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Steady relationships

Maritime trends #4: A maritime marriage of convenience

Shipping companies and suppliers typically enter into separate contracts for each ship, spare part, or service. This is set to change. In the future, long-term partnerships will be the norm. The fourth part of the “Maritime Trends” series ains the consequences of this trend.

Market consolidation is in full swing, remote navigation is making strides, and suppliers are taking over the role of shipyards within the value chain. In these unpredictable times, shipping companies have fewer resources available and are attempting to cut costs, which they can achieve by:

  • Narrowing their scope of activities
  • Taking on fewer assignments at a time.

Shipowners are shifting their attention to lifecycle costs for ships, components, and subsystems. This is because higher investment in original equipment can reduce ongoing expenditure on service and spare parts. Better quality pays off in the long run. Shipping companies will call on suppliers that reveal the total costs of a project at once—i.e. for an entire ship or fleet over a ten-year period. This way, they avoid having to pay separately for each service.

Shipping companies hesitant, suppliers under threat

Shipping suppliers specializing in service management and spare parts have become increasingly successful in recent years. However, many shipowners are skeptical. They deem certain suppliers’ business practices to be insufficiently transparent and remain unconvinced that they will fulfill their compliance requirements. Moreover, some suppliers are over-charging for their services.

Shipping companies that enter into contracts for entire fleets—and not just for single ships—can reduce operating expenditure.
Martin Johannsmann, CEO, SKF Marine

Suppliers that operate on the edge of the law threaten the success of their entire industry by skewing the traditional pricing model. Long-term, contractually-binding partnerships could prove a sound solution for both shipping companies and suppliers.

What does the future hold?

In the coming years, shipping companies will ramp up their efforts to standardize their vessels and implement consistent components and systems across the board. This strategy will improve their ships’ ongoing performance and enable more efficient service. As for suppliers, major players like ABB will concentrate on purchasing subsystems to boost their profit margins in service and spare parts.

Long-term contracts between shipping companies and suppliers will also ensure:

  • That response times are met
  • That spare parts are always available.

These uncertain times also impact on the balance between the Asian and European markets. In the fifth and final part of our “Maritime Trends” series, we discuss why that is and what consequences it has.

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