: Import/Export Process Flow to be Integrated in the LMS

4.7 Collaboration

As a non-asset-based Logistics Service Provider (4P - LSP), Westports need to manage those

asset-based LSPs (3P - LSP) in order to help customers obtain efficient cost savings at their

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end. At the same time, they also need to optimize the profits sharing along the value chain

which includes not only monetary values but also knowledge, information, responsibility and

risk. The idea of outsourcing the management of supply chain logistics is largely based on

cost saving. Thus, reducing the dependency of their customer to monitor the 3PLs provides

ability for them to focus on their core operations, and reducing the need to acquire assets.

The keyword here is 'neutralism', therefore, as a 4PL; Westports should be more flexible to

provide options for their customers to choose and must never practice any 'favoritism' by

only recommending their preferred 3PLs to the customers. In addition, should Westports

consider collaborating, it should be backed by a sound SLA that typically consists of below

components:

1. What will the service consist of and the definition of the “service” in question?

2. How exactly will the service provider deliver the promised service and the delivery

mechanisms, schedules etc?

3. How will the delivery be measured, who will measure, what kind and quantity of

service being measured, and how will be “failure” be measured and acknowledged?

4. What are the sanctions or penalties in case the parties agree that the service was not

delivered as specified in SLA and how will the SLA changes in the future?

REFERENCES

1. Kouvelis, P., Chambers, C., Wang, H. (2006). Production and Operations Management

- Supply Chain Management Research and Production and Operations Management:

Review, Trends, and Opportunities, Vol. 15, pp. 449–469.

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 2. Smimchi-Levi, D., Kaminsky, P. & Simchi-Levy, E. (2003). Designing and managing the

supply chain, Irwin/MC-Graw Hill.

3. Thompson A. A., Strickland A. J., and Gamble J. E. (2010). The Quest for Competitive

Advantage: Concepts and Cases, Crafting and Executing Strategy, 17 th Edition, pp.

C401 – 431.

4. Salvatore P. and Lisa S. (2002). Leveraging Knowledge Management Across Strategic

Alliance, Ivey Business Journal, Volume 4, pp. 42.

5. Stalk G., Evans P., Schulman L. E. (1992). Competing on Capabilities: The New Rules of

Corporate Strategy, Harvard Business Review, Volume 2, pp. 57 – 69.

6. James C. Q. (1992). Crafting an Organizational Structure: Herb’s Hand at Southwest

Airlines, Organizational Dynamics, Volume 2, pp. 51.

7. Joan M. (2002). What Management Is: How It Works and Why It’s Everyone’s

Business, The Free Press, pp. 199.

8. Stephen, P. R. (2001). Organizational Behavior. 9th ed. New Jersey: Prentice Hall, pp.

61-89.

9. Various sources from internal employees who deemed to be ambiguous, Westports

Malaysia Sdn. Bhd (information shared are not to be disclosed to public for 5 years

from the date of this article).

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