The OPEX balancing act

The need for constant optimization by strengthening operational excellence and reducing operating expenses traditionally causes conflicts in ship management.

Managing performance   Managing operating expenses
Today’s challenges:

 

 

 

 

  •  Ageing fleet, increased need for repairs, expired guarantees
  • Partially postponed/reduced maintenance
  OPEX efficiency increasingly important – but not first priority area before crisis arise.
     

Opportunity for vessel managers:

Agree on performance level

 

Reduce operating expenses

Challenges to reducing fleet operating costs

The challenges to reduce fleet operating costs can generally be grouped into four categories:

Cost pressure   Transparency
  • Company policy
  • “Unsubstantiated”budget costs reduction by management
  • Investment in prevention rather than curing continues to be a balancing act.
 
  • Unclear where company’s cost allocation stands versus industry standards
  • Difficulty to determine the root cause of the high operating costs.
     
Commercial   Organizational
  • Trade-off between CAPEX and OPEX (reduced M&R results in lower asset value)
  • Increased risk for off-hire and detention due to reduced maintenance.
 
  • Old habits die hard, change management procedures are not internalized
  • “Everything should be made as simple as possible, but not simpler” (Albert Einstein).

Risk management

Bad inspection management implies significant risks and costs for lack of adequate maintenance and subsequently bad performance – good performance offers opportunities and cost savings:

Direct risks
  • Higher maintenance costs
  • Costs for corrective actions
  • Control fees
  • Off-hire, detentions.
   
Indirect risks
  • Increase in PSC inspection frequency due to risk category in New Inspection Regime (NIR, Black Sea, Paris and Tokyo MoU)
  • Bad quality indication / low performance in benchmarks / loss of confidence from charterers.
   
Opportunities
  • Decrease in PSC inspection frequency up to being inspected only every 2-3 years per MoU as a Low Risk Ship (LRS)
  • Lower maintenance costs
  • Good quality indication / high performance in benchmarks / strengthening of branding and market position.