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I. Introduction
The performance of ports (i.e., seaports) has traditionally been evaluated by comparing its actual throughput (e.g., tonnage or containers handled) with its optimum throughput for a specified time period. If actual throughput is approaching the optimum throughput over time, the port's performance is said to be improving and alternatively, deteriorating. The critical aspect of this evaluation approach is the determination of the port's optimum throughput. For this determination, ports have generally taken an engineering perspective. A port's engineering optimum throughput may be defined as the maximum throughput that can physically be handled by the port under certain conditions for a specified time period.(1)
A port is not only concerned with whether it can physically handle cargo but also whether it can compete for cargo. The latter is especially true when the port logistics costs of shipments and the costs incurred by shipping lines and inland carriers in port are important factors in port selection by shippers and carriers. A port can lower the logistics costs of port shipments by becoming more cost efficient (i.e., lowering the cost of its service--the transport cost component of port logistics costs) as well as improving the quality of its service (e.g., if the speed at which shipments pass through a port is increased, the inventory logistics costs incurred by port shipments are reduced). A port can lower the port costs incurred by shipping lines and inland carriers by reducing their time in port.
In a paper by Talley (1988b), it is argued that if a competitive environment exists among ports for cargo, ports should also consider their economic optimum throughput when comparing actual to optimum throughput in evaluating their performance. Economic optimum throughput is defined as that throughput (for a specified time period) that satisfies an economic objective or objectives of the port. If the port is privately owned, its overall economic objective might be to maximize profits or to maximize throughput subject to a minimum profit constraint. If the port is a public port (i.e., government-owned), its overall economic objective might be to maximize throughput subject to a zero profit constraint or subject to a maximum allowable operating deficit (to be subsidized by government).
A problem that arises in evaluating the performance of ports by...