Scaling Up

After years of M&A activity and organic growth, the largest full-service ship managers have become so big they're nearing the scale of the world's largest shipping lines. Norway-based giant OSM Thome may not own a single hull, but it manages a fleet of more than 1,000 ships, approaching the heft of MSC or China's COSCO.

There are advantages to globe-spanning size.

The cost structure of the industry is only becoming more challenging for smaller ship managers and owners, particularly when it comes to fixed costs for compliance. Owners who have fewer than 50 ships and can't find a way to scale up face "cost death," V.Group CEO René Kofod-Olsen told Lloyd's List last year. "If cost to serve is not borne by a bigger revenue opportunity in your platform, it just becomes unsustainable," he said.

By contrast, shipowners who sign up with a big ship manager get access to economies of scale in procurement, crewing and back-office capacity – on top of the menu of specialized technical knowledge and services that top-tier managers offer.

Seafarers also benefit from big-company features when they sign on with a top-tier ship manager, and above-average retention rates at the best firms reflect a higher degree of satisfaction. Good pay and benefits are a start, but one of the biggest bonuses is scheduling: Big firms have more raw capacity to deliver schedule flexibility, predictable rotations and on-time relief (mariners who have had their hitches extended tend to remember this difference).

For seafarers who want to stay and advance, the best ship managers pride themselves on rapid career progression and put real resources into making it happen.

Anglo-Eastern, one of the largest, wants to put nearly a third of its management-level shipboard positions in the hands of young officers under 30 – and it wants to get it done by 2030. Anglo-Eastern sees a return to rapid early-career certification and promotion as a way to leverage the "digital fluency" of young mariners in an increasingly tech-heavy working environment and a means to ensure a steady supply of qualified senior officers.

RESILIENCE

Ship managers are on the front lines of vessel operations, and they – and their crews – get firsthand exposure to every disruption in international trade.

When the COVID-19 pandemic broke out, third-party managers had to figure out transit arrangements for thousands of seafarers stranded by lockdowns. When war broke out in the Arabian Gulf this year, managers had to balance the need to keep commerce moving with the requirement to assure seafarer safety, adapting their operations to changing circumstances by the day.

To prepare for challenging moments like these, ship management companies have to develop resilience, says Morten Sejrup, COO, Offshore at OSM Thome.

"At OSM Thome, we do not define resilience as simply absorbing more pressure," he says. "We define it as having the people, systems and preparedness to continue operating safely and reliably when circumstances change. That begins with strong operational fundamentals: preventive maintenance, competent leadership, clear communication, situational awareness, fatigue management and close collaboration between ship and shore."

OSM Thome operates just about everywhere that ships go including regions with a high-risk profile. Sejrup says that the company has specific management standards for voyages that could involve greater hazards. On these routes, each voyage is assessed for risk before departure, and the ship sails with a full set of prepared contingency plans and security procedures.

All pertinent information is shared with crewmembers so they can make an informed decision on whether to stay aboard for the voyage. They get full support from departure onward including psychological assistance if needed during and after the voyage. This is a meaningful benefit: The latest Seafarer Happiness Index surveys show that the strain of working in a conflict zone can take a toll.

Finding and training the right people is key for managing risk in constantly changing circumstances, Sejrup adds: "We look for sound judgment, professionalism, communication skills, learning agility. Technical knowledge remains essential, but adaptability also depends on the confidence to communicate, challenge unsafe situations, support colleagues and make disciplined decisions under pressure."

In uncertain times, it also pays to have a deep bench of talent at the top to handle any disruption.

After a recent transition at ship management giant Columbia Group, longtime executive Andreas Hadjipetrou has taken charge. The new CEO is a company man: He joined Columbia as an accountant in 1996, right after college, and has been helping the Cyprus-based ship manager grow ever since. Having taken over from Mark O'Neil, the maritime lawyer who ran Columbia for nearly a decade, Hadjipetrou's job now is to build on Columbia's reputation and relationships to meet new challenges.

"Shipping is changing quickly," he says. "Decarbonization, technology, regulation and market uncertainty are reshaping what shipowners and operators need from their partners. Our focus must be on reliable service, transparency, strong governance and trusted relationships."

TECHNICAL SKILLS

Ship management companies accumulate deep expertise in the details of practical vessel operations, and their technical staffs are often hired to act as owner's representatives during vessel construction.

By getting thousands of small details right during a shipbuilding project, an owner's representative helps set up the shipowner (and future crewmembers) for success over the commercial lifespan of the ship. The process starts with advising on smart choices during plan reviews and equipment selection, and oversight continues throughout construction. The goal is to ensure quality, manage risk and get any defects rectified as early as possible – before the ship sails away from the yard, says OSM Thome's Sejrup.

"An experienced owner's representative ensures the owner's operational requirements remain protected from specification and drawing approval through construction, commissioning, trials and delivery," he explains. "This becomes especially important for vessels with advanced propulsion, dynamic positioning, battery systems, alternative fuels, automation or specialized mission equipment. These technologies must function as one integrated vessel rather than as separate systems."

When the new hull is ready to enter commercial service, OSM Thome's shipbuilding team can hand the vessel to an OSM Thome operations team for long-term ship management – a warm handoff that passes along all of the knowledge accumulated during construction. It's an ideal solution for high-tech vessels with sophisticated systems.

"OSM Thome has applied this newbuild-to-management model to specialized assets including Ocean Infinity's marine robotic fleet," notes Sejrup. "The same approach is planned for five Vard-built service operation vessels that will be operated and managed by OSM Thome after delivery."

VESSEL CONSTRUCTION MANAGER

Third-party oversight of shipbuilding projects can benefit government owners, too.

TOTE Services, which has made a name for itself with decades of ship management work for the Military Sealift Command, has pioneered an enhanced form of owner's representative service: the vessel construction manager or VCM, who acts as a prime contractor and takes responsibility for the overall program. The VCM then subcontracts the physical construction to a shipyard of its choice and oversees the project as though the vessel were its own.

This injects commercial expertise and insulates the yard from the federal customer, reducing change orders, paperwork and contract disputes. The first examples of the VCM model include MARAD's National Security Multi-Mission Vessels (NSMV), a recently announced pair of new tracking ships for the Missile Defense Agency and the new Landing Ship Medium (LSM) for the Navy and Marine Corps – all of which happen to be TOTE projects.

For the government customer, a VCM contract opens up access to corporate speed and efficiency. Jeff Vogel, Vice President of Legal for TOTE Services, said in a recent interview that the LSM program will proceed through shipyard bidding and selection in a matter of months. The expectation is that the prices agreed up front will be good for the Navy, fair to the yards and unchanged at delivery.

"This is not the classic 'hundreds of change orders and increase everything,' and 'the government's making constant changes to the design,' which adds burden on the yard," Vogel told the CavasShips podcast, describing the traditional drivers of cost growth in federal shipbuilding programs.

BENEFITING FROM SCALE

TOTE brings scale to bear on the contracting process, too.

LSM is an eight-ship program with a ceiling of up to 35 hulls, and it will be split among three (or more) participating shipyards. Traditionally, three concurrent builders would divide up a program into three lines of effort, but not with a VCM. The plan is to deliver all the efficiency advantages of a big-yard series build but with the resources of a small-yard industrial base.

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TOTE will help negotiate prices for parts and components for all of the yards as a group, achieving more scale on procurement. It will also aim for maximum uniformity of the product across all three yards – not just during construction but throughout the maintenance lifecycle of the class.

"Crews will be able to go from ship to ship and find the same configuration regardless of the yard that's delivering the ship," said Vogel. "We'll be able to exchange parts between vessels and the supply depot without having to look at whether this is a Fincantieri ship or a Bollinger ship."