Table of Contents
How Do We Increase Port Security
Without Imperiling Maritime Commerce?
Using Flight Simulators and Workshops
to Begin the Discussion
Stephen Conrad!”, Walter Beyeler', Richard Thomas', Thomas Corbet',
Theresa Brown', Gary Hirsch’, and Christopher Hatzi*
Abstract
Port security is an area of increasing national concern. Various security measures have
been proposed in an effort to reduce perceived security threats. These measures have the
potential to significantly change port operations, and may lead to significantly increased
shipping cost and time. To help define and explore the tradeoffs between security and
commerce, we have used system dynamics models to engage diverse representatives of
business and government. In collaboration with domain experts, we have developed
models of port performance on two relevant time scales. A short-term port operations
model simulates the effects of a variety of security measures on port operations, under
both normal conditions and when subject to several disruptions in supporting
infrastructures. A long-term port economics model simulates the possible consequences
in of port performance changes caused by security measures on the long-term
competitiveness of the port. In workshops designed around these models, we have
engaged government and business representatives in discussions about the ramifications
of security policies. These workshops have catalyzed discussions among the diverse
parties concerned with insuring secure and efficient shipping.
Problem Statement
Especially since the events of 9-11, container shipments through US ports are believed to
be a potential pathway for introduction of weapons of mass destruction (WMD) into the
United States. Currently only about 2% of all cargo containers are inspected. New
security measures have been implemented, and others proposed, in an effort to reduce
this perceived threat. These measures call for additional processes and equipment to be
used in container shipment in an effort to better characterize and control cargo. Requiring
new security measures can change important performance characteristics of the port such
as the time and cost required to import and export goods. These performance changes
can suppress overall demand for shipping, and change the relative attractiveness of ports
to importers, exporters, and cargo carriers. The current inspection process was designed
' Sandia National Laboratories, P.O. Box 5800, Albuquerque, NM 87185-0451
> corresponding author, shconra@sandia.gov, 505-844-5267
> Creator of Learning Environments, 7 Highgate Road, Wayland, MA 01778
4 Transportation Strategies International, P.O. Box 549, Tualatin, OR 97062
primarily to enforce tariffs and intercept illicit drugs and other contraband, and may not
be well suited to interdicting WMD.
In addition to any long-term performance changes created by security measures, the
transition from the current system to an inspection system tailored for security may
impose additional costs and delays. Effective security measures must take account of the
economic consequences they entail. The National Strategy for the Protection of Critical
Infrastructures and Key Assets (2003) issued by the White House states that “security
solutions to the container shipping challenge should recognize that, in many cases,
commerce, including essential national security materials, must continue to
flow...Stifling commerce to meet security needs simply swaps one consequence of a
security threat for another.” Successful port operations requires the coordinated action of
many disparate people and organizations, including ship owners, port authorities,
importers and exporters, labor unions, and government agencies. Negotiating the
appropriate balance between security and cost requires considering the consequences of
alternatives on these diverse interests.
Port operations also rely on reliable performance of various infrastructures, including
electric power systems, telecommunications systems, petroleum refining and distribution
systems. Disruptions to these infrastructures may stop or degrade port operations.
Understanding the potential for infrastructure interactions is our line of business. We are
therefore interested in how new security procedures might change the sensitivity of port
performance to infrastructure disruptions. In this study, we used the Port of Seattle and
the Port of Portland as the ports we considered in our analysis.
Analysis Objectives
We have set about to inform decisions about port security measures by answering the
following questions:
« How might port security policies applied to container cargo affect shipping time
and costs?
e Under what conditions are there infrastructure disruptions and how will those
disruptions impact port operations? Can security measures exacerbate the impact
of port disruptions or impede the recovery from disruptive events?
e¢ What are the potential long-term economic impacts of increased security costs?
Security Policy Options
Over the past 18 months a variety of container security policy options have been
proposed. Those currently being considered include:
e Increased manual inspections
¢ Port of departure inspections
e Cargo profiling
o Early manifest reporting
o Supply chain assurance
e Container seals
o Physical
o Electronic/smart
e Scanners
e Detectors
o Radiological
o Chemical/Biological
¢ Monitoring and Access Controls
The system dynamics flight simulators we have constructed consider the effects of all
these security measures. The figure below shows some of the security equipment being
considered for deployment.
Disruptions
Disruptions to port operations we consider include:
°
Telecommunications — We consider the effect of a major telecommunications
disruption. A fire destroys all the switches in a single building downtown. The
cable vaults in the basement remain operational and unaffected office space in the
building is converted to house the replacement switches. Our collaborators at
Lucent developed a model of the Seattle network to simulate the performance of
the telecommunications system following this disruption. Both wireline and
wireless communications are severely impacted for 1 week. In the first day or so,
this impacts the ability to assemble labor, pilots, tugs, linesmen, and others, but
work arounds are implemented fairly quickly. However, this disruption more
persistently affects the logistical communications needed to (1) deliver cargo by
truck to the port; and, (2) truck import cargo off the terminal. Following the first
week, telecommunications gradually recover over the next three weeks. In all, it
is a month before telecommunications fully recover.
Electric Power — In this scenario an avalanche in the Cascades takes out two
major transmission lines. Rolling blackouts occur for 5 days reducing
productivity of both the day and night shifts by about half.
Labor — A strike or lockout occurs. In the first week, throughput is significantly
affected as "work to rules" is imposed. Then, a strike or lockout occurs for the
following 2 weeks.
Port Security Threat/shutdown — A dirty bomb is discovered during a Customs
inspection at another West Coast port. The users are able to specify the duration
of port closure. If they like, they can increase the amount of customs inspections
after the event.
Long-term Economic Factors
We have focused on the long-term economic viability of the port. There are several
distinct interests that must be served by the port in order to remain competitive, including
carriers, importers and exporters, and local businesses that support or rely upon port
operations. Some key decision variables in our analysis include:
fe)
°
fe}
°
Costs to carriers of making a port call
Costs to importers of customs inspections and supplementary security measures
Delays and unpredictability in shipping time created by alternative security
measures
Lease rates and other fees charged by the Port
Long-term performance will clearly depend on external factors as well. Our analysis
allows alternative assumptions for interest rates and market growth.
Process
We have consulted with port operations specialists, port interests, and business
representatives to learn about port operations. It was during an exercise in causal loop
diagramming in which the modeling team began to articulate the important feedbacks in
port operations that we observed that there seemed two primary time scales of interest in
this problem. First, the mechanics of port operations and its performance in response to
added security measures and/or disruptions operates on a time scale extending over days
and weeks to months. Second, long-term competitiveness and economic viability of a
port — especially in shouldering the burden of paying for increased security measures —
seemed to play out over a time scale that extended over years to more than a decade. Here
we hypothesized that, similar to many system dynamics problems (e.g., Forrester, 1971;
Sterman, 2002), cause and effect may not be closely related in time. As detailed in the
following sections, we used this understanding to develop three tools to help identify and
communicate the tradeoffs between security and commerce:
o A port operations model to evaluate potential impacts of security measures on
throughput
o A port economics model to evaluate long-term effects of security
o Workshops held in Portland and Seattle to test the port models and concepts, and
begin the process of finding the appropriate balance between security and
commerce.
Collaboration
We have worked with numerous individuals to design and parameterize the port models,
identify analyses and workshop content. Collaborators and domain experts that helped us
develop the model and workshops included:
e Pacific Northwest Economic Region
Regional Maritime Security Coalition
US Coast Guard
Bonneville Power
Ports of Seattle and Portland
Cities of Seattle and Portland
University of Washington
Lucent Technologies
Transportation Strategies International
Model Development
In discussing the processes that influence cargo flow through a port, under both normal
and disrupted conditions, we concluded that the system exhibited important dynamics
over a range of time scales, and that the system responses could best be captured by
separating these dynamics into short-term operations, concentrating on the internal
dynamics of the port, and long-term responses, addressing the responses of the shippers,
carriers, and port operators to changes in summary long-term operational characteristics.
Short-Term Operational Model
Our first goal was to explore the tradeoffs between security and port performance by
evaluating performance under a variety of alternative security policies. We designed a
short-term simulator of port operations to help us assess port performance under various
conditions, including imposition of diverse security policies. There are many possible
security policies, each combining some subset of available technologies. Each policy
will have some associated performance characteristics. In the short term, the tradeoffs
between security and performance are shown schematically in the following figure:
Security Enhancement
Added Shipping Time and Cost
In this figure, each dot represents a different potential security policy option.
Conceivably, there could be an infinite number of security policies, but in this schematic
we show that there are many possible policies. It is possible (though probably unlikely)
that a low cost, high security option could be identified. This is represented by the red dot
to the upper left of the graph. There are also many inferior options shown as orange dots.
For each of these options there exist other preferable options that provide either (1) more
security for the same cost, or (2) the same security at less cost. We anticipate there will
exist a continuum of preferable options (shown here as the blue dots connected by the
green line) where there will be direct tradeoffs between shipping performance and
enhanced security.
The short-term model was also designed to provide an understanding the robustness of
port to disruptions under different conditions, and to evaluate the effects of security
measures on the ability of the port to recover from such disruptions.
The figure below shows a simplified stock and flow structure for moving import cargo
containers through a port. There is also a corresponding outflow of export materials (not
shown).
Load Rate
to Trains
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Long-Term Economic Viability Model
Our second goal was to understand whether the consequences of additional security
measures on port operations, particularly the cost and time required to ship cargo, might
initiate a death spiral due to the large capital costs involved port and carrier operations.
The essential aspects of the causal structure governing long-term performance are shown
in the following diagram:
Inspection Cost ian
a to Importer Sree g WN
Inspection Carriers’ Fixed
Effects Costs
Importers' Gy
_—” Demand through a ie
Total Time Port Diluting Fixed Leave
Through Port
Volume
Handled
4)
Growth Attracts Trade Port Net
1 ———$_____. Investments Income
Capacity rea iti _——
Capacity Takes Revenue
Total Cost to
Port
Ports have large fixed costs for facilities and equipment, and may have large recurring
maintenance costs (e.g. for dredging) that do not vary with port traffic. In the long term,
the greater the traffic through the port the lower the unit cost. Large traffic volume may
allow Ports to lower the rates they charge to carriers, which make the port more
attractive, and thereby attracts more trade. Conversely, a decrease in traffic can increase
the unit cost, making the port less attractive, and diminishing trade. Long-term port
operations exhibit other classical feedbacks: higher traffic volume increases income and
permits more investment in equipment and facilities, allowing even higher traffic; repair
and maintenance of existing capacity diminishes income and hinders capacity expansion.
The model structures in both the short-term operations model and the long-term
economic viability model were constructed to be generally applicable to many ports. It is
the parameter values make them port-specific. The model and process can thereby be
used with little additional work to evaluate other ports.
Interface Design
Interface design for the models was especially challenging because of the need to quickly
and effectively present diverse users, usually with little prior exposure to simulation
models, with a clear representation of the way their system was modeled and convenient
access to model controls and results. The structure of the underlying models is quite
complex, creating further challenges for interface design. Our goal was to make the
model details available to interested users, while not confronting them initially with
overwhelming complexity.
The following figure shows the overview results screen. Each graph contains a hyperlink
allowing the users to drill down deeper to get more detail on various aspects of the model
output. The next figure below shows one representative drill down on costs.
Port Overview
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Likewise the long-term model starts from an overview screen (shown below) that also
allows many drill downs for more focused inquiry into model results.
‘Summary Causal Loop Diagram
Inspection costs a ‘More cals increase
L Shippers’ demand
‘delays decrease
"eho besa
iG a Demand tru =
= Fixed Costs
More demand
increases volume
Lower fees attract
Higher volume causes
‘congestion Higher volumes
— Nanded
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Investments increase
‘capacity
Increasing capacity, ri
Mcjeasns Mea) cists: Investments Cause Expenses
One drill down expands the volume of goods moving through the port, showing the
potential market for both imported and exported containers, and the amount of that
potential market currently served. The import and export markets are further subdivided
into “local” and “distant” components, which are distinguished by the mode of surface
transportation that serves them. Non-container traffic, include imports and exports from
both local and distant markets, are also tracked in the model.
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Workshop Process
There is a long history of using management simulators to teach System Dynamics and
Systems Thinking. Senge and Lannon (1990) describe the value of simulators or
"microworlds" as tools for organizational learning. Certain simulators such as People
Express have had extensive use for general management training and have been studied
by Sterman (1988a,b) for their effect on learning. Simulators have been developed in
specific fields such as health care to help those in the field understand the implications of
major changes (see Hirsch and Immediato(1998), Hirsch and Kemeny(1989)). Particular
design issues such as the desired degree of transparency in simulators have been studied
by Grossler (1998) and by Machuca et al. (1998).
We conducted 2 day workshops in both Portland and Seattle. We intend the workshops
to be the beginning of our collective discussion, not the end. During the workshop,
representatives from industry (including labor) and government (including the newly
formed Department of Homeland Security) used the models to perform several analyses:
e Run through short-term model base case together
e Disruption Scenario
—Anticipate disruption effects
—Attempt to mitigate disruption effects
—Groups present results
e Security Policy Options
—Implement single security policy, anticipate effects, (repeat)
—Implement comprehensive security policy, anticipate effects
—Groups present results
e Long Term Model
—Examine base case, understand behavior, manage port
—Examine security policy from short term model
—Groups present results
e Summing up
The photo below shows workshop participants in action.
Some | | Findings
About the System
Initial insights about how the port system operates come from some preliminary model
analysis and model runs conducted at the workshops. Much more systematic model
analysis will be conducted in the coming weeks and we will present some of these results
at the New York meeting (July 2003).
1. Some security measures can create substantial increases in the demand for customs
inspectors. If not properly anticipated, backups at customs might have paralyzing
consequences for port operations.
2. Specific port characteristics (unused container storage, cargo volume over which to
spread increased capital costs for security) lead to different operational consequences
from imposing security measures at different ports. This finding implies that new, across-
the-board, requirements for security enhancements may impact some ports far more than
others. Allowing some flexibility in the manner in which individual ports achieve
increased security might be warranted.
3. One group at the Portland workshop demonstrated that by imposing higher scanning
and inspection rates dynamically and intermittently in response to high alerts and certain
seasonal periods (such as before the July 4" holiday when imports of fireworks
skyrocket) that the overall perception of security could be enhanced while minimizing
inspection backlogs.
4. Many security measures can be designed which impose costs and dwell time impacts
well within the normal range of variation seen in current operations. However, initial
simulations with the long-term model indicated that imposition of some of the more
costly security measures may make the port non-competitive. Loss of traffic has the
potential to lead to collapse of container-handling business through the positive feedback
loop labeled “Diluting Fixed Costs” on the causal loop diagram shown previously. The
figure below shows the collapse of container traffic that can follow imposition of security
measures that cause large increases in shipping delays and costs.
Total Volume - Imports & Exports
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We emphasize that these results do not reflect our expectations about the effects of
particular measures at any port. The model is still being reviewed and modified in
response to comments received at the workshops. We include these results to present the
kinds of responses the model can produce, and to illustrate the assessment of mitigations.
To continue on with this example imposing high cost security measures, the next figure
shows that although container traffic has collapsed, non-container traffic continues to
grow throughout the 20 year simulation period. Bulk shipments and automobiles are not
affected by the enhanced security procedures.
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As a possible mitigation, a port operator might subsidize their container-handling
business by raising rates and fees for non-container carriers. The next figure shows that
this strategy delays but does not prevent the collapse of container traffic, and also
produces a decline in bulk trade.
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About the Process
Model development and use catalyzed discussions among diverse interests. This
occurred throughout the process. Data collection and systemization provided new
insights to operators about how their overall system works. The process of designing,
presenting, and using the models surfaced implicit assumptions about system behavior for
validation and refinement. Workshop participants readily engaged with one another and
with the simulators to understand the model responses, evaluate them against their
experience and intuitions, and to propose imaginative solutions to the problems that
developed. They volunteered valuable recommendations for improving the model
structures (such as explicit inclusion of customs training delays) and were generally eager
to continue to use the models as an aid to decision making.
Here are some example written comments provided by workshop participants:
“Very worthwhile — hands on aspect was particularly helpful”
Would use these tools to:
“_,.to collaboratively work towards addressing imminent issues.”
“As simulations for disaster conditions...”
“For enhancing viability of international business in our region.”
Summary and Conclusions
We found the workshops to be successful both in promoting discussion between the
participants and for providing valuable feedback into how we can improve the models.
Our next steps are to revise the models to include suggestions from the workshop
participants and to use the models to perform additional analyses of port-security issues.
We anticipate presenting some results of these analyses at the conference in New York.
Our experience with the models to date suggests some tentative conclusions concerning
the impact of port-security policies. In designing the port operational model, we
anticipated that increasing security measures could increase costs, increase the average
time to move cargo through a port, or both. Simulations to date suggest that the main
impact of increased security measures would be mainly increased cost. When we input
those increased costs to the long-term economic model, we found that often these added
costs tend to be small compared to the normal variations in cost due to other factors.
However, we have shown also that relatively high cost burdens for a port can initiate a
spiral of decreasing competitiveness resulting in significant loss of market share.
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The National Strategy for the Protection of Critical Infrastructures and Key Assets
(February 2003) http://www.whitehouse.gov/pcipb/physical.html
