TThe shipping industry needs to look beyond zero-carbon fuels to decarbonize the sector. “Circularity” and “servitisation” could be the new buzzwords to watch out for, according to Danish Ship Finance (DSF).
In its latest Shipping Market Review, DSF offers the idea of consolidated fleets of super-standardized vessels as an attractive business model for circular maintenance, where spare parts can be remanufactured, reused and recycled multiple times to save costs and reduce the environmental footprint.
The servitization model — which DSF defines as the extension of business by equipment manufacturers to include the use of their equipment rather than selling it — enables optimal data extraction from the standardized fleet of ships, which in turn allows the equipment manufacturer to improve and optimize performance The ship.
DSF recognizes that circular maintenance is not a new term as some vehicle and industrial equipment manufacturers use it to refurbish, reuse and recycle their used products and parts. However, combine this circularity with the standardized fleet concept and vessels can be provided as a service at a fixed flat rate per minute, reducing circuit maintenance costs. Looking to the broader horizon, DSF notes that all elements of a ship, its maintenance and demolition could be designed for a circular economy, with all materials and components being recycled, remanufactured and reused.
The Vessel-as-a-Service concept opens up new value drivers for operators
But this level of change will not happen overnight. “This type of change will force not only ship owners but also equipment manufacturers to change their go-to-market model to one that sells ‘time in transit’ rather than a product,” DSF said. Currently, most ships operate on a business model where “asset play guides decision-making,” she added. Therefore, retrofits and operational upgrades are only undertaken when they bring immediate cost savings without requiring long payback investments. An asset-play model seeks to exploit short-term market imbalances, while the servitization model proposed by DSF aims to improve long-term asset efficiency. “The servitization model enables investments with long payback periods that may even extend into the next lifetime,” said DSF.
Another benefit of the servitization model is that it reduces the risk of stranded assets, as gear makers can upgrade a ship’s performance when needed – as long as those upgrades don’t increase the cost of use.
DSF takes this model even further, proposing that ship ownership could be aggregated across fewer units, even across ship segments. “Vessel operations may remain fragmented but consolidate over time in line with the application of new technologies likely to reduce margins and increase competition,” it said.
The Vessel-as-a-Service concept opens up new value drivers for operators. While traditional players generate revenue from freight rates alone, those adopting this new business model can also generate revenue from trading zero-carbon fuels and ship operations data. “Traditional players may struggle to compete on costs as the new players can reduce costs through circular maintenance and economies of scale while offering additional services through the advanced ship connectivity system that has been scaled across the centralized ownership base,” DSF said.
Building on the proposal for a centralized ownership model, DSF asks whether, in a scenario where individual operators book cargo transport on vessels shared by many, there is potential to optimize capacity utilization and reduce their environmental footprint. “Experiences from other industries (telecoms, for example) suggest that structural separation can create more value when infrastructure sharing allows for massive scaling to a larger customer base,” it says.
The success of alliances and pools already indicates the potential here. This next step will support asset owners’ ability to scale and leverage economies of scale through standardization, enabling them to build a critical asset base that will enable larger investments in new digital technologies.
“Initial investments are aimed at increasing operational efficiencies and routing (to reduce fuel consumption), but the focus will soon shift to penetrating adjacent domains to establish a platform-based ecosystem that delivers data-driven insights across supply chains Optimization orchestrates value creation and new revenue streams,” said DSF.
The overarching goal is to create a “fully integrated transport-as-a-service transit system that will combine a digital platform, access to the latest freight mobility offerings, incentives (e.g. lower costs, zero-carbon mobility, transparency) and measurement tools (including CO2 to ensure all transport services run at full efficiency”.
DSF points to experiences from other industries to support its theory that a service model based on data from the operation of the standardized plant base could become at least as valuable as the plant operation itself. “The vessel-as-a-service model will allow players to focus on monetizing data throughout the lifecycle of ships through recurring revenue and paid over-the-air upgrades, which may eventually include those related to autonomous ship capabilities,” said DSF . “In today’s market, the lack of an established ecosystem often results in hard-to-scalable isolated solutions between a few players that end up generating significantly less value than they would have with a scaled solution.”
Source: The Baltic Briefing