1.0 Introduction
1.1 Background of Study
The globalization of trade and subsequent breakdown in trade barriers has generated tremendous growth in maritime transportation. Thus the stiff competitions among part operators have increased the desire to attract port uses. Therefore, port operators will have to optimize the cost of their operations if they must benchmark good productivity and performance for their terminals. There is no doubt that the maritime sector especially the port system is vital and instrumental to the national economic survival of the country. Nigeria is a popular nation, renowned for her international nature of business. Quality customer service is the benchmark principle for the maritime professional and customer care techniques. Therefore, the economic justification of a port is its ability to satisfy its customers at a lower price and also be able to make profits.
The lowest investment cost (the lowest price) is often the only priority in the process of preparation of the budget in a construction project. If we consider a building's lifespan as tens of years, assessing project alternatives in terms of only investment costs occurs as shortsighted and insufficient. Running costs (operation costs, maintenance and renovation costs) are an important section of investment during the life cycle. Life cycle costing (LCC) should be an inseparable part of decision making on financially expensive investments, which most construction projects can be classified. Calculation of life cycle costs provides a completely new economic view on building design. This paper covers the implementation and incorporation of the LCC criterion in decision making cycle for preparation of construction projects. RICS (Royal Institution of Chartered Surveyors) introduced a method of collecting data about running costs of buildings in 1971 (BMCIS - Building Maintenance Cost Information Service). The British ministry of industry published a document “Life-cycle costs in the management of assets” in 1977.
It is evident that Nigerian ports operate at very low optimal capacity, in spite of the expected large volume of cargo traffic that passes through it. It is very pertinent to note that vessel delay period is a very serious problem that contributes to over 60% of our ports low productivity problem in recent times. Ndikom (2008), further confirms that regrettably, at Lome port, dock workers load 700mts per day as against less than 250mt per day at Nigerian ports. The five days difference in loading arrangements between Nigerian ports and other ports in terms of ship delay rate billings of US$4,000 is rather too staggering and unfortunate. In clear terms, this is enough to deny Nigerian ports cargo and revenue that would ordinarily have come our way.
With regards to costs emanating from the vessel, it can be affirmed that port costs, above all are the most significant, since they depend on the gross tonnage of the vessel and the time it spends in the port. Bulk carriers are those which tend to spend most time in port as well as being the greatest in size. The costs of towing, which depend on the circumstances of the movement, tend to represent approximately 10% to 15% of the cost scale of the vessel (Valverde, 1995). More so, other costs due to the vessels stay at port, including agency fees average approximately 5 or 10% of the total. The port tariffs on the merchandise are situated at less than 50% of the total. Where all costs of unloading are considered in relation to port costs, the former are situated at about 70% of the total where all costs are also included storage, weighing etc. With a clear tendency to drop when using cranes of greater efficiency and capacity, about 30% would correspond to port costs.
According to Kaspi et al. (2006), He looked at the minimization of cost and optimum port performance as anchored on reducing port turnaround time. They developed a regression model to relate turnaround time and port cost which was highly related with allocation of port facilities. Beatriz et al (2004), argues that the optimal organization of the industry can be studied by means of cost and production functions. They reviewed the literature on econometric ports' structure and propose that the calculation of key cost indicators (economics of scale, scope and so forth) is best in determining optimal port structure is order to minimize the cost of port operations.
In many markets, firms compete over time by expending resources with the purpose of reducing their costs. Sometimes, the cost reducing investments operate directly on costs. In many instances, they take the form of developing new products that deliver what customers need more cheaply. Therefore, product development can have the same ultimate effect as direct cost reduction. In fact if one thinks of the product as the services render to customers, then product development often is just cost reduction.
1.2 Statement of the Problem
Investigation revealed the following problems of the analysis of cost optimization of port operation (a linear programming approach);
- Lack of proper determination of the minimum cost of port operations.
- Lack of information relating to the determination of the optimal time frames for the decision variables of port operations.
- Lack of proper assessment of the optimality range of cost variability and resource variability.
- Lack of proper and precise information relating to the assessment and determination of the amount to be paid in hiring a unit of the resources for the objective function to be optimal.
1.3 Objectives of the Study
The general Objective of this study is to analyze the cost optimization of port operation (a linear programming approach). The specific Objectives are to find out the following:
- To determine the minimum cost of port operations.
- To assess the optimal time frames for the decision variables of port operations.
- To determine the optimality range of cost variability and resource variability.
- To assess and determine the amount to be paid in hiring a unit of the resources for the objective function to be optimal.
1.4 Research Questions
The following research questions were formulated to guide this study:
- What are the optimal costs of port operation?
- What are the optimal time frames of the decision variables for port operation?
- To what extent will cost (i.e. coefficient of the objective function) vary for the solution to remain optimal?
- To what extent will the resources vary (i.e the right hand size of the equation) for the solution to remain optimal?
- What amount can be paid in hiring a unit of the resources for the objective function to remain optimal?
1.5 Significance of the Study
In this study, the researchers have set out to analyze the cost optimization of port operations using a linear programming approach.
- It would enable the offices in-charge to determine the minimum cost of port operations.
- It will assist in the assessment of the optimal time frames for the decision variables of port operations.
- It will help in determining the optimality range of cost variability and resource variability.
Besides, the study will serve as reference material for subsequent researcher in the field or related topics.
1.6 Scope of the Study
This study focuses on the analysis of cost optimization of port operation (a linear programming approach).
1.7 Limitation of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed forth is project work. There were lots of information needed from the staffs of this institute on to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
1.8 Definition of Terms
- Analysis: Analysis is the process of breaking down a something into its parts to learn what they do and how they relate to one another. Examining blood in a lab to discover all of its components is an example of analysis.
- Cost: Cost means a price that must be paid for something or a sacrifice. Cost is used as a verb to mean to require a payment or to cause the loss of something.
- Optimization: Optimization, also known as mathematical programming, collection of mathematical principles and methods used for solving quantitative problems in many disciplines, including physics, biology, engineering, economics, and business.
- Port: A port is a maritime facility which may comprise one or more wharves where ships may dock to load and discharge passengers and cargo. Although usually situated on a sea coast or estuary, some ports, such as Hamburg, Manchester and Duluth, are many miles inland, with access to the sea via river or canal.
- Operation: Operation is the work of managing the inner workings of your business so it runs as efficiently as possible.
- Linear: Linear means something related to a line. All the linear equations are used to construct a line.
- Programming: Programming is the process of creating a set of instructions that tell a computer how to perform a task. Programming can be done using a variety of computer programming languages, such as JavaScript, Python, and C++.
- Transportation: It is an act, process, or instance of transporting or being transported. Any device used to move an item from one location to another. Common forms of transportation include planes, trains, automobiles, and other two-wheel devices such as bikes or motorcycles.
- Accessibility: accessibility refers to ease of reaching destinations. People in places that are highly accessible would reach many other activities or destinations quickly and people in inaccessible places can reach many fewer places in the same amount of time, so that nearer or less expensive places are weighted more than farther or more expensive places.
- Logistics: Logistics is generally the detailed organization and implementation of a complex operation. In a general business sense, logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations.
- Logistics Management: Logistics management is the part of supply chain management that plans, implements, and controls the efficient, effective forward, and reverses flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation software. The minimization of the use of resources is a common motivation in all logistics fields. A professional working in the field of logistics management is called a logistician.
