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COMPETITIVE EDGE IN HARBOUR TOWAGE

The competition is winning in more ports because they have a more flexible operating model. Svitzer needs to change.

In some ports in Europe and Australia, Svitzer’s harbour towage business operates with an unsustainable cost disadvantage. Simply put, some of our competitors have a more flexible approach to doing business than we do. One that allows them, for example, to cherry pick the most profitable jobs during peak hours and then leave Svitzer to serve customers at off-peak hours, often at the standard tariff. According to Steffen Risager, Head of Business Transformation, we need to increase our competitiveness. “Demand is more or less fixed,” he says. “We can’t affect demand by attracting more volume, as the number of vessels attracted to a given port is pretty much fixed. The trick to increasing our competitiveness is to maximise our utilisation of tugs and crews.” 

Most Svitzer harbour towage operations use a traditional model that can be described as one tug, with one crew, in one location – with crews typically working one week on and one week off. This system is too inflexible to cope with the current competitive environment and needs to be replaced with tug and crew utilisation models that give us the flexibility to better control our supply to meet existing demand. “We have many tugs to serve customers,” says Steffen, “but we need to use and deploy them more effectively. On average, across all ports, our tugs sail only four hours a day, or roughly one-third of the time a crew is allowed to work. We want to maintain our high service levels and keep tugs in the ports to serve peak demand, but we need to look at how we can have crew available at a better match to vessel calls.”

ALIGNING SUPPLY AND DEMAND
Better utilisation of our resources is often a matter of seeing a familiar situation with fresh eyes. For instance, we have two crew bases with a total of 11 tugs on the River Thames, in the UK. These have always been regarded as separate operations, but if they’re viewed as one business it becomes apparent that it can be covered with nine active tugs – without jeopardising our service level – if they are placed correctly along the river and don’t have to steam far to do a given job. This means not only assigning tugs to jobs more efficiently, but also moving away from the one-tug, one-crew model and assigning crews to vessels and jobs as needed. 

“We’re trying to align supply to port demand by making crew available when crew is needed,” says Steffen. “No two ports are exactly alike, but there are similarities across ports. By analysing supply-and-demand patterns we can maximise crew availability by moving from a ‘base-crew’ model to a ‘flex-crew’ (or ‘peak crew’) model. The flex-crew approach allows us to use crews when we need them at peak times – maybe by having crews work three days a week, or full time in different locations. Competitors – like PB Towage, in Australia, and KOTUG, in the UK – are already doing this, which means we’re operating at a huge cost disadvantage. We need to level the playing field. In fact, we could actually be better at this system than our competitors because very few of them have the number of tugs we do working nearby each other, which would allow us to get the most from a flex-crew approach.”

VARIABLE WORK SCHEDULES
What would this look like for crews in a given port? The general answer is that jobs on the tug will be exactly the same, but how often we go out and how many jobs a tug handles will change. We are examining what this means in practice but instead of having two fixed time blocks from, for example, midnight to noon and noon to midnight, we are looking at flexibility in checking in at different times. This could mean working according to tides or on a sliding schedule, such as checking in at 1:00, working four hours, taking a sixhour break and then working for another four hours. All within the acceptable work- and rest-hour regulations and fatigue measures. Crews would still work on a one-on/one-off model, only they will be more flexible during their time on. “It’s important to stress that this is not an experiment,” says Steffen. “It’s been proven to work well across several operations in Europe and Australia, which already follows the flex-crew model. It can significantly improve our competitiveness. We simply have to crew smarter than we have in the past and to share best practices about tug and crew utilisation throughout the ports we serve. It’s also important to stress that we’re all in this together – if we don’t move in this direction and get new models working, we’ll lose market share to competitors. In Melbourne, Australia, for example, our competitors have 25% lower crew costs, which allows them to price significantly lower and still make the same margin we do.”

PRICING BY SERVICE LEVEL
Svitzer is also working on a new pricing structure under which we package our product at different service levels, which lets us get more business intelligently rather than by simply dropping rates. We don’t want to be a low-cost provider; our goal is to offer services customers are willing to pay for and charge accordingly. For example, in Melbourne we were charging the same rate at night as during the day. We had a unique product during the night, but we didn’t charge for it, and also didn’t make customers aware that we were providing a guaranteed service 24/7 – one that was unavailable from competitors. To correct this, we’ve changed our tariff structure to reflect the level of service we provide: we now charge double the rate for last-minute (within two hours) bookings, but offer a much better rate if customers book more than 24 hours ahead, which allows better crew planning. With HELM, Svitzer now has a new system that shows a time stamp on jobs. This demonstrates to customers how good we are at on-time delivery and helps them better understand their port operation. When customers know they’re getting more than the base product, we can justify a surcharge based on documented extra service.

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HOW WILL FLEXIBILITY CHANGES AFFECT YOUR TUG AND YOUR CREW?
Changes in tug and crew utilisation will vary from port to port according to operating and business circumstances. We are holding numerous town hall meetings to answer questions about how this will affect your specific port. Ask your port manager about when a town hall meeting will be held at your port.