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Peace of Mind

Third-party ship management firms can provide owners with deep expertise, economies of scale and – as one prominent firm puts it – “peace of mind.”

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By Paul Benecki 12-24-2019 02:12:00

(Article originally published in July/Aug 2019 edition.)

Shipowners are always looking for ways to reduce cost and boost quality, and sometimes the best option is to outsource vessel management to a specialist.

Ship managers are responsible for the safety, efficiency and compliance of a substantial fraction of the world’s fleet. They’re at the front lines of change as the shipping industry evolves and offer the peace of mind of knowing as asset is being cared for properly, no matter what time zone it may be in.

It’s fundamentally a people business. In order to deliver, the largest ship management firms have to find, train and retain literally tens of thousands of good mariners. The largest company in the sector, V.Group, employs some 44,000 seafarers on 2,200 vessels worldwide.

Cooperative Culture

Singapore-based Synergy Group was founded on the idea that a transparent, "no-blame" culture is the best way to build a winning team for a global shipping operation. Synergy's managers are trained to focus on finding solutions rather than faults, and crew members and shoreside employees are encouraged to speak up about issues early, before small problems become big.

"As a team we believe a lot in empathy,” says Captain H.S. Swaminathan, head of People & Culture at Synergy. “When things go wrong with people, asking 'Is everything okay with you,' or threatening to fire them are two totally different ways to get back on track. We believe in the former, and that's the key difference."

Less fear and more openness make it easier for shoreside and shipboard teams to work together and helps Synergy's operations stay in compliance, an important consideration in an era of tightening oversight. The company's culture of cooperation also has a positive effect on retention. "When people believe that the company and system is fair,” Swaminathan says, “they feel secure in their work."

Synergy has experienced strong growth over the past decade, and new shipowners often come in because their peers tell them about the way Synergy operates. Keeping the firm's culture strong in the midst of rapid expansion has been key, Swaminathan notes, and Synergy trains its new staff on people skills as well as technical competencies: "With a large pool of seafarers from India and the Philippines, combined with good training, we have been able to rise to the challenge."

Bernhard Schulte Shipmanagement (BSM), part of the Schulte Group, also emphasizes the value of company culture and treating seafarers with respect. "We are a family business, and we proactively live a family culture," says Jeroen Deelen, the recently appointed COO. "With this attitude we care about our staff, which leads to a high retention rate and long-term employment. For our customers, this means stability and continuity as well as easy collaboration and attentive operation of their vessels."

Smarter Fleets

Ship management will always require a deep bench of talented professionals, but the digital technologies undergirding day-to-day vessel operations and decision-making processes are evolving quickly.

New developments in “big data” analytics and satcom connectivity are changing the way ships are run. On a growing number of vessels, the Noon Report is no longer the main tool for determining ship performance. Rather, the ship’s electronics systems send a near-continuous stream of information back to the home office, and vice versa.

This creates new possibilities for detailed data analysis and rapid feedback, but first requires an investment. Spending scarce capital on technology might be hard for a small independent operator, but for a large ship management firm the cost is distributed (and benefits multiplied) over hundreds of vessels.

At BSM, the company’s leaders have decided to build a dedicated in-house analytics division, known internally as the Fleet Performance Centre. This business unit uses proprietary algorithms to monitor the performance of each BSM-managed ship and benchmark it against its peers in the fleet. The center’s technology is based on BSM’s own software platform, and Deelen says the company is continuously investing in its development.

Synergy Group, on the other hand, uses the SMARTShip software suite from Alpha Ori Technologies (AOT), a startup co-led by Synergy’s own CEO, Captain Rajesh Unni. SMARTShip provides managers with performance dashboards and alerts, a range of administrative tools and new options for data analysis. AOT also maintains an operations center in Singapore to monitor vessels equipped with its software.

“We view the ship as a digital enterprise,” says Unni. “Our mission is to digitally connect the entire ecosystem within the ship. This produces clear, tangible financial and environmental gains in the shape of fuel and maintenance savings.”

Hong Kong-based Wallem Group wants to use tech to create even bigger changes in the way the ship management sector runs. Newly appointed CEO Frank Coles, who spearheaded a digital transformation initiative at navigation technology firm Transas, is now bringing his forward-looking style to ship management at Wallem. He believes data can be used to shift the industry away from a year-to-year, cost-driven standard and toward long-term asset management.

"Using analytical data, we want to create and provide an intelligent picture of the ship’s budget for several years," Coles explains. "With this baseline, we can provide transparency on daily and monthly performance directly to the owners. We have to create the platform to supply the information and understand the data, and the technology tools we are putting in place will achieve this vision."

He calls the current ship management business model “old-fashioned” and says it’s in need of a wholesale overhaul, starting with ethics: "Rightly or wrongly, there’s a perception that some managers do not provide a transparent account of the operational costs and benefits of the services they provide. Charging a commission on each consumable provided to an owner is not a modern business model. Without providing value it is not justifiable, and in the business world today it’s also unethical."

In addition to transparency, Coles wants to see the industry refocus on quality, and he’s critical of a “drive to the bottom” on pricing that may lead to questionable practices. In particular, he singles out ship leasing companies for awarding contracts to the lowest-bidding managers.

"It’s ridiculous for leasing companies to hold auctions to allocate ships to new management,” he says. “Obviously, the leasing company pays no heed to quality of the product. Ship managers who want to create a quality product have to decide if they want to be involved in these auctions, and some of us have already decided that we will not. Others will resort to business solutions to recover the margin lost from bidding on a loss-making business."

IMO 2020

On January 1, 2020, the heavy fuel oil (HFO) that powers the overwhelming majority of the world's fleet will no longer be legal to use in the manner it is today. IMO 2020 requires ships to use bunkers with less than 0.5 percent sulfur content or limit their emissions to the equivalent level with an exhaust gas scrubber.

With just months to go until the deadline, ship managers are busy preparing crew members for new bunkering procedures and making technical arrangements for the transition. Synergy Group has created a dedicated team to handle everything related to IMO 2020, and it’s training seafarers on both the new fuel procedures and the use of different models of scrubbers.

"Specific training for various types of scrubbers installed is very helpful to ensure safe usage and compliance," says Synergy's Swaminathan. "We also have a support system for vessels with scrubbers to contact in case of any difficulties."

At BSM, the transition offers new opportunities in addition to new challenges. BSM has a fifty-year history with gas carrier operations, and that positions it well for both the rapid growth of the LNG shipping market and the growing popularity of LNG bunkering.

Small-scale LNG tonnage is an emerging specialty area that meshes well with BSM’s competencies and with the shipping industry’s compliance needs after 2020. BSM recently oversaw the construction of the world’s largest liquefied natural gas (LNG) bunker supply vessel, the Kairos, which serves the Baltic region with ship-to-ship bunkering and transshipment services under BSM’s management. BSM’s Deelen says the Schulte Group is pursuing similar opportunities for consultancy support, yard negotiations and newbuilding supervision as well as the possibility of ordering comparable vessels for itself as a shipowner.

Peace of Mind

Despite all the technological and regulatory changes in the shipping industry, the main elements of the business remain the same: reliably transporting customers’ goods, keeping costs low, maintaining safety, and navigating the technical and administrative challenges of marine operations.

The best ship management firms bring decades and, in some cases, more than a century of experience to these core tasks and are well-positioned to provide shipowners with quality service, trained seafarers, new innovations and – above all – peace of mind for the next era of maritime transportation.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.