The future of shipmanagement

• 07 Aug 2018

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Ship managers big and small will seek to use digitalisation as a tool to reduce operating
cost, but issues of crewing and size issues will continue. A Lloyd’s List webinar assesses
the next decade

Source: Pand P Studio/Shutterstock.comFOR MANY SHIPMANAGERS, DIGITALISATION WILL

BE THE TOOL THAT ENABLES SIGNIFICANT COST SAVINGS.

What will third-party ship management look like in 10 years’ time?

As ever, it’s tempting to suggest the fourth industrial revolution will transform this
sector beyond all recognition, but will it?

What indications can we identify from the past decade of austerity that might offer
some clues as to the evolution of ship management?
The sector is 43 years young. Capt Charles Vanderperre is credited with taking the
first ship, the tanker Sun Clipper, under the technical management of Univan (UNIted
VANderperre) in 1975.A year later, he set up a manning office in Mumbai, India.

Until the early-1980s, independent management companies served as a vessel-

operating alternative for shipowners suffering from high overheads at a time when
freight markets were depressed.

Growth has come from, among other sources, financiers repossessing ships from
distressed owners and contracting with managers; from the requirement to achieve
higher standards to comply with the International Safety Management Code; and
from the need to secure trained and experienced crews.

At the peak, ship managers are estimated to have had 13%-15% of the global
merchant shipping fleet under technical management, crewing management, or full
management, including vessel operations. Give or take a percentage, that remains the
case today.

Most ship managers insist the size of the controlled fleet is a consequence of good
practice and high standards, rather than the goal.

The largest managers have all increased in size and procurement influence through
acquisition or merger. In recent years, V.Group has added Bibby and Selandia to
V.Ships; Anglo-Eastern merged with Univan; Columbia got together with Marlow
Navigation.

Others have responded differently. Arthur McWhinnie, managing director of

Bernhard Schulte Shipmanagement in Cyprus, told Lloyd’s List at CMA in March this
year: “In 2008, Bernhard Schulte had four ship management units; these have been
consolidated into one group, but we don’t want to be the biggest. We want to grow in
a manner that retains our quality.”

In January this year, Bernhard Schulte acquired the privately owned specialist LNG
ship manager Pronav to give it a stronger position to exploit owning and managing
potential in the liquefied natural gas sector.

Speaking to Danish online media outlet Shipping Watch after the merger with Anglo-
Eastern, Univan chief executive Bjørn Hojgaard said he could envisage the
development of more larger ship management companies “and many small,
specialised companies, with fewer in the middle”.

He added: "We will likely not see super-big companies. If we at Anglo-Eastern Univan
Group today [August 2015] have a market share of 5%, we are one of the largest in our
industry.”
“Competitors are always saying V.Group is too big. They can say
what they want; our size is a massive advantage in shipping.”
Ian El-Mokadem, V.Group

“Scale matters; you have to drive scale and invest in IT — and it’s hard to invest if you
are a small business,” V.Group chief executive Ian El-Mokadem told Lloyd’s List at
Posidonia this June. Seafarers shouldn’t be worried, he said. “The biggest single
investment we are making is in crewing centres.

“Competitors are always saying V.Group is too big; they can say what they want. Our
size is a massive advantage in shipping. If a client says we are too large, then we
haven’t been doing what we should have done,” Mr El-Mokadem added.

Anglo-Eastern chairman Peter Cremers agrees. In 2017, told IHS Fairplay: “You need
volume; you need presence to grow. You need to be able to be everywhere; you need
to train the best possible people; you need to be able to attract the best possible
people.”

He believes ship management is about getting the systems right; thereafter, it doesn’t
matter how many ships are under management.

It might be a systems-driven business, but management is also a people business, and

having the resources to build and equip manning centres in Manila, Mumbai, China,
and Ukraine doesn’t come cheaply.

Ten years ago, the real fear for ship managers was a shortage of seafarers. While this
hasn’t been fully solved, managers face new concerns over seafaring.

“Ships with considerably reduced manpower will be here in the very near future,” said
Wallem’s group technical director, Ioannis Stefanou. Quoted in the manager’s True
North magazine, Mr Stefanou said he believed “remote-controlled ships will be a
reality much sooner than the masses believe, in my opinion. Completely autonomous
ships, I think, will come later”.

Then there is digitalisation, which is certain to impact all sectors of shipping. In the
same article, Mt Stefanou said: "Analytics or real-time data will allow companies to
make real-time proactive decisions, leading to efficiency increases and risk
mitigation.”
“Digitalisation is about the intersection of technology, process
and innovation – too many focus only on the technology.”
Mark O’Neil, Columbia Marlow

However, speaking at the Transas Global Conference in Vancouver earlier this year,
Mark O’Neil, chief executive of Columbia Marlow, urged caution. “Digitalisation is a
path, not a journey,” he advised. “It’s about the intersection of technology, process
and innovation — too many focus only on the technology.”

The problem for digitalisation comes when several legacy systems brought together
through corporate merger or takeover are not compatible. This leaves the whole
company vulnerable to hacking.

For many ship managers, digitalisation will be the tool that enables significant cost
savings. In a period of weak freight markets, charter contracts barely cover operating
expenses.

However, it has long been clear that performance levels should be made part of ship
management contracts, suggested DNV GL in a 2015 white paper ‘How to optimise
your OPEX’: “Many ‘owning-managers’ have a reputation for high-quality technical
management, not for OPEX excellence. Standard ship management contracts don’t
specify performance expectations, just crewing and budget.

In his concluding remarks to that white paper, Jan-Henrik Hübner, the class society’s
global head of shipping advisory, said ship managers should strive to enhance
operational excellence and defend their own as well as their vessel’s competitiveness.

“While adhering to defined operational and asset-related performance levels, they

should flip every stone looking for savings potential across their core processes,” he
said.

All of which suggests the issues faced by ship managers in 2028 might not look much
different from today’s issues. Chief among them is how to secure a source of highly
motivated seafarers; how to use digital technology to optimise operating expenses;
and how to maintain a reputation for quality, safety, and price that will attract the
industry’s long-term players.