Best practice shipmanagement study 2013 Overview and study results, Hong Kong 07 August 2013 Kevin M. Brunn Director Clients & Markets Ivan Tam Manager Clients & Projects www.gl-group.com www.gl-maritime-software.com
Introduction Best Practice comprises all approaches, procedures, business models or tools that ship managers use to do their business smarter, safer, and greener i.e. to be on top of competition. Ship managers are under increasing pressure. Overcapacity in the market is driving charter rates down. Ship owners face higher costs to finance vessels. Ship operators fight for cargo and drive down their main cost block, which is fuel. Ship managers sit in the middle with increasing burdens for the same management fees. In 2013, GL (Germanischer Lloyd) and Fraunhofer Center for Maritime Logistics and Services conducted a study involving around 100 ship management companies worldwide to find out what they are doing to improve their operations and what they consider as best practice in the industry. We would like to share these best practices with you and to give you the chance to reflect against your own operations and get inspiration and ideas on additional improvement areas. Presenters: Ivan Tam, MSc Manager Clients & Projects,, Hong Kong Kevin Brunn, MBA, BSc Director Clients & Markets,, Hamburg Best Practice Ship Management Study 07 Aug. 2013 No. 2
is the software provider and system integrator for the maritime industry. We improve our clients processes and decisions in ship operations and fleet management, both onboard and onshore. GL-Group is the world class technical advisor and trusted partner in assurance, consulting and classification for the maritime and energy industries. We enable our clients to build and operate their assets smarter, greener and safer. Key Figures 7,900 Vessels Served 6,700 Employees 200 Offices Worldwide
A Market Overview and Insights Ivan Tam Contents B C Results of the Best Practice Study Kevin M. Brunn Q&A / Distribution of your personal copy of the study D Drinks reception Share your experience on Best Practice with us and others
Liner companies suffer from low rates Market Summary First half-year 2013 CONTAINER mteu 200 150 100 50 mteu Global Containerised Trade GL classed Shanghai Express, 13.000 TEU, 366m long, delivered March 2013 2,0 1,5 1,0 0,5 2005 Transpacific (FE-US) Far East-Europe Transatlantic (EU-US) 2006 2007 2008 2009 Non-Mainlane East-West North-South Other 2010 + 7% + 4% + 6% + 6% 2011 2012 (Expected) Contracting >12k TEU 8-12k TEU 3-8k TEU * 2013 <3k TEU 2014 2008 2009 2010 2011 2012 2013 2014 2015 After only four months, Asia Northern Europe box rates reached their lowest level in more than a year. Spot rates have fallen by more than 40% since January 2013. The intended rate increase by carriers failed Despite the state of the market, newbuilding ordering has not halted. Giants abound - Large liner companies are focussing on maximising economies of scale. More and more smaller container lines are forced out of the East-West trades, because they are no longer competitive Trend towards consolidation of services Nevertheless, containerised trade to grow by 5.5% With newbuild prices down, and advantages of new efficient ships, vessel deliveries forecasted at 1.4 m TEU for 2013 (up 10%) Best Practice Ship Management Study 07 Aug. 2013 No. 5
Market Summary First half-year 2013 Tanker Positive demand forecast, but still slow Stable growth of oil & product trade around 4% Overcapacity of fleet continues Earnings are at bottom, bunker prices soaring Time charter and spot rates continue to decrease (both falling by further 2% compared to 2012) GL classed Shanghai Express, 13.000 TEU, 366m long, delivered March 2013 But, declining orderbook (down 11% from 2012) could diminish supply demand gap in 2014 Future contracting is key to market balance Newbuilding prices stable but low Second hand market picking up (+10%) 40 mgt 30 20 10 8 % p.a. 6 4 2 0-2 -4 2005 2006 (Expected) Contracting 2007 2008 2009 VLCC Suezmax 2010 Aframax Panamax Handy 2011 2012 2013 2014 2015 Fleet Expansion vs. Demand Growth Fleet Growth Rate Demand Growth Rate -6 2008 2009 2010 2011 2012 2013 2014 2015 Best Practice Ship Management Study 07 Aug. 2013 No. 6
Bulker market to remain down Market Summary First half-year 2013 Bulkers 100 mgt 80 60 40 20.000 USD per day 150 100 (Expected) Contracting GL classed Shanghai Express, 13.000 TEU, 366m long, delivered March 2013 2005 2006 2007 2008 2009 2010 2011 2012 Time Charter Rates 2013 Capesize Panamax Handymax Handysize 2014 Capesize Panamax 2015 Handymax Handy Despite demand growth (7%) driven by iron ore and coal, overcapacity in almost all segments keeps market down 3 consecutive years of double-digit fleet growth 2013 deliveries significant, but declining Calm contracting and melting orderbook will balance supply and demand after 2014 Earnings currently at or below operational costs, but rates expected to improve after supply demand gap closes But certain owners with good cash / funding position (e.g. Frontline) are able to leverage low newbuild prices to replenish fleet with efficient vessels Secondhand prices increasing 50 2007 2008 2009 2010 2011 2012 2013 Best Practice Ship Management Study 07 Aug. 2013 No. 7
A Market Overview and Insights Ivan Tam Contents B C Results of the Best Practice Study Kevin M. Brunn Q&A / Distribution of your personal copy of the study D Drinks reception Share your experience on Best Practice with us and others
The best practice study serves as a guide to reflect own ideas, priorities and have a look over the fence Collection of over 50 common qualitative observation and quantitative statistics across all companies Derivation of 30 best practice measures in the 5 key areas of all ship managers Many connected context boxes with subjects that came up A Best practice is not understood as recipe that fits in all circumstances to all companies. Best Practice Ship Management Study 07 Aug. 2013 No. 9
Shipping companies are using the crisis to sort themselves our study should help We have asked around 100 shipping companies around the globe: What are the areas you are working on to improve your business? What have you seen in other companies you consider as best practice? Best practice in this study comprises all approaches, procedures, business models or tools that ship managers are using to do their business smarter, safer and greener, i.e. to be on top of competition. Best Practice Ship Management Study 07 Aug. 2013 No. 10
Recap: Is ship management an attractive market to be in? Growing, but... 3-5bn USD annual fee volume for ship management services (not all 3 rd party) Growing fleet with technically more challenging assets underlying stricter regulations with more difficult to find crew and increasing pressure and costs and quality will nurture professional ship management be they 3rd party or inhouse.... highly competitive More than 1500 companies are managing 10+ vessels Only 150 manage 40+ Many midsize and small companies in the market 1 Clarksons Research, 2013 Best Practice Ship Management Study 07 Aug. 2013 No. 11
Is looking at best practice common? Best Practice Ship Management Study 07 Aug. 2013 No. 12
Where are the biggest perceived challenges? Best Practice Ship Management Study 07 Aug. 2013 No. 13
Results summary: Best practice in crewing In 2010, there were around 1.4 million active seafarers There is particular concern over current and future availability of senior officers, especially engineers, in the Far East and Indian subcontinent Best Practice Ship Management Study 07 Aug. 2013 No. 14
Results summary: Best practice in crewing 69% Of all respondents are actively looking at best practice measures in crewing 77% - organizational measures 73% - process measures 52% - IT measures Best Practice Ship Management Study 07 Aug. 2013 No. 15
Results summary: Best practice in crewing Representative quotation: Getting the same senior officers back onboard of the same vessel is the ultimate goal of crew planning. Fewer crew changes mean lower costs and more commitment from senior officers for their vessel. Best Practice Ship Management Study 07 Aug. 2013 No. 16
Results summary: Best practice in crewing Common observations Organizationally, many shipping companies reinsource crewing activities again Culturally, a lot of focus is given to training, development, welfare package and teamwork. Process-wise, re-insourced crewing processes need proper system support Best practices Invest in culture and teamwork Invest in crew welfare packages Integrate training, appraisal and development management systems Use a combination of personal and computer-based training Use an integrated crewing solution onboard and onshore Best Practice Ship Management Study 07 Aug. 2013 No. 17
Results summary: Best practice in technical mgmt. 65% Of all respondents are actively looking at best practice measures in technical management 77% - organizational measures 85% - process measures 69% - IT measures Best Practice Ship Management Study 07 Aug. 2013 No. 18
Results summary: Best practice in technical mgmt. Life Cycle Management is a growing trend in Technical Management 82% - focus on machinery 74% - focus on hull structures Best Practice Ship Management Study 07 Aug. 2013 No. 19
Results summary: Best practice in technical mgmt. Representative quotation: We have focussed too much on papers and we are asking every day for more and more paperwork, forgetting the hardware, i.e. the ship s structure. Best Practice Ship Management Study 07 Aug. 2013 No. 20
Results summary: Best practice in technical mgmt. Common observations Different organisational options are tried out, fleet teams becomes common Planned Maintenance Systems standard Life cycle management view with increasing importance Best practices Organize along processes Build processes around a state-of-theart planned maintenance system Harmonize and centralize the management of master data Manage a key element of your maintenance budget: dry dockings Pay attention to hull maintenance Embrace condition based maintenance Best Practice Ship Management Study 07 Aug. 2013 No. 21
Results summary: Best practice in financial mgmt. 45% Of respondents are actively looking for best practice measures in Financial Management 55% - process measures 55% - IT measures 50 % - organizational measures Best Practice Ship Management Study 07 Aug. 2013 No. 22
Results summary: Best practice in financial mgmt. Growing trend towards business intelligence applications in shipping to integrate data and automate reporting Best Practice Ship Management Study 07 Aug. 2013 No. 23
Results summary: Best practice in financial mgmt. Representative quotation: Managers with field experience should be employed in Finance. Best Practice Ship Management Study 07 Aug. 2013 No. 24
Results summary: Best practice in financial mgmt. Common observations Separation of finance from operations seen as issue Too much complexity built up in last years State-of-the-art finance systems not common Best practices Integrate Operations with Finance Simplify and harmonize the accounting structures Centralize the invoice registration process Harmonize and automate reporting Invest in cash management procedures Best Practice Ship Management Study 07 Aug. 2013 No. 25
Results summary: Best practice in quality & safety mgmt. Fires and explosions are 3 rd greatest reason for total loss of vessels, 5 th largest reason for accidents at sea, and fire safety is no. 1 in PSC findings (every 5 th detention) Best Practice Ship Management Study 07 Aug. 2013 No. 26
Results summary: Best practice in quality & safety mgmt. 45% Of respondents are actively looking for best practice measures in Quality & Safety Management 79% - organizational measures 73% - process measures 58% - IT measure Best Practice Ship Management Study 07 Aug. 2013 No. 27
Results summary: Best practice in quality & safety mgmt. Representative quotation: The critical success factor is awareness of the individual crew member that he can make a difference in both quality and safety, and all focus of a Quality & Safety Management system is directed towards this. Best Practice Ship Management Study 07 Aug. 2013 No. 28
Results summary: Best practice in quality & safety mgmt. Common observations Dedicated QS teams reporting to MD common Staff awareness on QS issues is critical success factors Process supporting systems start to come in Best practices Move from QS to QHSE Deploy and monitor regular crew training on safety issues Nurture a no accusation / blame culture Use integrated Quality & Safety solution Automatically produce regular quality and safety KPI reports fleet-wide Have risk assessment integrated in regular processes Best Practice Ship Management Study 07 Aug. 2013 No. 29
Results summary: Best practice in procurement Best Practice Ship Management Study 07 Aug. 2013 No. 30
Results summary: Best practice in procurement Representative quotation: Our goal is to move from just purchasing to a more strategic supply chain management perspective. This includes materials and vendor management as well as the whole transportation, storage, material and information flow. Best Practice Ship Management Study 07 Aug. 2013 No. 31
Results summary: Best practice in procurement Common observations Organisational and process measures common to increase data quality Purchasers are bound into processing and have too little time for sourcing activities Supplier treatment changes to a more long-term partner approach Best practices No purchase outside the system (no maverick buying ) Harmonize and centralize the management of master data Communicate with suppliers electronically Plan demands fleet-wide Embrace strategic sourcing activities Reduce number of suppliers Best Practice Ship Management Study 07 Aug. 2013 No. 32
The role of information and communication technologies Shipping has in the past largely underinvested into IT (e.g. compared to Oil & Gas industry) Despite crisis majority of respondents do not cut back IT budgets Enabling function for best practices is well understood among respondents Best Practice Ship Management Study 07 Aug. 2013 No. 33
The role of information and communication technologies Trends: 1. IT budgets are not being cut 2. A generation change in management is lowering barriers 3. Software usage strategies vary but come closer together 4. Buying criteria are stable 5. Many implementation projects fall short of expectations 6. The need for services around software is increasing Best Practice Ship Management Study 07 Aug. 2013 No. 34
A Market Overview and Insights Ivan Tam Contents B C Results of the Best Practice Study Kevin M. Brunn Q&A / Distribution of your personal copy of the study D Drinks reception Share your experience on Best Practice with us and others
Good fleet management solutions build in and support a lot of shipping best practices Examples Best practice Central and fleet wide management of master data (equipment, spares, jobs, certificates etc) Use all available information to specify and execute dry dockings Deploy a central purchase platform and communicate with suppliers electronically GL Solution Fleet Equipment register in GL ShipManager New Dry Docking tool in GL ShipManager Procurement module with e-commerce interface in GL ShipManager Focus maintenance also on hull integrity GL HullManager Connect available data in business systems to management reports and KPIs Reduce the own investment into onshore IT environment GL FleetAnalyzer Managed Server solution 10.08.2013 No. 36
The most comprehensive and innovative portfolio in the industry Ship management Ship operations GL ShipManager Shipmanagers workbench to support all key processes (maintenance, procurement, quality / safety, onboard administration, etc) GL CrewManager Complete crew management package supporting planning, dispositioning, data / certificates mgmt., rest hours,... GL EmissionManager Smart solution for onboard voyage reporting and onshore emission- and fleet performance analysis GL HullManager Advanced hull integrity solution supports inspections and thickness measurement processes based on interactive 3D ship model GL FleetManager - Finance module Complete finance system incl. Accounting, Controlling, Cash, Intercompany for shipping CFOs GL SeaScout Navigational decision support system helps you navigate through bad weather without damages on shortest route GL MachineryManager Integration platform for all condition monitoring machinery information (e.g. visual inspections, vibration, oil analysis, perf. monitoring) Currently in pilot stage GL FleetAnalyzer Business Intelligence solution, gets you information out of your different operational data for flexible and powerful reporting & analysis EcoAssistant Software system to save fuel without modifying your vessel by optimal trim Provided By FutureShip Software solutions for increased performance Slide 37
A Market Overview and Insights Ivan Tam Contents B C Results of the Best Practice Study Kevin M. Brunn Q&A / Distribution of your personal copy of the study D Drinks reception Share your experience on Best Practice with us and others
Thank you! Ivan Tam Manager Clients and Projects Tel. +852 6111 4320 Email: ivan.tam@gl-group.com Kevin Brunn Director Clients and Markets Tel. +49 381 673 11 37 Email: kevin.brunn@gl-group.com www.gl-maritime-software.com maritime.software@gl-group.com www.gl-maritime-software.com