Ship Management: Regulations, Outsourcing, and Pooling Strategies
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Introduction - Maritime Industry Regulations and Relief Material Supply Chain Management
1. Explain how shipping customers regulate ship safety and environmental performance.
In the maritime industry, it is very important that safety is undertaken correctly and maintained. management of safety regulations and proper implementation of them. The maritime sector has plenty of codes, regulations, guidelines as well as conventions that ensure the proper boundaries are drawn for safety measures and that there is efficient shipping (Hirata, 2019). Recent years have seen rapid growth in technology, advancements made in design, propulsion, and size, and safety. The maritime industry has therefore invested a lot of time and resources in ensuring that these regulations related to shipping are maintained and followed.
International shipping is a popular form of trade between countries and has a great contribution to the economy at large. Trade conducted internationally is given more opportunities to expand. It has also provided firms with the ability to become global and explore brand new potentials in countries with untapped resources. The process of international shipping, therefore, involves selecting the correct shipping partner, making a comprehensive list of the details of shipments, and being very well aware of the international laws and conventions (Halff, 2019). But perhaps, most important of all is the extensive system of checks and regulations that have to be maintained for efficient shipping and performance.
The International Safety Management (IMO) has provided for a code of safety regulations that is standard to all shipping across the globe. International Safety Management (ISM) ensures regulated international standard that provides for safe management and ships operating properly (Chen, et.al, 2021). It is also responsible for laying down strict rules to prevent pollution. These protocols are in place because shipping management needs to be organized so that it can be responsive to the needs and requirements of personnel aboard the ship and achieve a high standard of service and safety as well as environmental protection. As shipping firms are unique with a different set of operations guided under different conditions, this Code attempts to provide general principles that include an assessment of risks that any company can face, the threats that might be faced by individuals aboard, and taking care of the environment through proper channels of safety established (Wen, et.al, 2019). Safety management is therefore necessary for carrying out smooth operations of shipping while providing the best service to the customers, ensuring efficiency and safety of personnel related to the ship and the environment as well.
2. a) Discuss the advantages and drawbacks of outsourcing ship management.
How big the given firm is and the number of vessels that the shipping firm may possess and the various kinds of it influence the method and need for outsourcing. Most ship-owners however do not use a singular method but rely on mixed strategy and only point source a few of their ships at a given time. Business complexity that arises when firms move into international markets and have to consider material sources as well as supply chains, firms can often take up specialized activities that add value and outsource to be cost-efficient. This practice, therefore, is very common in ship management. So, the advantages of outsourcing ship management are:
This will help in lowering the costs that are involved in supply chains and resourcing materials in foreign markets
Internal staff can be developed very well
Staffing flexibility can also be offered
Core tasks of shipping can be focused on
Operational control can be maintained and regulated
This will ensure safety management and ensure the following of international guidelines and protection
Impact environmental performance
Thus, as we can see, efficiency will be increased in the system of transportation. A well-developed shipping management system can outsource some aspects of shipping to make the process quick and smooth. Outsourcing can also aid in gaining useful expertise. Transportation Management System (TMS) is important in this regard. Good management and outsourcing can also help in managing economies of scale.
The disadvantages of outsourcing are as follows:
In the process of outsourcing there is a transfer that happens in case of responsibility
Increased dependency on outsourcing companies
Service delivery may be delayed or fail
There can also be the issue of security as well as confidentiality
The process can lack flexibility
It can happen that the outsourcing company ran out of business
Difficulties can be faced in management (Chen, et.al, 2021)
That is why most shipping management is done by employing a mixed strategy.
2. b) Discuss selection criteria when choosing 3rd party ship managers.
In the complex ship industry, Third Party ship Management (TPSM) is very crucial to consider. There are several factors that influence the process of decision-making when it comes to TPSM. Researches have found that the most important considerations when it comes to shipping managers and outsourcing are the reputation of the third-party company and its experiences in the shipping industry.
In recent years there has been diversification in the merchant fleet. Some firms own their ships and have independent operating capability but do not have certain expertise to properly operate certain aspects. Cargo owners can also own tonnage so that risks can be hedged. In these cases, they can enlist assistance from 3rd party managers of the ship. They often have specialization in operation and can offer a range of management packages and commercial management. They can also offer shipping services like broking ship agencies and insightful maritime information as well as carry out consultancy functions.
Therefore if the 3rd party company whose help is being enlisted has the proper expertise and experience to show for their dependability and reliability then most ship owners will find it easier to depend on them for generating savings via economies of scale.
3. a) Explain the features of shipping pools.
For administrative reasons, many merchant vessels can be taken together depending on the similar nature they might share and are referred to as shipping pools (Karakansaki, 2018). The earnings that are generated are pooled after distributing those earnings to vessel owners which are carried out in accordance with the previously agreed-upon terms and conditions.
Time Charter and a Pool Charter are quite similar to one another. There is a floating rate charter. Upon entering a pool, the process in which distribution is to take place becomes a key factor (Parviainen, et.al, 2018). This process is formulated after extensive negotiations, and the agreed-upon terms and clauses provide the basis for the way in which earnings would be shared. This in turn relies on the capacity of a vessel to earn profits and then it is compared. Things that are taken into consideration before a ship can join a pool are- capacity of a vessel to hold cargo, availability of equipment like cranes, cargo segregations and hatches of different kinds, consumption level, and speed of the vessel (Pantouvakis, 2018). The pool agreement is then drafted afterward.
In a joint venture, ships are selected in a pool when the fleets have similar sizes or are of a similar type. They, therefore, have a singular centralized administration and in the market have a presence of a singular entity. They carry out different functions in collaboration like time charter parties, voyages, and contacts.
The pool has the following characteristics:
There is a fair share- everyone involved in the membership of the agreement is liable to get an equitable share of the proceeds.
Freight is collected properly- Collection of freight can be a difficult task while operating in foreign markets and due to time crunch, so pool enables the vessels to collect the freight properly.
Revenue is distributed- The earnings that are so generated from the collaboration are then distributed equitably amongst the members, this is a chief feature of the pool.
Voyage costs are centralized- As there is only a centralized system, voyage costs that are incurred also get centralized.
There is a weighing system- The pool employs an efficient weighing system.
Freight rates are negotiated- Before the agreement can be drawn, rates of the freight that has to be collected are negotiated upon and agreed to.
Pool management or administration is there- A comprehensive system of centralized management looks after different kinds of operations and carried out administrative works.
Joint marketing- This refers to the official agreement that is agreed upon by companies or firms to produce or ship products and services in the market to be delivered to customers.
Similar tonnage- The tonnage is similar since ships of a similar type of capacity and size are chosen (Parviainen, et.al, 2018).
3.b) Explain the reasons for pooling.
Owners might consider the following alternatives to their methods of conducting business:
There is a high return when conducting spot trade but that also involves high risks
There is low or medium risk involved when considering time charter
There is medium return and consequently medium risk involved while doing pool employment (Halff, 2019)
So the owners of the ship consider these three avenues, so they opt for pooling because it involves medium risks and the returns that are anticipated are on good rates (Theotokas, 2018). So, the reasons that are beneficial for the ship-owners to get into pooling are as follow:
Economies of scope are provided
Cash flow is secured even during times of uncertainty or unemployment
Undertaking of CoA is a nice benefit to have
There is much-needed diversification in operations and therefore dilution of risks
Ballast legs, as well as idle times, are compensated and minimized
Triangulation factor is involved with load factor being high
There is a great capacity for bargaining during the negotiations before the agreement is drawn (Wen, et.al, 2019)
Pool Managers rely on charterers to assess the availability of different cargos and therefore introduce more flexibility in the operation. Owners, therefore, employ 3rd party who can be a commercial manager so that the interests can be safeguarded properly to tackle problems like:
Cargo discrepancies
Bills of Lading
Indemnity
Breaching trade rights or regulations
High-risk operations
Potential claims owing to violation of any trade regulations or safety measures
Pools are therefore an essential part of the maritime industry, particularly the shipping industry. They can provide access to foreign markets, untapped resources, and remote cargoes as well. Pools also promote collective expertise (Yao, et.al, 2018). Pools, therefore, provide stability and security to the volatile market of the shipping industry.
References
Chen, J., Zhuang, C., Yang, C., Wen, Z., Zeng, X., and Yao, J., 2021. Fleet co-deployment for liner shipping alliance: Vessel pool operation with uncertain demand. Ocean & Coastal Management, 214, p.105923.
Halff, A., Younes, L. and Boersma, T., 2019. The likely implications of the new IMO standards on the shipping industry. Energy Policy, 126, pp.277-286.
Halff, A., Younes, L. and Boersma, T., 2019. The likely implications of the new IMO standards on the shipping industry. Energy Policy, 126, pp.277-286.
Hirata, E., 2019. Service characteristics and customer satisfaction in the container liner shipping industry. The Asian Journal of Shipping and Logistics, 35(1), pp.24-29.
Pantouvakis, A. and Karakasnaki, M., 2018. The human talent and its role in ISM Code effectiveness and competitiveness in the shipping industry. Maritime Policy & Management, 45(5), pp.649-664.
Parviainen, T., Lehikoinen, A., Kuikka, S. and Haapasaari, P., 2018. How can stakeholders promote environmental and social responsibility in the shipping industry?. WMU Journal of Maritime Affairs, 17(1), pp.49-70.
Theotokos, I., 2018. Management of shipping companies. Routledge.
Wen, M., Larsen, R., Ropke, S., Petersen, H.L. and Madsen, O.B., 2019. Centralized horizontal cooperation and profit-sharing in a shipping pool. Journal of the Operational Research Society, 70(5), pp.737-750.
Yao, X., Huang, R., Song, M. and Mishra, N., 2018. Pre-positioning inventory and service outsourcing of relief material supply chain. International Journal of Production Research, 56(21), pp.6859-6871.
