Per Starup Sennicksen questions whether any manager is brave enough to offer clients a guaranteed opex.
Sam Chambers recently wrote on LinkedIn: “The business model of ship management has been the same for nearly half a century – it will face some kind of disruption soon, delegates were told at our Maritime CEO Forum Singapore.”
Based on my comment, “Anyone bold enough to offer GOPEX – Guaranteed OPEX – thus being accountable, not just responsible, for their shipmanagement services?”, Sam asked me to write a short piece on gopex.
“Will you be accountable?” That was the question asked by the CEO of a major shipowner and operator about two decades ago, a question that keeps resonating with me.
We, a shipmanagement division of a more than 100-year-old shipping group, were targeting significant growth. In this context we had developed a concept of gopex – Guaranteed Operational Expenses – to differentiate ourselves from other shipmanagers.
Personally, I had recently joined the shipmanagement company as head of business development. I was no ordinary shipmanagement person in as much I had never served onboard vessels as an engineer or deck officer, not even as an able seaman. I did, however, have a background as an agent – liner agent, freight forwarder, and logistics provider. These roles as a middleman were not too different to that of a shipmanager. Granted the tasks are different, but the role is not.
As an agent you take on a lot of responsibility, however, the final bill always ends up residing with your customer – the ship or cargo owner – unless you take on accountability for your services. This we had successfully done as a logistics provider, so why not in shipmanagement?
Supporting the concept was the inherent capabilities of our technical management teams. During my onboarding induction, everybody was extremely proud of being able to predict opex for any vessel, no matter vessel type, trade, or owner. They also claimed to always deliver services within a few percentage points of opex, as evidenced by the financial statements produced.
As a shipmanager your revenue is the shipmanagement fee, your costs are primarily administrative in nature – offices, people, IT. Everything related to your actual services are pass-through, you operate your customers’ bank accounts – none of the opex costs should ever hit your own P&L or balance sheet.
One thing that had surprised me was the how shipowners asked for quotations of our services. They wanted an opex – a budget that had to be generated by just knowing the vessel IMO number. One way to deliver the lowest opex was in the crewing figures – knowing well in advance this would never materialise. The only thing negotiable was in fact the shipmanagement fee.
With gopex this could change significantly – suddenly the top line would increase tremendously. Say the shipmanagement fee was $200,000 and the annual opex $4m, the revenue would grow by $3.8m.
Of course, your operating costs would also increase. Yet, the opportunity would be there to achieve a higher profitability – if in fact you knew what you were doing.
We were unsuccessful in securing any customers on gopex contracts. Fortunately, I may add. A few years later during the deployment of an upgrade to our administrative tools keeping track of opex, it was discovered that some technical superintendents had their own individual parallel and manual accounting practice. They simply kept invoices due in their desk drawers until they were certain payment would not distort the annual opex target.
Surely things have since changed, and ship managers are ready to be accountable.
This is an interesting topic. having been involved directly with Ship Management on the Technical side, would like to highlight following points. Intention is not being pessimistic, but to be more specific about expectations of the Ship Owner and actual deliverable –
– To fix a Guaranteed OPEX, for any ship, even a new build delivery will require quite a few exclusions as Rider clauses. These can be debated between Principal & manager and chances are very slim of arriving at common ground. More specifically, even with PMS and various other modern practices of maint. of machinery, there are always chances of failures, unforseen and not included in OPEX assumptions. Human failure/negligence is a major factor, which cannot be covered by Ship/crew managers. Not all damages are going to be covered by Under writers and can increase the cost component of OPEX.
– To include all above variables in the initial OPEX as Guaranteed OPEX would increase the same much above industry standards, which will not be attractive for the Principal.
– To meet the target of OPEX, either poor maint. or cooking the accounts will be resorted to by Managers, counterproductive to the asset management quality.
– There may be a way of doing this in future when large data analysis of OPEX components of similar size, type of ships on similar trades are considered and a reasonably large fleet of ships are included in this project, thereby hedging against singular risk.
I am newly immerging ship manager, having 1 principal. At present the most highly challenging issue face is in managing energy in overall. Due to the rise in fuel price, allbthe projected budgets gone hay wire. This has created lot of conflicts between managers and principal. To avoid all this, the opex planning has to short term.