While some of you will be correct arguing that OPEX optimisation is a small challenge in comparison to shortage of income, there is a good reason to look at this from different perspective. If we consider two companies operating in the same market and struggling with the same challenge of low charter rates, we never see the same financial performance results. It will depend on number of factors but mainly on:
1.The revenue from chartering
2.The model of financing
3.The cost of operating the vessel/other assets
While individual players can not significantly influence the market rates, and if we assume that finance costs are not something you can improve without implementing new finance models, the only area where companies are able to achieve improvement is vessels operating costs and G&A. Depending on the type, age and size of the vessel, the operating costs may represent from 14% to 45%, which is good news in terms of amount of savings companies can count for.
Another point is that the business with smart OPEX management looks more attractive for investors and shareholders. They will appreciate management's efforts to optimise business processes via innovative initiatives and digital solutions.
The bad news however is that many shipping and offshore companies have already run through cost-cutting programs, in order to meet market challenges. What they have done? They laid up vessels, froze all development initiatives, fired crew, closed up offices and reduced office staff. Well done! While these seemed to be right solutions at the time, I strongly believe that this way is the way to nowhere for the shipping and offshore industry. This is also sadly discouraging for young generation who become less and less interested in building their future with shipping and offshore industry.
The answer is well known. It is new technology, digital solutions and optimisation via innovation. While we are so good to talk about it at the various conferences and gatherings, it is also time to act. Companies should look outside the box and instead of creating cost-cutting groups inside, go and share their pain points with those industry innovators who has developed smart solutions for business optimisation.