The encyclopedia · Strategy & Leadership · Strategic decision · 1970–2000
Singapore made itself the place where mega-ship meets feeder.
PSA built a terminal for the hub-and-spoke model, so a small city could run the world's busiest port.
PSA International
the move
Singapore is a city-state with little domestic cargo and no deep rail hinterland, so the usual recipe of serving surrounding industry was never going to make a great port.
PSA instead aimed at transshipment, the hub-and-spoke model where giant mother ships call once at a hub and much of the container load is transferred to smaller feeder ships, and the cargo moves on without entering the city. PSA containerised in the 1970s and reached five million TEUs by 1990, the world's busiest container port then.
Betting on the handoff let Singapore turn a lack of local demand into an asset: it now connects to hundreds of ports, has daily sailings and operates the world's largest container transshipment hub, all built on moving other people's boxes.
why it works
- Transshipment lets a port earn from cargo that never enters its own market.
- A hub-and-spoke network hides the cost of big ships behind the transfer price.
- Making the terminal fast and cheap makes it the natural place to swap loads.
- A 24/7 hub with frequent sailings locks in the regional feeder traffic
what transfers
If you cannot win the market, win the connection: a transfer hub can be built by anyone with no market of its own.
what came after
PSA grew from a Singapore statutory board into PSA International, a global terminal group, and Singapore stayed among the world's busiest container ports. Rivals such as Malaysia's Tanjung Pelepas later competed for the same transshipment traffic, and the hub strategy remains the model for port development across the region.
references
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