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South Carolina State Ports Authority  

The South Carolina State Ports Authority is the fourth largest container port in the United States. It moves over 10 million tons of cargo each year through four terminals in Charleston, South Carolina. Twenty-six major steamship lines move cargo through the Port of Charleston, including nine of the top ten carriers in the world. Each of these lines operates under a separate contract that covers its special needs and modes of operation. Because of the variability and complexity of individual steamship line contracts, revenue projection and contract profitability reporting have unique problems. Revenue projection and budgeting involve computations based on contractual rates applied to a series of activity indicators. While profitability of the port as a whole is tracked using standard accounting practices, the profitability of individual contracts requires some form of Activity Based Costing.

IMS Quantum was engaged to develop an Integrated Revenue Planning Model to budget revenues and an Integrated Profitability Model to report on the profitability of individual steamship line contracts.

The revenue budget had a number of features that required unique solutions. The contract year did not necessarily correspond to the Port's fiscal year. Pricing based on a series of activity thresholds required the careful treatment of activity in the previous fiscal year that influenced pricing in the current contract year. IQ’s flexible approach to constructing planning models allowed these unique features to be reflected accurately.

The Profitability Model required a multi-layered allocation process that involved the allocation of resources (e.g. electricity) to services (e.g. container storage) using appropriate indicators, and the allocation of services to contract using another set of activity drivers. Service capacities became an important aspect of the allocation process. The development of the concept of "Profit for Capacity Utilized" was a result of the understanding of these capacity issues and greatly influenced the interpretation of contract acceptability.

This information is used to provide more efficient service to customers and thereby further the port’s mission. Significant cost saving actions became apparent after the publication of the first Profitability Report. Implementation of those actions has resulted in saving of hundreds of thousands of dollars over a one-year period.

In addition, IQ developed or improved models for salary and wage budgeting, insurance budgeting, operations planning, and contract negotiation. The contract negotiation model marries the revenue budgeting model with the contract profitability model to allow the user to quickly evaluate the financial and operational consequences of a new contract or a change in an existing contract. IQ Continues to provide sophisticated quantitative solutions to industry.

 
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