Article - January 3, 2023

The Hidden ROI of Ship Routing Services

Rolf Reksten

Rolf Reksten

Vice President, Route Advisory Services

Container ship in blue sea

Company expenditure is always under the microscope, and every business needs to see quantifiable returns on investment. With the ever-growing pressure on transport industries to supply the increasingly globalized world, the need for ship routing services has grown. But how do we know that these services are worth what they cost?

Weather forecasting began with the first storm warnings in 1860, but it wasn’t until 1898 that ships used forecasting to avoid storms and increase journey safety. In 1952 major transpacific ship operators started using shore-based weather routing, and in 1983 the IMO recognized that weather routing aided safety, encouraging vessels to use the service. Today, this means that almost all fleets have this added expense.

As time and fuel account for 60% of voyage-related costs in the shipping industry, the key to ship routing services is to optimize the operation of a vessel in relation to the cargo being carried. In other words, to maximize the Time Charter Equivalent (TCE) of an ongoing voyage. The key is to optimize time by optimizing the track of a vessel. In turn, if time is optimized, then so is fuel consumption.

The Business Value of Ship Routing

Optimal ship routing can provide measurable value to a business by making savings related to time and fuel expenditure. For example, the IMO has publicly stated that weather routing saves at least 3% fuel consumption, not including time savings. For some vessels, such as container ships, that number can be as high as 10%.

Ship routing services offer several options for use. For example, Strategic Power Routing, based on track and weather forecasting, allows constant power to be maintained through appropriate adjustments of RPMs. Fuel Optimization Services, in comparison, focus on reducing fuel consumption and analyzing the entire operational performance of a vessel.

Calculating the Business Impact of Ship Routing Services

Shipping companies can ascertain savings by comparing a vessel’s TCE to its journey in real-time. First, a pre-plan is generated from the data about the vessel: type, route, condition, speed, and fuel consumption. From these factors, ship routing services can provide several possible routes to complete a journey. Then, a net daily TCE can be calculated by dividing the net income of a journey by the journey’s duration in days, resulting in a figure representing the daily cost of the voyage.

Net Income ÷ Duration (days) = Net Daily TCE

Daily expenditure can decrease by reducing the days at sea, either through adverse weather avoidance or by taking advantage of currents. The same applies to reducing fuel consumption, directly impacting daily operating costs. These savings can be quantified in dollars saved per day and are visible to senior management. One of the perks of ship routing services is that these savings are captured in ROI reporting, ensuring each journey is analyzed and accounted for. 

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Alongside these quantifiable savings, ship routing services contribute to more invisible savings along a journey. Businesses can safely outsource 24/7 support for their vessels by using a ship routing service. This means that ships are monitored throughout their journeys, receiving regular updates on routing, and forecasting along the way. With rapidly changing weather forecasts, emergency support teams are on hand to guide vessels along the safest (and quickest) paths. For all businesses, personnel safety comes first, making it an immeasurable benefit.

Improved Vessel Performance Rating with Ship Routing Services

Not only do routing services provide the guidance needed to make port on time and most efficiently, but the data captured from each vessel enables accurate performance reporting. Reporting includes access to user-friendly interfaces accessible by onshore and vessel personnel. These dashboards show vessel performance on a daily, journey-based, and long-term basis so that operators have the most accurate actionable information. In addition, it gives operators the transparency they need to see the measurable impact of their choices on each vessel’s journey. This kind of data gathered can make longer-term improvements to a fleet, resulting in long-term time and fuel savings.

A factor that will only come into action in 2023 is the IMO’s new Carbon Intensity Indicator (CII) rating scheme applied to all cargo, RoPax, and cruise ships above 5000 GT. The regulation is in place to meet the UN’s climate target aims. Vessels that do not adhere to CII regulation will lose attractiveness to charters, impacting how charter parties are managed. The most viable solution to improve a vessel’s CII rating is to leverage operational parameters achievable through the reporting, alerts, and interfaces generated by routing services.

Every year, StormGeo Route Analysts route approximately 64,000 voyages across the world. With an average consumption of about 30 MT of fuel per day and an average voyage time of 17.5 days, the total consumption for all voyages was 33,750,000 MT of fuel. With a 3% reduction in consumption from weather routing, we can calculate that StormGeo enabled a staggering saving of 1,012,500 MT of fuel. At today’s rate of $800 per MT of fuel, that is a whopping $810 million in fuel savings per year.

(On-demand webinar) The Hidden ROI of Ship Routing Services

These days, with heightened awareness of company expenditure, every bit of investment must come with justifiable returns.

In this webinar, we provide guidance on how to quantify and determine the value of ship routing to help you decide whether it is right for you and your business.

We'll also explore how your company could make the most out of ship routing data, including an overview of common misconceptions around the service.

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