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McKinsey & Company: How to transform your shipping company

Digital tools can help to identify trends, optimise crewing spend and the overall procurement envelope, and streamline repair, maintenance, port, drydocking, and bunkering costs.

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Global management consulting firm McKinsey & Company on Thursday (1 December) published an article on how digitalisation can help the shipping industry cope with uncertainties and help streamline bunkering costs. The following are excerpts from the article:

Players in most shipping subsectors have enjoyed a profitable couple of years. However, the industry faces a complex, rapidly changing environment. Macro uncertainties—the threat of recession, geopolitical volatility, crew shortages, escalation of operational costs, and fluctuations in cargo demand—affect all aspects of operations. In addition, there is increased environmental regulation to get to grips with, and much uncertainty around decarbonisation pathways.

Crucially, the shipping industry lags behind in digitisation, a key enabler for prompt decision making, operational and cost efficiencies, and improved performance. This article introduces a transformation framework to help shipping companies navigate these choppy waters. In particular, it explores how data and analytics can be leveraged to gain competitive advantage and unlock value.

Cost optimisation

Cost-optimisation levers can be enabled by collecting and analysing data and building digital applications to inform decision making. Digital tools can help to identify trends, optimise crewing spend and the overall procurement envelope (spares, stores, provisions), and streamline repair, maintenance, port, drydocking, and bunkering costs.

Client experience has shown that various levers can improve cost performance in specific areas of shipping:

Crewing: Shipowners could leverage analytical tools to identify the right talent, improve ship-to-shore communications, and revamp safety- and quality-assurance procedures. Data tools could aid in optimising factors such as crew remuneration, number of crew onboard, nationality mix, medical claims and welfare, travel scheduling, training, and recruiting.

Procurement: A spend-intelligence dashboard could provide real-time insights and transparency. Further, digital tools could standardise the procurement process, define supplier-specific strategy, consolidate purchases, and reduce unplanned spend.

Shipping companies that rely on manual processes often struggle to track their expenditure by supplier, location, or even product or service type. This can cause a lack of comprehensive planning of purchases such as spare parts. Suppliers cannot be selected in a systematic way, and companies miss out on volume discounts and delivery-pool savings. They may also incur higher operating expenses with emergency procurement and repairs.

Such companies could invest in technology that provides digital dashboards. Here, real-time insights and analysis across key metrics can be accessed easily. Spend details can be sorted by type, category or organisation, and details made instantly available by clicking on a specific deep-dive area (Exhibit 5).

Screenshot 2023 01 03 at 12.50.29 PM

Dry docking: Digital solutions are now available to optimise dry-docking processes and ensure full transparency. These can help to standardise processes, gain greater negotiation power with suppliers, optimise timing and location, pool vessels to benefit from scale and synergies, and increase the vendor pool.

Bunkering: Digital techniques can be used to implement vessel upgrades, find optimal bunkering locations, obtain better bunkering bids, execute hedging strategy, and review vendor contracts.

Consumption can be reduced with optimised vessel execution and performance-management mechanisms. For example, one shipping operator was looking to optimise varying fuel consumption. However, fuel and emission data were lacking. There was also a lack of transparency about captains’ voyage decisions, and no comparisons of their performance. The solution was the installation of a new data interface between vessels and central IT. This created transparency around key levers, such as speed, slip, trim, and fuel type, and leveraged automatic identification systems (AIS) and weather data for route mapping and fuel-type usage. A dashboard was developed to report key metrics to fleet operations and captains (Exhibit 6).

Screenshot 2023 01 03 at 12.50.45 PM

Note: The full article titled “How to transform your shipping company” can be found here

Photo credit: Chris Pagan on Unsplash / McKinsey & Company
Published: 3 January, 2022

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Alternative Fuels

DNV paper outlines bunkering of alternative marine fuels for boxships

Third edition of its paper series focuses on LNG, methanol and ammonia as alternative bunker fuel options for containerships; explores bunkering aspects for LNG and methanol.

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DNV paper outlines bunkering of alternative marine fuels for boxships

Classification society DNV recently released the third edition of its paper series Alternative fuels for containerships, focused on LNG, methanol and ammonia as alternative bunker fuel options for containerships.

In its updated paper series, DNV examined the different alternative marine fuel options and provided an overview of the most important technical and commercial considerations for the containership sector.

It explored the bunkering technology for LNG, bunkering infrastructure for methanol, and availability and infrastructure of ammonia. 

Building on the foundation laid in the second edition, which focused on the most important aspects of methanol as a fuel, this latest third edition delves deeper  – exploring the technical intricacies and commercial considerations associated with adopting methanol as an alternative fuel for containerships.

Furthermore, it provides an overview of crucial aspects related to ammonia and discusses its potential as an alternative fuel for containerships.

Amongst others, the new edition of the paper looks at the following aspects:

  • Technical design considerations for methanol
  • Commercial implications of adopting methanol as an alternative fuel
  • Ammonia's potential as an alternative fuel
  • Availability, infrastructure and ship fuel technology for ammonia
  • Major updates based on the latest IMO GHG strategy decisions at the MEPC 80 meeting

Note: The third edition of DNV’s full paper titled Alternative Fuels for Containerships can be found here.

Related: DNV paper outlines bunkering infrastructure of alternative fuels for boxships

Photo credit: DNV
Published: 29 November, 2023

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Alternative Fuels

EDF, LR and Arup launch tool scoring ports’ potential to produce and bunker electrofuels

Tool is also applied to three different port scenarios, including ports exploring fuel production and bunkering, ports exploring fuel exports, and ports exploring fuel imports and bunkering.

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EDF, LR and Arup launch tool scoring ports’ potential to produce and bunker electrofuels

Lloyd’s Register (LR) Maritime Decarbonisation Hub and Environmental Defense Fund (EDF), in collaboration with Arup, on Tuesday (28 November) introduced the Sustainable First Movers Initiative Identification Tool, a system to help shipping stakeholders align investment decisions that support the maritime energy transition away from fossil fuels.

The tool, which is presented in a preliminary findings report – The Potential of Ports in Developing Sustainable First Movers Initiatives – scores a port’s potential to produce and bunker electrofuels while delivering local environmental and community benefits in alignment with the global temperature target of 1.5 degrees Celsius set by the Paris Agreement.

“Ports can play an important role in kickstarting shipping’s decarbonisation process even before global policies are established,” said Marie Cabbia Hubatova, Director, Global Shipping at Environmental Defense Fund.

“By considering the impact sustainable first mover initiatives can have on port-side communities, climate, environment and economies, resources can be better directed to locations where these initiatives will make the biggest difference.”

With close to two billion people living near coastal zones globally, the role of, and impacts on local port communities must be intentionally considered as the sector decarbonises globally. Ports can play a crucial role in ensuring shipping decarbonisation efforts are done in a way that has positive impacts on port communities.

The preliminary phase of the Sustainable First Movers Initiative Identification Tool analyses 108 ports in the Indo-Pacific region according to five criteria including land suitability, air quality, renewable energy surplus, economic resilience and ship traffic.

It is also applied to three different port scenarios, including ports exploring fuel production and bunkering, ports exploring fuel exports, and ports exploring fuel imports and bunkering. The combined criteria and scenario evaluation determines which ports have the greatest potential (high potential) for sustainable first mover initiatives to lead to significant emissions reductions and positive impacts in nearby communities, such as improved air quality and economic resilience.

“The transition to clean energy supply for shipping can be achieved only if stakeholders act together. Identifying potential port locations is the first step in this process,” said Dr Carlo Raucci, Consultant at Lloyd’s Register Maritime Decarbonisation Hub. “This approach sets the base for a regional sustainable transition that considers the impacts on port-side communities and the need to avoid regions in the Global South lagging behind.”

Regions in the Global South are fundamental in driving the decarbonisation of shipping. To make this transition effective, the rate at which different countries adopt and scale up electrofuels must be proportional to the difference in capital resources globally to avoid additional costs being passed on to local communities. Sustainable first mover initiatives can play an important role in making this happen by ensuring the sector’s decarbonisation is inclusive of all regions and by engaging all shipping stakeholders, including port-side communities.

“There’s a huge opportunity for early adopter shipping decarbonisation initiatives to unlock benefits for people and planet – shaping the way for a more equitable transition in the 2030s,” said Mark Button, Associate, Arup. “Our collective approach shows that taking a holistic view of shipping traffic, fuel production potential and port communities could help prioritise action at ports with the greatest near-term potential.”

The tool can be customised according to stakeholders’ needs and goals and is dependent on scenario desirability. The next phase of this work will include the selection and detailed assessment of 10 ports to help better understand local needs and maximise the value offered by sustainable first mover initiatives. 

LR and EDF carried out a joint study on ammonia as shipping fuel, and LR and Arup have collaborated on The Resilience Shift study focused on fuel demand for early adopters in green corridors, ports, and energy systems, amongst many other projects.

Photo credit: Lloyd’s Register
Published: 29 November, 2023

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Wärtsilä signs agreement for first zero-emission high speed ferries in US

Group has signed a strategic partnership agreement to provide its Fleet Electrification and Systems Integrator Services for a project to build the first zero-emission high speed ferries in the United States.

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Wärtsilä signs agreement for first zero-emission high speed ferries in US

Technology group Wärtsilä on Tuesday (28 November) said it has signed a strategic partnership agreement to provide its Fleet Electrification and Systems Integrator Services for a project to build the first zero-emission high speed ferries in the United States.

The fully electric vessels will be built for San Francisco’s Water Emergency Transportation Authority (WETA), the operator of the San Francisco Bay Ferry system.

The project, and several others Wärtsilä will work on under this partnership, are a part of the agency’s Rapid Electric Emission-Free (REEF) Ferry Program, a phased decarbonisation of high-speed, high-capacity ferry service in the San Francisco Bay. 

Wärtsilä will work within the WETA project team to finalise vessel and charging system concepts.

“We’re proud to operate the cleanest high-speed ferry fleet in the nation, but a zero-emission future for our system is within reach,” said WETA Executive Director, Seamus Murphy. 

“Wärtsilä’s expertise and experience will be incredibly valuable given the complexity our ferry decarbonisation program entails.”

“This is a major project within the maritime sector’s journey towards decarbonisation, and we are proud to be a part of it,” said Hanno Schoonman, Director of sales for AMER region, Wärtsilä Marine Power. 

“Wärtsilä joins an industry leading team tasked to develop newbuild battery electric vessels that combine innovative technology and sustainable practices. Wärtsilä is well qualified to provide this project support, and this agreement is a clear endorsement of our strong track record in systems integration and emission-free propulsion.”

After completing the conceptual phase, WETA will move on to the initial construction phase of a multi-vessel programme. This phase will involve the building of three smaller ferries with a capacity of approximately 150 passengers each and two larger ferries capable of carrying at least 300 passengers. 

Additionally, the scope of this phase will encompass the inclusion of battery charging floats. The construction of the first electric-powered vessel is slated to commence before the conclusion of 2023, with commercial operations expected to launch in 2025.

Photo credit: Wärtsilä 
Published: 29 November, 2023

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