February 6, 2018

How Automated Noon Reporting Creates Massive ROI For Your Maritime Business

After Noon: Digitalization Wins the Day

Imagine that you own a physical asset worth hundreds of millions of dollars. You expect this asset to return value to your business for at least ten years, and perhaps as many as thirty. You are a shipowner, after all.

You may own ten of these assets, or you may own hundreds of them. Your only understanding of each asset’s economic performance is a single set of data points that is collected and tabulated manually at sea and reported back to your globally distributed team once per day.

Only once.

This is the current state of data reporting for the vast majority of ocean shipping companies, particularly those focused on bulk commodities. These firms, including those publicly traded and valued in the billions of dollars, enable the global economy to exist, carrying 90% of goods traded worldwide. And this method of data collection, known as “noon reporting,” is what informs them.

The surprising reality is that noon data is often wrong.

Manual noon reporting introduces risk.

A vestige of the pre-industrial era, noon reporting has supported every facet of a shipping company’s internal workings for centuries.

Even today, every team inside a shipping company relies on this information. Operations teams leverage it to understand whether a vessel will meet the terms of its commercial agreements. Technical teams retroactively analyze months of this data to determine which vessels require maintenance and physical upgrades. Chartering teams base commercial terms on a historical understanding of a ship’s efficiency, derived almost entirely from noon data.

And the reality is that running a shipping business on manual noon data is a lot like managing your bank account with your checkbook register. Manual errors happen, and mistakes are often made. In an era of ATMs and online banking, most people leverage automated tools to know with 100% confidence where their accounts stand at any given time. The technology is accessible. The benefits are clear. And it greatly reduces the risk of an overdraft fee or a bounced check.

Similarly, manual noon reporting puts these maritime businesses at risk for financial loss and reduced profitability. Charter agreements are breached because no one has simple tools to gain real-time insight into actual performance during a voyage. Maintenance decisions are accelerated or delayed because it isn’t clear how to prioritize different actions. Vessels are intentionally under-marketed to hedge against the risk that a ship won’t perform as expected. Most importantly, shipping executives cannot drive universal accountability for business results across all their teams, both onshore and at sea.

One vessel, one voyage, major savings.

On one particular voyage, a shipping company using Nautilus Platform noticed that the data collected directly from the ship’s engine showed a surprising variance in speed: the vessel ran at a higher speed during the day and at a lower speed overnight, while the average of the two was reported at noon.

If the shoreside teams had relied only on these reports, they would have misunderstood the vessel’s true performance. Total consumption would have been compared against the averaged speed — even though a ship requires exponentially more fuel to raise speed linearly.

In this case, the shoreside operator called the crew and inquired why they were seeing this behavior in the auto logged data. The operator had a simple request: please adhere to the ordered speed to run most efficiently for the rest of the journey. The net result was thousands of dollars of fuel saved — in that one leg alone of that one journey.

The Vicious Circle: How hundreds of thousands of dollars can be left on the table.

For most shipping companies, the prospect of saving a few thousand dollars on bunkers in one voyage isn’t that interesting. But it’s important to understand the long-term implications of this improved insight, as it impacts every decision our client would have made about the vessel in question. Let’s consider what would have happened, if the operator in this case didn’t have real-time visibility into the vessel’s actual performance.

If the crew continued to repeat the behavior without the operator’s knowledge, that vessel would have over-consumed hundreds of thousands of dollars worth of fuel over the course of a year — and millions of dollars in its practical lifespan. Perhaps some of the cost burden for fuel is shifted to the charterer, but in some cases this type of overconsumption could put the owner at risk for a claim. Regardless, there is no good reason to needlessly burn ton after ton of HFO — for the owner, for the charterer, and for the environment.

Less obvious are the implications for the technical team. Every decision they would have made about the vessel, from hull cleanings, to efficiency improvements, to planned maintenance on the engine, would have been driven by an incorrect understanding of vessel efficiency, due to faulty underlying data. When you consider this in the context of a fleet of ships, the team could easily make a misinformed decision about how to prioritize work on this ship rather than on its peers, which could cost the business hundreds of thousands of dollars each year.

Meanwhile, the chartering team would have been compelled to market the vessel less aggressively. Every charterer wants to price a vessel as optimally as possible, without exposing their maritime company to the risk of a claim for underperformance. Since the shoreside team would have perceived the vessel to be less efficient than it actually is, chartering would necessarily have to market it as a lower performing ship.

The shipping executive, however, is the one most imperiled in this scenario. As a vessel is repeatedly thought to underperform its maximum output, this vicious circle sets a progressively lower bar, which ultimately forms the basis of every commercial agreement the company enters into — including whether to retain or sell the vessel.

Extrapolate that over not just one ship, but over an entire fleet — and you have an organization that is chronically being held to a lower standard after every voyage.

Optimize for speed and consumption.

At Nautilus Labs, we are dedicated to solving this problem with owner-operators globally by transforming how their businesses leverage performance data across the entire organization. Our clients use Nautilus Platform to automate data collection, unify their fleet intelligence, and generate real-time insights that are shared across technical, operations, and chartering teams.

We speak often about optimizing for speed and consumption. At the most fundamental level, this means automating the understanding of vessel performance in real-time — not just at noon every day, but throughout each hour of every day. We do this based on three core principles:

Automate data collection. Shipping companies benefit from removing human intervention in the data collection process, dramatically increasing the number of data points collected, and aggregating them in an organized way to have the dataset that helps them understand vessel performance and minimize human error.

Eliminate data silos. For many companies that already automatically collect ship data, this information then resides in disparate systems that make it virtually impossible to understand relative ship performance across an entire fleet. Cleansing, rationalizing, and unifying all vessel data is elemental to understanding how the whole fleet is performing.

Generate automatic insights. For those clients who already automate and unify their data, this is often done in Excel spreadsheets using macros. Putting aside all of the potential for human error this type of manual manipulation introduces, it is a time-consuming process that can only be done retrospectively every few months. There are massive efficiencies to be realized by implementing software that processes all of this data in real-time and then automatically generates performance insights as often as desired.

We believe that the shipping companies that do these three things the best will achieve a competitive advantage globally. They’ll market their ships more aggressively, getting the best rates on their charters while increasing margins. They will have real-time visibility into business performance, so that charter terms are always met or exceeded. They will know when and which vessels to prioritize for capital upgrades and maintenance. Everyone will be held to a higher standard of performance and accountability, and ultimately, the executives, owners, and shareholders who trust their teams to do the right thing every day will have data to back it up.

As the maritime shipping industry moves well past noon for ship data reporting, the owner-operators who execute the transition first will ultimately win the day.

Don’t Miss Out

Get the latest insights in your inbox