Earning Their Keep
In a fiercely competitive market, ship management companies turn to digitalization to prove their worth.
(Article originally published in July/Aug 2018 edition.)
Olav Eek Thorstensen, Executive Chairman of Thome Group, delivered his company's 55th anniversary message in May, highlighting the need for agility and noting a focus on digitalization. He's not alone in his thoughts. With only 20 percent of ships under third-party management, there’s plenty of room for growth, but the competition is fierce – even for the 20 percent.
Thorstensen has responded to what he says is a more demanding market than ever before with the recent opening of a new operations hub at the company's head office in Singapore. He sees the international focus on safety and the environment as one of the increasing demands faced by the industry. The new hub hosts systems for the remote tracking of individual ships, passage planning, security risk assessment, weather routing, video conferencing, integrated vessel management system implementation and onboard CCTV remote monitoring. The aim is to get more accurate information faster if emergencies arise.
The Digitalization Difference
The informational needs of shipowners have always been central to the debate over whether or not to use third-party managers. Stephen MacFarlane, CIO of V.Group, says, “It’s well understood that some shipowners prefer to manage their fleets in-house. The arguments against outsourcing are, on the face of them, sound. It’s perceived by some that employing a third party to manage marine assets may result in a loss of control and oversight caused by a lack of transparency.”
But the counter-argument is that an experienced ship manager will always ensure that clients are well-informed. “Digitalization is enabling this to go one step further by providing a completely joined-up, real-time approach to ship management and the data it generates,” says MacFarlane.
He adds that using a ship manager's integrated digital platform can give shipowners even more control than they would have if managing their vessels in-house: “In-house management or ship managers not able to provide this data-driven insight on a contemporary digital platform are likely using diverse, separate and unconnected systems.”
It's an issue V.Group has solved by investing heavily in its own digital platform called ShipSure 2.0. The cloud-based service architecture and ownership of the complete IT stack has enabled V.Group to offer full mobile access to data across multiple platforms including both iOS and Android smartphones and tablets anywhere in the world.
Ship manager Anglo-Eastern has directed its digitalization efforts to the use of virtual reality in training cadets. Students can walk around ships in a virtual reality environment with the system identifying where all the safety equipment is and how it is used. There are demonstrations included on how, for example, to don an emergency suit or put out a fire.
Anglo-Eastern merged with Univan back in 2015 in part to strengthen training initiatives ashore. Today the group manages around 650 ships and 27,000 seafarers and is growing its market share by about five percent a year. However, CEO Captain Bjorn Hojgaard notes volatility in the industry: “It used to be that people bought and sold individual ships. Now they buy and sell whole fleets.” The change follows a trend that has seen more financial institutions investing in ships, and it means that ships can rapidly change hands, change managers, change flags and change crews.
Columbia Shipmanagement (CSM) and Bernhard Schulte Shipmanagement have combined their global buying power for over 800 vessels through an independent procurement company, GenPro, set up in June. Mark O’Neil, CEO & President of CSM, says: “Ship managers have to ensure that the services they provide are both relevant and compelling to the market – relevant in the sense that the services are what clients need, compelling in the sense that clients must have these services from managers. To achieve this, managers have to ensure efficiencies and economies of scale that simply cannot be matched by operators on their own.”
To this end, CSM is investing hugely in IT and performance-optimization technologies. The company will launch its Performance Optimisation Control Room later this year – a first in the industry, says O'Neil – and the objective is to optimize all aspects of vessel performance including safety, operations (fuel consumption, routing, avoiding delays at load port and disport), maintenance (through camera and sensor technology to enable preventative maintenance techniques), crewing (including efficient rotation, training and welfare) and commercial (including contractual parameters).
“Technology is at the very heart of the drive for optimization, and its impact cannot be underestimated,” he says. “The third-party management industry is intensely competitive, both from other third-party managers and from operators who perform management themselves in-house. This explains the absolute need to achieve efficacies and efficiencies, range of services, and different products and structures that differentiate a manager from the competition. The driving force is optimization and the need to do more for less and better than ever before.”
O'Neil would like to see a change in the management market: “The industry needs to be regulated to ensure there is a certain minimum entry level, as far as quality of management services is concerned, for all vessel types. This will avoid undercutting and ensure that quality of service is maintained. The tanker market, for example, is indirectly regulated by the complexity of the rules and regulations surrounding it and the need for management companies to be oil-major acceptable, which prevents the cowboy element from establishing a presence. At the other end of the spectrum, the bulk carrier sector is wholly unregulated and is open to anyone, leading to severe undercutting and significant variances in the quality of services provided.”
David Price, Managing Director of Wallem Ship Management, says the barriers to entry in ship management are very low, which he finds “surprising given how well-regulated the industry is as a whole. While the ISM Code has gone a long way to improve the quality of operations both on board and ashore, I would like to see the industry make it more difficult for substandard operators to exist.”
However, he also cites problem owners: “We feel very strongly about looking after our crews, ensuring that they are well cared for on board, that their families back home are supported and that we do the right thing by them. Owners with a history of crew abandonment simply would not pass our risk assessment, and we would not knowingly work with these companies.”
The Crewing Challenge
Price says ship managers face an ongoing challenge supplying well-trained crew: “Unfortunately, a career at sea is not as attractive an option to many young people as it once was. We are working hard to attract the next generation of seafarers by utilizing the latest training technologies and techniques and working with local universities and colleges.”
Captain Kuba Szymanski, Secretary General of InterManager, says the organization has always tried to establish and maintain the best ship management industry standards through initiatives such as the ISM code, shipping KPIs, a cadet policy and the MARTHA seafarer fatigue project. He agrees there are issues, particularly with crewing.
“We've got a problem with young people,” Szymanski explains. “Sometimes owners are not very happy about paying the money for junior officers, so there’s a bit of frustration because ship managers are trying to explain that if you don't have a fourth engineer, you won't have a chief engineer in a few years’ time. If you don't have a junior deck officer, you eventually won't have a master.” He predicts there will be a shortage of senior crew in around five years.
“Ship managers are feeling more and more pressure from shipowners to train and pay the cost of training for all ship officers in order to provide continuity in their services,” Szymanski adds. “Otherwise, managers will not have a next generation of seafarers. The situation will improve once the market improves for shipowners and they get more money. Then they will understand they have to pay.”
He says there is no shortage of seafarers at the moment because so many have been trained, but “the problem is the practical knowledge of those seafarers. They are not sailing on ships. They are not learning practically. It will be sooner rather than later that there will be a shortage of experienced seafarers. Somebody cynical would say a shortage of 'free-of-charge' seafarers.”
If there is a shortage, then pay rates will increase. “I can see the first signs,” says Szymanski. “Salaries are creeping up for the first time in eight years. I am of the opinion that this is the first sign of what we were dreading – a real shortage of seafarers – and all of this with thousands of cadets waiting for berths in order to validate their theoretical knowledge.”
Poaching among ship managers may ensue if a crew shortage occurs, and smaller managers without their own training academies will likely suffer more than larger managers. – MarEx
Wendy Laursen is the magazine’s Asia-Pacific Editor.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.