In Conversation with Wärtsilä’s Emil Katajainen

In Conversation with Wärtsilä’s Emil Katajainen

10 min read

20 May 2020

Text

Lara McCoy

Photo

Wärtsilä

10 min read

20 May 2020

Text:

Lara McCoy

Photo:

Wärtsilä

System to improve marine traffic arrives just-in-time. Emil Katajainen, Business Development Manager at Wärtsilä, says there are solid economic and environmental reasons for changing the way berths are allocated at ports. 

1. What are some of the main problems with the current system of ships arriving at port?

Right now, there's a big problem with ships arriving too early, which is mainly caused by the first-come-first-served slot allocation at ports. In a typical case, every shipowner or operator wants to have a slot as soon as possible, and since ships have to be physically present to secure a slot, they need to speed up to get the slot they want. This leads to huge waste because the whole system is set up in such a way that vessels need to speed up, and when vessels speed up, fuel consumption rises, and that leads directly to higher emission levels.

Imagine a situation where three vessels are arriving around the same time to the same port and the same berth, and berthing slots are allocated on a first-come-first-served basis. There is a big incentive for all three vessels to “race to the finish line” and try to secure the first possible slot. Two of the vessels will speed up for nothing, and even the extra fuel consumption for the winning vessel could’ve been avoided if the slots were allocated dynamically. Now imagine the exact same situation, but with dynamic slot planning. The exact same berthing slots are available, and the only difference is that they’re given in advance. Each vessel will know their laytime in advance, and each vessel can schedule their arrival according to the slot availability, thus leading to less fuel consumption. It should be mentioned also that there needs to be a fair and agreed upon method of slot allocation to share the benefits of the systemic improvement.

Having ships arrive earlier than their berthing slot creates challenges for the ports, too. Today, in the event of voyage chartering, the captain can only tender notice of readiness when the ship is present in the port’s allocated anchorage site and is ready in all respects to load or unload the goods at port.  The knock-on effect is such that the areas around the ports get more congested, and ships at anchorage have their auxiliary diesel generators running causing unnecessary local emissions.

2. How does Wärtsilä Navi-Port disrupt the traditional system? 
Wärtsilä Navi-Port middleware is enabling a real-time digital arrival time exchange between the port and the vessel. When the berth is allocated, it will automatically send out the recommended arrival time information to the approaching vessel. The vessel can then act on that information to either continue sailing as it is to meet the original arrival time or slow down if the proposed slot is later than it planned to arrive. Sharing the recommended arrival time gives the approaching vessel more flexibility and awareness for its decision making. By allocating the berthing slots in a dynamic way, and in advance, the port is enabling just-in-time arrivals, and from that come fuel savings and environmental benefits. Sharing the arrival time information across stakeholders also helps keep the port services running smoothly, as port services such as tug operators, pilots, and bunkering facilities can receive the same information.

The arrival time exchange works two ways, so the ship can notify the port as well if it can’t make the proposed time, for example. Wärtsilä Navi-Port middleware is replacing email and phone calls as a basis for delivering that information, and we're directly putting it into the navigation system so the people who are making the navigation decisions will be able to react instantly. This streamlined communication is especially helpful at a time of distress, such as during a storm, which impacts everyone’s schedule and causes a lot of changes in arrival times.

3. What are some of the challenges with getting market players to adopt the just-in-time system? 
When it comes to the operational side of things, there are still some incentive schemes and contractual structures that are preventing the adoption of just-in-time arrival. For example, the demurrage clauses and the arrival clauses can specify that the original target time must be applied even when a berthing slot is not available at the original target time.

And there are, of course, ways of achieving just-in-time arrivals even with today’s contracts. For example, BIMCO, the largest international shipping association, offers charter party clauses that enable virtual arrivals, which enable just-in-time arrivals. In a virtual arrival clause, the arrival time may change along the way, and the ship operator and the charterer agree on how the benefit of fuel savings is split through a decreased demurrage rate for the period between actual arrival and original arrival time.

So just-in-time shipping is not impossible, but there are elements that need to change. And I think we are getting to a point where we are ready for that change, especially given the recent push from the IMO’s ambitious greenhouse gas emission reduction targets. I’m certain that just-in-time arrivals as a way to reduce emissions without significant capital expenditures will attract interest among ship owners reaching for the IMO targets.

4. Are there certain segments of the industry that are more likely to use just-in-time?
The streamlined communication between the ship and the shore is a benefit that can be achieved regardless of the segment and the type of operation, although the benefits of executing just-in-time arrivals using the arrival time exchange depends heavily on the type of operation. There are different types of contractual agreements in the market and implementing just-in-time is easier with some more than others.

If you take the cruise industry, for example, they are mostly operating on this just-in-time principle already, but the cruise industry example can’t be directly copied because of the special status cruise ships have. They have the luxury of having their own berths and terminals, and usually they are also given priority in arriving and departing bigger ports. A lot of the cargo vessels are competing for the same berths, which can be only used one at a time.  

Another very promising group for expanding just-in-time operations is container liners, which are usually operating on a regular time-bound schedule, calling at certain ports, and have standard operations all the time. They are usually operating on one fixed route or for one consortium, so this is also easy to align with just-in-time.

Then there are time charter trades where the vessel is hired for a certain fixed period of time. It does whatever the charterer tells the vessel to do. So, in that case, the incentives are very much aligned because the charterer has full control of the vessel for the contractual period’s operation, including its fuel bill.

The tricky part from the market perspective is the voyage charter market. This is where the arrival clauses in the charter party agreements come into play, and this is where there needs to be a bigger change. Right now, the ship operators have conflicting interests and incentives, so there needs to be a broader change in the way contracts are structured. With virtual arrival clauses that fix the arrival time problem, the charterer and the ship operator can negotiate provisions that allow them to share the benefits. I think the hard part in this case is to find a percentage level of the applicable fees that are beneficial to both parties

5. There have been some arguments made against just-in-time that there are benefits to waiting for a berth, such as being able to use that extra time for repairs. Is that a valid point?
If you need to find time for repairs, by all means, do that, because that's going to benefit you more than the potential savings of just-in-time. Just-in-time isn’t something that you must blindly commit to. It’s a way of unlocking benefits that you wouldn't otherwise unlock. The availability of the most recent and most accurate berthing slot helps to make the decisions in the best possible way both for the vessel and the port.

6. Do you think that the concern over environmental issues and climate change are a big enough impetus for ships to adopt new technology or new practices? Or do you think there has to be a business case for it?
I think we're in a fortunate position because I think we are offering both environmental and financial benefits at the same time. By removing this wasted time, ships are both saving on their fuel bill and bringing about environmental benefits. It's one of the cheapest, most bang-for-your-buck methods of reducing emissions, which is also a clear IMO goal for the future. You will get both benefits when you are executing just-in-time arrivals.