SAGT

MN 1020

Organisational designs should be responsive

Submission date: 9th

November 2011

Chandrakesan Delakshan 101412 A

Thushan Dharmawardana 101414 G

Tharindu Kodikara 101419 C

Gayashan weerawansha 101449 R

Chandika Gishyan 101450 C

Organisational Management Page 1

Acknowledgements

Our sincere gratitude goes to the following persons who have given their utmost support to make

this project report possible.

Mr. Sanath Kumara Palliyaguru – Employee Relations Manager / SAGT

Mr. Indika Fernando – Management trainee/ SAGT

Mr. Niles Perera – 4th

year undergraduate / Department of Transport & logistics Management


Contents

Table of Contents

Chapter 1

Introduction …………………………………………………………………….. 4

Chapter 2

History & Development …………………………………………………………6

Chapter 3

Business Expansions & Design…………………………………………………..8

Chapter 4

Present Situation & Its Industry Environment ……………………………………9

Chapter 5

Present Organisational Structure ………………………………………………….12


Abstract

This study is based on the structural changes took place in the organisational environment of

South Asia Gateway Terminals.

The objective is to present our views on the statement, “Organisational designs should be

responsive “using the data and examples gathered.


CHAPTER 1

Introduction

1.1 Place of study

South Asia Gateway Terminals (here in after referred as SAGT) is the best performing terminal

in Sri Lanka and it is rated among the best performing container ports in the world. It is an

important milestone of Sri Lanka’s quest of becoming a maritime hub.

1.2 Location

SAGT, which is located in the Colombo port, is advantageously placed on the main sea routes in

the world.

1.3 Main customers

SAGT serves both main line operators and feeder line operators. Their key customers are,

Maersk Line

Mediterranean Shipping Company

Orient Overseas Container Line

Nippon Yusen Kaisha Line


1.4 Importance of a Flexible structure

If organizations are to successfully implement their chosen strategy, it is important that they

develop an appropriate organization structure and design. The appropriateness of any

organization structure and design is dependent upon a number of key factors: the chosen

strategy, the nature of the external environment, and the organizational culture. Therefore

organizational design in an organization is a key factor which determines the success and

sustainability of a certain organization. These organizational designs should be flexible enough

to confront any kind of obstacles coming on their way. The obstacles vary according to the

business process and the scale of the organization. Therefore organizational designs should not

be rigid it must adjust according to the dynamic business environment.


CHAPTER 2

History and Development

As a result of a Build, Operate & Transfer (BOT) agreement, spanning 30 years with the

government of Sri Lanka, SAGT was established in September 1999 as the largest foreign direct

investment at that time. In the inception the operations were done under the guidance of P&O

ports the main shareholder at that time. The other shareholders were Sri Lankan Ports Authority,

Peony Investment, Evergreen Maritime and John Keels Ltd. In the year 2003/04 with the

bankruptcy of P&O ports the ownership of SAGT changed again. The shares of P&O ports were

distributed between John Keels and APM terminals. Withstanding to those alterations in the

ownership John Keels Holdings now has become the major shareholder in SAGT.

In this period of time the organization underwent lots of changes. Physical infrastructure were

changed and added like reclamation, steel piling, reinforced concrete decking, new pavements,

reefer stacking areas, electrical items and modern container handling systems in 2002 and 2003.

The main structure of birth of QTC was changed in 3 steps.

1st step completed and operated in February 2002.

Changes - Berth one was developed to 340m and depth alongside 15m

Added 3 Super Post Panamax cranes

Added 9 Rubber Tyred Gantries (RTG)

2nd

step completed and operated in July 2003.

Changes - Added another berth, with 310m length with depth alongside 15m

Added 3 Super Post Panamax cranes

Added 9 Rubber Tyred Gantries (RTG)

3rd

step completed and operated in Augest 2003

Changes- Added 3rd

berth with 290m with depth alongside 15m

Added 3 Post Panamax cranes


Added 10 Rubber Tyred Gantries

Added 50 Terminal Tractors

After the completion of these three phases present terminal has an overall length of 940m and a

draft of 15 metres.

In the year 2003/04 Navis terminal operating system which is known to be the 1st fully

automated container terminal in Sri Lanka was introduced in SAGT. This was a unique

milestone in SAGT history as the organisational design and efficiency changed a lot after the

introduction of this system. Many more TEUs (Twenty-foot equivalent unit) were able to be

handled using less resources such as manpower and time.

They sat up IBM RS/6000 Computer system in December 2006. Other than that 2 Kalmar Empty

handlers are also added in this period. This enhanced the productivity of the organisation.

SAGT is using Oracle Finance system for their financial works. So their financial system

speeded than before. Another key milestone in SAGT history is the establishments of Twin Lifts

used in year 2009, which was the first of kind in Sri Lankan history. These innovations and

upgrades in the SAGT structure made the organisational design to change accordingly.


CHAPTER 3

Business Expansions & Design

Time to time businesses have to expand their product capacity, product quality, etc… to survive in the

market. In the start of the SAGT container facility capacity was about 250,000 TEU/year. But gradually

SAGT increased their TEU/ year. After the ownership change mentioned above SAGT passed a key

milestone in their business procedure surpassing the designer capacity of 1.1Million TEU/year. This was

an important juncture in SAGT organizational structure. Lots of new posts and new departments were

introduced as a result to successfully sustain this achievement in the long term.

SAGT invested millions of rupees on new systems such as RDT (Radio Data Terminal), Crane

Management Systems (CMS) and most importantly deployment of WAVE’s IP-based infrastructure has

improved operating efficiency because crane operators and truck drivers have access to voice

communications. With these implications in technology the working environment in SAGT became much

more organized and also it improved their safety condition and efficiency on other activities such as crane

operating by increasing communication ability.

SAGT introduced significantly higher service standards to Colombo Port, which today is the benchmark

for port operations in Sri Lanka. As a result, overall container terminal efficiency at the Port has

significantly increased. SAGT introduced not only service standards but also a professional work ethic

and corporate governance to the sector. Its human resource policies and programs are geared toward

improving worker compensation and promoting strong worker relations.

References : http://www.adb.org/Documents/PCRs/SRI/31910-SRI-PCR.pdf

http://www.adb.org/Documents/PCRs/SRI/31910-SRI-PCR.pdf


CHAPTER 4

Present Situation and its industry environment

SWOT analysis is used to define the present situation of an organization. It gives us an idea

about organizations strength, weaknesses, opportunities & threats. Through these analysing data

then top management people of an organization can take responsive decisions to ensure its

market share and etc. Decisions are very important because decisions can make organizational

success or its failures.

SWOT

Organizational Strength

Common strength

Strategic imitation

Sustained competitive advantage

Organizational Weakness

Organizational Opportunity

Organizational Treats

To make organizational design in a responsive way top level people should have a good idea

about their strengths. Management should always try to take maximum use of their strengths &

try to reduce their weaknesses by taking good decisions. Opportunities and threats are very

important managers should responsible to take maximum use of opportunities & reduce their

threats through responsible decision making.

The SWOT analysis for the SAGT can be done as follows with the strengths, weakness,

opportunities, threats.


STRENGTHS

Quality of their services

12 years of experience

Agreements with leading shipping links

Location of the Colombo port

WEAKNESSES

Limited yard capacity

Difficult (can’t ) handle mega vessels

Running with old equipment

Problems in finding employees

OPPORTUNITIES

Rapid increase in Indian exports

Increase world trade between the east &

west

Government vision of make Sri Lanka a

maritime hub

THREATS

Lack of yard storage capacity

Development of Colombo south port

Indian port developments

This is the current situation of SAGT. We can take responsible decisions by using this analysis.

As an example we can take a threat ‘‘Development of Colombo south port’’. Because of its

development SAGT is going to lose their market share by a higher proportion, after this it will be

very difficult to survive. So SAGT should try to survive by responsible decision making.

SAGT has 12 years experiences & their services are in a good quality, major strength is they

have agreements with leading shipping links. So they can try to continue their operations with

those companies because those ships have experiences already with SAGT.

But because of limited capacity, difficulty of handling mega vessels & using old equipment those

can affect to reduce their vessels when start Colombo south port. But they can improve because

already they know what are their opportunities, weakness, strengths & treats.

Organisational design should change according to the present external environment.


Choice strategy to survive from the above problem

For that top level people of SAGT can use BCG Matrix model. Currently SAGT is at a

position called ‘‘STARS’’, because they have the biggest market share, but now with the

development of Colombo south port SAGT’s relative market share is going to be reduced. That

means they are going to enter to the ‘‘QUESTION MARK’’ situation, then there will be a big

problem because running in that kind of a situation is not worth but there are some opportunities

to grow because market is growing high.

When some company is in a ‘‘QUESTION MARK’’ situation, then they have to decide whether

to strengthen them by pursuing an intensive strategy, ex – market penetration by supplying very

effective & high quality services and go to the deep of the market, market development by

improving further services, actually its more than what they provide now, they can improve their

existing services also to survive or recover from ‘‘QUESTION MARK’’ situation.


CHAPTER 5

Present Organisational Structure

After having above alterations to the organizational design SAGT now has a capable

organization structure consisting of 6 major departments namely engineering, finance, human

resources, informational technology & marketing and commercial and operations. Each of these

departments has a General Manager except in Finance department. Because of the importance of

finance, Chief Finance Officer (CFO) has been included into the organizational design. In

addition there are relatively smaller departments, in the likes of Health, Safety and Environment,

Administration, Internal Audit and security. Excluding the outsourced staff SAGT now has about

650 employees working.

Since the business expansions SAGT had its organizational design changed accordingly such that

new posts were introduced to the organizational structure. Posts of Berthing Manager,

Performance Manager and Security Manager which were not there at inception are introduced

into the design because of their importance to the current market development. All the structure

of Engineering Department has also been expanded recently as a preventive and proactive

measure to make sure operations are carried out in all 24 hours. SAGT gives a little importance

to marketing sector as they are following a market skimming strategy because of the extensive

market share they are having. Only two persons work in the Marketing department. As


mentioned above since the vast increase the annual TEU throughput in SAGT they now give a

significant importance to their inventory as they now have two inventory managers.

New departments were also introduced system such as Health & Safety department which had its

inception in year 2007. As per their cost focus strategy several kinds of employees are

outsourced to reduce cost and mitigate the power of unions. Canteen, Security staff, Cleaning

staff and most importantly truck drivers are been outsourced. SAGT has been entered into a

labour contract with Inter Orient Logistics Limited to supply them with adequate truck drivers

for the operations.

5.1 Distributing Authority

CEO, Edward Hans with the guidance of the director board compose a target of certain TEU s

per year that responsibility is collectively given to the general manager. Operational manager is

responsible for the goals set per shifts in accordance to the main target set by the CEO. Duty

manager has been granted the responsibility of completing the target by closely monitoring Crain

handling, Prime mover handling and all other operations. Duty manager’s responsibility is to

complete the due targets with lesser discrepancies. If not he is liable to the general manager.

Recently in SAGT the person who is responsible for clearing import trucks out of the port,

Receiving and delivery Officer (RDO) has mistakenly issued a document for a truck that should

not be driven out of the port. It has cost SAGT million rupees therefore RDO, the person who is

collectively responsible for that function had to pay for the lost occurred because of him.

5.2 Chain of Command

In SAGT lower level management cant report to the higher level management directly they have

to follow the hierarchy. It is highly recommended to always follow the chain of command

functions according to the hierarchy. The administration is not that strict therefore small

deviations in the chain of command are accepted. The internal auditor of SAGT is a special

person in the design he has the authority to report directly to the director board rather than the

CEO.

5.3 Perspectives in Organisational design

The organisational approach is a mix of both bureaucratic and classical approaches. In some

departments such as engineering the approach is more bureaucratic while in operations

department the approach is more classical. Team working has been given a priority that

Employees work as teams in different shifts.


According to the study we had it is evident that organisational designs should change

accordingly to the situation. Otherwise it would not sustain in the long run. If SAGT structure

and design remained the same from its inception they would not have achieved this kind of

success in the market. And they would not keep the same structure sustained, even though they

don’t express they should surely have a strategy to confront the challenges coming ahead. They

will have a change in their design according to their rivals’ behaviour. Therefore it is in evitable

that “organisational designs should be responsive “

SAGT

Business

organisational designs

sagt history

ownership of sagt

changes berth

main line operators

chapter 1introduction1

main shareholder

organizational designs