Sugato Ray
Apr 4, 2018

Unlocking Value for Shipping Operations

Introduction

Maritime Industry is the backbone of most heavy industries when it comes to their supply chain. There are numerous stakeholders in the maritime industry such as ship builders, fleet owners, charterers, ship management companies (SMCs), freight forwarders, shipping liners, port operators, bunker suppliers, insurance providers, classification societies, regulatory bodies, etc. Each of these stakeholders play a major role in ensuring smooth operations and business continuity. As varied as the roles that exist in the value chain are, so are the challenges that they bring forth. For example, a Ship Builder’s primary concern may be aftermarket services whereas for a Shipping Liner, it may be avoiding unplanned downtime of vessels or inefficient cost predictability. Today, let’s take a look at how Operations Digitalization can help a Ship Management Company (SMC).



The Stakeholder – Priorities & Challenges

Understanding the needs and priorities of the stakeholder is key to the success of any Digitalization initiative or use case. Ship Management Companies (SMCs) essentially have to ensure that cargo gets from one place to other intact, and on time. It sounds rather simple but it’s a complex balancing act involving:

  • Trade Imbalance & Scheduling – Let’s say you have a thousand containers being shipped from China to the US. Now, if scheduling is not spot on, you may have 100s of empty containers being shipped back from the US back to China.

  • Hazard Anticipation & Mitigation – Take LNG carriers as an example. These are highly compressed flammable fluids being shipped on large carriers in a highly controlled environment. Temperatures, pressures, movement, etc. – everything has to be really close to ideal to ensure safe operations.

  • Navigation & Tracking of numerous Fleets – With thousands of ships moving all across the globe, vessel routes and tracking becomes extremely important. Slight deviations due to environmental conditions, etc. could cause heavy delays and end up in SLA breaches.

  • Emissions & other Operational Compliances – Regulatory compliance are strictly enforced to ensure the health and safety of workers as well as to ensure that operations are environmentally responsible. Especially, when approaching a port, ships have to follow mandatory processes that are specific to ports. Any breach of such compliance can result in safety or environmental concerns that may eventually translate into large fines.

  • Cargo Visibility, Damage Prevention, Capacity Utilization – The integrity of the cargo being delivered is key to any shipping operation. Any damage could result in massive losses. Moreover, if capacity utilization is not optimal, there are repercussions in terms of both direct and opportunity costs.

  • Off-hire Reduction – Off-hire days, especially the unscheduled ones, basically means that your vessel(s) is nothing more than deadweight during that period. Without proper planning and foresight, off-hire periods can result in major direct and opportunity costs.

  • Condition Monitoring – One has to ensure that the ship, including its main engine, hull, and all other sub-systems, is in good condition, to ensure safety and minimization of operating costs. Mid-sea failure of a main engine during a stormy condition may spell doom for the ship and its crew. Biofouling alone can increase the fuel cost by 18%-20% and reduce speed by 20%.

  • Operational costs around Fuel Consumption, Manning, Maintenance, Opportunity Cost etc. – This is where the balancing act pivots to reduce as much of LPOs (Lost Profit Opportunity) as possible. All of the above challenges boil down to increased costs and risks, much of it revolving around inspection and maintenance, fuel consumption, manning, and opportunity costs.



The Impact of Operations Digitalization – A Few Use Cases


 Live & Synchronized Digital Replica on 'Ship & Shore'

                         

Digitalization can play a massive role in aiding key decisions for SMCs that would have a large bottom line impact – it can provide economically contextualized information to the right stakeholder or user within the opportunity window, either in terms or real-time visibility or foresight. Moreover, it can create new revenue streams for them through Digital Service Offerings that they can offer to their customers. Let’s look at a few critical use cases and benefits.


Maximizing The Benefits From Investments in it & OT Systems

The shipping industry is hallmarked by a multitude of IT and OT systems, both on-board and on-shore. The present landscape for most organizations comprises divisions and personnel operating these systems in silos. This translates to a lack of visibility, prioritization and coordinated response to risk scenarios that emerge in different functions.​Digitalization can act as a savior for the industry which is presently sailing in murky waters. Digital Twins of Operational Entities (equipment, events, workflows, etc.) offer the unique capability to homogenize and virtualize the data associated with the specific object, i.e. they can wrap the object with all the data related to it, which comes from different heterogeneous source systems.​Business can get the 10,000 feet overview of their entire operations on a single screen, with prioritized and contextualized alerts and deviations, which can be further drilled-down on-demand, all within the opportunity window.


Scheduling & Planning

Trade Imbalance is one of the biggest problems in the Maritime Industry. Operations Digitalization can help SMCs understand their shipping assignments better, as well as predict upcoming orders to optimize their routes and hence improve scheduling. This would drastically improve LPOs resulting from Trade Imbalances.


Load, Voyage, and Fuel Consumption

The combinatory effects of the load of the vessel and voyage elements such as timing, duration, speed, trim, ship condition and route affect fuel consumption. Data can definitely help to find the right balance of all these factors to create the optimal journey plan that would need the least amount of fuel as possible.


Predictive Maintenance

We are all familiar with this use case. When it comes to shipping, failures can happen during a voyage, and that can be disastrous. Delays can result in SLA breaches costing SMCs a lot of money. Moreover, docking a journey-bound ship for a full inspection and maintenance work can be very expensive. Digitalization can provide foresight into potential issues and enable pre-emptive measures to prevent such situations.


Economic Assessment

LPOs (Lost Profit Opportunities) are the key concern of any SMC. Due to the nature of shipping operations, there are many ways a SMC can lose money. However, there are smart ways to prevent or minimize these losses as well. One of the key things lacking in the industry is a contextualized economic perspective into issues in real-time, coupled with foresight into the potential ones. Operations Digitalization can deliver this key differentiator and offer decision makers an economically prioritized view of issues within the opportunity window. This drastically minimizes LPOs as tasks get prioritized and issues get tackled before they cause losses.


Safety & Emergency Response

This is a critical use case for the maritime industry, especially for the players involved with the Oil & Gas industry, e.g., LNG and LPG. Such cargo needs to be handled extremely carefully given how flammable they are, and the hazardous situations that may arise from any mistake or failure. When it comes to the transportation of liquefied gases, currently, the safety assurance process is still quite manual. This is how it generally works – the tanks carrying these fluids are full of sensors that measure different things such as temperatures, pressures, levels, etc. These sensors are grouped according to the corresponding safety situation associated with them. For example, Temp 1, Pressure 3, and Level 7 may be associated with leakages for Tank A. There are specialized teams of engineers/personnel monitoring these groups of sensors where the team is equipped with very specific knowledge on how to handle each situation such as Leakages or Seepages. Basically, Team Leakage only looks at the parameters associated with leakages. These teams are generally located onshore and assist the crew on the ship with situations over a combination of excel forms and phone calls. The crew basically follow their instructions and act accordingly. This is a painful process, and it can become inefficient because of the number & type of interactions involved.​Digitalization offers the perfect solution to this. It offers a Digital Knowledge-graph of the key signals associated with different types of safety situations. This not only automates the process of detecting current situations and informing the right stakeholders within the opportunity window, but also offers foresight into potential future safety risks. Digitalization also enables the immediate delivery of key recommended procedures for handling specific situations to the crew onboard. Human expert intervention can never be taken out of the equation when it comes to safety, but the automation and predictive capability that Digitalization offers can aid the current process to a great extent.


Vessel Benchmarking

Many a time, the performance of vessels of the same class significantly vary. This may be due to a number of reasons including engine performance, hull condition, etc. or even the crew.  Through benchmarking, SMCs can gain insight into what is curbing the performance of the vessels they are managing and adding on to operational costs, so that they may take the necessary corrective measures to maximize and “levelize” the profitability from vessels of similar classification.



Connecting Ship & Shore – Still a Challenge?

As we have mentioned in our previous posts, if you’re looking for a barrier to Digital Transformation, you will most definitely find one. For example – “Market conditions are good – why do I need to change?” The key is to have foresight and understand how Operations Digitalization can boost your bottom-line immediately and give you a competitive edge. Resistance to change is one problem we know that exists everywhere. However, it can easily be addressed by working with the senior leadership and demonstrating the benefits of Digitalization.​Today, let’s talk about a very real problem that the shipping industry has faced for a long time – connecting ship and shore. The industry has always been looking for ways to connect ship and shore, however, the seemingly narrow bandwidth of satellites has always been a key concern. As such, today, only periodic reports are sent from ships which highlight their condition and state.While simple communication may not be a problem but transmitting large amounts of data is perceived to be a key barrier.​However, today technology not only offers cost-effective and viable solutions to connect ships and shores, it also offers solutions that create a live digital “run-time” replica of the entire shipping operations through the integration all data sources on ship and shore.



Conclusion

As complex as it may be, the operations of SMCs can be drastically improved through Operations Digitalization. In fact, it can deliver immense value across the entire Maritime value chain. Digitalization is the most critical piece of core infrastructure that can ensure competitive edge and also safe and profitable operations in the long run. The industry needs to move away from Digital Darkness.

Sugato Ray
Advisor, dDriven

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