TDABC for Ports and Logistics: A Practical Application

The ports and logistics sector presents unique costing challenges that make it an ideal candidate for Time-Driven Activity-Based Costing. With diverse cargo types, varying vessel sizes, complex handling processes, and shared infrastructure, traditional costing methods simply cannot provide the accuracy needed for strategic decision-making.

The Costing Challenge in Ports

A port handles thousands of transactions daily, each with different characteristics. A container vessel with 2,000 TEUs requires different resources than a bulk carrier with 50,000 tons of grain. A reefer container needs powered storage. Hazardous cargo requires special handling protocols. Each variation affects the cost of service delivery, but traditional costing treats all cargo similarly.

Applying TDABC to Port Operations

TDABC models for ports typically include resource groups for vessel operations (pilotage, towage, mooring), terminal operations (crane operations, yard management), cargo handling (loading, unloading, storage), documentation and customs, and maintenance and support services.

Time equations capture the drivers of complexity. Vessel handling time varies with vessel length, draft, and weather conditions. Container handling time depends on whether the container is standard or special (reefer, hazardous, oversized). Storage costs depend on dwell time and storage type.

Insights and Impact

Port authorities that implement TDABC gain the ability to price services based on actual resource consumption rather than simple per-ton or per-TEU rates. They can identify which trade routes and customer segments are truly profitable. They can quantify the impact of operational inefficiencies like excessive vessel waiting times or suboptimal yard layouts.

Our work with major port authorities has consistently demonstrated that TDABC reveals significant cross-subsidies between different types of cargo and vessel operations, enabling more equitable and competitive pricing strategies.