intertanko payment performance · pdf filetanker chartering, ... the payment performance...

INTERTANKO PAYMENT PERFORMANCE SYSTEM

INTERTANKO

Payment Performance System (PPS)

The Way Forward

PPS: The Way Forward

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PAYMENT PERFORMANCE SYSTEM (PPS): THE WAY FORWARD

https://www.intertankopps.com

DATE: 1 January 2015

Contents

1: Introduction ............................................................................... 3 2: Moving beyond a proof of concept .................................................. 3 3: The need for critical mass ............................................................. 3 4: PPS: Value Proposition ................................................................. 4 5: PPS: Basic Principles .................................................................... 4 6: PPS: Output and Deliverables........................................................ 4

6(a) Comparison of payment performance ........................................ 5 6(b) Comparison of owner’s own data with all Members’ data .............. 6

6(c) $ cost to owner of late payments .............................................. 7 6(d) Best payment performers........................................................ 8

7: PPS: Freight and Demurrage Scenarios ........................................... 9 Scenario A ................................................................................. 9 Scenario B ................................................................................. 9

Scenario C ................................................................................. 9

8: PPS: Data Needs ....................................................................... 10

9: PPS: Next steps ........................................................................ 11 Appendix 1: PPS Technical Specification ........................................... 12 Appendix 2: PPS: Terms & Conditions of use ..................................... 13


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1: Introduction

INTERTANKO is committed to improving the sustainability of the tanker industry and the way you do business. This important focus area forms part of the Association's five-year plan and includes several inter-related initiatives which will provide Members with real, tangible, practical benefits. The initiatives include the use of a Code of Conduct (CoC) in tanker chartering, more cost-effective vetting practices and the use of a monitoring and benchmarking tool for delays in freight and demurrage payments – the Payment Performance System (PPS).

What is PPS in practice and what it can mean for you, our Member?

Assuming you operate a five-ship fleet with each ship fixing once a month and 5% p.a. cost of funds, the average freight/demurrage amounts and delays from our trial database would result in a cost to you of well over USD $200,000 a year.

The idea behind the sustainability initiative and PPS in particular, is to reduce such delays through monitoring and benchmarking such delays and using the results in the dialogue with charterers. If we manage to achieve a reduction of two days in freight payment delays, a Member would save $20,000 a year for a five-ship fleet; and if we manage to halve demurrage payment delays from 120 days to 60, that means a saving of $56,000 a year for the same fleet.

2: Moving beyond a proof of concept

During an initial pilot phase, a bespoke PPS was created and tested using 7,000 chartering data points supplied by INTERTANKO Members.

This confidential briefing note explains what has happened since that pilot study and sets out the next steps in the development of a robust way of monitoring and measuring the freight and demurrage payment performance of the charterers of INTERTANKO Members’ tankers.

Benefitting from the valuable information gained in the pilot study, INTERTANKO now encourages its tanker-owning Members to begin using the PPS and make it an integral part of INTERTANKO's efforts to promote good chartering practice.

3: The need for critical mass

As in the case of INTERTANKO’s CoC, the success of the PPS is dependent on the level of support of key industry stakeholders led by the Association's tanker-owning Members. This strictly confidential database of voyage charter information will enable Members contributing information to access reliable KPI data on payment trends in real time and will at the same time enable INTERTANKO to show evidence of payment performance to stakeholders.


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4: PPS: Value Proposition

The PPS has been designed and developed to provide insight into freight and demurrage payment performance in the tanker voyage charter market. Its ultimate aim is to underpin a behavioural change among the tanker chartering community in the form of demonstrable reductions in the time taken to settle freight and demurrage invoices.

5: PPS: Basic Principles

The PPS is a proprietary database that has been designed by INTERTANKO’s software development partner Tradenet, who provide technology solutions for the maritime and commodity industries. These include examples such as the Market Intelligence Network (MINT), a GIS-based visualisation tool which analyses and presents ship movement and cargo data from a number of industry sources.

An outline technical specification of PPS is presented as Appendix 1.

PPS design and development to date has been governed in accordance with the guidelines set by INTERTANKO’s Council and in full compliance with data protection and anti-trust legislation. Governance also encompasses:

• a strict data security protocol to ensure that the database is only accessible via a unique password control that allows access according to a strict hierarchy of usage.

• Members’ compliance with the terms and conditions of usage set out as Appendix 2.

6: PPS: Output and Deliverables

• A list of the best performing charterers for prompt payment of

freight and demurrage

• Average delays in freight payments

• Average delays in submitting, negotiating and getting demurrage

claims paid

• Comparison of your own data with the average for other

participating members for a specific charterer

• Comparison of a specific charterer’s performance with other

charterers (in compliance with anti-trust advice)

• Comparisons of delays for different tanker sizes

• USD $ cost to you of late payments

• Comparisons of payment performance over time


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Sample PPS outputs are presented (using fictitious data) on the following

pages, including:

6a) Comparison of payment performance 6b) Comparison of owner’s own data with all Members’ data 6c) $ cost to owner of late payments 6d) Best payment performers

6(a) Comparison of payment performance This chart shows where one nominated charterer is positioned compared to all charterers across all INTERTANKO Members.

It also shows (white vertical line on blue vertical line) one INTERTANKO Member's freight payment experience for this nominated charterer (white) in comparison to the performance of the same charterer across all participating INTERTANKO Members (blue) (e.g. in this case, the performance shown is at seven days and, therefore, better than the mean and median averages).


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6(b) Comparison of owner’s own data with all Members’ data This chart shows on the two left-hand bars that an INTERTANKO Member has reported a total of 21 fixtures overall (white) compared to an overall total of 3,045 fixtures (blue) reported by participating INTERTANKO Members for the given period; also that the Member’s demurrage payment performance, at 75 days, is slightly higher than the INTERTANKO Member average.

On the two right-hand bars, the two fixtures reported by this Member with one nominated charterer are, at 230 days, above the INTERTANKO Member average of 155 days for the same charterer.

The chart also shows the time taken to pay by the slowest and by the fastest payer overall.


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6(c) $ cost to owner of late payments The average freight invoice amount in our trial database was $1.2m per fixture with a mean payment delay of 9.32 days. So at 5% annual interest that is $1,532 cost of delay for the average freight.

Based on one owner with a five ship fleet fixing each ship once a month, that is $91,923 a year.

Or basis 3,000 tankers (our membership) fixing once a month, that is $55m.

The average demurrage claim amount in our trial database was $119,473 per fixture with a mean time from invoice to payment of 117.18 days.

So at 5% annual interest that is $1,917 cost of delay for the average demurrage. Based on one owner with a five ship fleet fixing each ship once a month, that is $115,020 a year.

Or basis 3,000 tankers (our membership) fixing once a month, that is $69m.


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6(d) Best payment performers This is the type of graph we have all been waiting for. It shows the charterers which have performed best over a specific period of time. In other words which have paid freights with the least delay, or have settled demurrage with the least delay.


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7: PPS: Freight and Demurrage Scenarios

Three voyage charter scenarios are considered for demurrage:

Scenario A: the demurrage claim is submitted and accepted by the charterer

Scenario B: the demurrage claim is submitted and challenged by the charterer with the negotiated outcome resulting in a settlement at a lower amount than originally claimed

Scenario C: as Scenario B although the outcome of negotiation results in a settlement at the original amount claimed by the owner

It is important to note that time measurement between demurrage invoice submission and payment excludes the time taken to negotiate the amount payable in the case of Scenario B but is included in the case of Scenario C.

A single scenario is considered for freight:

EventVoyage End

DateInvoice Sent

DateDispute Notified

DateDispute Settled

DateInvoice Payment

Date

Time ® ® ® ® ®

x

Delay in paying Delay in submitting

EventVoyage End

DateInvoice Sent


DateDispute Settled

DateInvoice Payment

DateTime ® ® ® ® ®

Delay in paying Delay in submitting

Delay in paying Negotiation

EventVoyage End

DateInvoice Sent


DateDispute Settled

DateInvoice Payment

DateTime ® ® ® ® ®

Delay in submitting x

Delay in paying Delay in payingNegotiation time included

EventVoyage End

DateInvoice Payment

DateTime ® ®

x

Delay in paying


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8: PPS: Data Needs

Thirteen data points are required to support the deliverables outlined in section 6.

We want to make this data transfer as easy as possible for you.

• We can provide you with a standard input format using an Excel spreadsheet.

• We can accept this data in the format routinely used by you and apply a formula to convert it into the format required by the database.

Data point Required for 1 Charterer name* Identifying charterer 2 Vessel name Identifying unique voyages 3 Vessel deadweight Identifying unique voyages 4 Voyage start date

(NOR at first load port) Calculating cost of late payments

5 Voyage end date (hoses off at last disport)

Used as freight invoice date. Also for calculating cost of late payments

6 Invoice amount: freight Calculating cost of late payments 7 Invoice amount:

demurrage Calculating cost of late payments

8 Invoice dispatch date: demurrage

Calculating demurrage payment delays. Also for calculating cost of late payments

9 Dispute notified date for demurrage (if applicable)


10 Claim agreed date for demurrage (if applicable)


11 Invoice payment date: freight

Calculating freight payment delays. Also for calculating cost of late payments

12 Invoice payment date: demurrage


13 Amount actually paid for demurrage Calculating cost of late payments

*NB: given the variation in the use of charterer names revealed during the pilot phase, the PPS will include a dictionary of charterer names. This master list will ensure that voyage charter data is attached to the right charterer.


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9: PPS: Next steps

To ensure that the PPS is populated with sufficient data to enable the generation of meaningful statistics and provide insight into charterer payment performance, the following four steps need to be taken.

1) Agreement in principle by the individual INTERTANKO Member to participate according to terms & conditions of use (see Appendix 2).

2) Engagement between the Member's designated post fixture representative and INTERTANKO's Project Manager to:

a) explain how the PPS works in practice; and to b) create an Excel 'bridge' to enable data transfer into PPS via a portal

on www.intertanko.com.

3) Testing of data transfer to ensure reliable functioning.

4) Go live as basis for on-going usage.

5) Members participating in PPS may wish to include at the bottom of their freight invoices wording to the effect that they participate in INTERTANKO’s Payment Performance System.

For further information or to set up your username and password for the PPS platform, please contact:

Bill Box,

Senior Manager Communications & External Relations, INTERTANKO

[email protected]

+44 20 7977 7023

http://www.intertankopps.com

mailto:[email protected]

http://www.intertankopps.com/


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Appendix 1: PPS Technical Specification

The system will be delivered using web-based technologies, therefore most system interaction will take place using a web browser. A spreadsheet upload feature will be provided for bulk data upload; this will use secure web services to connect to the system.

The system and its support processes will use a number of techniques in order to prevent unauthorised access to data:

• Application-based security control. A username and password combination will be used to secure access to the system. A strong password policy (enforcing the use of complex and sufficiently lengthy passwords) will protect against password guessing.

• Data encryption in transit. All data traffic into and out of the system will be encrypted using HTTP Secure, a web standard protocol for securing data transmission over the internet, as commonly used in ecommerce, online banking and other applications where protection against eavesdropping is required.

• Data encryption at rest. All sensitive data will be stored using strong encryption (Advanced Encryption Standard) in the database. In the highly unlikely event of unauthorised access to the database, the exposed data is meaningless.

• Internal segregation of users and transaction data into Member organisations. Accidental access of one Member’s data by another Member will be prevented by keeping the user and transaction data for each member logically separate within the system.

• Strong data validation and robust procedures for new user access.


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Appendix 2: PPS: Terms & Conditions of use

• The content of the PPS is for your general information and use only. It is subject to change without notice.

• The information is submitted by Members and compiled by INTERTANKO and whilst we endeavour to keep it up to date and correct, neither we nor any third parties provide any warranty or guarantee of any kind, express or implied, as to the reliability, accuracy, timeliness, completeness or suitability of the information found or offered on the PPS for any particular purpose. You acknowledge that such information and materials may contain inaccuracies or errors and we expressly exclude liability for any such inaccuracies or errors to the fullest extent permitted by law.

• Your use of any information or materials on this website is entirely at your own risk and it shall be your own responsibility to ensure that any information available through the PPS meets your specific requirements.

• The PPS and its contents are copyright of INTERTANKO. Any redistribution or reproduction of all or part of the contents in any form is prohibited save that the user may print or download to a local hard disk extracts for the user’s own use.

• Users of PPS accept the Terms and Conditions of use (see Data Licence attached).

INTERTANKO LondonSt Clare House30-33 MinoriesLondon EC3N 1DDUnited KingdomTel: +44 20 7977 7010Fax:+44 20 7977 [email protected]

INTERTANKO OsloNedre Vollgate 45th floorPO Box 761 SentrumN-0106 OsloNorwayTel: +47 22 12 26 40Fax:+47 22 12 26 [email protected]

INTERTANKO Asia5 Temasek Boulevard,#12-07 Suntec City Tower 5Singapore 038985Tel: +65 6333 4007Fax:+65 6333 [email protected]

INTERTANKO North America801 North Quincy Street – Suite 200Arlington, VA 22203USATel: +1 703 373 2269Fax:+1 703 841 [email protected]

INTERTANKO BrusselsRue du Congrès 37-41B-1000 BrusselsBelgiumTel: +32 2 609 54 40Fax: +32 2 609 54 [email protected]

www.intertanko.com

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