When writing commercial articles about the maritime market, I found analogies for players in the shipping ecosystem most useful. After undertaking recent new research on satellite operators, service providers, shipping companies, ship owners (most of the time the former, however, not in some cases), ship managers and seafarers. I thought a simplification of their roles would be beneficial.
There are ship owners, ship managers and seafarers who go (down) to the sea in ships. A shipping company’s customer likes to buy a product from A where it is cheap and move it to B where it can be sold to make a profit. To do this require shipping companies and owners to commission shipyards to build metal boxes to carry the product. Sometimes this box is made of steel and floats on the ocean. Sailors live on the ship-box, look after it and care about it. They talk of being married to the ocean and treat the ship as if it is their wife (or husband).
Ship managers are relationship experts who try to maintain these many relationships and keep all in good health.
Commercially this makes good sense for smaller ship/fleet owners as the overhead and cash flow required for maintaining a crew and vessel management department within the owner’s organisation is onerous. Because management contracts are negotiated mainly on price, margins for ship management companies are squeezed and hiccups in cash-flow, for example an international pandemic which keeps ships from docking and crews from changing, can mean the difference between survival and bankruptcy. Even for larger fleet operators, there is some logic in relieving the parent company of the responsibility and risk inherent in hiring permanent staff for crewing and administration, but cost comparisons must be harder to justify outsourcing. The low freight rates ($1,576 per 40ft container according to Drewry’s World Index) and the pandemic have all taken their toll on the industry and there will likely be cohort of mergers, bankruptcies and acquisitions.
Whether a ship owner gives the ship management tasks to a separate division within the company, or outsources the job to a third-party ship manager, the services provided will cover the same operational needs. Third party ship management companies play an important role in the shipping industry.
Remit of ship management firms:
Ship management usually covers crew management – selection, training, competence, medical fitness for duty, payroll and tax, pension, repatriation, insurance, even union negotiations.
Operationally, it might include – supply of necessary victualling, stores, spares, and lubricating oil and services for the ship, repair and maintenance, arranging dry dockings, modification and upgrades, audit planning, monitoring of flag state compliance, classification society compliance, safety and health management and compliance with port and docks security codes.
Commercially, services offered include: financial accounting including voyage estimates and issuing voyage instructions, ship financing, newbuilding contracting and supervision, chartering including demurrage, insurance, claims handling, appointing agents, appointing stevedores and arranging surveys associated with commercial operation.
In at least the last 20 years, the ownership of the world’s merchant fleet has become more varied. Aside from independent ship owners who have their own ship operating ability, investors, banks and hire companies have bought, or ended up owning by default, ships but do not have the necessary expert knowledge to operate them. However, the relationship between the ship manager and the ship owner is not always ideal. Disputes between them may arise, regarding claims from third parties, standards and the quality of service or of returning asset after the contract terminates. Around 25% of the world’s international trading fleet of ships is reliant on services provided by third party managers in whole or part.
How does this situation influence the adoption of smart-ship technology?
A little description of the main players follows with their origin, base of operations and some discussion of their approach to smart-ship technology, always remembering that, unless a vessel is built with the necessary sensors and communication capacity, the retrofitting smart-ship technology is an expensive and time consuming business that ship owners rarely want to fund unless promised a clear-cut increase in return for the effort.
Anglo Eastern-Univan Group (Hong Kong) started out in 1974 as Anglo-Eastern, a chartering and ship owning company with Anglo-Eastern Management Services being the in-house manager for the ships. This in-house department was the start of the present Anglo-Eastern Group. There was a management buyout in 1998 and a subsequent merger with Scottish ship manager, Denholm Ship Management three years later. Anglo Eastern merged with Univan Group in 2015. It now has roughly 1,700 shore staff and over 27,000 sea crew and combined third party management of nearly 900 ships. A majority of its ships’ crews come from India, Philippines, Ukraine and China.
In March 2020, the group announced that it is adopting the Wärtsilä Fleet Operations Solution (FOS) by Transas, in order to optimise the planning, weather routing, fuel consumption, and speed of a vessel. It also facilitates ship to-shore reporting and fleet performance management to reduce fuel consumption taking into consideration charter party compliance, speed management, as well as hull, propeller and engine condition. Key benefits of deploying the Wärtsilä FOS include a unique platform that integrates with a ship’s planning station and electronic chart display and information system (ECDIS), immense cloud computing power, machine learning, data analytics, and onboard/onshore mobile applications.
V.Group (London) has been in operation since 1984. It’s core operations are ship operation management; V.Ships leisure; and crew management. Other divisions include the ship supply chain division, marine services division and offshore division. It is 51 per cent owned by a private investment company Advent International. The company website states that it manages 2,200 vessels with a sea crew of 44,000 (half of whom will be at sea and half on liberty) and a shore staff of 3,000 spread over 60 offices. The company employs an in-house integrated management software system called Shipsure 2.0 which can be installed in modules.
Fleet (a rebranding from Fleet Management) (Hong Kong) was established in 1994. It provides technical management, ship building, marine insurance, maritime training and crew management to ship owners worldwide. The company manages around 550 cargo vessels, multipurpose vessels, container vessels, bulk carriers, reefer vessels, chemical tankers, gas carriers, product tankers, crude oil, roll-on/roll-off vessels, and pure car carriers. Its crew roster numbers 20,000 and it has 25 offices in 12 countries with a shore staff of 800. The software monitoring system they use is called PARIS (Planning and Reporting Infrastructure for Ship) which is now a cloud-based reporting dashboard for every aspect of a vessel’s performance, condition, operating cost, and crew details.
Bernhard Schulte Ship Management (BSM) (Singapore) has more than 135 years in the shipping industry. Originally founded in 1883 as a ship-owner for the timber trade in the Baltic Sea, the family-owned business developed until now, the parent company, Schulte Group, manages a ﬂeet of around 600 vessels, 18,000 seafarers and 2,000 shore based employees through a network of 11 ship management offices, 24 crew service offices and four wholly-owned maritime training centres. The company uses an in-house developed PAL software system, an integrated ship management software suite, on all BSM-managed ships. It is a calendar maintenance schedule with respect to machinery running hours and condition-based maintenance, an enhanced system we use with electronic engine indicators. PAL voyage module is used to monitor ship performance with the data compared to past voyages providing accurate information on the right timing for propeller and hull cleaning.
Columbia Shipmanagement (Cyprus) as established in Limassol, in 1978. With more than 380 vessels under full and crew management, 280 new build vessels under supervision, 8 management offices, 14 crewing agencies, more than 15,000 employees. CSM is at the forefront of shipping digitalisation and is a key contributor to the technological revolution in the maritime industry. CSM has a software suite called Performance Optimisation Control Room (POCR) which provides 24/7 expert monitoring of its fleet. The POCR optimises operations in all areas of vessel safety, crew rotation and training, maintenance and fuel efficiency.
Synergy Group (Singapore) was founded in 2006. They provide technical management, commercial management, crew management, new ship building, maritime training, pre-purchase inspection, port agency and marine travels. They have more than 300 vessels under management with over 12,000 crew members out of 13 offices in six maritime centres Synergy supervises a diverse fleet which includes LPG tankers, chemical tankers, oil tankers (VLCC, Suezmax, Aframax, LR2, LR1 and MR), container vessels in the 1,800 TEU to >20,000 TEU capacity and every size of bulk carrier. Its in-house software, known as ‘ShipPalm’, runs their ship management software that is regulatory compliant. It provides an integrated business solution to Synergy’s Ship Management division. It is modular in concept and can monitor voyage performance, keeps track of certificates, has a documents management module, a defect reports module, crewing module, purchase module. It includes a planned maintenance system and can produce business intelligence reports. Furthermore, the company has introduced the SmartShip Technology into one of its group vessels, Trammo Dietlin which is the first vessel to receive the Certificate of Class, ‘AL-SAFE’ notation from Lloyd’s Register. This is the first example of a ship certified to stream data into a big data platform. Elements of the navigation, cargo and machinery systems have been certified AL2, which means ‘systems provide on and off-ship decision support for operators’. This provides operators and shore-based support staff with instant access to operating data from these systems for monitoring and diagnostics through the cloud, with which they can make more informed decisions and respond to issues faster and more efficiently. The Air Handling Unit has been certified AL3 which means ‘systems that operate autonomously, but with an active human ‘in-the-loop’’.
Wallem Group (Hong Kong) was established in 1903 by Haakon Wallem in Shanghai. Now it manages more than 350 ships with 7,000 qualified seafarers and 1,000 shore-based staff in 17 countries with 8 training centres. The software suite it employs is BASSnet currently trialled on three vessels using Inmarsat’s Fleet Xpress – a crude/oil products tanker and two vehicle transporters. After setting up the planned maintenance databases for the three pilot vessels. and revamped the chart of accounts with the aim of making it more granular, enabling more detailed comparisons and analysis of actual and budgeted costs, and allow greater transparency in reporting to vessel owners. Wallem is also linking BASSnet up with the company’s other software with a view to harnessing ‘Big Data’ across Wallem’s business process and reducing administrative burden. Initially this will see automation of the invoices register and procurement management process and integration with COMPAS – the crew management software used by Wallem seafarers. BASSnet is also an Enterprise Resource Planning (ERP) platform.
Thome Ship Management (Singapore) was, set up in 1963 and undertook agency work mainly for Scandinavian owners, in addition to his chartering and shipbroking activities. In 2013, the company had more than 400 vessels under full technical management serviced by 750 shore staff and 12,000 crew members in 11 locations. It is not clear if there is a company-wide monitoring and management suite of software.
Wilhelmsen Ship Management (Lysaker, Norway) Founded in 1861, the parent company Wilh. Wilhelmsen Holding ASA is a global maritime industry group employing more than 21,000 people. They deliver products and services to more than half of the world’s merchant fleet, along with crew and technical management to the biggest vessels at sea. Its ship management division is a 45 year old stand-alone entity fully owned by the parent company. It manages 396 ships, employs 4,500 marine professionals (shared with other group companies) servicing 2,200 ports in 125 countries and has 9,200 active seafarers. WSM uses a range of software suites to address different aspects of voyage, engine and fuel efficiency, client and supplier information including FRED (Framework for Enterprise Data) a customer portal for securely accessing their transaction information, including invoices, delivery notes, order history and current delivery status of orders. It also allows customers to retrieve certificates for products such as ropes, along with providing an instant overview of which cylinders they have on board, and where. For engine rooms, they have trialled the ER-EMT solution (engine room – energy management technology) “True Demand”. This automation technology responds to the varying conditions of the engine room. It delivers direct energy savings, and also allows the crew to constantly monitor and verify the status of each controlled unit and ensure that the savings are sustainable and extending the scope for benchmarking and energy optimisation. It is thought that WSM also use Kongsberg and Honeywell integrated automation systems. Wilhelmsen Ship Management has entered into strategic partnerships with DNV GL, Norwegian Maritime Authority (NMA) and University of South-Eastern Norway (USN) for the development of autonomous shipping operations.
OSM Maritime (Kristiansand, Limassol, Singapore) Founded in 1989, OSM is now a leading provider of full-service solutions to the Offshore and Maritime Industry with more than 12,000 employees, 30 office locations, 500 vessels under management. OSM recently announced that it has extended its partnership with Tero Marine, and will install its TM Master suite on the remaining OSM fleet globally. The frame agreement with Tero Marine means that all vessels with various planned maintenance systems across the OSM fleet would be standardised on TM Master. At the core of this digitalisation is the visualisation of quality data which are used to monitor the fleet and provide real-time support to the crew, around-the-clock, performance management and fast response capabilities if the need arises. Combined with an analytics platform that helps them capture and act on detailed insights from the data, the company has tested artificial intelligence capabilities that enable the platform to identify advanced correlations that humans would normally not be able to catch on first sight. TM Master as the preferred maintenance and purchasing system will fit into this digital strategy. TM Master has been designed to enable you to take care of your assets; vessels, crew and cargo. The fleet management system consists of the following modules: maintenance, procurement, human resources and quality & environment. TM Master is designed to work with future operating systems and is also ideally suited for integration with third party software such as ERP software.
Ship management companies seem to be divided into two types; those that developed from departments of ship owners and charterers such as Anglo-Eastern, BSM, Wallem and Wilhelmsen. The other is those that have been more recently set up specifically to cater to the ship management industry. This reflects in their approach to automation and AI. It makes little financial sense to promote technology that reduces or diminishes reliance on technically and legally qualified crew if one of your main streams of income is manning and associated costs.
Dr Malcolm Willingale of Henley Business School and author, with others, of “Ship Management” has suggested that the level of the management fees might be around $75,000 – 100,000 per annum for a bulk carrier, $90,000 – 150,000 per annum for a tanker and approximately $400,000 per annum for a cruise vessel. The difference is largely driven by crew, provisions and insurance costs
Even though the expenses for the SMCs have increased around 10% the last years, due to the demand for investment in IT systems and safety and quality management, the weakening of the dollar and the rising service delivery costs, the management fees have stayed at the same levels as in the past or even declined.
On the other hand, those ship management companies, whose parent companies have their own ships, know that there is more profit to be had from more automation. True AI and unmanned or deeply automated shipping is still some years away, although the current pandemic may have hastened its adoption somewhat.
The companies that adopt it are almost assuredly going to be owner-operated such as Maersk, COSCO and such. For more information about Valour Consultancy’s maritime research, please click here.