How to get more ship uptime, save fuel or cut emissions – guaranteed

It’s time to shift your focus from short-term fixes to long-term goals. Are you targeting uptime, fuel savings or lower emissions? Do you know the best way to hit your target? This article reveals your number-one route to success.

Because ships are a long-term investment, it makes sense to focus on long-term goals when managing your vessel’s lifecycle. This helps you plan better so that you:

• achieve your strategic business goals
• secure your future profitability
• hit your decarbonisation targets, and
• squeeze every last drop of value from your investments.

Juggling all these factors while keeping your core operations running smoothly and safely can be a challenge. Traditional service agreements can help you manage the load, but they often don’t give you what you need to tackle these challenges effectively.

There are seven signs that you might benefit from an outcome-based service agreement. Download the white paper “How a service agreement could give your maritime business a competitive edge” and discover what these signs are and how these types of agreements work:

Get more for your money with performance guarantees

When you choose a supplier that offers performance guarantees, the supplier becomes a partner who guarantees that together you will achieve a defined quantifiable outcome. For example:

1. If you’re in the offshore industry uptime is almost certainly your top priority.
2. If you’re a cruise operator, you’re probably focused on cutting emissions above all else.
3. If bulkers are your business, CII compliance is likely your number one concern.

Focusing on a quantifiable metric instead of micromanaging individual systems and technologies provides a solid framework to achieve your goals. When your agreed outcome is achieved you and your supplier share the rewards. If you don’t achieve the agreed outcome, the losses are shared too.

This kind of service agreement is a genuine commercial collaboration based on joint key performance indicators, shared benefits and shared risks.

One of the biggest advantages of an agreement with performance guarantees is that you get the best bang for your buck from investments in hybrid systems, future fuels and novel energy-saving technologies.

The three steps to setting performance guarantees

There are three steps to setting performance guarantees:

1. Identify the quantifiable goals.
2. Agree the metrics that will be used to measure them.
3. Define a payment model that benefits you and your supplier.

For example, if your goal is to cut fuel consumption the agreed metric could be fuel efficiency, or tons of fuel burned over a specific period. If your fuel consumption drops during that period, you and your supplier share the financial gains from the common savings pot.

Because you are both playing for the same side, your supplier will do everything they can to make sure the outcome is realised. This might mean:

• Taking care of asset maintenance
• Optimising hardware like engines for maximum efficiency
• Advising on and installing energy saving technologies
• Optimising vessel propulsion systems

This is different from a regular service agreement, where your supplier gets paid for these kinds of activities whether you reach your goals or not.

Real-world examples of successful performance guarantees

Several Wärtsilä customers are already reaping the rewards of agreements that include performance guarantees. For example:

• Carnival Corporation, the world’s biggest leisure travel operator, wanted to improve the fuel efficiency of its cruise ships. They are already looking at net fuel savings in the region of EUR 2.5 million thanks to a service agreement with performance guarantees.
• A platform support vessel operator has secured a guaranteed fuel saving of 20% under an agreement with Wärtsilä.
• A tug operator has agreed an overall equipment reliability guarantee of 98% with Wärtsilä, with guarantees for vessel engine room reliability, duration of overhaul and the availability of the fuel gas supply and storage system.

What can be included in a service agreement with performance guarantees?

A service agreement with performance guarantees can cover individual equipment elements like your ship’s powertrain, or be structured so that it focuses on the overall vessel level.

For example, powertrain-focused guarantees could include:

• Power system uptime ­– optimising your engine room for maximum availability
• Fuel optimisation – optimising your vessel’s engines to improve efficiency
• Asset usage – actions such as crew training to maximise the benefits of new systems and technologies

Vessel-level guarantees could include:

• Voyage optimisation – optimising vessel routing to reduce overall fuel consumption
• Vessel fuel optimisation – a two-level approach to optimising fuel consumption through engine and propulsion upgrades plus energy-saving technologies
• Emissions optimisation – minimising fuel consumption in order to achieve a specific CII rating

Like a tailored suit, these different elements are combined into a whole that is far greater than the sum of its parts to maximise your profitability.

Conclusion

Performance guarantees are a unique approach in the maritime service agreement landscape because they are a win-win for both you and your supplier.

A service agreement with performance guarantees can help you achieve your goals whether you’re targeting uptime, fuel savings or lower emissions – or even a combination of all three. Your supplier will do everything in their power to make sure the outcome is realised, because you are both working towards the same goals. That’s performance, guaranteed.

Uncover the secrets of how an outcome-based service agreement can guarantee you a head start on the competition. Download this white paper: How a service agreement could give your maritime business a competitive edge.

This article about outcome-based service agreements and performance guarantees first appeared as one of Wärtsilä’s Insights stories.