The Maritime Executive
There are two key measures central to transforming the maritime industry to increase its sustainability and profitability. In this article, we introduce both of them, E’ (E prime) and C’ (C prime), and we discuss their relevance to operational efficiency, predictability, and strategic competitiveness.
Managing E’ and C’ for shipping success
The world consists of two major ecosystems. The natural ecosystem produces the food we eat. Humans have created a capital creation system that produces the goods and services we consume. Success in the natural system depends upon capturing and storing energy, and we measure success in terms of energy efficiency, which we call E’ (E prime). Those that are efficient at capturing and converting energy survive. Every organization and industry need to raise its E’ in order to create a sustainable society. Energy expenditure is a component of nearly every cost of business. E’ is the invisible fuel, and the resulting savings go directly to the bottom line and enhance sustainability.
Every organization is a capital creation system and has a recipe for converting one of six types of capital (economic, human, natural, organizational, social, and symbolic) to another form or enhancing one form of capital. The transport industry, composed of multiple value-producing organizations, creates economic capital by moving goods from producer to consumer. In so doing, it relies on, for example, human capital (a ship’s crew), economic capital (a ship), and social capital (connections to shippers and shipping agents/port operators). Successful capital creation is measured by capital productivity or C’ (C prime), and in the shipping industry this is influenced by E’ because ships requires large amounts of energy.
Managing a ship requires balancing these two primes. To maximize C’ you want to spend the least amount of time traveling between ports and in ports and carry the largest possible cargo on each leg. In other words, you want to maximize port visits so you can carry more cargo with fewer ships. However, as you are aware, this not a trivial management task, as exemplified by the following challenging questions:
In order to get more cargo, should a ship spend another day in port, or should it sail with a partial load?
Should a captain sail between ports at full speed in order to maximize port visits per year?