Outsourcing – The Green Answer (Ari Marjamaa, Dnv Maritime Advisory)

Ari Marjamaa, Director

DNV Maritime Advisory Nordic

November 18th, 2009

Outsourcing – the green answer?Performance critical outsourcing for the maritime industry

© Det Norske Veritas AS. All rights reserved.

Outsourcing – the green answer?

18 November 2009

2

Framing the issues

Can outsourcing

- Play a role in helping ship owners conform to new regulations?

- Contribute to a company’s green profile?

Is the growth of outsourcing a threat or an opportunity for class?



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3

Change in regulations? What changes?



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BALLAST WATER

RECYCLING

NOx, SOx & “PM”

SCRUBBERS

VOC

+++

EEOI

EEDI

SEEMP

FUEL LEVY

ETS

Environmental regulations are here to stay

BEYOND CO2PENHAGEN FUTURE REGULATIONS

But also: Increased stakeholder awareness

CO2



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Compliance depends on your capabilities

TECHNOLOGY

PROCESSES & ACTIVITIES

PEOPLE & COMPETENCE



18 November 2009

6Slide 611 November 2009

Most companies face the capability gap

CAPABILITY

TIME

Company required capabilities

Company capability outlook

NEW TECHNOLOGYINCREASING FLEET & COMPLEXITYINCREASING COMPETITIONCHANGING REGULATIONNEW MARKETS

LOWER EMPLOYEE RETENTIONFINANCIAL PRESSURESCOST CUTTING

Status quo



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Your capabilities determine your green performanceTechnology vs capability – what matters the most?

NOx

Alien Species

Arctic spills

Waste

Mammal

CO2

0

1

2

3

4

5

0 1 2 3 4 5Environmental impact

(Measured as environmental significance, impact on brand, cost and compliance)

Technology vs capability – what matters the most?

NOx

Alien Species

Arctic spills

Waste

Mammal

CO2

0

1

2

3

4

5

0 1 2 3 4 5Environmental impact

(Measured as environmental significance, impact on brand, cost and compliance)

ENVIRONMENTAL IMPACT

CAPABILITYVS

TECHNOLOGY

World class capability

Technology



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Access to capabilities increasingly drive outsourcing

CAPABILITIES AS DRIVER

CO

STA

S D

RIV

ER

1970s

1990s

2000+

EXAMPLE: SHIP MANAGEMENT

DILEMMA TODAY:

ACCESS TO LOWER COST & CAPABILITIES AT THE SAME TIME



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The same discussion…in 1998

http://www.marinelog.com/DOCS/sman.html

Vessel owners with smaller number of vessels would benefit by having 3rd party managers to

deal with the ever demanding maritime legislation worldwide.

It's a sad thing that people who have known about the imposition of ISM becoming mandatory for the past four years are now, some of them, still rushing to gain certification.

RAMESH BHATJardine Ship Management

BRUCE W.B. LUCASAtlantic Marine



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So, can outsourcing help ship owners conform to new regulations?

And does it contribute to a company’s green profile?



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YES…



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…but it all depends on what you can outsource

Strategically important

Not strategically

importantNot needed Critical

Outsourced

In-house

IMPORTANCE TO PRIME PURPOSE

CORE COMPETENCE TO ACHIEVE PURPOSE



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Managing uncertainty and risk through outsourcing

If you do not have the technology……outsourcing might give you cost efficient access to it

If you do not have the right people & competence……outsourcing might let you get access to them quickly, without developing from scratch

If you do not have the right processes & activities……outsourcing might let you leverage on something that already exists

But will you need the capabilities in the future?



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Outsourcing places demands on the company

Fundamental competence available in-

house to select, monitor and

control 3rd party services

3rd party support to

select, monitor and control 3rd party services

OR



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Partnerships contribute to company image and brand

Green Ship of the Future

Sustainable shipping

Clean Cargo

SEAaT

BUT ONLY REAL CAPABILITIES CAN BUILD A REAL GREEN PROFILE



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All in all, outsourcing can be good for you

Good for the company- Quicker- Cheaper- Less hassle

Good for the industry- Quicker ramp up to meet requirements

- Knowledge diffusion- Drive innovation

The 3rd party supplier needs to offer significant advantage

You still need to be in control

You will not be a green champion solely through outsourcing

SOME ADVANTAGES… …AND SOME BUTs



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Is the growth of outsourcing a threat or an

opportunity for class?



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The survey is still a complex process…



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…with some critical success factorsEfficient organization of work

Decision makingTIME

TRANSACTION COST

COMPETENCE

Number of parties involved

Effective organization of work

Competent counterparties



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Opportunities – and some challenges too

Conflict of interestLack of clear mandateInteraction with too many parties

Drive developmentNeed for verificationCompetent counterparties



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Peanuts does not always get you monkeys

Monkeys, or elephants, are not always what you need

Some times, all you need is a cost efficient expert



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Safeguarding life, property and the environment

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Documents

Outsourcing – The Green Answer (Ari Marjamaa, Dnv Maritime Advisory)