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Union Marine Management Services: The case against consolidation in shipmanagement

Union Marine Management Services: The case against consolidation in shipmanagement

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Contrary to the prevailing mood of consolidation seen in the sector and shipping in general, one shipmanager tells Maritime CEO today there is a push back against the largest names in the shipmanagement business.

Vinay Gupta, managing director of Union Marine Management Services, claims to have received new ships in recent months from owners who felt they were not getting the right level of attention from some of the shipmanager majors.

Founded in Singapore in 2012, Union Marine now manages 30 ships for six different owners from Japan, Greece, the Isle of Man, Croatia and Singapore. Gupta says the ideal fleet size for his company going forward is somewhere between 50 and 60 vessels.

“In my opinion,” Gupta says, “shipmanagement is a service industry and policies that are made at the top have to be followed and implemented at the ground level by the superintendents, masters and chief engineers.”

In a larger organisation, Gupta claims, where there is so much of what he describes as a “power gap” and limited accessibility, it is difficult, he argues, for the guidelines to percolate down to the grass root level.

“Unlike hardware based industries where emulation of process is easier to control and monitor, the service industry loses its cutting edge when it becomes too big,” Gupta says, adding: “I think more and more owners have also started to realise this.”

Despite the wave of consolidation seen throughout shipmanagement, Gupta is adamant he has no intention of merging Union Marine with anyone.

“I think it would be against our core philosophy to get merged with a larger shipmanager,” he says, “since the majority of our owners have given ships based on our size now and commitment to remain medium sized. Therefore, we do not wish to lose our originality by joining the rat race.”

Union Marine’s size allows it to pursue quality that larger names cannot match, Gupta reckons.

“Our safety records, PSC records and incident records are clear examples of extreme micromanagement that was possible only due to our size and close follow up,” he concludes.

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7 Comments

  1. Bjorn Hojgaard
    March 22, 2017 at 3:59 am

    Firstly, congratulations to Mr. Gupta for having built a boutique ship management business. I have for long been convinced that the future in our industry belongs to ship managers that can leverage scale to provide superior support and training but also that there is a – crowded – space for niche outfits. Obviously, Union Marine is one of those and I wish them well in helping raise standards in our industry.

    Having experienced the quality of ship management in small and large companies, in-house and third party only, I can, however, with confidence say that for the majority of owners it makes sense to pool their ships in large ship management companies, who have the depth and breadth to invest in proper training, good systems and who have a geographical footprint supporting a worldwide business.

    The ability to live a company’s values and comply with procedures at all levels is a question of management, structure and processes, not of size. Take it from someone who has seen it done both wrongly and rightly, in a long career of managing ships!

    We are all victims of our own life experience and I can honestly say that Anglo-Eastern is delivering a higher standard of ship management than I have seen elsewhere in soon 25 years of observing our industry. And we have more than 600 ships under management. It is because of our scale and setup, not despite of it, that every client and ship gets the attention required – and more!

    No size fits all, however, so there will be some owners who resort to manage their ships in-house, and there will be some who choose more boutique offerings. But in terms of bang for the buck, where volumes are leveraged to maximize performance whilst minimizing costs without compromising quality, I am sure we provide the most compelling solution for most owners.

    In the end of the day, the ship’s performance is determined onboard and the competencies, skills and attitude of the shipboard management are key to the safe delivery of a cargo, on time and as promised. We offer unparalleled career opportunities for the best and brightest and we are extremely proud of our pool of officers who we believe are the best in our industry. This is not by chance but by design and we are continuing to invest to ensure they stay at the forefront of the industry.

    Lastly, I will highlight that the character of your clients is also an important element to ship management. In Anglo-Eastern we are fortunate to serve a pool of clients of very high standards. We are humbled by the partnership with these clients and we know that our growth over the years is a result of our clients’ growth. This long-term partnership is at the core of what we do and will continue to be a guiding principle for our services – whether we have many or few ships in the fleet. In the end of the day, size is the result of what you do, not a goal in itself.

    Bjorn Højgaard
    CEO
    Anglo-Eastern Univan Group

  2. Vinay Gupta
    March 22, 2017 at 10:51 am

    Dear Bjorn,

    I would like to first of all thank you for your kind words, best wishes and great comments. I also would like to congratulate you and the entire Anglo Eastern Group for being a beacon of excellence in this industry that many try to follow and emulate.

    Though I agree with you that consolidation has it’s own advantage and benefits for all parties, however, at the same time, I believe that it requires highly sophisticated system in place to ensure that effects of human interface at various levels does not destroy the essence of flow of process and guidelines laid down as basic philosophy of the company. In a smaller organisation like our where I can still have potluck lunch everyday with all our superintendents, the pipeline losses are minimum, flow even though turbulent on the surface with each person free to think and voice their opinions but still smooth down below with very little undercurrents, it is probably easier to achieve this.

    Again, undoubtedly, combining resources gives a larger leverage to organisations like you to invest in great training centres and development of skills that is indisputably your strong point as I also agree that ships are managed from ‘ships’ and not from the ‘office’ and having quality staff onboard makes all the difference. Obviously, a smaller company like us cannot imagine having a training centre like yours but if the intent is right like we have , we can use the facilities available outside to compensate for this and use the makers training centre to supplement our weakness. A clear example is ME Engine course that MAN provides that I believe is being used by majority having the right intent irrespective of the size of the organisation. I remember of my days sailing with AP Moller Singapore in 2000/ 2001 when I did a course in IMTC (Wilhelmsen’ training centre) that provide me great learning platform and deep insight on electrical circuits and changed my vision. Clearly, AP Moller has gone ahead and developed their own training centres since then but since the intent was right, the end result was still great – at least for me.

    And indeed, I have very high regards for your organisation and I know the numbers and size for your company is the result of your committment to quality service and not otherwise but I think there is a space for medium size outfits like us that are scared to go into that arena where we unable to manage growth as some other organisations have.

    Thank you so much for your kind words. It motivates us.

    Best Regards

    Vinay Gupta
    Managing Director
    Union Marine Management Services

  3. Michael Smith
    March 24, 2017 at 6:00 am

    Very interested to read the contrasting views from two ship management companies, one a comparatively new start-up with 30 vessels under management, advocating a medium size solution for ship owners. The other, representing the merger of two big management companies, both established over 40 years ago and with a combined fleet of 600 vessels under management, offering a “geographical footprint supporting a worldwide business.”
    The ship management industry has come a long way from its humble beginnings in the 1970s; companies were usually headed up by respected industry veterans, and the industry grew rapidly, driven by European shipowners flagging out tonnage to reduce OPEX from national flags to FOCs, which ship managers specialised. Then in the 1980s fleet growth continued as banks with distressed shipping loans appointed ship management companies until the loans could be worked out or the vessels went for auction. By the late 1980s, the major management companies had around 40-50 ships each under crewing, or full management and aspired to reach fleet sizes of 50-70 ships as the ideal size to offer cost advantages and economies of scale while maintaining close relationships with the owners.

    Thirty years on and the world’s leading third-party ship management companies are each managing fleets of between 500 to 1100 ships from six to 10 or even 18 ship management offices spread across the globe, supplemented with maritime training centres. Also providing newbuilding supervision, engineering consulting, inspections and maintenance support services as a cradle to grave service concept.
    It’s up to the ship owners to evaluate the benefits offered by the two business models, the boutique with its tightly integrated operations versus managers having a global presence with large fleets under management to spread overheads. Here are a few guidelines for assisting with further evaluation:

    1) The leading ship management groups have spent decades investing in training centres developing the industry’s safety culture and well-trained crews. Without which there could have been a race to the bottom for the lowest cost crewing solutions that some owners demanded.
    2) Economies of scale are often bandied around rather loosely and although can result in cheaper bulk rates for supplies and insurances may not always stack up on fleet size as diminishing returns can apply.
    3) The larger groups have legacy real estate and infrastructure systems costs, which may become increasingly redundant as the shipping industry adapts to ICT.
    4) New start-ups can take full advantage of ICT and other technology to leapfrog legacy systems.
    5) We could see the ship management industry severely disrupted in the next five years.

    Finally, taking a note from the banks, in 2002 HSBC decided to rebrand itself as the “The world’s local bank.” The slogan was justified at the time having offices in over 70 countries worldwide across several continents. However, a decade later the Bank decided “to reshape and refocus how it worked as a business, which involved a string of cost-cutting measures, scaling back retail operations and inevitably, the phasing out its iconic motto.” And to paraphrase:
    “So actually what you’ve got to do is start thinking about the kinds of products and services that people (ship owners) are going to need from banks (ship managers) in the future.”

  4. Colin Ip
    March 24, 2017 at 8:10 am

    I like the reference to HSBC, Michael. When I was at SCB shipping finance, I said in a meeting with seniors that may be SCB should take a spin on the motto for themselves and rephrasing it, “The local’s world bank”. When discussing large ship managers and let say “boutique” ship managers there is a corollary to management consultancy firms, like McKinsey, Bain, BCG. Leading MNCs will pay big bucks for these firms, there is brand and reputation recognition but also an “assurance” aspect with a low risk of the project failing. Whether the quality of the work, service and value from these mandates is significantly better than instructing a lesser known firm is subject to conjecture. What MNCs are paying for is risk mitigation. The same partly applies with ship management. Owners, banks etc. will go with leading name ship managers: reputation, assurance, less risk. It is a question whether “boutique” ship managers can offer effective service differentiation and improved value differentiation to remove client stickiness and persuade these owners and banks to move over. Over the coming years technology/ICT/data management will be a major contributing part to that equation.

  5. Michael Smith
    March 24, 2017 at 9:09 am

    Hi Colin,
    Totally agree, the ship finance banks made it very clear, when seeking ship management services during recent restructurings, they would only deal with well known reputable ship managers, which is understandable given their needs and circumstances.

  6. Dave
    March 27, 2017 at 4:23 am

    As a ship repair and pipe coating provider, the big operators have some indisputable advantages in the repair and maintenance arenas. I have seen China dockyards repeatedly roll docking slots for smaller operators to accommodate a larger operator.

  7. Colin Ip
    March 28, 2017 at 3:34 am

    Michael,

    Thanks. I believe there is also an alternative school of thought here.

    There are ship finance banks and there are banks who do ship financing, and equally there are ship managers who provide integrated services across core asset sectors (dry bulk, tankers, containers, and offshore) and “boutique” ship managers who focus on one sector but provide more bespoke and strategic partnership services to their clients.

    Prior to working at SCB, I undertook a due diligence review, for SCB and its club bank partner, of a well known, large, and reputable ship management company. The two banks were looking for that “reputation” and “assurance” aspect of ship management to run two assets they were considering financing. While technically and operationally the ship management company under consideration met the banks’ two requirements, from a financial transparency perspective we were not quite satisfied that it met the two requirements.

    The point is, “big” may be good from an economy of scale point of view, or at least on paper it would seem to be the case. But essentially, the banks need look further than just “reputation”, “assurance”, and size.

    Boutique ship managers may also offer greater transparency and flexibility, as well as bespoke and strategic partnerships, to banks who do ship finance but do not need to tap into the broad services of more expansive ship managers.

    Ship managers can layer their business with policies, training, strong core skills and competencies, technology, economy of scale, and strength of balance sheet. But, they still need to demonstrate core values and business practice that is not dissimilar to the counterparts they work with.

    It is a question how do ship managers and banks (and one should also include hedge funds, leasing institutions, and PE investors) see each other’s relationship, longevity in the market, and value to each other’s business:
    a) dominant service provider/”another” new client, short term transactional, relationship over this period of restructuring, or
    b) two collaborative entities, long term relationship that is a strategic partnership.

    Hence banks/financial institutions should consider the “boutique” ship managers, along with the established expansive ship managers, to assess the appropriate fit for their needs in order to reach their objectives. This was is what I did at SCB when the operating lease practice was established in late 2010.