Shipping KPI project

An industry initiative to enhance excellence in ship operation

Egil Rensvik,Project ManagerMARINTEK

(Norwegian Marine Technology Research Institute)

March 2007

Background

A group of leading ship owning and ship management companies agreed in November/ December 2004 to launch a project to establish unambiguous ways of measuring performance in ship operation.

The participating companies felt that the absence of an international standard for KPIs would result in each company defining, measuring, and reporting information on operational performance differently.

Consequences:– Too many different indicators (KPIs)– Opportunities for confusions and mistakes– Difficult to mobilize organizational focus on quality improvement– Additional manpower required to present the same information in many different

ways (onboard and in office)– Comparison of performance between companies not possible– An example:

Project details (per March 2007)

Project period: June 2006 – December 2008

Project budget: Approx. US$ 4 mill.

Funding: • Research Council of Norway - 40%• Participants contributions - 35%• Other sources - 25%

Participants: 21 of the world’s leading ship owning and ship management companies (see next slide)

Project responsible: Intermanager/ (Wilh. Wilhelmsen ASA)

Project manager and main research partner:

Norwegian Marine Technology Research Institute (Marintek), Trondheim

Additional research resources: • University of Singapore (NTU)• University of Trondheim (NTNU)• The Maritime University of Hong Kong

Steering Committee: • Chairman: Mr. S. Sorlie, Wilh. Wilhelmsen• Vice Chairman: R. Bajpaee, Eurasia Group• Intermanager rep.: Mr. Guy Morel, Intermanager• Project participants: Mrs. Y. Åsheim, Hoegh Fleet

Project Participants (March 2007)

• Anglo Eastern Ship Management

• B+H Equimar Singapore

• Barber Ship Management / Wilhelmsen Maritime Services

• Bergesen Worldwide Gas

• Chemikalien Seetransport

• Columbia Shipmanagement

• Dobson Fleet Management

• DS Schiffahrt GmbH

• Eurasia Group

• Fleet Management

• Hanseatic Shipping Company• Høegh Fleet Sevices• Jebsen Total Transport Solution

Services• Navigo Shipmanagers• OSM Group• Seaspan Ship Management• Stolt-Nielsen Transportation Group• Eitzen Maritime Services• Thome Ship Management• V. Ships Shipmanagement• Wallem Group Ltd

Project goals

To establish an international standard for measuring performance in ship operation (KPI’s)

and create platforms for:

• increased transparency on quality matters, safety issues and environmental performance in ship operation:

– develop frameworks for reporting of operational performance– create communication models for operational issues that is also meaningful for

stakeholders without technical/ maritime background

• enhanced governance in ship operation:– facilitate performance improvement processes (e.g. benchmarking)– further develop standardization of “best practices”

• future regulatory developments in shipping focused on “process output” regulation:

– improve the effectiveness of the ISM Code and various other process management standards being applied to operation of ships

– support a new regulatory regime of setting minimum operational standards

Participants’ commitment

• The shipping industry is often seen as being slow to respond to requirements from “Society”, and is frequently accused of having improper balance between financial, environmental, and social goals

• The participating companies want to demonstrate that they are forward looking companies that genuinely responds to the requirements for more transparency

• The project participants take responsibility for maritime safety and environmental protection and are firm believers that a regime based on self regulation is the way forward to excellence in ship operation

• Committing time and resources to this project is a demonstration of Corporate Social Responsibility (CSR) in practical terms

Main project activities

Project Management and interaction with participants

Establish project

Develop KPI Depository

Dissemination and Communication

Implementation by industry (convergence)

Develop Shipping Performance Indices

“SPI’s”Develop KPI Depository

Scientific University Cooperation

June 2006

October 2006

2007 2008 2009

KPI Depository - Features

• Contains a collection of “recommended KPIs” for measurement of operational performance in shipping

• Each KPI will be assigned:– a recommended definition

– a set of explanatory recommendations, experiences made, etc.

• Constitutes the collective “wisdom” with regard to measurement of operational performance

• Intended as a reference model for individual companies establishing (or revising) their respective performance measurement indicators

• The KPI depository will be available on the Internet at the webpage of the Shipping KPI project:

www.shipping-kpi.com

The Shipping Performance Indexes (SPI) are supported by an indicator structure

TOP DOWN PROCESS

SPI 1

KPI 1 KPI 2 KPI n

SPI 2 SPI n

KPI 3 KPI 4 KPI 5

Ship Management Report CardShip Management Report Card

KPI c KPI d

KPI a KPI b

…

BOTTUM UP PROCESS

KPI Depository - Structure

A reference model for the shipping industry with regard to measurement of performance in ship operation

A reference model for the shipping industry with regard to measurement of performance in ship operation

Indexing(reference process, stakeholder, etc)

Purpose(considerations of objective, rationale, etc)

Metrics(Validity, inaccuracies, limitations, etc.)

Review Board(observations, recommendations, etc.)

KPI – Definition(to achieve consistence and repeatability)

Application(lesson learned, suggestions, etc.)

KPI Depository - Opportunities

• Enable companies to compare (and align) own in-house performance indicators with an industry norm

• Provides opportunities for comparison and benchmarking of operational performance

• Permits more meaningful discussions about quality of operations, operational methodology, environmental impact, manpower issues, regulatory, etc.

• With sufficient support from the industry the depository could form the foundation for an international standard

• Could change regulatory efforts in shipping away from “process management” intervention and rather focus on “process outcome” regulatory requirements

KPI depository - Misconceptions

• The depository is NOT a database for capturing operational performance information from the participants

• Sharing of operational performance data is voluntary• Benchmarking is NOT compulsory and will not be done as

part of the project• The project will NOT set any “minimum operation standard”• It is voluntary for a company to align its current in-house

KPIs with the recommended KPIs in the depository• Alignment with the “recommended KPIs” in the depository

should be performed as regular revisions of the company’s quality system

Users / Stakeholders

• Who have interest in the information given by the KPI?

• Authorities (Port State, Flag State, IMO, MARPOL,…)

• Class society• Industry Associations (Intermanager, Intercargo,

Intertanko, OCIMF,…)

• Ship Management Companies• Ship Owners• Shippers• Charterers• Society (Public opinion, Local population, NGOs,…)

• Crew/personnel (including families)

KPI

User / Stakeholder

KPI standardization problem (one example)

Lost Time Injury Frequency (LTIF) rate:(Normally calculated as incidents per million manhours)

Variables:

• What is manhours?– Working hours - including or excluding overtime?– Time onboard - 24 hours or excluding time ashore?

• What is an incident?– Any injury or only injuries requiring medical treatment?– Only work related injuries?– Only incidents where work time is lost? (1hr, 8 hrs, ?)– Only incidents where signoff is the result?

KPI – development process

Development ReviewCollection

Analysis of information collected.

Compilation and structuring

of available know-how and

experience

Review developed KPI’s with regard to suitability for industry wide application

Collection of KPI’sin use from the

companies participating in the

KPI project

KPIDepository

RecommendedKPIs

• Participating Companies

• Marintek

• Participating Companies

• Marintek

• University resources

• Others

Involvement:

• KPI Review Board

KPI Review Board

The Shipping KPI Project will invite representatives from a broad range of important shipping industry stakeholders to participate in a meticulous review process before the KPIs are being recommended- and placed in the KPI depository

The Shipping KPI Project will invite representatives from a broad range of important shipping industry stakeholders to participate in a meticulous review process before the KPIs are being recommended- and placed in the KPI depository

Purpose:• Ensure the suggested KPIs are covering performance aspects that

are important for a wide range of stakeholders • Confirm the suggested KPIs are relevant and useful for their

intended purpose • Make certain that the suggested KPIs are aligned with future

compulsory or voluntary reporting schemes (e.g. GRI)• Utilize expertise outside the sphere of the “shipping professionals”• Ensure broad acceptance of the suggested KPIs through a process

of involvement and empowerment

Main project activities

Project Management and interaction with participants

Establish project

Develop KPI Depository

Dissemination and Communication

Implementation by industry (convergence)

Develop Shipping Performance Indices

“SPI’s”

Develop Shipping Performance Indices

“SPI’s”

Scientific University Cooperation

June 2006

October 2006

2007 2008 2009

Shipping Performance Indices (SPI)

Standardized KPIs provide opportunities to aggregate performance information into indices

Standardized KPIs provide opportunities to aggregate performance information into indices

SPI 1

KPI 1 KPI 2 KPI n

SPI 2 SPI n

KPI 3 KPI 4 KPI 5

KPI c KPI d

KPI a KPI b

…Shipping Performance Indices

Shipping Performance Indexes - SPI

Indexes to be considered:

• Environmental protection index • Personnel safety index • Cargo transportation effectiveness index• Statutory rules and regulations compliance index• Natural resources preservation index• Social responsibility index• ……….

• Environmental protection index • Personnel safety index • Cargo transportation effectiveness index• Statutory rules and regulations compliance index• Natural resources preservation index• Social responsibility index• ……….

SPI - opportunities

The SPI concept may open a number of opportunities:

• May create a new level of transparency in ship operational performance issues

• Enhances opportunities for discussion of important operational performance issues in shipping

• Gives more focused and efficient quality improvement processes

• Could be basis for establishment of minimum (acceptable) operational standards

• More efficient use of resources for audit, inspections, and operational follow-up

• May create a new level of transparency in ship operational performance issues

• Enhances opportunities for discussion of important operational performance issues in shipping

• Gives more focused and efficient quality improvement processes

• Could be basis for establishment of minimum (acceptable) operational standards

• More efficient use of resources for audit, inspections, and operational follow-up

Main project activities

Project Management and interaction with participants

Establish project

Develop KPI Depository

Dissemination and Communication

Implementation by industry (convergence)

Develop Shipping Performance Indices

“SPI’s”

Scientific University Cooperation

June 2006

October 2006

2007 2008 2009

Scientific University Network

• The approach in the scientific level with an University network activities focus on:– KPI standards

− Measurements – sensitivity of performance indicators, analyzes methods

− Transparency - unambiguous definition and measurement of KPIs’− Development of a framework for the KPI depository

– Communication to stakeholders – methodology and benefits– Corporate Governance – future requirements and practical

approach– Corporate Social Responsibility (CSR)– Benchmarking analysis methods and tools

• NTNU (Norway), Univ. in Hong Kong, Univ. in Singapore

Summary and conclusions

• ISM Code introduced 8 years ago – next step with KPI initiative

• Establish a framework for Shipping-KPI and Shipping Indexes to be developed

• Involvement from stakeholders• Best practice – on voluntary bases • Operational approach –vs – Pubic approach• Performance indexes selection will differ to different

stakeholders• KPI includes own parameters and 3rd party KPI delivery• International cooperation needed to achieve the objectives

More information?

Svein.Sorlie@wilhelmsen.comSvein.Sorlie@wilhelmsen.com

Guy.Morel@intermanager.orgGuy.Morel@intermanager.org

www.shipping-kpi.comwww.shipping-kpi.com

Egil.Rensvik@marintek.sintef.noEgil.Rensvik@marintek.sintef.no

Torkel.Fyrvik@marintek.sintef.noTorkel.Fyrvik@marintek.sintef.no

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KPI standardization problem (one example)

Lost Time Injury Frequency (LTIF) rate:(Normally calculated as incidents per million manhours)

Variables:

• What is manhours?– Working hours - including or excluding overtime?– Time onboard - 24 hours or excluding time ashore?

• What is an incident?– Any injury or only injuries requiring medical treatment?– Only work related injuries?– Only incidents where work time is lost? (1hr, 8 hrs, ?)– Only incidents where signoff is the result?