Antecedents and consequences of complexity in vessel sharing:
A case study in the offshore oil and gas energy industry
Master’s thesis Written by Saowen Yen December,2020 S4248767 (University of Groningen) 190098685 (Newcastle University)
Total word count: 10,566
Supervised by
Dr Onur Kilic, University of Groningen Dr Jiayao Hu, Newcastle University University of Groningen
Faculty of Economics and Business MSc Technology and Operations Management
Newcastle University
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Abstract
The benefits of resource sharing have been presented in some studies. Applying this concept on offshore logistics could be the resolution for high operations and
maintenance (O&M) cost for the offshore energy industry. The transportation fee is the primary factor that causes high O&M costs. Vessel sharing has been utilised in offshore operations logistics to achieve cost reduction in recent years. However, as some studies revealing that the management of vessel sharing is complicated, it requires an adequate mechanism for management and coordination. It is rare to find a study that is discussing the complexity of managing vessel sharing. This research aims to investigate the complexity of vessel sharing from a real case study which has been running for over ten years at the North Sea. From the case study realises the necessity of building a framework for vessel sharing. Five dimensions are presented to build a generic framework for vessel sharing, including partnership, objective & task definition, resource-, cost-, and responsibility-sharing, coordination and conflicts resolution, and performance and quality assessment. Secondly, the structure of vessel sharing collaboration is displayed. There are three flows regarding information, financial, and service covering the collaboration. They could be deployed flexibly based on the requirement of collaboration. Lastly, the complexity of vessel sharing includes four factors, which are vessel capacity, workload and task scheduling,
weather conditions, and constraints. If one of these factors becomes unpredictable, the complexity might increase.
Acknowledgement
With the great excitement of the time, I would like to thank the following people who have helped me to complete my master thesis.
First and foremost, I want to thank Professor Onur Kilic. Professor Kilic has always been helpful for giving me advice and direction on my research and stepping in while I needed the support. Without him, I could not conduct my research in such a well-thought fashion. During these few months, I had the chance to learn professional knowledge and the proper means of conducting scientific research. It was my pleasure to have him as my supervisor. Secondly, I would like to express my gratitude to Professor Jasper Veldman. Professor Veldman was willing to provide me valuable feedback throughout my project, from pitching the idea to my final colloquium. Moreover, his effort of managing the double degree program has let me and all other students experienced the best quality of learning. Thirdly, thanks to Professor Arijit De, the useful feedback which he kindly provided has taken my thesis to a more mature state.
Furthermore, I would like to thank all the interviewees who had spent their precious time to give me a chance to be in the interviews with me. It has not only helped me to complete my research but also gave me a chance to learn from the best in the industry. Last but not least, I am honoured to be a part of Newcastle University and the
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1. INTRODUCTION ... 5
2. LITERATURE REVIEW ... 8
2.1RESOURCE SHARING ... 8
2.2HIGH OPERATIONS AND MAINTENANCE COSTS IN THE OFFSHORE SECTOR ... 9
2.3RESOURCE SHARING IN THE OFFSHORE ENERGY INDUSTRY ... 10
2.4CHALLENGES OF RESOURCE SHARING COLLABORATION ... 11
2.5CHALLENGES OF VESSEL SHARING COLLABORATION ... 12
2.6STRUCTURE OF LOGISTICS COLLABORATION ... 13
2.7DECISION FRAMEWORK OF HORIZONTAL LOGISTICS COLLABORATION ... 14
3. METHODOLOGY ... 16 3.1RESEARCH QUESTIONS ... 16 3.2RESEARCH DESIGN ... 17 3.3CASE SELECTION ... 18 3.4INTERVIEWEES SELECTION ... 19 3.5DATA COLLECTION ... 20 3.6DATA ANALYSIS ... 22 4. CASE STUDY ... 22
4.1OVERVIEW OF THE VESSEL SHARING CASE ... 22
4.2MOTIVATION FOR THE COLLABORATION ... 23
4.3STRUCTURE OF THE ALLIANCE ... 24
4.4DIFFICULTIES OF THE COLLABORATION ... 25
4.5SOLUTION FOR THE CHALLENGES ... 27
5. FINDINGS ... 28
5.1NECESSITY OF A VESSEL SHARING FRAMEWORK ... 28
5.2STRUCTURE OF COLLABORATIONS ... 32
5.3COMPLEXITY OF COLLABORATIONS ... 35
6. DISCUSSION ... 37
7. CONCLUSION ... 40
8. REFERENCES ... 43
APPENDIX-A- INTERVIEW PROTOCOL ... 47
1. Introduction
Resource sharing is a specific type of collaboration that entails the joint use of an asset among two or more business partners. It is an effective means of increasing the utilisation of available capacity, which in turn leads to significant cost reductions, especially when the demands of business partners are scattered over time (Cao et al., 2010; Gong et al., 2015; Yu et al., 2015).
Operations and maintenance (O&M) are costly in the offshore energy industry due to long-distance transportation and the challenging working environment (Tavner, 2012; Rahman et al., 2019). The efficient use of available resources to perform O&M is hence paramount (Shafiee & Sørensen, 2019). A viable approach to resolve expensive transportation fee is resource sharing and, in particular, the sharing of vessels that conduct logistic operations (Beinke et al., 2017; uit het Broek et al., 2019). Vessel sharing could lead to the cost reduction, robustness, and flexibility of operations and the maintenance of offshore facilities (Boxem et al., 2016).
However, a successful collaboration hinges on suitable means to form a partnership and coordination mechanisms in particular. Vessel sharing under volatile situations is challenging. The manageable variation and stable partnership are important to
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sharing is still lacking, especially lacking on the topic of the complexity of vessel sharing.
Vessel sharing could be implemented as horizontal logistics collaboration (uit het Broek et al., 2019), which is composited by multiple firms and organisations that stand at the same level in the supply chain, to achieve a common goal (Cruijssen et al., 2007). Verstrepen et al. (2009) and Martin et al. (2018) both presented the
decision frameworks for horizontal logistics collaboration, but they are not dedicated for vessel sharing. However, the general concept of their framework could be a reference for this research.
The contributions of this research are threefold. First of all, five pillars for building a general framework of vessel sharing are suggested, in order to increase the efficacy of the overall collaborations. The identified five dimensions cover five key perspectives of this collaboration. They are partnership, objective & task definition, resource-, cost-, and responsibility-sharing, coordination and conflicts resolution, and performance and quality assessment. Secondly, the model of collaboration is discussed. Different structure of collaboration is required for various purposes and projects. Different configurations and coordination mechanism are needed
accordingly. Lastly, the critical factors resulting in the complexity of vessel sharing collaborations are presented. They are overall capacity, workload and task scheduling and weather conditions. Moreover, persistent learning from empirical tasks and experiences could enable an alliance to reduce the complexity in the future.
The following content of this research is structured in five chapters. In section 2, the current studies about resource sharing, vessel sharing, and logistics collaboration are presented. Section 3 illustrates the method through which this research was
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2. Literature review
This section presents the previous studies regarding resource sharing, offshore energy, vessel sharing, and logistics collaboration. It starts with introducing the benefits of resource sharing and utilising this concept on offshore logistics to solve the high transportation cost issue for the offshore energy industry. However, this kind of logistics collaboration is not simple, especially vessel sharing. It needs more research on the complexity and the solution. Three types of logistics collaboration and the frameworks are presented in previous studies. However, the framework for vessel sharing is not found.
2.1 Resource sharing
Assessing the utilisation of resources is an indicator to access the performance of a company (Beinke et al., 2017). In principle, each resource must be deployed to a production or service in the supply chain. Otherwise, if a resource is not able to be fully utilised, the rest of the capacity may become idle but still cost consuming
(Saygin & Tamma, 2012; Freitag et al., 2015). A proper plan to manage the utilisation of resources could facilitate the avoidance of the idle capacity of a resource and eventually reduce the likelihood of negative performance. Sharing resources with companies that lack resources is a potential solution to avoid idle resources (Freitag et al., 2015).
resource so that they can share the capacity of joint resources. When the costs of sharing capacity and the delay costs become lower than using the asset individually, the allied firms can receive the benefits of resource sharing (Cao et al., 2010; Yu et al., 2015). Firstly, it can enhance the utilisation rate of resources to avoid idle
capacities (Gong et al., 2015). Secondly, resource sharing can improve service quality by using the same amount of capacity of the resource. Alternatively, the same level of service can be achieved by using less capacity of resources (Yu et al., 2015).
Moreover, the collaboration for resource sharing could prompt companies to reallocate the resources to as close to the optimal level as possible (Schrotenboer et al., 2018; Leuschner et al., 2013).
2.2 High operations and maintenance costs in the offshore sector
Offshore wind energy and offshore oil and gas energy are two primary energy
businesses in the offshore sector. They all have high O&M cost. First of all, downtime loss is one of the primary factors that lead to higher costs in offshore wind farms (OWF). Compared to an onshore wind farm, turbines in an OWF have relatively more downtime, and this eventually results in a higher downtime cost (uit het Broek et al., 2019). Moreover, the longer transportation distance and the higher utilisation fee for using service vessels are two common difficulties that result in a high O&M cost for OWFs. The same can be said for offshore oil and gas (OO&G) platforms. Since the distances of the OO&G platforms are mostly far from the shore, the transportation fee is high, and it is relatively more challenging to conduct the offshore service,
comparing to onshore facilities(Rahman et al., 2019).
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conditions (Hansen, 2019; Boxem et al., 2016). However, as offshore facilities increase, the resources become more limited. It should be utilised efficiently to prevent idle capacities of the offshore resources (Schrotenboer et al., 2018). It is therefore essential that the resources that are required for offshore services should be utilised efficiently.
2.3 Resource sharing in the offshore energy industry
The benefits and the concept of applying resource sharing have been suggested in some studies. Sharing offshore resources could bring better robustness and efficiency and also provide flexibility for companies to cope with an unstable supply and
demand (Boxem et al., 2016). The first suggested step is to define the assets to be shared. During the installation phase of an offshore facility, there are different transportations, warehouses, and equipment that can be chosen as the resource to share (Beinke et al., 2017).
advantage of the economics of scale as more parties share the fixed cost (uit het Broek et al., 2019).
In addition to the financial benefits, vessel sharing can benefit the environment due to reducing travel distances as well. If the sailing in a vessel sharing collaboration is designed efficiently and there is more than one company included in one sailing, travel distances can then be reduced in comparison to companies chartering individual vessels. Greenhouse gas emissions can thus be reduced (Basso et al., 2019; Sanchez Rodrigues et al., 2015).
2.4 Challenges of resource sharing collaboration
As competition in most industries is increasing globally, the ability to respond to changes and perform better in supply chain system has become important. Some companies are eager to collaborate with others to improve their competitiveness. However, this is dependent on companies' ability to negotiate and coordinate with partners (Arunachalam et al., 2003). Communication and coordination are two important factors that could further significantly affect the performance of
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Singh, 1998). An adequate mechanism could enable collaboration to become more efficient.
Developing a partnership for a collaboration of resource sharing should consider multiple factors from different perspectives. Demand rate, delay cost, and service demand level are a few common factors that should be taken into account when forming collaborations. For example, the amount of capacity that is going to be shared is determined based on the delay costs and the required service levels of all involved participants (Yu et al., 2015; Dyer & Singh, 1998).
2.5 Challenges of vessel sharing collaboration
There are different factors that can affect the efficiency and performance of vessel sharing. Looking for the optimal size of collaboration is a common issue in a vessel sharing partnership. If there are too many parties in an alliance, the utilisation of a resource is less flexible. This may lead to extra delays for future work, and the downtime cost might increase. Moreover, more partners in an alliance increase the complexity to manage the collaboration, as it could lead to conflicts (uit het Broek et al., 2019).
Difficulties in negotiation and coordination may also be present in vessel sharing collaborations. Some policies should be designed to adequately manage vessel
levels (Basso et al., 2019). The demand for a resource is varied in an alliance, and the utilisation of each partner is different. It is therefore often unreasonable for each partner to pay the same amount in an alliance of resource sharing. An appropriate cost allocation should be fair for every participant. This helps to prevent opportunism from occurring within a partnership (Yu et al., 2015).
Furthermore, another typical challenge that transpires in resource sharing
collaborations is the issue of service prioritisation. If multiple devices require the same resource at the same time, prioritisation issues emerge (Saygin & Tamma, 2012). A simple way to determine the sequences for getting service is the "first come first served" policy. However, in reality, this might not be suitable for every resource sharing collaboration. For example, it might not be the optimal policy when there are multiple companies with different service level requirements and delay costs (Yu et al., 2015). This topic has also been discussed in vessel sharing. The prioritisation can be affected by different service requirements (uit het Broek et al., 2019)
2.6 Structure of logistics collaboration
In principle, collaborations are developed in different structures which are vertically, horizontally, or in lateral (Simatupang & Sridharan, 2002). Vessel sharing is
horizontal logistics collaboration which is allied by multiple offshore service providers (uit het Broek et al., 2019). This type of supply chain collaboration
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vertical collaboration since they do not rely on each other's inputs to complete the tasks. Instead, they share the same resources. Therefore, horizontal collaboration should develop a series of rules as a governance mechanism to ensure the bond between partners (Rindfleisch, 2000).
2.7 Decision framework of horizontal logistics collaboration
The process of resource sharing has been suggested by Gong et al. (2015). They suggested four steps to form resource sharing, which are setting the goals, recognising the resources, obtaining the resources, and maintaining resources (Gong et al., 2015). However, it might be too general to apply it on vessel sharing due to the unique working environment the offshore sector has. There was no framework designed for vessel sharing collaboration found while conducting this research.
Vessel sharing is horizontal logistics collaboration (uit het Broek et al., 2019). Two relevant extant studies that suggest frameworks for horizontal collaboration were found during this research. Verstrepen et al. (2009) suggested four steps (strategic positioning, design, implementation, and moderation) for the decision framework. Martin et al. (2018) also presented a decision framework (see fig 2.1) which was built on Verstrepen et al. (2009), including orientation, partner selection, negotiation, implementation, and management. Martin et al. (2018) emphasised the importance of the partner selection and negotiation by treating them as two individual steps instead of two dimensions of the design phase (Martin et al., 2018; Verstrepen et al., 2009). Although the framework presented by Martin et al. (2018) is not dedicated to vessel sharing, it could act as a reference for this research.
The whole framework is continuously evaluated to ensure the collaboration is on track. Orientation refers to the opportunity for collaboration. A company has to realise the need for collaboration before they can start to work on it. Searching for a partner to collaborate with is the next step. There are four criteria that have been proposed for selecting a suitable collaboration partner. According to Breedam et al. (2005), the four key factors that should be considered for selecting a partner are trust and engagement, operational fit, strategic fit, and cultural fit (Breedam et al., 2005). The trust and engagement of each participant are required to reach their common objective
(Francesco et al., 2015). This dimension is utilised to avoid opportunistic behaviours and evoke mutual responsibility within the partnership (Martin et al., 2018).
Operational fit requires the assessment of the physical characteristics of partner firms. The physical attributes of companies must be compatible so that the partnership can work adequately (Breedam et al., 2005). Furthermore, a compatible organisational ability and strategy could increase the strength of the collaboration (Breedam et al., 2005). The commitment between partners may then increase because of the
complementary capability (Francesco et al., 2015; Naesens et al., 2009). Lastly, as collaboration requires two or more than two firms to work closely together to achieve a common objective, it is necessary to assess the compatibility of each company's cultural aspects. This will facilitate the stability of the collaboration (Martin et al., 2018).
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can function appropriately under a comprehensive mechanism. It should be able to ensure that the activities, costs, and benefits are balanced and equal by having a consensus in the negotiation phase of the alliance (Verstrepen et al., 2009). After each partner consents the decision, the content that is established in the contract should then be implemented. This process requires adequate information and a
communication system. In order to ensure that the collaboration can keep functioning, management is the next step. This helps to prevent opportunism, failure, and ensure that the collaboration can achieve the common objective (Martin et al., 2018).
3. Methodology
Although vessel sharing researches are still not popular, such collaborations are not uncommon in offshore O&M fields. This research is based on an industrial case study of vessel sharing collaboration for oil and gas platform logistics in the southern North Sea region. Data is collected from four interviews. The interviewees all work in a 4th party logistics company which takes part in the vessel sharing collaboration. The data analysis and summarised data can be seen in Appendix C.
3.1 Research Questions
implementation (Basso et al., 2019; uit het Broek et al., 2019). However, the reason results in the complexity and the means to manage the difficulty and complexity is still lacking with research. It is worth to explore and bring new insight to the offshore logistics field. Accordingly, this research aims to discover the causality of the
complexity and the methods to manage the complexity by focusing on the questions below.
Research questions
1. What are the antecedents and consequences of complexity in vessel sharing? 2. How should the complexity be managed?
3.2 Research design
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The case study research method is a suitable research method for this paper because the purpose of the case study research method is to form the phenomena from real cases (Zaidah & Zainal, 2007). An entire case study can provide an in-depth
understanding and reveal the phenomenon for the processes of vessel sharing and the difficulties of management. The aim of this research is indeed the purpose of the descriptive case study method, which is utilised to illustrate the description of a phenomenon (Eisenhardt, 1989). This research followed the steps proposed by Stuart et al. (2002) to conduct the case study, which is specific for operations management case study research (Stuart et al., 2002).
3.3 Case selection
A real vessel sharing case is required for this research. Two criteria have to be reached to be a suitable case. Firstly, it must be a matured project. The information about the structure and the content within the collaboration would be complete and rich. Besides, there might be some critical factors in the case which are noteworthy, since they can successfully run for a long time. The experiences of coping with the challenges are vital information for this research. Secondly, it has to be still an ongoing project. It is appropriate to select an ongoing case so that the phenomenon under observation is state-of-the-art.
the new technologies and past experiences. It is a suitable case for this research to explore the means to collaborate, the challenge they met, and the resolution they applied.
3.4 Interviewees selection
Since this study is built on researching a single case deeply, the interviewees should all participate in the same vessel-sharing projects. Moreover, interviewees should work in different positions. The intention is that they would all have differing views on the same subject so that the collected information would be comprehensive.
Therefore, by analysing their different concerns and reasoning, the information would be helpful for the researcher to understand the case better.
Four interviewees from a 4th party logistics company participated in the interviews as described in table 3.1, including a business manager, a project leader, and two
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the planners. Two planners who are responsible for planning both routes for sailing and the offshore activities participated in the interview. The collected information is regarding the implemented vessel sharing process and what the daily running looks like. This information is useful to discover critical factors for management. Other than detail about their work scope, all interviewees also indicated the challenges that they met during the collaboration. They demonstrated different solutions that they could provide in relation to their management level.
3.5 Data collection
In accordance with the defined research questions, this study targets on collecting data to understand the formulation of the alliance as well as its operation and challenges. Therefore, a comprehensive project report that provides a detail description of all the activities, organisational processes, and the primary components of vessel sharing collaboration are all essential. However, due to the concern of commercial
confidentiality, these documents are not accessible. This research utilised the interview method to collect the necessary information. Developing the interview protocol (see appendix A) is the first step in collecting the data. Since the required information had been roughly determined, semi-structured questions are designed for
this research to collect the necessary information. The semi-structured interview method is suitable to collect data about complicated activities and experiences. The responses from different interviewees contain different opinions and experiences from different perspectives. The discrepancy within them is worth to explore to complete the information (Longhurst, 2010). The predetermined questions can ensure that the responses from the interviewees are on track while retaining flexibility for their responses (Bartholomew et al., 2000).
The interview protocol consisted of 23 semi-structured questions covering information about the participants’ backgrounds, their understanding of vessel sharing, the structure of the case, the process of collaboration, and the challenges of collaboration. Alongside the questions, the background of the research was also included in the protocol. The interview protocol was designed to ensure that the interviews could be conducted precisely.
The interview was carried out by the following steps to gather the data and documents as designed. The interview protocol was provided to interviewees in advance to inform them of the research topic. All interviews were conducted within one month, and each interview took approximately one hour. During the interviews, all
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3.6 Data Analysis
Before analysing the data from the interviews, the transcripts were trimmed to remove irrelevant content. The data then became apparent and were ready to be organised. In order to group the data into a story, a pattern of the responses was first found. The pattern was built by the code of the data and the theme of the data (see appendix B). Coding the data is to identify the information that is relevant to the same topics. The similarity between these topics is then grouped into a theme, and relevant themes are grouped into a dimension. The pieces of information were therefore amalgamated based on their relationship and interaction into a complete story. Additionally, the data from the documents were utilised to support the findings from the interviewers. The final step was to combine all data and summarise the information to explore the knowledge in it.
4. Case study
The detail of the case is illustrated based on the collected information in this section, including an overview, the motivation behind the collaboration, the structure of the alliance, and the challenges and solutions of the collaboration. All the descriptions of this case are forming from the summarized interviews data (see appendix C).
4.1 Overview of the vessel sharing case
operations of collaboration were managed and coordinated by a logistics company, which acted as a facilitator in this collaboration.
4.2 Motivation for the collaboration
The offshore service providers in the collaboration wanted to collaborate due to the benefits of cost reduction and increased flexibility. Since the sizes of each operator were different, the idle capacity of a vessel was frequently emerging for the small size operators. The small operators did not have sufficient work to hire a vessel, so there were excess decks and long vessel idle times. Although the operators did not use the full capacity of the vessel, they still had to pay for it. Therefore, they wanted to
collaborate with other operators to cover these excess idle capabilities. In other words, they wanted to reduce their costs by reducing idle capacities.
Furthermore, the operators can utilise the vessels more flexibly because more vessels can be used in the coalition in comparison with one company hiring a vessel by themselves. The operators can cope with uncertainties by using resources flexibly. When urgent demands or accidents happen at the platforms, the alliance can still send
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a vessel to satisfy the requirement. In contrast, if an operator only hired one vessel, it would be more difficult to find an additional vessel for urgent requirements.
4.3 Structure of the alliance
There are three different roles with varying responsibilities in the alliance: operators, facilitators, and the steering committee. Their relationship is displayed in fig. 4.2. The primary goal of each participant in the alliance is to ensure that the cargo can be delivered to the right place at the right time with an efficient route and schedule to minimise the total costs.
Nine operators who provide services for OO&G platforms joined the collaboration. They service more than 100 platforms in the North Sea. They need vessels to transport the required equipment and components for their services. These requirements are passed to the planners in the logistics company, whose job is to arrange the schedules and plan the routes. In general, the operators should provide forecasts for their future demands and schedules to the planners. Besides, they should also provide information about the operational status of the OO&G platforms. For instance, the operators should pass on information about the shutdown of the facility
or other unordinary situations. They must also prepare their cargo and stand by for departure.
The responsibility of the facilitator (the 4th party logistics company in this project) can be divided into three categories: routes and schedule planning, monitoring, and cost allocation. Firstly, the facilitator collects the forecasting data from the operators to plan efficient routes and schedules for sailing. The planners monitor the process from ground transportation to the unload at the platform to avoid interference. However, the predetermined plan is easily affected by weather conditions, which may result in delays or urgent requirements. The planners should provide a solution to adjust the plan and to prevent the vessel's journey from interference.
The performance is assessed based on key performance indicators (KPIs). If the performance is below the standard, the planner must investigate what the problems are and propose solutions. In the role of a facilitator, provide suggestions and opinions based on their professional knowledge, experiences, and historical data to the
operators. Then the operators will make the decision. Another scenario is that if the planners cannot solve the problem, it will be escalated and passed to the steering committee. The steering committee is a group responsible for the supervision and making the operational decision for the alliance.
4.4 Difficulties of the collaboration
The planners designed fixed routes as efficiently as possible for the regular
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negotiation and coordination. Firstly, if there is any change regarding sailing and schedule, this may lead to delays for others. Since there are multiple operators' cargos on a vessel, more than one operator will be affected by the change. Additionally, if there is urgent cargo, an extra vessel might be required to deliver the urgent cargo and ultimately increase the overall cost.
Secondly, service providers may feel that the replanned schedule is not fair for their company. This can result in demand conflict, which denotes two or more operators having requirements for the vessels at the same time, but the capacity of the vessels is insufficient. Lastly, the discussion and negotiation for changing a sailing plan
frequently happen in the offshore environment. Negotiations are not always easy to conclude because most of the operators are selfish to protect their benefits
individually.
The reasons for sailing plans being changeable can be categorised in two parts: the force majeure factor and the man-made factor. The force majeure factor generally denotes changes in the weather conditions. Vessel sharing strongly relies on weather condition. Vessels can only sail under the proper weather. In addition, force majeure also relates to accidents. Each operator provides services for many offshore facilities, and no matter the size, they all must be supplied. Therefore, if an accident occurs on any facility of them, there may be urgent demands that eventually affect the regular sailing plan. These two eventualities belong to the force majeure factor.
On the other hand, the second category for which sailing plans may change involves the actions of service providers themselves. The sailing plans and activities are designed based on the forecasts provided by service providers. However, it was frequently possible to ascertain an error or a difference between reality and the service providers' demand requests. Firstly, if service providers do not look far enough
forward for their forecast, this can make the information unreliable because the forecast is not comprehensive. Secondly, a lack of communication between the departments in the operator's company can decrease the quality of information. A forecast is generated from multiple data sources. Different departments in
collaboration's companies should exchange their information to generate the forecast. These human-made factors can result in differences between forecasting and reality.
4.5 Solution for the challenges
In general, the best practice to avoid the challenge is having regular demands and efficient plans. Since the forecast is the input for planning the routes and arranging the activity, its accuracy is essential. The planners had to validate the quality of the
information provided by the operators. They always checked the data with the operators and assessed the accuracy based on the historical data. If the operators frequently provided low-quality information, the steering committee investigates the problem.
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Therefore, planners would try to provide a cost-wise solution to avoid interference from regular sailing.
Ideally, there were some extra spaces on the remaining vessels as a buffer. If the spaces of a vessel were not enough, they would negotiate with the operators for the possibility of postponing. If no one was willing to postpone their shipments, the planner might hire a spot vessel to deliver the cargo. The extra vessels were utilised to avoid interference with the regular schedules, yet it could increase the eventual
overall cost. In general, there were still some operators willing to compromise for delaying their cargo because the steering committee reminded them that the concept of the alliance was to help each other lower overall costs. As a result, some operators did not want to spend additional money on hiring an extra vessel.
5. Findings
The core value of vessel sharing collaboration is to achieve cost reduction more as a group than as individual members. Similar to other successful cases, collaborations in the industry have also become typical to achieve better operational profits. The case study explored in this research illustrates effective approaches for vessel sharing collaborations, although there is no single recipe for making collaboration work. In addition to the benefits, models, and complexity of vessel sharing, some drawbacks to avoid are also be highlighted in this chapter.
5.1 Necessity of a vessel sharing framework
have better reliability. Simply speaking, in comparison with owning a vessel without a significantly high utilisation, the vessel sharing is much flexible, scalable, and economical. Moreover, when there is any unplanned vessel requirement or when unexpected schedule delays occur, vessel sharing collaboration is able to reduce the impact through the dynamic arrangement. The planning for these goals is a highly complex process because of the involvement of various parties in the offshore service supply chain.
An effective collaboration framework can be constructed by using five pillars, in order to target the common goals: partnership, objective and task definition, resource sharing, coordination mechanism, and performance assessment. This study focuses on vessel sharing instead of broader resource types. The primary tasks and key factors of each pillar that are identified in this study are listed below and illustrated in figure 5.1.
1. Partnership: The objective is to team up partners to accomplish a mission effectively. The qualifications of collaborators, such as capability, geographical positions and financial health, should be clearly identified. From the case study can realise that the location of the platforms directly affected the overall cost and the routes planning because sailing time increases with distances. The long transportation distances result in higher costs. Secondly, assessing the criteria of the financial health of the potential partner is applied to ensure the new operator could be reliable on affording the cost because the cost of the partnership was divided to every operator.
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collaboration. The means to develop trust between partners is setting up a fair and transparent mechanism to ensure the right and interest for every partner.
Additionally, many uncertainty results from human behaviour or weather condition could bring changes to collaboration. At that point, the mindset of helping each other to achieve the common goal is necessary for rapidly generate an efficient solution.
2. Objective and task definition: According to the workflow of serving offshore facilities, major tasks encompass the job definition and implementation, work assignment and costs distribution rules, performance assessment and indicators, vessel assignment policies, progress tracking, and change management methods. Defining the objective of the collaboration and distinguishing the task to each participant helps the participants having a clear idea about how to work toward success. The guideline and the assessment for the performance help to ensure the collaboration can achieve success.
3. Resource-, cost- and responsibility-sharing: This pillar ensures that tasks are fulfilled with fairness. The case study reveals that the discussion for the cost allocation, liability distinguishment, resources management, and rules for
management includes the list of the suppliers, the uniform charter for the vessel, rules for using the vessels. Besides, it is necessary to develop a rule to protect the right and interest for each participant from the opportunist.
4. Coordination and conflict resolution: In addition to established policy and guidelines of collaborations, decision-making and conflict resolution mechanism are also indispensable for the efficiency and benefits of collaborations. A well-defined model serving accident and change management, uncertainty reduction, and dispute settlement must be in place. In the case study, the principle of generating the solutions is making cost as low as possible and try to avoid interference the regular sailing. The most important is that the solution should be approved by every operator.
5. Performance and quality assessment: Routine inspections of KPIs to rectify deviated processes in time or to investigate performance bottlenecks actively is
the usual approach.The measurement could utilise as a proactive warning to
remind the adjustment for deviation, to minimise the cost of failures, and to maximise vessel utilisation. Moreover, the lower risk of each project and a shorter turnaround time of key resources and accurate information providing are
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Effective collaborations rely on trust, shared vision, partnership, and apparent policy, similar to other collaboration. Cooperation and coordination are key determinants of collaborative success (Gulati et al., 2012). The proposed collaboration dimensions are generic and can be adapted to other vessel sharing cases. The sequences are flexible, but all of the dimensions and factors should be taken into account for the vessel sharing collaboration.
5.2 Structure of Collaborations
In principle, according to different structures of cooperation, collaborations are developed vertically, horizontally, or in lateral (Simatupang & Sridharan, 2002). In offshore service logistics, different parties are involved, including the operators, vessel company, facility owners and facilitators etc. Horizontal collaboration refers to ally service providers which provide similar services for offshore facilities. Vertical collaboration addresses the whole workflow of the logistics and coordinate partners of all parties. Lateral model is a mixed case of vertical collaboration and horizontal collaboration.
Fig. 5.1 Five pillars of critical factors for forming a vessel sharing collaboration.
3. Performance assessment and indicators
According to the case study, collaborations ensure that the efficiency level of each vessel mission is assured by a fixed route and a task in each trip. Additionally, the idle capacity of a vessel can be minimised by the dynamic arrangement of vessels on demand. The optimisation of the profits and vessel utilisation is achieved collectively by taking into account all shared vessels and demands from all partners. Moreover, each operator does not have to be responsible for caring for the complex optimisation process individually, but the whole entity instead.
Vessel sharing collaborations for offshore logistics is a relatively complex problem. The tasks such as the optimisation of vessel arrangement according to planned workloads and tasks, best route planning based on weather and oceanic environment (which are constantly changing), and urgent trips for repairs and transportation are all intricated, not to mention managing the change and accidents. Besides, knowledge sharing and the experience of all partners are essential to the collaboration, which should be able to tackle complex tasks.
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requests, deliveries, statuses, downtime, and other general information about services and products. The design of these systems depends on the collaboration model. In practice, a generic logistic collaboration architecture for offshore facility logistics can be depicted as fig 5.2.
It can be seen from the case study that this model of collaboration is not pure horizontal logistics collaboration because it includes a neutral party logistics company. The case study revealed that daily operational management relied on a neutral logistics company. They facilitate the partner to collaborate mutually and also ensure the neutrality of management on service flow, information flow, and financial flow. Besides, since they provide plans, solutions and advises from a neutral and objective perspective, it could reduce the difficulty of negotiation for fairness, and also prompt the trust for partners. However, this role is not necessary to exist in every vessel sharing collaboration, as long as all participants trust each other and the
mechanism to manage the information flow, the financial flow and the information flow is steady and comprehensive.
5.3 Complexity of Collaborations
Collaboration is the principal to the success of vessel sharing. Complementation, alliance, common goals, and trust are the critical factors of collaborative success. The complementary partnership leverages different strengths from partners. Alliance leads to greater achievements by working together. Common goals ensure objectives are achieved efficiently. Trust results in the synergy of best efforts from all partners. In practice, all projects must be accomplished within a limited budget and timeline and to a good standard. Unfortunately, for offshore logistics, unexpected bad weather conditions and failures of facility and vessels are not unusual, and they could influence the efficiency and the performance of collaboration.
The primary components of the complexity of vessel sharing collaboration can be split into four dimensions according to this case study: 1) vessel capacity, 2) workload and task scheduling, 3) weather conditions, and 4) constraints on cost, timing, and quality. When one of these factors becomes unpredictable, the complexity will increase. The collaboration must minimise the impacts on cost, schedule, and quality while assuring the benefits. On the other hands, the alliance can keep improving based on accidents, failure, and other tasks to innovate their collaboration.
The alliance needs to sustain an optimal size and setting of collaboration. The
workload and the capacity of vessels should be balanced to remain cost-effective and efficient collaboration. There are three types of vessel scheduling: planned,
unplanned, and urgent. Finishing a task with a steady schedule and efficient route is ideally. For an unplanned task, a buffer must be available for such resource
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arrangements may be required. The best practice in the case is that fixed routes are designed for a regular voyage because this is the most efficient arrangement.
Whenever a vessel's schedule is changed, a conflict of vessel demands from operators occurs. Change management and effective negotiation and resolution mechanisms must thus be in action.
Workload and tasks can be scheduled, urgent, changed, or delayed. The ideal scenario is the tasks can be accomplished on time. However, an accident on a platform or a failure of a facility causes urgent tasks. The differences between a plan and actuality can lead to change for a predetermined task. Then the unexpected situations might induce delayed tasks, such as longer voyages or longer offshore service time. The tasks not scheduled as plan increase the complexity of collaboration. Weather condition is normally a big factor when in regard to changes for offshore
transportation. Although the accuracy of weather forecasts is increasingly improving, the impacts of the weather are still unavoidable, especially in the ocean and for extreme weather.
practical solution, as learned from the case study. Lastly, the complexity could also be reduced by keeping identifying new solutions that can benefit all collaborators by improving and innovating solutions based on new requirements and solutions from the industry.
6. Discussion
Collaboratively vessel sharing perform better than non-sharing models in terms of average cost and efficiency. Coordination and negotiation are necessary to receive the benefits from the collaboration (Beinke et al., 2017; uit het Broek et al., 2019). The case study of this research demonstrates how they take advantages of such
collaborations. However, an effective vessel sharing relies on a well-designed collaboration framework, as explained in the previous section.
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prevention of mistakes, early warning of anomaly and failure, efficient planning, and workflow bottlenecks is also key to improve the ability to manage the complexity.
Moreover, each vessel sharing project has various optimal settings and requirements. Finding out the trade-off between cost and efficiency under constraints is typical for offshore operations logistics (Norlund & Gribkovskaia, 2017). A fixed route approach is applied initially under normal conditions. For an offshore logistics project, the best route of each vessel should be chosen by evaluating all feasible routes first, due to the changing nature of the weather, every feasible route has to be verified repeatedly and periodically. This was also already be suggested in a previous study (Fagerholt & Lindstad, 2000). However, it might not be enough to assure the efficiency of vessel sharing. Another issue learned from the research is the importance of change
management. Unexpected changes or failures usually induce extra cost or disrupt the whole project. When the change or failure is not avoidable, its impact has to be mitigated as soon as possible. Therefore, the swift measures such as a dynamic arrangement of vessels, routes, scheduling and task assignment have been put into practices according to the case study. Systematic review and redefinition of standard operating procedures, as well as the predetermined plan of backup solutions for key tasks and components, are all essential.
efforts and knowledge. The policy and guideline are defined by all collaborators. Fair rules of benefits and costs allocations should also be included in the collaboration, which is helpful for trust-building (Cao & Zhang, 2011; Tejpal et al., 2013). Besides, it is important to acquire the transparent status of a project by observing the KPIs of the operational aspect as can be seen in the case study. It can increase the efficiency of managing collaboration and communication. The efficiency can lead to cost reduction. Besides, it can indicate the overall performance of the alliance regarding the possibility of achieving the common goals (Ariño, 2003). All these should be included in the collaboration framework to enhance the overall efficiency
systematically.
The structure of the collaboration framework has to be determined by the way to achieve efficiency goals. There are two parties (service providers and a 4th party logistics company) in this case study directly involving in the collaborations on complex offshore logistics, and other two indirect parties (vessel owners and OO&G platform owners) which are the stakeholders of the direct participants. A neutral party in charge of managing the collaboration is mentioned in this case study. It is
influential in conflict resolution and effective coordination, as presented by previous studies (Cruijssen et al., 2004; Sitadewi et al., 2020; Rodrigues, 2019). However, because of the limitation of the data, the necessity of a neutral party cannot be
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Quantitative analysis model development is feasible to deeper understand the correlations between those key complexity factors if enough data for analysis is available. An operational model for measuring the efficiency could be developed based on indicators such as an accurate forecast of resource availability and the demand, quality of tasks, efficiency gains, the amount of cost reduction, and balance between demands and supplies. Systematic data monitoring on all key components in the workflow regularly is the foundation of the data source. For instance, periodic preventive maintenance could be scheduled based on the meantime to failure. Metrics corresponding to those common goals of the vessel sharing could be built and
monitored. Intelligent control for efficiency optimisation could be established accordingly as the next step.
7. Conclusion
In the offshore energy industry, high O&M and installation cost has been a challenge for years. The efficiency of offshore operation logistics needs continuous
improvements. Especially, it needs evolving with the advance technology and
knowledge as well as changing environmental conditions. Vessel sharing has become more common as the consequence of cost reduction and increased flexibility. A few previous studies suggested that vessel sharing need adequate management and a coordination mechanism to prepare for dealing with the complexity and maximising the benefits. However, there are not many discussions about the causality of
complexity that emerges in vessel sharing collaboration and also the solution. This research is hence aiming to answer the two questions:
This is a single case study research. Based on the research design and the method to conduct this research, the contents and structures of vessel sharing and the dimensions of complexity are summarised from the interviews of four experts from a 4th party logistics company on projects in the southern North Sea region. The findings were explored from the analysis of the information.
Primary contributions of this study are threefold: 1) Collaboration framework for vessel sharing is necessary, and five pillars of the framework are highlighted,
including partnership, task definition and assignment, resource sharing, coordination mechanism, and performance assessment; 2) Collaboration structure depends on the means of managing information flow, financial flow and service flow. It is adaptable to deploy the structure based on various requirements and partnership; 3) The
antecedents of the complexity of vessel sharing are presented. Four main factors of complexity are categorised, which are vessel capacity, workload and task scheduling, weather conditions, and constraints. If one of the factors become unpredictable or change, the complexity will increase. It is significant in reducing complexity by constantly monitoring the KPIs of collaboration and learning from each task and sailing.
Increasing the capability of matching demands and supply by leveraging collaborative resources while being agile to cope with unexpected changes due to weather
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information flow, financial flow, and service flow, the collaboration could be accomplished efficiently by the appropriate type of collaborations and the engagement of proper partners.
This study is carried out based on qualitative research methods. When more data of KPIs and routine monitor data are available, the correlations of those determinants with the efficiency of vessel sharing collaborations could be explored quantitatively and systematically. Constant collecting the parameters from key components are instrumental in the optimisation of efficiency. Insights from the data of each project will be the knowledge for driving the continuous improvement of the collaboration efficiency.
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Appendix-A- Interview Protocol
1. Background:
High cost for installation and O&M is the significant challenge of offshore wind farms, especially the cost of using service vessels. To minimize the cost, sharing vessels between service providers could bring a certain extent of cost reduction. However, the limited amount of service vessels could lead to competition between offshore wind farm and offshore oil and gas platform due to their similar background. Regardless, these two industries should collaborate on vessel sharing to bring out synergy, instead of competition.
Vessel sharing can be seen as a horizontal collaboration, and it is not a comfortable collaboration due to uncertainty and complexity. They make the implementation unpredictable. Therefore, the alliance should have a well-designed plan to increase the convenience for implementation and management, then ultimately increase the
efficiency for the collaboration. 2. Research Design:
Martine et al. (2018) presented a novel decision framework for horizontal logistics collaboration which includes five steps (orientation, partner selection, negotiation, implementation, and management). This research follows this framework and focuses on partner selection and negotiation phases. However, the applicability of applying this to vessel sharing is still haven’t tested. Accordingly, the interview data will be analysed then be combined with the existing universal framework into a vessel sharing collaboration specialized framework.
3. Interview Questions:
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1. Could you describe your tasks and your position in your company?
i. How long have you worked in the company or related industry?
2. Could you describe what is vessel sharing for you?
i. What is your understanding of vessel sharing?
ii. What is different between vessel sharing and other horizontal logistics collaboration? Why?
iii. What is your experience on vessel sharing project? 3. Could you describe the project of you participated?
i. What was the structure of the project? (scope, size, partner, resources) ii. What was the motivation for the project?
4. Could you describe the alliance?
i. How did you select your partners?
ii. What was the relationship between you and your partners? iii. How did you think about working with your partners? 5. Could you describe the preparation for forming collaboration?
i. What were the steps to forming collaboration?
ii. Which was easy and which was complicated? Why?
iii. Was there any conflict emerging between you and the partner? What is it? iv. Could you provide critical factors that must be considered in the preparing
phase? Why are they necessary?
6. Could you describe how do you communicate and negotiate with your partners?
i. What was important that must be discussed?
ii. Was it hard to have a consensus? If yes, could you describe what were barriers to make the consensus?
iii. How did you allocate the entire cost generated by the collaboration? 7. Could you describe the implementation of the project?
i. Was it difficult? If yes, what was the difficulty of implementation? Why did
it happen? What was the impact?
ii. How did you determine whether the project is a success or not? How did you assess the performance of the collaboration?
8. Could you describe the benefit you gained from the alliance?
i. What was the benefit?
9. What is the cross-industry vessel sharing collaboration for you?
i. Do you think it is a feasibility plan? Why?
ii. Is there any difference between cross-industry collaboration and single-industry collaboration?
