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Best practice shipmanagement study 2013

Overview and study results, Hong Kong – 07 August 2013

Kevin M. BrunnDirector Clients & Markets

Ivan TamManager Clients & Projects

GL Maritime Software

Introduction

Best Practice Ship Management Study | 07 Aug. 2013 | No. 2


• 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, GL Maritime Software, Hong Kong

• Kevin Brunn, MBA, BSc – Director Clients & Markets, GL Maritime Software, Hamburg


� GL Maritime Software 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

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A Market Overview and InsightsIvan Tam

B Results of the Best Practice StudyKevin M. Brunn

D Drinks receptionShare your experience on Best Practice with us and others

C Q&A / Distribution of your personal copy of the study

GL classed “Shanghai Express”, 13.000 TEU, 366m long, delivered March 2013

• After only four months, Asia – Northern Europebox rates reached their lowest level in more thana year.

• Spot rates have fallen by more than 40% sinceJanuary 2013.

• The intended rate increase by carriers failed

• Despite the state of the market, newbuildingordering has not halted. “Giants” abound - Largeliner companies are focussing on maximisingeconomies of scale.

• More and more smaller container lines are forcedout of the East-West trades, because they are nolonger competitive

• Trend towards consolidation of services

• Nevertheless, containerised trade to grow by5.5%

• With newbuild prices down, and advantages of

new “efficient” ships, vessel deliveries forecastedat 1.4 m TEU for 2013 (up 10%)

Market Summary – First half-year 2013

Liner companies suffer from low rates CONTAINER

Global Containerised Trade

200

150

100

50

2014201320122011201020092008200720062005

Other

North-South

Non-Mainlane East-West

Transatlantic (EU-US)

Far East-Europe

Transpacific (FE-US)mTEU

+ 7% + 4%+ 6%

+ 6%

*

(Expected) Contracting

mTEU

2,0

1,5

1,0

0,5

20112008 20102009 2015201420132012

<3k TEU>12k TEU 3-8k TEU8-12k TEU




• Stable growth of oil & product trade around4%

• Overcapacity of fleet continues

• Earnings are at bottom, bunker pricessoaring

• Time charter and spot rates continue to

decrease (both falling by further 2%compared to 2012)

• But, declining orderbook (down 11% from2012) 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%)


Positive demand forecast, but still slowTanker


10

40

20

30

2011 20142012 20152013201020092008200720062005

Aframax

Suezmax

VLCC

Panamax

HandymGT

-6

-4

-2

0

2

4

6

8

20152014201320122011201020092008

Fleet Expansion vs. Demand Growth

Demand Growth Rate

Fleet Growth Rate

% p.a.




• Despite demand growth (7%) driven by ironore and coal, overcapacity in almost allsegments keeps market down

• 3 consecutive years of double-digit fleetgrowth

• 2013 deliveries significant, but declining

• Calm contracting and melting orderbook willbalance supply and demand after 2014

• Earnings currently at or below operationalcosts, but rates expected to improve after

supply – demand gap closes

• But certain owners with good cash / fundingposition (e.g. Frontline) are able to leveragelow newbuild prices to replenish fleet with

efficient vessels

• Secondhand prices increasing


Bulker market to remain down Bulkers


100

80

60

40

20

20152014201320122011201020092008200720062005

Handysize

Handymax

Panamax

CapesizemGT

Time Charter Rates

.000 USD

per day

100

50

150

2012201120102007 2008 2009 2013

Capesize

Handy

Panamax

Handymax



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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.



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.



Recap: Is ship management an attractive market to be in?

• 3-5bn USD annual fee volume for ship management services (not all 3rd

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 in-house.

Growing, but... ... highly competitive

1 Clarksons Research, 2013



• More than 1500 companies are managing 10+ vessels

• Only 150 manage 40+

• Many midsize and small companies in the market

Is looking at best practice common?



Where are the biggest perceived challenges?



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




Of all respondents are actively looking at best practice measures in crewing

• 77% - organizational measures

• 73% - process measures

• 52% - IT measures

69%




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.

Representative quotation:


• Organizationally, many shipping companies re-insource 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

Common observations 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





Of all respondents are actively looking at best practice measures in technical management




65%

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




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.




• Different organisational options are tried out, “fleet teams” becomes common

• Planned Maintenance Systems standard

• Life cycle management view

with increasing importance


• Organize along processes

• Build processes around a state-of-the-art 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





Of respondents are actively looking for best practice measures in Financial Management



• 50 % - organizational measures

45%

Results summary: Best practice in financial mgmt.




Growing trend towards business intelligence applications in shipping to integrate data and automate reporting



Managers with field experience should be employed in Finance.




• Separation of finance from operations seen as issue

• Too much complexity built up in last years

• State-of-the-art finance systems not common


• Integrate Operations with Finance

• Simplify and harmonize the accounting structures

• Centralize the invoice registration process

• Harmonize and automate reporting

• Invest in cash management procedures





Fires and explosions are 3rd greatest reason for total loss of vessels, 5th largest reason for accidents at sea, and fire safety is no. 1 in PSC findings (every 5th detention)

Results summary: Best practice in quality & safety mgmt.



Of respondents are actively looking for best practice measures in Quality & Safety Management



• 58% - IT measure

45%




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.




• Dedicated QS teams reporting to MD common

• Staff awareness on QS issues is critical success factors

• Process supporting systems start to come in


• 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



Results summary: Best practice in procurement






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.



• 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


• 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



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



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



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Good fleet management solutions build in and support a

lot of shipping best practices

Best practice GL Solution

GL Maritime Software | 10.08.2013 | No. 36

Central and fleet wide management of master data (equipment, spares, jobs, certificates etc)

“Fleet Equipment register” in GL ShipManager

Use all available information to specify and execute dry dockings

New Dry Docking tool in GL ShipManager

Deploy a central purchase platform and communicate with suppliers electronically

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

GL FleetAnalyzer

Reduce the own investment into onshore IT environment

Managed Server solution

Examples

Ship management Ship operations

The most comprehensive and innovative portfolio in

the industry

GL CrewManager

Complete crew management

package supporting planning, dispositioning, data / certifi-cates mgmt., rest hours, ...

GL HullManager

Advanced hull integrity

solution supports inspections and thickness measurement processes based on interactive 3D ship model

GL FleetAnalyzer

Business Intelligence solution,

gets you information out of your different operational data for flexible and powerful reporting & analysis

GL ShipManager

Shipmanagers workbench to

support all key processes (maintenance, procurement, quality / safety, onboard administration, etc)

GL SeaScout

Navigational decision support

system helps you navigate through bad weather without damages on shortest route

EcoAssistant

Software system to save fuel

without modifying your vessel by optimal trim

GL MachineryManager

Integration platform for all

condition monitoring machinery information (e.g. visual inspections, vibration, oil analysis, perf. monitoring)

GL FleetManager -Finance module

Complete finance system incl. Accounting, Controlling, Cash, Intercompany for shipping CFOs

GL EmissionManager Smart solution for onboard voyage reporting and onshore emission- and fleet performance analysis

Provided By FutureShip

GL Maritime Software | Software solutions for increased performance | Slide 37

Currently in pilot stage

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www.gl-maritime-software.com

Thank you!

[email protected] www.gl-maritime-software.com

Ivan TamManager Clients and ProjectsTel. +852 6111 4320Email: [email protected]

Kevin BrunnDirector Clients and MarketsTel. +49 381 673 11 37Email: [email protected]

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