Third party ship management is transforming the shipping industry globally
Third party ship management is one of the recent management methods employed by various shipping industries in the world. According to (2003) the third-party ship management has become more usual recently, however the extent of it has been utilised by different shipping companies world wide in various forms, due to the fact that shipping companies come from different cultural backgrounds. Shipping is one of the oldest industries in this world. It dates back during the time of Herodotus wherein he even stated that “while we have ships on the sea we shall always have a homeland.” According to (2005) the Greeks have taken the statement of Herodotus seriously and that is the reason why the Greek Shipping Industry is the number one in the world. In addition, discussed that shipping is the most significant asset in the Greek economy and plays an essential role in the national income and employment of Greek, as well as, foreign citizens. Moreover, Fragaki stated that the commercial fleet of the Greek Shipping Industry has approximately 4000 ships that are able to carry more than 20% of the total capacity of the world. Over the past years, the shipping industry individuals all over the world have seen the shipping industry evolved, from the size of the fleets, technology that is being utilised, and the management. This paper examines third party shipping management in Stealth Gas Company, a Greek shipping company, with an evaluation on the cruise operator, bulk carrier, mega container operator and the ferry operator.
According to (1997) is one of the most important industries in this world. Moreover, he discussed that the Seaborne trade is at the highest point of the world economic activity. In terms of the shipping industry, the Greek is definitely the people who dominate the business. Third-party shipping management is one of the recent trends in the shipping industry. It is a form of management in which a company plays a substantial role in shipping through the management of the day to day activities of the various forms of vessels whether afloat or ashore.
The shipping industry is one of the biggest and most important businesses in the world today. Almost all of the relevant goods that the consumer utilises is carried by ships such as oil, transportation and many more. According to , there are four shipping markets in which the ship owners are trading off and these are the new building market, freight market, sale and purchase market, and demolition market. The new building market trades new ships, the freight markets trade sea transport, the sale and purchase market trades second-hand ships and the demolition market trades and deals scraps in the ships.
The outsourcing business is now common to a number of industries. According to (2006) outsourcing in the context of business is the transfer of practice of an organisation to a third party. Outsourcing on some of the functions of a business has its benefits on the organisation because it allows the owners and management of the company to focus on the important matters of their business. In the maritime industry, outsourcing is not common; however recent years have shown that there is a considerable increase in the outsourcing of some of the operational and management functions of shipping. According to because of this trend there have been structural changes in the shipping industry and that is the reason why there are a number of inexperienced owners and flag states in the industry, it also provided new opportunities for companies that are already expert in the field. That is one of the reasons, indicated by , why third-party ship management have grown into the maritime sector and a number of companies have emerged providing various services from technical management of the shipping vessels up to the accounting and hiring of the crew. The Greeks are the forerunners in the shipping business; however the practice of third-party ship management is not common due to the huge influence of the life-cycle effects of the organisation.
According to there are numerous factors that can be an influence in the transformation of an organisation such as the culture, size of the company, information and technology, the market, the economy and politically stability. But in a business wherein the majority of the shares is held by family members the age of the firm and chief is a significant entity with regards to the changes in the structural operations and functions of the organisation (1972).
Running and transforming the structure of the family business is hard. According to (1986) there are four crucial stages in the cycle of a corporation run by a family and these are:
Creating the business- wherein the founder or family members of the founder are building up new businesses and enterprises.
Growth and Development- in this stage the entrepreneurs must do business wherein he or she will encounter problems of growth and maturity of the created business.
Succession to the second generation- in the family business, the founder of the company hands down the business to his or her sons or daughters, therefore the transfer of management and ownership involves transformation into a tone of conflict.
Public Ownership and Professional Management- this stage emerges when the company needs an extra capital, incompetent management by the members of the family.
And according to King and Mitroussi the outsourcing of the management to third-party shipping management happens in the third and fourth stages. In the context of third-party ship management in the point of view of Greeks is different from the belief of the international shipping industry. King and Mitroussi discussed that managing the ships of unrelated families is common among the Greek ship owners however they do not consider it as a third-party management. Third-party ship management companies that have sprung in the 1980s and have tried to enter and dominate the Greek market had a hard time. According to an (1991) Greek owners are very independent minded, especially those people that moved up in the corporate ladder the hard way, these owner do not depend or rely on other people in terms of managing even some of the aspects of the business. Another reason is that the owners of the large ships are perceived as most likely not utilise the services of a third-party ship management unless they are compelled to ask for the service for particular reasons. Important figures in the Greek Shipping industry have expressed their insight and have stated that they rather keep all the aspects of the business within the family than asking for the services of the third-party managers because they believe that the special interests of the professional managers are a huge concern especially if it involves the assets of the company. And finally, the tradition and culture of the Greeks wherein management of the companies must be within the hands of the owner is considered a big factor in the utilisation of the third-part ship management.
However, the view on third-party shipping management has gradually changed over the years. With the shipping business getting more complex and being independent and having an established family firm does not guarantee a success in the industry. Added to the fact that new technologies and regulations of the government have been a huge challenge for the owners, a number of Greek shipping companies have utilised the service of the third-party ship management. The newer successor or generation of Greek ship owners have different views and insights towards shipping. According to an Anonymous author (1996) the new generation of ship owners are committed to a good management than extravagance, and the result is the identification of the owner of the ship with the vessels that he or she owns is starting to be the thing of the past and the younger generations see ships as just a mere component in the business. The children of the shipping magnates have academic and business qualifications in order to prepare them for the handling of the business. In addition, the younger generations are more receptive to the new concepts and ideas of management such as the third-party management.
Aside from the new ideas and concepts in which the younger generations are utilising in the shipping industry, the younger generations of ship owners have invested in businesses that are far from shipping such as construction, aviation, banking, oil refinery and more. According to (1998) these younger generations of ship owners favours the idea of corporatism rather than individualism wherein it is more related with the Greek tradition. According to people in the business sector have noticed the changing trends in the shipping industry of Greece, especially the point of views of the younger generations. They believed that the Greek shipping industry is entering into a new era of management of the business. One of the most evident events is the listing of several shipping companies in the Athens Stock Exchange. Even though most of the Greek Shipping companies are beginning to revolutionize and evolved their handling of the business, tradition is still evident in the owners. However, the new insights and attitudes of the younger generations will be more beneficial and will have a huge impact on the maritime industry of Greece.
Aside from the management of the activities in the vessels, it also has important contributions in the successful finance in the Athens Stock Exchange. According to (2001) working with a third-party management has probable benefits than with the in-house operations. Willingale discussed that the reputation, name, and size of the resources could be an advantage because it adds competence and comfort for the investors, aside from the fact that the range and the resources of the third-party ship managers can acquire cost savings, it also aids in the investor relation of the shipping company, and the ship owners are disentangled from the day-today management of the chores of the fleet which gives the owner an ample amount of time to focus in more important issues of the company.
StealthGas is one of the leading shipping companies in Greece and in the world today. According to the (2007) company website, the organisation is a provider of international sea transportation services to the producers and consumers of the liquefied petroleum gas. Moreover, the vessels of StealthGas carry different petrochemical and petroleum gases such as butadiene, propane, isopropane, butane, propylene and vinyl chloride monomer. In addition, StealthGas currently owns a fleet which has 29 shipping vessels that has a range of 1600 cubic metres up to 7500 cubic metres which can transport about 120,760 cubic metres.
In addition, according to (2007) StealthGas Inc. was integrated in December of the year 2004, and has a management agreement for five years with Stealth Maritime that will be expired in December of the year 2009, under the contract the Stealth Maritime will be responsible and accountable for the management of the affairs of the company and the technical and commercial administration of the fleet.
Moreover, according to Reuters the Stealth Maritimes is subcontracting or utilising a third-party for the technical management of the vessels of the fleet of the organisation. The four technical managers that StealthGas Inc. has subcontracted are the V. Ships, a ship-management company that is based in Cyprus, as well as, Hanseatic Shipping Co. Ltd. also from Cyprus, Tesma a shipping management company that is based in Singapore and Swan Shipping Corporation a shipping management company that is based in the Philippines. These shipping management companies are responsible for the day-today operations of the vessels such as the maintenance of the ships, crewing and these companies must also give assurance that the vessels’ performance act in accordance with the regulatory and environmental requirements.
The V. Ships manages over 600 types of shipping vessels. According to (2007) website, one of the technical management aspects of the company is to recruit and train seafarers. The company is one of the largest trainer and recruiter of shipping staff in the world which manages approximately over 20,000 seafarers worldwide. The company believes that crew is one of the most important services the company supplies to various ship owners, and because of that V. Ships recruits seafarers through its own offices in different parts of the world. In order to continuously enhance and improve the worth of the seafarers of V. Ships, the company has mandatory and non-mandatory training and the establishment of training centres in countries such as Ukraine, India and the Philippines. Aside from the training V. Ships also boasts of its high retention of its crews for about 85% due to the formulated career paths designed by the company to each of the crew members.
Apart from the Crew members that V. Ships provide StealthGas Inc. the company also delivers risk, safety and quality management disciplines. According to (2007) the disciplines are rendered into the V. Ships Management System that documents the steps and procedures, the approach in identification, control and assessment of the risks and safety are held in the R, S and Q of the company proactively. The staffs that V. Ships hired are trained in advanced and basic trainings in safety and environmental protections so that they will be aware on possible risks and threats involved in the job.
Procurement is another approach that V. Ships is doing in order to ensure that the company provides efficient shipping management; according to the V. Ships the procurement uses the advantages to be calculated from scale economies which include the total purchasing. Due to the fact that the company is administrating around 350 ships full-time, the clients such as the StealthGas Inc. enjoy a huge degree of buying power.
The information and technology system of V. Ships which is the ShipSure provides a collection of data and a tool for analysis that has three purposes:
- ShipSure empowers single data entry so that the ship owners are assured of the efficacy of the system with minimum errors on processing.
- After the data are entered it can already be available all through the shipboard organisation which can be the foundation for an efficient decision-making.
- It also provides transparency because it gives its clients such as the StealthGas Inc. the capability to cross-examine the management information especially in the financial and operational aspects.
The V. Ship addresses all its 100 and more clients with the particular needs and requirements. The service was created in order to specify and address the needs of every client with a personalised and customised ship management. The delivery of the service is decentralised in order to sustain the relationship of the company to its client on a daily basis through the managing director and team in every regional office world wide.
The third party ship management is substantially a young area in the shipping industry and because of that V. Ships is creating a new service that will add to the third-party ship management and it is the performance. The performance of the crew, as well as, the systems used will be measured and assessed in order to identify the service delivery of the system across the clients’ organisation. The company will utilise the data from the ShipSure, at the same time, five indicators would be utilised and these are the safety and risk, cost control, forecasting and planning, work quality and providing management actions at the right time.
The second third-party shipping management that the company have utilised is the Hanseatic Shipping Company Limited. It provides technical management in some of the fleets of StealthGas Inc. According to the (2007) website the technical knowledge is delivered via skilled multi-operational teams that is composed of the technical, purchasing, administrative staff and operations, the functions are carried out according to the requirements it can be on the Drydock which involves the conversions and repairs inside and outside the ship, regulations which include the flag and class, purchasing and negotiation of the contract, planning and controlling of the budget, and planned system of maintenance.
The third ship management company that StealthGas Inc. subcontracted for the technical management of various vessels of the company is the EMS Ship Management. According to the (2007) website the technical management have given emphasis on the Pro-Active, Active and Re-active, as well as, the management of the relationship of EMS to its clients. Under the Pro-active management it includes the preventive maintenance of the vessels, the planned dry-docking in order to make room for the earning of the vessel, buy frame agreements, safety, quality and environmental system of management, pre-briefing of the management team of the shipboard, emergency readiness, and budgeting. The active management of EMS includes the following; maintenance with the shipboard management team and daily operations of the vessel, manage the inspections of the conditions, compliance, security, safety, environment and quality of the vessels, mediate with the commercial existence, arbitrate with the authorities, flag state, port state and the inclusive class society, control deviations and exceptions for the usual operations and functions of the vessels, communicate in the crucial elements that will be considered on the interest of the owners, effective interaction of the aspects of crewing which involves the planning and onboard training and tests, buying the supplies and spares, control of the costs, overall management of the spares and supplies, management for bunkering and testing and accounting. The reactive management includes the description regarding the past performances and advances, examination in order to determine the areas in which needs continuous improvement, reporting the tasks of the shipboard management team, and insurance and handling of the claims. The vessels under the EMS Ship management will be handled by a specified technical superintendent who will be responsible for the service delivery in accordance with the Service Level Agreement signed between the two parties. The fleet of StealrhGas Inc. in which the EMS Ship Management is currently handling are the Gas Chios, Gas Emperor, Gas Monarch, Gas Shanghai and Gas Tiny. All of the fleet are for carrying the Liquefied Gas.
The fourth subcontractor that StealthGas Inc. hired for the technical management of its fleet is the Swan Shipping Corporation. According to the SWASN Shipping Corporation (2004) website, the company provides its clients the concept of total ship management, which includes the services such as inspection of ships on dry dock, being in charge of the new construction, management of the flag and administration, control and preparation of the budget, organisation of the supply of the spare parts and the consumable stores, directs the inventory, and arrangement of the dry docking. Moreover, the company is managing seventeen semi-refrigerated and pressurised LPG carriers.
Currently, the StealthGas Inc. has 29 LPG carriers in their fleet and these are the Gas Amazon, Gas Flawless, Sir Ivor, Gas Monarch, Lyne, Catterick, Gas Cathar, Gas Chios, Gas Marathon, Gas Nemesis, Gas Emperor, Birgit Kosan, Gas Courchevel, Gas Zael, Gas Sincerity, Gas Spirit, Gas Shanghai, Gas Legacy, Gas Prophet, Gas Eternity, Gas Fortune, Gas Czar, Gas Arctic, Gas Ice, Batangas, Gas Crystal, Gas Prodigy, Gas Oracle, Gas Tiny, and Gas Haralambos. These ships from the fleet of the Stealth Gas Inc. are managed technically by the four third-party shipping management subcontracted by the StealthGas Maritime.
StealthGas Inc. is one of the companies that have embraced the idea of third-part shipping management having subcontracted four different companies to handle the technical management of their ships in various parts of the world. Third-party shipping management have proven to be an efficient way in handling the business because the owners can focus more on more important aspects of the business, aside from the fact that these professional managers lessen the burden of the owners of the company by providing solutions to various problems directly. However, in hiring or subcontracting a third-part management the owners must be aware on the background of the company, whether they can provide the best solutions to the technical management problems of the ships.
Greece remains to be the leading nation in terms of the shipping industry and the Greeks regard shipping as a vital part of their economy. The Greek ship owners have remained over the past centuries loyal the tradition and shipping practices. However, the younger generation have been more receptive to changes, especially in terms of management of the organisation. During the 1980s up to the early 1990s most of the Greek ship owners are not open to the idea of other people, apart from the family members managing some aspects of the business. However, due to the challenges that emerged in recent years and changing views of the younger generations the idea of utilising third-party shipping management and other approaches to the business have been positive.
However, the tradition and culture of the Greeks have continued to influence and impact the decisions of the owners. These traditions cannot be easily removed from these people especially the ship owners, despite the fact that the society that we are in is modern, due to the fact that these characteristics and traditions have made their forefathers the top of the shipping industry not just in Greece but in the whole world. The culture of shipping among the Greek owners is deeply embedded that is why some of them are still not open to the idea of having a third-party management. On the other hand, there are some Greek companies that have tried using the services of third-party management. In the near future, more Greek shipping companies will outsource its management activities in to firms, as the trend of globalization rapidly increase and the competition becomes tougher