ItJVooSl

Public Disclosure Authorized

THE WORLD BANK

POLICY PLANNING AND EXTERNAL AFFAIRS

Infrastructure and Urban Development Department

V.'
Report INU 57
Public Disclosure Authorized

The Management
of
Port Equipment Maintenance
Public Disclosure Authorized

An UNCTAD Policy Seminar

Code IPP-3
Public Disclosure Authorized

Shipping Division, UNCTAD

University of Wales College of Cardiff - \
Performance Associates, Inc.

AUGUST1990

Technical Paper

This is a documentpublishedinformallyby the World Bank.The viewsand interpretationshereinarethose of the author

and should not be attributedto the World Bank,to itsaffiliatedorganizations,or to any individualactingon their behalf.
 The WorldBank

The Management
of
Port Equipment Maintenance

An UNCTAD Policy Seminar

Code IPP-3

TechnicalPaper
 POLICY SEMINAR ON

PORT EQUIPMENT: POLICY, MANAGEMENT AND MAINTENANCE

CODE IPP-3

The World Bank, UNCTAD and other international agencies have been
concerned for some time about the poor availability of port equipment in
developing countries. Indeed, equipment procurement, operation and
maintenance are seen by these agencies as among the biggest difficulties
facing port management. Because of the technological developments in shipping
in the past two decades, and the consequential changes in cargo-handling
methods, there has been a vast investment in port mechanical equipment, all of
it needing continuous and effective maintenance. In particular, ports have
had to purchase large quantities of specialized, high-capacity and complex
cargo-handling equipment; a very high proportion of the capital and operating
budgets of port authorities and cargo-handling companies is now devoted to the
purchase, operation and maintenance of mechanical handling equipment. In a
typical, medium-sized seaport in a developing country, handling about 5
million tonnes of break-bulk cargo in a year, the total investment in mobile
cargo-handling equipment (measured on a replacement cost basis) may be more
than US$30 million. A large port could have over $200 million invested.

The benefits that all this investment in mechanization can bring to

seaports will not be realized if the equipment is not properly operated and
maintained. While much of the port's infrastructure can continue to function
for some time in the absence of regular maintenance (albeit at lesser
efficiency and with increasingly serious signs of decay), neglect of
mechanical equipment causes very rapid and very obvious productivity
deterioration. If current problems with equipment procurement, operation and
maintenance are not resolved, the efficiency of cargo-handling operations will
be threatened and the financial and other benefits of technological change
will be lost to the economies of those countries. Despite considerable
assistance from international agencies in the past two decades, experience
shows that equipment management problems (and particularly those of
maintenance management) in many developing countries - far from being solved -
are actually becoming more serious. In some regions, equipment management
deficiencies threaten the ability of the ports to perform their primary task
of providing the services required to meet the needs of maritime trade.

It is because the situation is so serious, and because the scope for

improvement and the scale of potential benefits from improving equipment
management are so great, that the Shipping Division of the United Nations
Conference on Trade and Development (UNCTAD) has developed the Policy Seminar
on Port Equipment: Policy, Management and Maintenance.

This seminar discusses the major policy issues faced by officials from
developing countries in the management and maintenance of cargo handling
equipment and the likely steps to be taken to improve their performance up to
a level compatible with the requirements of the international transport.
Potential participants to this seminar are:

Senior officials from port authorities, cargo handling companies,

Ministries of Transport, Communications and Public Works, Finance and
National Planning.

Senior officials within the port authority and cargo handling

organizations in charge of planning, procurement, operations, personnel,
maintenance.

The objectives of the seminar are:

- Identify the deficiencies in equipment management policies and

practices in their ports.

- List the benefits to the port, its customers and to the national
economy of adopting good equipment management policies and
practices.

- List and define the elements that make up the equipment management
function, and state how they interrelate.

- List the steps involved in preparing an equipment inventory plan

and annual capital budget.

- Examine and, where necessary, revise procurement regulations and

methods, to ensure that they result in an equipment inventory that
matches the port's operating and maintenance needs and
capabilities.

Establish good equipment operating procedures, effective

management and supervision of equipment use, and sound and safe
driving practices.

Review the organization of the port's engineering department and,

where necessary, revise it to ensure that it meets present
maintenance demands, has a status commensurate with the increasing
dependence on mechanical equipment, and is sufficiently flexible
to respond to changes in the nature of the engineering services
required.

List and describe the policy options for maintaining equipment and
ensure that engineers incorporate the most appropriate and cost-
effective policies, strategies and tactics in a comprehensive
maintenance plan.

Describe the principles of effective supplies management for

controlling the purchase, storage and issue of spare parts and
supplies for maintaining plant and equipment.

Identify the steps in preparing a manpower development plan

(particularly for the engineering, operations and supplies
 departments) and evaluate the various management techniques and
incentive schemes designed to improve employee attitudes and
motivation.

Describe the essential functions of a management information

system and explain how it can be used to improve port equipment
management.

- Examine the present institutional and organizational arrangements,

particularly as they affect the working relations between ports
and central government, and take the necessary action to
streamline regulatory and administrative procedures to improve
equipment management efficiency.

The seminar lasts five working days and is supported by twelve exercises
and a handbook. The most important elements of the seminar are likely to be
the exercises, where participants work in groups before taking part in
discussion sessions designed to illustrate the major policy issues. It is
strongly recommended that the seminar be held in a location remote from the
port or normal workplace of the participants so that the temptation to omit
some of the sessions is removed and the participants can devote their full
time to the seminar. An added advantage is that time constraints are lessened
and the evenings can be used for essential preparatory reading.

The materials are currently available only in English but proposals to

translate them into Spanish, French and Arabic are being considered. The
seminar is divided into the following eight sessions:

* Equipment Inventory Planning, plan the equipment needs in accordance

with the port's trade, the operational and maintenance practices and the
availability of financial resources.

* Equipment Procurement, review administrative procedures to assure that

the right equipment is bought at the right time.

- Equipment Maintenance, discuss maintenance strategies and procedures,

organizational aspects, workshop's requirements, and other aspects
related with developing a customer oriented behavior in this service.

*fi Supplies Management, discuss the need for adequate supplies policies and
practices. The management of procurement and storage of spare parts.

* Equipment Operations, discuss the allocation, deployment and safe

operation of equipment and the conflict of interest with the Maintenance
Department in this respect.

Management and Manpower Development, discuss the main components of an

adequate manpower and resource development policy.

Management Information Systems, discuss the main elements of a reliable

and comprehensive information system to manage all the management
functions.
 -4-

Institutional Framework, discuss the institutional changes required to

improve the equipment and maintenance function in the port set-up.

It is recommended that the Seminar be conducted at a national level by

two or three experienced instructors for no more than 20 participants who
should be carefully selected. Since policy issues related to the management
and financing of port operations and equipment are discussed, it is essential
that participants are selected among the relevant policy-makers and managers.

This is the second of the policy Seminars being prepared by UNCTAD's

Ports Section under the Improving Port Performance (IPP) programme. It was
validated in Kingston, Jamaica, December 1989, with a group of Caribbean
participants and the first African country to benefit was Tanzania in June
1990. UNCTAD Policy Seminars deal with topical subjects of interest to senior
officials from the port industry and related organizations. As such these
seminars may lead to the implementation of adequate policies in several fields
and the undertaking of major changes in the industry as well as the setting up
of comprehensive training programmes for personnel within the industry.

Enquiries on this Policy Seminar should be addressed to: Director,

Shipping Division, UNCTAD, Palais des Nations, 1211 Geneva 10, Switzerland,
(FAX + 41.22.7336542; Telex 289696).
 -5-

ImproviingPort Performanice

PORT EQUIPMENT:POLICY, MANAGEMENT

AND MAINTENANCE
Programllme

* Session 1: Port lIzvenitoryPlannini^g

- Exercise 1: Equipment Inventory

- Exercise 2: Economic Life of Assets

- Exercise 3: Equipment Replacement Strategy

- Exercise 4: Equipment Inventory Planning

* Session 2: Equip;nenjt Procurement

- Exercise 5: Equipment Procurcrnent

- Exercise 6: Bid Evaluation

* Session 3: Equiipment Maintenan2ce

- Exercise 7: Equipment Maintenance

* Session 4: Supplies Management

- Exercise 8: Spare parts and Supplies Policy

* Session 5: Equtipnent Operations

- Exercise 9: Equipment Operatinrg Policies and Practices

* Session 6: Mfanagement and Manpower Developmiienzt

- I)cvelopmcnt
Exercise 10: Management and Mvlanpowero

* Session 7: Alnagemenit Infornation Systems

- Excrcise 11: Managernent Informnation Systems

* Session 8: Instituttionial Framework

- Exercise 12: Institutional Plroblems

 Port Equipment

An UNCTAD Training Strategy

Backggrouttd

UNCTAT) thle World Bank and other intcrnational agencics liavc been conccrndc< for somc
time about dcficicncies in cqtuipment managctncint in dIcvcloping coUnltr'iCs. lndcecl, cqLuipmCrnt
procurerncit, operation and maintenance arc secn by thesc agencies as amorng the biggcst difTfi-
cultics facing port managmecnt. 13ccausc of tlh tcchntological developments in shipping in thlc past
two dclca(cs, and thic conscqucintial clhanges to cargo-handling methods, thlcrc has bccn a vast in-
vestmncit in port Mechanical cquipmicn1t, all or it nCceding continuous and cfcctivC maintcnancc. In
particular, ports have had( to purchase large quaniticiis of specializcd, high-capacity and complcx
cargo-handlling cquipmetit; a vcry hiigh proportioni of the capital and opcrating budlgets of port
authorities and cargo-handling companies is nowv devoted to thc purchase, operation an(d mainitc-
naiice of mechanical handling Cquipment. In a tvypical, medium-sized scaport in a developing
country, handling about 5 million tonncs of break-bulk cargo in a year, the total investmcnt in
mobilc cargo-handling cquipincrit (measured on a replacement cost basis) may be morc than
USS30 million. A large port could have over $200 nmillion invested.
The bencfits that all this investmcnt in mechanization can bring to scapoits will not be rc-
alized if the equipment is not properly operatcd and maintained. While much of tile port's
infrastructure can continue to function for some time in the absence of regular maintenance (albeit
at lesser efTicicIlcy and with increasingly serious signs of decay), negicct or mcchanical qC(UipmCent
causcs very rapid and very obvious deterioration. If currcnt problemis with cquipmcnt procure-
ment, operation and maintenancc arc not resolved, tilc effciency of cargo-handling opcrations will
be threatened anci the financial and other benefits of technological clhange will he lost to tlec
economics Of those countries. D)espite considerable assistance From interinational agencies in the
past two decades, cxpcricnce shows that cquipment management problems (an1d particularly those
of mainitcnancC managcment) in manv developing countries - far from being solved - aec actuallv
bccominig mIoreCsCrious. In sonric regions, c(uipmientit manlagcemecnlt(IcficiCenciesthircatenI the ability
of the ports to prcrform thicir primary task or providlinig thc facilities and services required to mect
maritime tradling rcqtiuirements.
It is because tthC situaition is so Serious, and because the scope for improvement andl the
scale of thc poteintial bcncfits fromnimprovinig equipment management are sn great, thot the Ship-
ping lDivisionof the lnited Nations Confcrcncc onl *'ra(Ic and D)evelopment (UJNCI I)) hais (de-
veloped an integr-atcd programme of seminar and couIIrses onl the subject of' plort cquipml-eniltto
coveI tile Whole range of problems racedby the ma nagement from pt)rts of dcvclopiii, conIIItriCS.

Tlrc scope of tlie ploh/)clmi and the proposed strfatcgij

'I'hc problem of port c(dl ipmnent has lead to the prepar-ation of the olilowing hasic (doc-
umcntation:
* Repor-t Maintenance oif Port Equipment TID'B/1C.4/AC'.7/9prieparedrorI the Ar11-/Imc
Intcrgovcrnmental Group of Plort Experts. (Gcnevai 1990.
* Manual for the Il P-3 Policy Seminalrr, publication 1INU'NT1)D/SIII P.'63 I, Ncw York 1990.
* Technical paper from the Workld Bank, T'h J\l anagement of lPort l(lipiimcnt Maintenance
Rcport INIU 57, Washington 1990.
Aitltougih thir-c is little doubt that inadequacics in port maintcnancc lie at trle leCart of the
inefficicncy of iiany ports, thC prTolem is not ptircil an cngiiiecring one. rcsolvabic by upgrading
workshopl facilitics and tilc tecihinicalskills ofcenginecring sta f. Good cquipimiit IllainrlliTnCC aIid
a satisfactorysupply of equipmcntto operators lepei(ndlargely on correct managemcntpolicics anld
appropriate govcrnmrcnt rcgulations. It is vital, thet-Jore, to idcntify thosc con(litions that have to
be met in or(ler to ensurc that port cquipmcnt is managed cffcctivcly.
Thc lVigurcbelow shows the individual clementsmaking up the anatagemceitof port cequip-
mcnt. They arc a set or strategics, proceIlu1Cs, practices, controls and activitics, individually dIefin-
able andl dcscribalic hut totally niterdcpncident. Failure to establish, sustain or follow one set of
activitics leads inevitably to dleficicicics or problemns itn others. 'T'lhcsuccess or the ovcrall man-
agecncnt function is dcpcp lenit on the strengths andi (qualitiesor the individUal complonents. An
understanding of the nattiuc an(d intcrrciationshiips of thcse componcilts is fundlamicnitalto the cef-
fective management of port cquiipment.

Port Equipment l\lanagement

//DEVLOPMN-,IT O/MNAG.MN PORT CRMN\

FRE ORKEM INENOR

\\ EQUtPMENT
n /gEQUIPMENT /
\OPERAlN /MAINTiENANCE/

\\ // ~SUPPLIS< /
\\/g MANAGEMENT \ /

Thc following sections give a blricf(escriptionof the eight clemnciitsof-thiCcqtqipmeniitman-

agemcnt togethier with an indication of the availability of UIN-YADI)courses to tackle cach of
thern.

IPP-3 Policy, SenJi;ar( oir Pofrt Equi4 wint-: Polic.r. AJanagcmyCcinf

and Aaifl;tenRa;;cc

hliis Seminar sCts oult the wholc probicin. discusses the majolr policy isslues fiaced by oflicials
from dccloping countries in the managemcentand maintcnancc ofcargo handling cequip ment and
the likely steps to be taken to imipr-ovethicir performance utp
tic a level compalibic with the Ce-
(]uirements of tlc international transport.

As this seminar deals with policy issues of worldwide revlvince its conltcnlt doCe not nee(I to
bc adaptcd to local circumstances. On thc contrary, tilc in-delpt1 alsis of the eighit elements
making up the management or port. equipment dio need
iec(' substantial adaptation to the ni tiollna
an(l local condlitions prevailing in the port.
 -8-

PoiltInventorl'Planni,,g

'I'he efTicicnt operation and rnaintenanecof' equilpnnllCt(inCluding cargo-ihandling,marinie

and othcr port plant and machinery) are the ccntral conicerns in port performance and profitability.
Clearly, planning fiiturc cquipmlcnt rcquiiemiicnltsmiust, thcrcforc, hc a senior managcmtneTtfunc-
tion. Thle activity lhas bcome extremely eomplex reccnstly,bccause of'tlhe growing range ofcquiip-
ment available and the rapid evolution in cnginecring dcesign, cquipmnc11t pci-rormancc and
specification. l'orts must establish pnroecdluresfor preparing an equipment plan that ensures that
an appropriate inventory exists at all timcs to mcci operational and othicr requircmcnits. It must
be based on traffic forecasts (taking into aCCountall piroposed port develolptnents and the intio-
duction of new traffics) andclpredicte(l operating and maintenance performvince. Appropriate re-
placement strategies must be worked out, basecdon local conditions, on equipment reliability and
on running ancd maintenance costs. ''lhe plan should( determine the demand for each class of
cquiipmenitin the port. o reiflectthe increasing importance of equiplmientto operators, the equip-
ment plan must he incorporated wvitlhinthe port's corporate plan, to prrovidlea framework for fu-
ture acquisitiorn lpolic. 'I'he port inventtory plan is a vital input into the annual capital budgeting
process and in longer-termnport rinancial planning. Some of the items inclutded in thlis climeilt are
discusse(i in the Trainmnar02.1 PoritPlanninig course.

Equi.pnpctt Pr-ocir-enwtt,t

Suitabie procuieinent policies ancl strategies imust be formulated and Followed if the cquip-
ment plan is to be successfully implemented. The objective nmustbc to acquire the equipmen1t that
most appropriately meets operators' and engineers' requirements; it must serve its operational
function to maximum efriciency while matching as nearly as possibie the port's teclhnical abilitv to
maintain it. EIVective procedures must be established and followed For writing technical specifLia-
tions, preparing ten(ler doctiments and administerinig the tendering process. Reliable techniques
mnustbe developed for evaluating bidding documents and for contract suLIervision. Finally, an ap-
propriate organizational structure is needed for the procurement fuuncticinandl action taken to re-
cruit, retain and! develop competent staff All tlhese issues are dealt witih in an IPP-4 Eq"ipaieut
Procure,nemit course under preparation.

AMaintcliance AIana,gcnient

TIecscalcof potI investmnCit in equipment and the growving signilicance Or cquipmnent run-
ning and maindtcnance costs on revcnue budgets an,l comnIpany1 profitabilityjulstiRf a considerable
rise in thc status of thc maintenance fiunctioni. This must lbereflected in an increased level of au1l-
thority for engineering managers within the organi/atioln and the allocation or grCatCr resources
to maintenance. There munstlie a fundamncital cli;inge in management culture, with a mluch in-
creasCdempliasis on ctistomer service and( perfortmance-orientated mn;aintenan1ee.
This can onlI he
achievecl tlhrouigih wvell thiouiglht ouit nmaintenance strategics. supported liv lreliable precvcntivc and
corrective maintenance procedures. (ood worksholp fu.cilities and cngineering practices nmist be
cstablished, within a framework Ofran efTicicnt worlkshop adminictralion and informiation systcm.
The T,rafirnar 02.9 A (nmgemienentnfEquipment Alain retiance course develops these ideas in depth.

Supplies A11fan1age'nelt

'Ihc port maintenance ftunctionl canntlot work efrectiveiv if'it is not spportcd ftuliv bv an cf
Ficicnt spare parts and ConSuma11bleCS SUPplliCSSVStCen).
Supplies mallagCelicnlt is thills a vital compo-
nCnt of tlhc mlaintCliance mianllagCellmiet Structure, and needs to be devcl peid to tl1t fu;lil aeccount
of, and oveCrcoe,allC .t1 the (lificuIltiCs imposed by sup-,ply conditions, in(ventonir coqts and govern-
micnit conitrools. I fT'cctivc reporting and administra tixc svstcls are 11neded to initiate thlc procorc-
mzeat rmoccssi to maintain accuratc recordIs on usaget and stock levcs. and to mllonitor andl nllect e
costs. Tic Suplics Management Information Systcm is a vital tool of the poirt maintenance
function. Ilic arca or supplics tnagagmcnt is considercd in thlc Trainmar02.IS SVpreParits Alttan-
agemertt coursc.

Equipment Operatiopns

Crucial to cflicient cargo-lhan(dlingopcrations is tilc preparation of rules govcrninig thc allo-

cation, deployment and saFc operation of cquipTict. Tlhc aim must bc thc eTecctivc utilization of
equipmcnt, maximum opcratinig perfornanice and miniLum dcmand on1 mainitcnance facilities.
Opcrating manaialsinust he prparcei, setting out saflcand ceficientpracticcs, and adequate training
and supervision providled to cnforcc them. Managcictnt must bc better iniformi(edabout cquipmcnt
deployment and morc cost-conscious. Ihere must be a new spirit or co-operation andl collab-
oration between operations and engitincring staff, to ensuic that operators have the cquipimnclttlhat
they need, wvhileengineers have access to that equipment whenever it neetis their attention. A key
factor is an effcctive Operatiolial Management Inforima"tiotnSystem, incil(lilig da3taon cquipment
costs. So far thierc is not a specific course covering thiesc aspccts, but sotme of' thc points imncitiondc
are includcel in the JPP-I A?na<agementt of General(Cargo Operationsalbeit in a gencral way. Also
the Trainmar 02.1 Porrt Operations for supervisors corisc is rielvanit to this clemcnt.

Managemlent and Manpower Demlopment

I-luman resourccs are a key factor in all components of port cquipinent managemcnt. Man-
power development policies and proccdures must ensure that the port recruits suitably qualified
personnel anid that all cinployces arc ofecrcd attractive carecr pattcrns. Iraining is of vital imipor-
tance, and must be suited to the intcllectual abilities and rcquirecdskills of the indlividuals and to
the necds of the port. Employec motivation must bc fully developed, tlhrough rlnancial and other
incentives, discipline maintaiticd and accountability established for cachimyembcrof the port's staff.
Salary, welfarc and amcnities must he reviewed to ensure that they serve to attract and rctain staff
of the right calibrc for a moderm, higlhly techclinologicalport. Tlhcrc is not anI UNCTAI course
covering this vcry important arca of manageicnt.

ManageinmcntInformiatio,, Sj'ste,,s

Central to the Formulation of effectivc port eluipnment managemnentpolicics is a rcliablicand

comnpirclcnsivcinformation systeim. TI'lis illUistcont:iin cotinulally np-datcd records on opcrating
performancc, reliability, rcpair and maintenance sclhc(dules,and costs. It will thien riovi(lde all the
cssentialinformiation necessarv for mnonitorinigoperational and engincering performance and efri-
ciency, an(l for making soull(i (lecisions on all aspccts of e(luipnlent manapgemcnt. Management
InformatioIn Systecmlsimpinge onl, and are the vital inputs ror, almost all the otlher aspects of port
managemelt. No course availablc to covcr this cleinicit,

lnsfit,itionial Frame ,iork

TIllC policies an1dpracticcs of C(qipmiinilltmanagcmncntmuinstbC flormulated wvithinlthe rramc-

work of the institultional andl organizational arrangcmnets of'the particular country and port. TlheV
wxill c innUiCicediby the constitution, organizationll structure and obIjcCtivC!; oftihe port authority
and the respective responsibilitics, (lutics andI auithority of private and public opcraoti'mncomnies
A inajor infiluincc oiia mnagenient in dcvelopinig conlitries is thlc relationship befCfkIi thlie organ-
izations in the port and central govcrnmiiien)t. Regulations aid controls imposed on the port by
central govciernmiet all'ect prlociireinciit of cq uipimcit and supplies, nIaIngclilent acldInMTIpower
 - 10 -

carccr structures ancd otlhcr vital arcas. I'hc deg-ce of' financial autonomy permnitted to ports, par-
ticularly in access to forcign cxchange and frcc(loi fV-ominvcstmn1ct controls, is of crucial impor-
tancc to the port cquipment ftunction. 1nstitutional alnd organizational arrangemeicnts must hc (dc-
signcd and( dcvclopeci so as to promotc cflicicnt equipment managcmcut policies andi practices.
Therc is no course available for this largc an(i complex subject, but givenI its considerable inlpor-
tance this matter is discusscd in the l'olicy Scminar.