Safety & Security
Shipping companies have the primary responsibility for adhering to high standards of safety and environmental performance. Regulating to ensure safety of life at sea has always been the principal function of the International Maritime Organisation (IMO), and the primary role of the International Chamber of Shipping (ICS).
The International Shipping Federation (ISF) is to represent the considered opinion of the international industry and to suggest measures to improve safety - and to prevent pollution – developed through consensus amongst the world’s maritime administrations.
Tracking & Tracing - Radio Frequency Identification
Shippers face challenges such as security threats (including misplacement, theft, product tampering, and illegal uses or even terrorist attacks) and inefficient use of labour and equipment for tracking goods and containers. International supply chains have a complex and dynamic nature. Accurately tracking and managing the flow of goods is therefore challenging and costly.
Radio Frequency Identification (RFID) is a technology that is being used today for automatic identification and traceability through supply chains due to the multi-party and multi-modal nature of the global supply chain. It improves significantly visibility and helps to move goods more efficiently through the global supply chain. It differs from barcodes because RFID requires no-line of sight. A variant of RFID uses active tags containing a battery, which are used in Real Time Location Systems (RTLS). Apart from identification, the RFID tag is also used to determine the exact location of the goods. In addition, the battery power enables the recording of vibrations, shock, temperature or movement.
Authorised Economic Operator
An EU initiative increasing safety, efficiency and speed
The European Union has embedded the initiative of the World Custom Organisation to improve security of the supply chain in the ‘Authorised Economic Operator’ programme. This initiative was converted into the legislation of the different EU member states.
Certified Economic Operators will be treated as reliable trade partners and will have access to ‘green lanes’ which will increase safety, efficiency and speed of the supply chain. The ‘AEO’ status will become an undeniable need for all companies who envisage to participate efficiently and cost-minded in the supply chain.
In return for AEO certification, companies will need to benchmark and adjust their internal control processes affecting the supply chain against the EU member state ‘AEO’ requirements. In order to live up to the standards imposed by the custom authorities, companies will carefully need to review control processes in place and to act as pioneers in the use of innovative techniques.
The Shipping and Ports industry is extremely capital intensive. Well thought-out capital allocation decisions are essential to maintain competitiveness.
Investments in ships, infrastructure, ports, warehouses and terminals requires a high level of working capital to be spent on new assets, replacements and maintenance. Developments in the environment make asset management more and more complex.
Management must cope with major challenges such as achieving higher asset utilisation, decreasing capital and operational expenditures, managing risks efficiently and weighing the options for all stakeholders.
Asset (lifecycle) management is the process of establishing an operating environment under which capital returns are improved through effective management of risks inherent in owning, managing and operating a large asset base. Companies may be an asset owner, asset manager, service provider, or some combination of these roles.
Companies need to take care to assess the expected benefits of spending (e.g. improvement of financial performance, availability, improvement of environmental performance of health and safety issues) to ensure that the right investments are made. They also need to be prepared to document to stakeholders how these investments create and increase value.
Increasing transparency, decreasing cost, improving reliability and availability of assets and improving on performance in health, safety and environment are key goals of a considered approach to asset management.
Fuel price exposures
Shipping companies are structurally exposed to fuel price risks. Increasing fuel prices may impair the profitability going forward. Given the high fuel prices shipping companies have been confronted with in FY 2008 they are considering to increase their protection through the use of financial derivatives, either locking-in future purchase prices on forecasted purchases of fuel with forward or swap contracts, or by entering into options to cap the forecasted purchase prices at maximum level, or within a range with a collar.
When your functional currency or costs/ revenues are other than USD, you, as a shipping company, are also substantially exposed to USD risk on purchases of fuel since fuel is internationally quoted in USD. Shipping companies may also be exposed to foreign currency risks on the revenue side.