Making money in a tough market

May 01 2013

Tanker Operator's April Athens conference in the current series 'Making Money in a Tough Market' drew a large audience.

As usual, the day’s proceedings were conducted under the watchful eye of Ulysses’ Dimitris Lyras who took on the onerous task of conference chairman.

Martin Shaw, managing director of Marine Operations and Assurance Management (MOAMS) kicked off the morning session by giving delegates a warning about the dangers of over complexity.

In general “….more complex companies will not make as much money as a less complex company,” he said.

“Over management demands your time, uses your energy and fills your diary,” he explained. “It is direction and leadership that require your time and will drive a company’s success.”

Complexity obscures direction and undermines leadership, as it doesn’t slow down, it speeds up, creating costs and value loss. Complexity throws up more process traps and leads to more inexplicable incidents, he said.

In a commercial environment where markets remain low and companies are continuing to fail, complex companies are around 10% less profitable than simpler ones. “Leadership, direction and management need to be balanced. Without direction and leadership, complex over management will just get you to the wrong place more quickly,” he said.

“Complex organisations are brittle, while simple organisations lack the sophistication to survive in the modern tanker industry. A sophisticated organisation with the right balance of direction, leadership and management will mobilise the whole workforce to deliver that things that are required to survive and take advantage of the upturn when it comes,” he explained.

A balanced shipping company is a successful shipping company, Shaw said.

He also warned companies to ensure that their KPIs are heading in the right direction and not the wrong direction and knowing when to stop if the latter occurs.

‘Drive change and boost the company’s efficiency’ was the theme chosen by Georgios Poularas, COO of Enesel. He claimed that 70% of the change efforts made by companies fail – “change is hard,” he acknowledged.

Why change? he asked. A company might be strategically diversified or changing from a family ownership to a more corporate identity, or a company cannot survive in the current status.

“Companies need to develop an awareness culture,” he said. He explained that this entailed bringing outside reality into the company and discuss what is really important for the company.

“Make your colleagues ‘hunt’ for their tasks and not just sit at their desks waiting to be fed, “ he advised. “Ignore irrelevant activities and make time for the important ones. Do not waste time and eliminate the comfortable options.”


Winning mindset

Management needs to regroup, refocus and unite people to create a winning mindset, culture and a positive team environment. A change driving team should be developed. “Ask for volunteers as passion powers change,” he stressed. “Invite outsiders to join the team. Promote the ‘want to’ rather than the ‘have to’ concept. The team should have trust and a shared objective. Enthusiasm and energy is needed.” Young talent should be employed and sought after. The vision of change needs to be communicated so be adaptive, flexible and innovative,” Poularas said. “Invest time in one-to-one conversations, address the skeptics and ignore the gossip and criticism,” he advised.

“People have different perceptions, thus you need to communicate your vision with patience and using plain language. Avoid sophistication and ‘think small’, “ he said.

Middle management needs to be enhanced and information sharing needs to be encouraged. “Avoid blocking of daily stuff at a senior manager’s desk and involve more hands on colleagues in every day task delegation. Revise the formal structures,” he urged.

“Those people who are responsible and wish to become accountable should be promoted, but do not bypass senior managers,” he said.

“Clear and tangible targets should be set, such as vetting records, TMSA score, budget results, etc, while short term ‘wins’ should be generated. ‘Wins’ undermine those who resist change and makes sacrifices worth it and should be celebrated,” he continued.

Unnecessary work, which demoralizes colleagues, should be avoided. Let go of preconceived ideas as change will happen and know what is beyond your control.

Once achieved, the momentum should be maintained as success enables a team to fine tune the vision and change the initiatives.

Decisive action should be taken and problems should be tackled rather than avoided. Culture drives behaviour, which then drives habits and finally results, he concluded.

Stylianos Mavrelos, technical director of Capital Shipmanagement addressed the problems associated with effective shipmanagement by way of improving operating costs and minimising losses.

“To respond to challenges, we need to manage and to manage we need resources,” he said. “To manage effectively, we need qualified, trained and motivated people to manage the risks. We need to develop and implement dynamic performance strategies and provide systems procedures, IT and other infrastructure. We should manage changes and be adaptive to changes,” he said. He quoted Charles Darwin’s theory of evolution, which he thought was applicable to all - ‘It is not the strongest of the species, nor the smartest of the species that survive, but those most adaptive to change.’


Operating costs

Returning to the question of operating costs, he said that they maybe improved by people, control measures put in place for costeffectiveness, implementing loss control management principles, effective planned maintenance with no short cuts and investment in IT.

He then described a few control measures needed for cost effectiveness. These included the continuous evaluation of operating cost results, which should accurately reflect the context of measurement; the costs should be benchmarked against industry standards; the systematic measurements of relative changes/variances not only against annual budgets; a company’s processes should be reviewed to identify areas of improvement; changes should be implemented and the achievement should be re-measured.

He warned that it should be remembered, however, that any severe cost cutting measures may have a significant impact in areas beyond financial statements and that the impact on those areas may not be readily apparent to the stakeholders in the short term.

Mavrelos cited the case of on board inventories lists, which he said could save a lot of money. He advised the use of equipment manufacturers lists on a newbuilding to guarantee spares and services for five years, or so. At the newbuilding delivery stage, a shipmanager should know exactly what is on board the vessel. Spares on board sister vessels can also save money, he said.

During the panel discussion, which addressed the question - how to control costs, Enesel’s Poularas said cost control meant increasing productivity by maximising output from the people you have. He also said that now was the time to invest both onshore and on board ship. “We need more systems to analyse,” he said.

Stealthgas’ head Harry Vafias advised thedelegates to pay lots of attention to the crew and encourage communications with the shoreside office. “Use face-to-face discussions to create bonds,” he said, as this investment will lead to less downtime.


Clear strategy

Naftomar’s George-Paul Perantzakis urged delegates to have a clear strategy and said that management should set clear targets. There should also be a sufficient amount of data for you to evaluate, so you know where you stand as a company.

Jobs should be risked assessed with candidates keeping a very detailed file of their experience. “Collect information from individuals,” he said. Their experience could be used for the future of the company. Use a document management system for control.

Mavrelos said that you should start with the resources available to you and give people back their pride in working for the company.

Former director of Thenamaris Shipmanagement, Emanuel Vordonis said the industry needs to find new ways of sustainability. He warned that seafarers in the 2000s were de-motivated by cost cutting regimes that were prevalent at the time.

People should work smarter as there is a cost in mis-performances. “People should be empowered,” he said. A self-driven organic/scientific management system, such as TMSA, must be balanced by human responsibility. “Not just wanting the system to make a decision, which cannot be done,” he said.

“When you create a system motivate the people to use it intelligently,” he said. Shaw said that if people see that the information coming is mechanical with no leadership from above, then they will act as robots. Fundamentally, we need to put the human element back in shipping. Instruments should be created to motivate and inspire people.

Mavrelos called for the building of education training schools in Greece. Science needs to help organic knowledge growth. Books can be read, but show people by example. For example, send young graduates to newbuilding vessels with an experienced engineer to learn how humans and systems interface.

What creates knowledge is skill confidence. “Education, plus skill and attitude – how do you measure attitude?” he asked.

Vordonis then turned to the market asking everyone to “….increase market interference. How can we create markets? Go to the charterers to discuss synergies. However, this needs leadership,” he said.


Technical matters

Installing Variable Frequency Drives (VFD) is a simple way to get started with green shipping, said Antonis Asimakopoulos, marine service manager, marine energy solutions, ABB Marine Services’ Greek office.

Instant energy savings can be gained when a pump, or fan always run at the correct speed to meet flow and pressure demands. For example a 10% speed reduction could amount to a 27% power reduction.

“The fuel emissions and savings generated by VFD may surprise you. A 50kW power reduction equals to $80,000 savings per year,” he said.

He described the vfd concept as similar to a dimmer operation as it reduces the speed of electric motors, pumps and other equipment.

Taking vessel cooling systems run on the auxiliaries as an example, pump applications are very often over-sized for their needs, as the design criteria are often set to meet the extreme conditions that the vessel may operate in. Every day operation rarely comes close to such conditions.

Throttling and by-pass loops reduce the flow, but they do not reduce the power consumption of the motor. Up to 40% energy savings may be achieved by applying VFD, together with ABB’s patented intelligent pump control (IPC) to the existing seawater cooling process.

IPC is a software package for ACS800 drives. Incorporating the most common functions required by pump, or fan users, it eliminates the need of an external PLC and other additional components.

A pump system with fewer electrical components is always more reliable, especially in the harsh environment typically found in marine applications. IPC can help save energy, reduce downtime and prevent pump jamming and pipeline blocking, Asimakopoulos claimed.

By dimensioning a cooling system with parallel pumps, this enables a redundant system to be created. With the cooling demand control of the IPC, the redundancy of the system is 100%.

Taking engine room ventilation as another example, again exhaust fan applications and their power supply are very often over-sized.

Asimakopoulos advised the use of actual temperature and pressure information to apply a VFD, together with ABB’s patented intelligent fan control (IFC), to the existing ventilation system to achieve at least 20% energy savings.

He gave examples of other processes suitable for an VFD upgrade, including -

  • Boiler feed pumps.
  • Bilge water pumps.
  • Air conditioning systems.
  • Cargo tank cleaning pumps.
  • Cargo pumps.
  • Lubrication pumps.
  • Mooring and anchor handling winches.

In practice it is useful to install a VFD on any process equipped with a motor and a throttling valve aimed at reducing the flow, or changing the pressure, he said.

ABB can offer a turnkey type supply solution, which will include the equipment, VFDs, optional high frequency motors, sensors, PLC as an option, installation material, services, on board survey, project management, engineering, delivery and logistics, installation and start up and a savings’ verification.

He gave an example of savings made on Stolt Nielsen’s 43,475 dwt parcel tanker Stolt Breland, which achieved annual savings of 60% on the engine room ventilation and seawater cooling pumps energy consumption.

This equated to fuel savings of 255.4 tonnes, which at $650 per tonne amounted to $166,000 over a 12-month period, equalling a 2.8% saving of the total fuel consumed over the year. In addition, the total CO2 reduction was 644 tonnes.

The return in investment (ROI) in installing the VFDs was claimed to be less than six months.

The turnkey VFD retrofit undertaken by ABB, involved two sea water cooling pumps of 65 kW each, four engine room ventilation fans of 32 kW each and one tank cleaning pump of 160 kW.

Asimakopoulos warned that crew training was essential to monitor the data properly to gain energy efficiency and he also said that there were several methods of financing such projects.

He advised owners to keep in close contact with their charterers in order to get them on board with the idea of investing in energy efficiency. He thought that more interest could be gained from those using the spot market.

Capital Shipping’s Mavrelos gave his ideas on how to reduce fuel consumption and thus emissions in a typical MR products tanker.

The installed power can be reduced from 10,000 down to 6,000 rev/min MCR, by derating the main engines and also the pumping systems. Energy efficiency devices can be retrofitted and the hull coated with modern silicon paints.

Slow steaming should result in the fuel consumption going down to 26-27 tonnes per day from the more normal 32 tonnes per day for an average MR.

If the engines are de-rated then the fuel consumption could go down further to about 22 tonnes per day. Obviously, the final figures will depend on the equipment installed on board to improve efficiency.

He thought that the new eco-designs already show an improvement in energy efficiency, but as yet, the amount is by and large unproven.


Pilotage risks

There have been several high profile incidents recently, which have involved pilots.

Dr Alexandros Glykas, director DYNAMARINe addressed delegates on ‘reducing the risk of working with pilots’.

He said that there were key elements to consider, including pilotage contribution to marine safety, the statutory framework, hazards and their consequences and the identification and modulation of current practices.

Within the above, the factors identified were standards and regulations, vessel and its safety equipment (including a back-up system), language, co-operation and communication, crew training and skills, reported accidents/incidents, ambient factors and stress and time pressure.

As for the pilots’ contribution to safety and hence risk reduction, this could be summarized as expertise in local knowledge, experience, an ability to make a risk assessment, having local language skills, taking on an advisory role and functioning as a relieving bridge operator, such as a watchkeeper.

He explained that the International Maritime Pilots Association (IMPA) was officially launched in Amsterdam in May 1971. The prime obligation of pilots was outlined by IMPA as –

  • Provide a critical public safety service.
  • Ensure careful management.
  • Ensure the free flow of all traffic within their pilotage area.

According to IMPA, a pilot’s professional judgment should not be distracted by commercial, or economic pressures. It is an essential part of a port’s safety management system. Compulsory pilotage is considered to be the most effective and important form of navigational safety. The association regularly addresses the IMO on pilotage matters.

Many pilots operate under the auspices of a competent pilotage authority, which is either a national or regional government, or a local group, or organisation that by law, or tradition, administers, or provides pilots.

Glykas called for all reports on incident investigations involving pilots to be included

in a pilot’s training curriculum.

He said that Masters and navigation officers have a duty to support the pilot and to ensure the pilot’s actions are monitored at all times. Both parties have a responsibility for good communications and understanding.

A shipowner’s risk involves the exchange of information between the navigating officers and the pilot. They should agree on plans and procedures, any special conditions, unusual shiphandling characteristics, berthing and mooring arrangements and confirmation should be sought as to the language to be used while on the bridge.

Other risks could involve the pilot’s fitness for duty, the perception of his, or her experience and his, or her training and assessment procedures.

When examining the normal hazards/risks, these can be defined as man made, human error, economic, or of a technical nature. A review of the pilot’s past accident history can be taken into account, as can consultation with stakeholders and specialist experts, to gain a sort of risk assessment of the pilot.

Glykas explained that there is an international standard for pilot organizations (ISPO), which is a safety and quality management system specifically for pilots and those pilot organisations. It was developed by pilots and their organisations, based on the ISM Code and ISO standard.

It promotes a method of self-regulation aimed at adopting the highest standards in the maritime pilot sector of the shipping industry. ISPO provides transparency in pilotage standards to all port related stakeholders. The system is audited by external concerns, such as classification societies – Lloyd’s Register being one.

The ISPO code was developed by the Dutch pilots, Lloyd’s Register and the European Maritime Pilots Association.

He advised a short interview with the pilot and to evaluate the pilot’s advice, intentions, or actions and his/her competence. Always consider a pilot replacement, if necessary, he said.

DYNAMARINe’s proposal was to introduce an assessment scheme on pilots’ competence in order to assist in the distribution of pilot performance data among vessel Masters.

He concluded by saying that pilotage as a risk in marine safety has been acknowledged by various coastal states. He advised shipowners to develop a policy on pilotageadvisory control, if they had not alreadydone so.


*Please note that Kostis Gkenes paper on operating with SEEMP appears on page 45 of this issue and Germanischer Lloyd’s (GL) paper on the use of IT given by Kevin Brunn was first featured in the January/February issue of Tanker Operator on page 42.

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