Shipowners realize that cheap solutions will do more harm than good in the long run

Ship management is a highly competitive industry. Even though there has been much consolidation in the industry, with some very big managers developed, the reality is that this is an extremely fragmented business with hundreds of enterprises selling their services to the same client.

Pricing has always played a significant role in who earns the contract, but according to those who polled for this study conducted by Splash247, the importance of pricing above all else is shifting in owners’ priorities.

According to Caroline Huot, senior vice president for ship management at Delta Corp, the ‘we can do it cheaper than you’ approach has resulted in poor vessel management, underestimating of operating costs, and fooling owners into believing that vessel operation expenses can be permanently reduced. Caroline says that because of this model, many companies have failed to develop and invest in new tools.

Mingfa Liu, general director of ship services at IMC Shipping acknowledges that “For some shipowners, saving a dollar now would mean everything, as they have a relatively short-term vision.”

Experienced Ship managers focus more on value than the price

According to Claes Eek Thorstensen, vice chairman of Thome Group, only short-term “opportunistic” ship managers have this mindset of looking for cheap solutions while investing in ships. He adds that experienced managers have always prioritized performance and efficiency.

Quality shipowners understand that cost is only one component of the equation and a knowledgeable ship manager will consider regulatory compliance, safety, seafarer training and welfare, as well as environmental concerns like decarbonization to be a critical component of running a well-rounded ship management service.

“Focusing just on expenses was never a viable and promising business strategy for taking care of high-value client assets,” says Ian Beveridge, CEO of Bernhard Schulte Shipmanagement. The CEO of Anglo-Eastern Bjorn Hojgaard agrees with this and says that the old adage of ‘price is what you pay, value is what you get’ still holds.

“Ship Managers have been effective in growing the positive gap between the value delivered to their customers and the price clients have had to pay for this value,” Hojgaard adds. Northern Marine’s ship management director, Sean McCormack, says his company has never subscribed to the idea of a low-cost business strategy. The managing director of Union Marine Management Services, Vinay Gupta, believes that a lot of good operators have finally realized that there is a limit to how low they can reduce costs without compromising quality, and that decreasing them further will only affect them in the long term.

He says that “I have observed a trend nowadays where too low a budget is not considered clever anymore”, adding that he finds it gratifying that many clients recognize these days that the cheapest option is not always the best.

Ship management software affects the cost

Shipping industry has been slower to undertake the digital transformation journey. What differentiates a manager in high quartiles is his or her ship management software with its value-added and user-friendly features.

Shipping managers can’t pool their knowledge together to offer a standardized software for a suite of functions for two main reasons: competitiveness and the fact managers all have different opinions about what a software suite of functions should entail.

Sachit Sahoonja, CEO and managing partner at Su-Nav says that, “For most of the managers their software is their USP. If that’s common, there is nothing left.”

According to Sean McCormack, ship management director at Northern Marine, the demands of clients in shipping are quite different, and attempting to produce standardized off-the-shelf software that is flexible enough to suit all of those needs would be difficult.

Environmental considerations

Environmental factors are becoming increasingly significant in most owners’ decision-making processes, and this trend will only continue with new laws beginning next year. “A badly managed ship owing to a low budget will reflect emissions when you can’t repair the engines due to financial restrictions,” cautions Sanjeev Verma, managing director of Landbridge Ship Management.

Owners, according to Verma, may begin to realize that those who provide low management dues may be unable to maintain the right emissions rating of their ships, which would subsequently reflect in a vessel’s commercial revenues.