A Study on Port (Terminals) Operational Efficiency Analysis Using PCA-DEA Approach: Focusing on Container Terminals on Busan Port

Abstract

Previous literature has recognised the importance of port efficiency to port performance, and two popular methodologies of DEA (Data Envelopment Analysis) and SFA (Stochastic Frontier Analysis) have been widely applied to efficiency evaluation. However, there seems a limitation of lacking objectivity when selecting the variables of inputs and outputs. Meanwhile, as for the largest port in Korea, although many related efficiency studies already exist for Busan Port, most of them are founded on a whole port level basis while seldom on the container terminal level. Therefore, to fill the gap, this paper introduces a PCA (Principal Component Analysis) - DEA approach to research the operational efficiency of nine container terminals of Busan Port with the latest data of 2021. The PCA-DEA port (terminal) evaluation approach is practical and unbiased, and it may have some special practical value for the port industry. Container throughput is set as the output, and 13 variables from three scopes of land, facilities and labour are identified as inputs, followed by PCA which eventually detects three indictors of “No. transfer crane (RMGC) in yard”, “Staff average salary” and “Container freight station (CFS) space” as the core inputs representing the above three dimensions. Then, the DEA (CCR) and DEA (BCC) models are used to gain the assessment results: “PNIT, “PNC” and “HJNC” are DEA efficiency, while others of “HPNT”, “BNCT”, “Jaseongdae”, “Shinseondae”, “Gamman” and “Shin Gamman” are non-DEA efficiency. In addition, to achieve the target efficiency for the non-effective terminals, this paper confirms improvements through Return to Scale (ROS) and input redundancy discussion. This study objectively evaluates port terminals and provides useful data when establishing strategies to strengthen port efficiency and competitiveness in the future.