Function-of-Maritime-Management.pdf

Prepared by;
Capt. Esmundo B. Diaz, Jr. MM

BACKGROUND
 Henri Fayol, the father of the school of Systematic
Management, was motivated to create a theoretical
foundation for a managerial educational program
based on his experience as a successful managing
director of a mining company. he observed that the
increasing complexity of organizations would require
more professional management.
 Fayol's legacy is his generic Principles of
Management. Of Fayol's six generic activities for
industrial undertakings (technical, commercial,
financial, security, accounting, managerial), the most
important were The Five Functions of Management
that focused on the key relationships between
personnel and its management.

Functions Of Management
PLANNING
 According to KOONTZ, “Planning is
deciding in advance - what to do,
when to do & how to do. It bridges the
gap from where we are & where we
want to be”.
 Planning is necessary to ensure
proper utilization of human & non-
human resources. It is all pervasive,
it is an intellectual activity, and it also
helps in avoiding confusion,
uncertainties, risks, wastages etc.

ORGANIZING
 According to Henry Fayol, “To
organize a business is to
provide it with everything
useful or its functioning i.e.,
raw material, tools, capital and
personnel’s”.
Organizing as a process involves:
 Identification of activities.
 Classification of grouping of
activities.
 Assignment of duties.
 Delegation of authority and
creation of responsibility.
 Coordinating authority and
responsibility relationships.

STAFFING
 According to Koontz & O'Donnell, “Managerial function of
staffing involves manning the organization structure
through proper and effective selection, appraisal &
development of personnel to fill the roles designed un the
structure”.
 It is the function of manning the organization structure and
keeping it manned.
 Staffing involves:
 Manpower Planning (estimating man power in terms of
searching, choose the person and giving the right place).
 Recruitment, selection & placement.
 Training & development.
 Remuneration.
 Performance appraisal.
 Promotions & transfer.

DIRECTING
 It is that part of managerial function which actuates the
organizational methods to work efficiently for achievement of
organizational purposes.
 Direction has following elements:
 Supervision
 Motivation
 Leadership
 Communication

CONTROLLING
 According to Koontz & O'Donnell “Controlling is the
measurement & correction of performance activities of
subordinates in order to make sure that the enterprise
objectives and plans desired to obtain them as being
accomplished”.
 The purpose of controlling is to ensure that everything occurs
in conformities with the standards.
 Therefore, controlling has following steps:
 Establishment of standard performance.
 Measurement of actual performance.
 Comparison of actual performance with the
standards and finding out deviation if any.
 Corrective action.

WHAT IS MANAGEMENT ?
 Definition: “The process of working with people and
resources to accomplish organizational goals.”
 Managers must be:
 Effective: achieve organizational goals.
 Efficient: achieve organizational goals with minimum
waste of resources.
EXPERTS’ FUNCTIONS OF
MANAGEMENT
Different experts have classified
functions of management: According
to George & Jerry, “There are four
fundamental functions of management
i.e., planning, organizing, actuating
and controlling”.
Whereas Luther Gullick has given a
keyword POSDCORB where

 According to Henry Fayol, “To manage is to forecast and
plan, to organize, to command, & to control”.
 Functions of management given by KOONTZ and
O’DONNEL are: Planning Organizing Staffing Directing
Controlling.

BY TRANSGLOBE
Functions Of Ship Management In Shipping Companies
Ship management consists of registration with a nation or
flag, insuring, crewing, retaining and operating with numerous
laws and regulations to fulfil with. Shipping companies cannot
stay alive without management, and management is the way
to suitably acclimatizing to their business environment. The
achievement of shipping companies lies in the management’s
efficiency. As shipping management is a division of the
managing process, chances are there the management will
become successful and effective if the acknowledged roles
are used properly by the companies at all points. Pursuing a
good shipping management course will make you capable of
it. Have a look at some management in shipping.

Technical functions
It is the duty of the ship management that to check the
configuration of the ship stays in fine condition and also
sufficient observance with international guidelines such as
Safety of Life at Sea, Prevention of Pollution from ships and
several other management functions. It is also vital that the
International Safety Management Code should agree with the
company to avoid any permits that may happen as an outcome
of the failure to work along with the command. The ship
management crew has the responsibility that the protective
equipment and extras are available on ships always.

Operational functions
The operational management maintains the ship and makes
sure that it can offer the mission to which it has dedicated to
executing. The tasks are crewing, bunkering, employment of
port agents and accounting and so on. The registration flag is
essential because the minimum workforce is usually set by the
regulation of the country of registration. A ship management
must be confident that the squad members of a ship act in
accordance with Standards of Training and Certification of
Watchkeepers Convention.

Commercial functions
The duty of charting and documentation can at times become
difficult. Even though, an excellent ship management must be
aware of the market circumstances. It is crucial for a voyage
an approximation to be made before making finalizing the
practicability of a trip. For example, it could be commercially
feasible to ignore a cargo and sailing weight to an additional
port if the trade there will take the ship to a harbor where it will
be easy to get a record business.
The success of the company is depending upon the efficiency
of the management. Trans globe's shipping management
courses guarantees in shaping a better squad of professional
management.

FUNCTIONS OF SHIPPING TRANSPORTATION
 Shipping is concerned with the transport of cargo between
seaports by ships. “Shipping” is a term that is open to
interpretation. For some, “shipping” means ships and
seaborne businesses. For others, “shipping” refers to any
mode of transport that moves goods between two
geographical points. Trends in the shipping business are
moving towards the concept of economies of scale in
operations, the development of network-based management,
and the adoption of technology to improve efficiency and
effectiveness. The varied interpretations of shipping imply
that the shipping business has become increasingly dynamic
and complex. Shipping is one of the world’s most
internationalized industries.

 The shipping business involves the physical transport of
cargoes from an area of supply to an area of demand,
together with the activities required to support and facilitate
such transport. A transport system involves three key
components that
1. fixed infrastructure such as ports or terminals;
2. vehicles such as ships or barges using the fixed
infrastructure to move cargoes;
3. organizational systems necessary to ensure that the
vehicles and the fixed infrastructure
4. are used effectively and efficiently.

Dry Cargo Ship
( Grain, coal, iron ore,
cement, sugar, salt and
sand)
General Cargo Vessels
( Paper, wood, bags of
cocoa, rolls of steel, parts of
wind turbines)
Container Vessels
(Container)
Reefer Vessel
(Fish, Meat,
Ro-Ro Vessels ( cars,
busses, trucks, agricultural
vehicles and cranes)
Liquid Cargo Ships
(Crude oil, petrol, fuel oil,
vegetable oils and even wine

Crude Carriers
Chemical Carriers
( sulfuric and phosphoric
acid)
Liquefied Gas Carriers
(LNG,LPG)
Cruise Ship
Passenger Ship
Tug Boat
Off Shore Unit

WHAT IS CREW MANAGEMENT FOR SHIPS.
CREWING SERVICES?
Crew management for ships incorporates a variety of activities
handled by crew management companies and their manning
agencies.
The crew management company is responsible for the manning
of vessels under a crew management contract. This includes
the sourcing, recruitment, selection, deployment, scheduling,
training/upgrading programs, and on-going management of
seafarers engaged on vessels under crew management
contracts.
It also involves crew administrative aspects, such as payroll
services, travel arrangements, insurance, assistance with
health, banking & financial services, career guidance,
communication duties, as well as team-building and
family/social programs.

What is Ship Management?
Ship management, as the name suggests, deals with the
process of managing a ship. Ship management is done by
independent companies which use ships of some other
companies or independent owners. The ship management
company manages ships for the owner and pays him the
yearly amount which is settled between the owner and the ship
management company.
Moreover, the owner of the ship signs a contract and leases
the ship to the ship management company for a defined
duration of time. The ship owner may continue with the same
management company or can approach another company if
the he is not satisfied with the performance of a particular ship
management company. It is to note that the owner can lease
the ship completely or he can render some of the services
provided by the ship management companies.

What Things are Included in Ship Management?
Managing ships is not an easy task. Ship management
includes several tasks which are to be carried out before,
during and after the operation of the ship. The first and
foremost thing that a ship management company needs to do
is get the ship approved. There are many approvals that are to
be taken from different classification societies. However, the
company can operate different types of vessels or just
concentrate on any one type. For e.g. MSC (Mediterranean
Shipping Corporation) deals with only container vessels,
whereas companies like V ships, Anglo-Eastern manages all
types of ships.
Now, if a management company wants to enter into a new field
by indulging itself in operating different types of vessels, but is
operating the vessel type for the first time then approval for
operation is given for six months and their performance is
evaluated, which will decide any further play casino online
approval.

Services that a Ship Management Company Provides
Following are the services that a ship management company is
entitled to provide:
1. The ship management company should do the supervision
of the maintenance of machinery on board the ship. The
process should also include different surveys and repair
work of the ship.
2. The ship management company should provide adequate
crew for manning the ship.
3. The company should arrange for loading and unloading of
the cargo.
4. The ship management company can hire the ship on behalf
of the ship owner.
5. The company should negotiate the contracts for bunker and
lube oil.

6. The ship management company pays the expenses on
behalf of the owner.
7. The ship management company should make an
arrangement for the entry of the ship in the P&I (Protection
and Indemnity) association.
8. The company also deals with various claims related to
insurance, salvage etc.
9. The ship management company should arrange for the
insurance in relation to the ship.
10.The ship management company’s services also include
arrangement for providing victualling and stores for the crew
of the ship.

What is Included in Shipping Management?
Ship management is a multifaceted task and involves work
during the sailing, but also before and after. Ships should
always be approved before sailing, and this approval can be
obtained from various classification societies. Some companies
today focus on a specific type of vessel, such as container
vessels, whereas others may be happy to manage any type of
ship. If it’s the management companies first time operating in a
certain area, then they are given temporary approval for six
months before receiving an evaluation.
A shipping management company will offer full supervision of
the ship’s maintenance and repairs. They will maintain
machinery to a working standard and continually perform
checks as needed. One major reason for owners opting to use
shipping management services is that crew is provided by the
company. This saves a lot of time and hassle hiring staff, which
can be a long process that regularly needs attention.

The company will ensure that the ship meets the required
staffing regulations for sailing. The management company will
also look after the loading of the cargo and the unloading upon
arrival at the destination. If an owner is looking to hire their ship
to someone else, a management company can also assist with
this process.
As shipping involves such a high amount of paperwork and
procedures, owners appreciate the assistance a shipping
management company can provide. They’ll look after contracts
for lube and bunker oil and will know how low they can
negotiate prices. The company also pays any of the expenses,
so the owner doesn’t have to be involved in that procedure.
Also, one important task they can assist with is arranging a
ship’s membership with a Protection and Indemnity (P&I)
association.

If any incidents do occur on the ship or with the goods being
shipped, shipping management companies will look after the
claims for insurance and salvage, saving owners a lot of time
and paperwork. Speaking of insurance, they also arrange the
insurance for the ship itself to ensure it has adequate coverage
for its voyages. Finally, it works to ensure the ship is fully
stocked with supplies and stores for the crew working on board,
ensuring everyone is well fed and watered at all times. While it
costs a fair amount for a ship owner to employ a ship
management company, as you can see, they take care of many
time-consuming processes. This service is extremely popular
with ship owners who are looking to free up time in their
business and lives.

Why Would Someone Use Shipping Management Services?
As you can probably gather from the huge list of tasks ship
management companies undertake, there are many reasons a
company would opt to use this service. With over 50,000 ships
in the world’s merchant fleet, it’s important to understand not all
of these vessels are owned or managed in the same way. Many
big companies order new ships, but instead of paying outright
for the millions of dollars in expenses, they use a shared fund.
This fund then owns the ship together, limiting the risk for
everyone involved as the vessel becomes its own company.
Of course, private investors and banks usually lack the
expertise to manage a ship by themselves, which is why they
hire a ship management company. These companies are then
given a budget by the owners, which they use to complete all
the tasks we listed above. Depending on the budget and
requirements, the ship management company will take care of
the whole of the operation or may just look after certain aspects

of the day-to-day running of the vessel. While many owners use
a ship management company, there’s also another option. This
involves employing a ship manager directly with the owner,
which is often used within maritime companies. Large
companies may have the capacity to be both the owner and the
manager, and they sometimes opt to charter their vessels to
assist other companies in transporting their goods.
Advantages of Shipping Management
Many top ship owners are quick to share the benefits of using
this service, which is why it’s so commonly used around the
world today. Owners find a third-party management company
who can look after the ship and maintain it to the highest
quality. Management companies are experts in this field and
have the resources to look after your ship, hire its crew, and
smoothly run the daily operations. While there is a cost
associated with this service, many ship owners find it’s well
worth the output and can be cost-saving in the long run.

instead of looking after these separate entities by themselves
The increased availability of resources that shipping
management companies have easy access to offers many
advantages. It gives ship owners the flexibility and time to work
on their other projects, so they don’t have to worry about smaller
day-to-day concerns. Many ship owners appreciate the flexibility
this service offers, and they can then use this to help grow their
company in the long run. They find that they experience
improved results after using this service on their vessels for a
longer period of time.
Another huge benefit ship owners notice from shipping
management is a standardization of the service their vessels
offer. If you have multiple vessels managed by one company,
you know the crew, operation, and upkeep will be similar
throughout the fleet. Owners enjoy a high standard of operation
and lower overall costs over an extended period of time. When it
comes to the technical aspect of operating a ship, you’ll be in

safe hands using an experienced shipping management
company who will have witnessed most issues in the past
before and know the best solution to any challenges.
As shipping management companies operate multiple ships,
they have the scale to offer lower operating costs while still
focusing on safety, efficiency, and offering high-quality services.
From a human resources point of view, they also have access
to a broader base of crew and can train and hire with ease.
Crew often leave the industry for other ventures, and so the
ability to quickly replace these staff members is advantageous
and helps avoid operation delays. The main drawback of using
this service is in regards to the cost, but many ship owners find
this to be an advantage in the long run and believe that it saves
them money over a few years.

What is ship management?
When a ship owner prefers to own and profit from a vessel but
does not want to personally handle the ship’s operations, the
owner can contact with a ship management company. This
company manages the ship and its transactions. The ship
management company and the owner sign a contract for a
specified period of time. This contract details the yearly amount
the management company will pay the owner and any other
specifications agreed upon.
Does ship management cover everything?
In some cases, ship management may cover some of the ship’s
services, but not all. It is up to the owner if they want to lease
the ship completely to the company or contract for partial
services. If they decide to use the ship management company in
Texas for all their vessel’s needs, they can do so. The various
tasks that ship management companies handle include:

 Maintenance: The ship management company handles the
maintenance and repairs of the ship. They supervise these
tasks to ensure the ship is properly cared for and remains in
optimal condition.
 Crew: To man the vessel, the ship management company
provides adequate crew.
 Cargo management: The ship management company in
Texas makes arrangements to load and unload cargo to and
from the ship.
 Transactions: On behalf of the owner, the company can hire
out the ship for work.
 Negotiations: Part of the company’s services can include
negotiating oil contracts for the ship.
 Insurance: One of the main duties of a ship management
company is often to arrange for insurance for the vessel.
 Claims: The company may handle salvage, insurance and
other types of claims for the owner.

 Supplies: In addition to supplying the crew for the ship, the
management company also provides food and other
supplies for the crew.
Can an owner change ship management companies?
Yes, the owner may decide if they are satisfied with the ship
management company in Texas and continue their agreement
with them. They may also approach another company to
change services. The owner may also decide to keep only part
of their services with the ship management company.
What Can a Ship Management Company Do for Me?
Managing a ship, even just one, is a labor-intensive and
complicated job. From ship maintenance to staying on top of
regulations and compliance guidelines, managing a ship can
be a daunting task. However, regardless of what business you
are in, having ships for transporting goods is likely to be
beneficial to your business. So how can you get the benefits of
using a ship without the added work and cost of managing it
yourself?

Shipping management companies are third parties that work
with private ship owners or shipping companies to deal with the
process of managing their ships. Typically, a ship owner will
lease a ship to a ship management company under contract for
a specified duration of time and in exchange for a set monthly
cost or a portion of profits. This is a win-win situation for both
parties.
 Managing machinery maintenance: The shipping
management company is responsible for the maintenance of
machinery on board the ship, including different surveys and
repair work. This not only saves the ship owner time and
resources, but it also ensures that these vessels remain in
top condition.
 Providing a crew: Besides making sure that the ship itself is
always prepared, the shipping management company is
responsible for manning the vessel with an adequate number
of well-trained crewmen and providing any on-boarding,
training or disciplinary actions.

They also manage providing for the crew, which means
coordinating victuals and other supplies needed while at sea.
 Making arrangements for loading/unloading: Shipping
management companies typically have partners they work
with for loading and unloading cargo, which will not only save
the ship owner time and headache, but also usually allow
maritime shipping management companies to reduce costs.
 Manages insurance: There are a lot of things to consider
when insuring a vessel. Dealing with various claims can also
be time consuming. Maritime shipping management
companies can help in this area as well by arranging for
insurance for the ship and then managing any insurance
claims that may arise.
 Negotiates for bunker and lube oil: Negotiating and
managing the bunkering on a ship requires the utmost care
and expertise. Maritime shipping management companies
can assist with this service to help cut costs and ensure the
safety of the ship and its crew.

Handles expenses up front: A maritime shipping management
company can actually handle expenses on behalf of a ship
owner, which means that ship owners are not required to have
funds up front to handle every cost associated with managing a
ship.
Ship Management 101
Ship management sounds fairly easy—it’s the process of
managing a ship. However, there are so many details that ship
management provides. It’s crucial to pick the correct ship
management company to ensure that your goods and services
are taken care of properly.
In the shipping industry, the management company pays the
owner of the vessel a yearly amount agreed upon by the owner
and the ship management company.
The stress that the operation of import or export companies can
bring to clients is alleviated by the ship management.
Management services are responsible for covering all aspects

of vessels to reduce your stress while your products are in
transit.
Port vendor management and crude and clean tanker
management are only a few services shipping managers
oversee in the maritime industry.
What Ship Management Services Typically Provide
Ship management should always be considered when you
want your goods to be delivered in the most efficient and safe
way. Protecting your crew as well as the goods that you’re
transporting is incredibly important. Good management
services know this and make sure that the voyage runs
smoothly.
Bulk liquid products can be harmful and need to be transported
with ship management services that know the safety of delivery
is essential to clients.

Other staff repairs vessels and performs maintenance when
needed.
We ensure that your crew and your products are safe while
traveling the friendly seas. Here are just some of the key
services our shipping management agency provides:
 Supervise crew
 Protect and oversee crew welfare
 Provide ship superintendent
 Arrange for and supervise loading and unloading of cargo
 Provide a freight forwarder
 Maintain all vessel records and documentation
 Coordinate the supply of provisions and other requirements

What is a typical organization structure for a shipping
agency?
On an average the following departments constitute a normal
shipping company.
1. The Technical Team: The basic function of this team is to
look after the day to day operations of their vessels. The
officers involved are called Technical Superintendents, and they
generally report to a Fleet Manager. Technical Superintendents
are generally people with considerable sea going experience,
like Chief Engineers or Captains, who know the ins and out of
vessel operation. Depending on the number of vessels in the
company fleet, there can be more than one fleet manager or
someone like a Technical President. The technical team works
in close cooperation with workshops which are appointed to
take care of ship repairs which the ship staff cannot manage
themselves.

2.The Purchase and Procurement Team: The general work
of this team is to communicate with suppliers/ship
chandlers/other organizations to connect ship supplies all
around the world, where ever the ship calls port. This team
also takes guidance and approval from the technical team,
because all stores and stock items and generally approved by
the technical team.
3. The Operations team: This team is generally headed by
someone like an experienced Captain who works in close
liaison with the vessel charterers (one who hires the vessel in
return of money) and instructs the vessels well in advance
about what operations they will be doing in the coming dates.
They also look after things like port clearances, appointment
of local agents etc. etc. They may also be given the task to
chasing the charterers for the charter fee.
4. The Finance team: As the name suggests, they handle the
money; both of the employers and of other parties like

workshops, chandlers, agents etc. etc. They will also be headed by the
a senior person (typically a MBA) who will be in charge of the overall
finance of the fleet operations
5. The Fleet Personnel Department: These guys looks after the
recruitment and concerns of the sailing staff. These guys have to be in
touch with the ships and the people on land to rotate crew and make
sure the vessels are always manned by competent people. They work
in close cooperation with the technical team, so that the correct person
with required experience and knowledge lands up on the vessel.
6. The HSSE and training department: HSSE stands for Health
Safety Security and Environment. This department, along with fleet
personnel dept, ensures that people going on board have the correct
competence required. They will also ensure that all the required audits,
memorandums with the different flags etc etc are up to date so that the
vessel or the office does not lapse with any statutory requirements.
7. The Marketing team: Vessels need to be marketed and need to be
in charter so that they make money. The marketing team does that.
The owners may directly be involved in this team.

SHIP MANAGERS
Who are they?
Operating a ship takes a great deal of resources, knowledge
and experience. There are cargoes to find, regulations to meet,
maintenance schedules to consider, crew to employ and a
whole host of other jobs that is all involved in ship operating.
Ship Managers, as an umbrella sector of the industry, take on
some or all of those operational activities, leaving a ship owner
free to pursue other business aims, such as expanding the
business. Whether a ship owner gives the ship management
tasks to a separate division within his/her company, or
outsources the job to a third party ship manager outside of the
company, the services provided will cover the same operational
needs.

What do they do?
Activities that a ship manager could cover include repair and
maintenance, arranging dry dockings, audit planning,
monitoring of flag state compliance, financial accounting, crew
management, ship financing, newbuilding contracting and
supervision, chartering, insurance, and claims handling.
Interesting Facts: Third-Party Ship Managers
In at least the last 20 years, the ownership of the world’s
merchant fleet has become more varied. Aside from
independent ship owners who have their own ship operating
ability, investors, banks and hire companies also buy ships but
do not have the necessary expert knowledge to operate them.
These ship owners often get the assistance of Third-Party Ship
Managers who specialize in ship operation and usually offer a
range of different management packages, from crewing only, to
full commercial management.

Many ship managers also offer other shipping services such as
ship broking, ship agency, maritime information technology and
other advising functions.
Today, around a quarter of the world’s internationally trading
fleet of ships is reliant on services provided by third party
managers in whole or part.
Ship Management
The ship manager is responsible for and accountable for the
work of others who performs the tasks of ship management. In
the shipping business, the basic role of the ship manager is to
anticipate and solve any problems that may arise during the
operation of the ship. The process of )ship management is not a
separate function within the shipping organization.
Notwithstanding, ship management's functions relate to all the
activities of the shipping organization. The ultimate purpose of
ship management is to achieve the objectives of the shipping
organization.

Ship managers should be aware of their immediate contacts in
the shipping organization. Ship managers also should have a
basic knowledge of what other people do in a shipping
organization and how other people can assist in different cases.
Ship Management Activities has 5 basic elements:
1. Co-ordination
2. Organization
3. Planning
4. Command
5. Control
Types of Ship Management:
1. Traditional ship management system: shipowner
organized an in-house ship management system. The
shipowner has full responsibility for operating, crewing
personnel to ships directly. Shipowner in-house ship
management meets the requirements of the ISM Code
Certification for the office and each ship.

2. Outsourcing ship management system:
Shipmanagement is contracted out to a 3rd party company
like V-Ships, Bernhard Schulte, Unicom Management. All
day-to-day operations of the ships like technical, crewing,
operations, commercial, accounting, and financing carried
out by 3rd party. The Ship management company reports to
the shipowner and the shipowner will be responsible for
funding the operation of the ship and supplying the
management company with a monthly fee.
3. Hybrid ship management system: Partial outsourcing of
the functions from the shipowner to the ship management
company. This will be agreed in advance and a fee
structure set for the services provided. Many shipowners
still only outsource crewing.

Why shipowners outsource ship management?.
The reasons shipowners outsource ship management:
1. Cost savings (decreased head-overs)
2. Flexibility
3. Cost-effectively the ship is operated
4. Reducing the problems of legislative demands
5. No in-house expertise to operate
Shipowners changed in recent years. A few decades ago,
shipowners were real people who had paid for the ship.
Shipowners order ships to carry charterers' cargoes to specific
geographical areas. If shipowners are successful, they would
order to construct more ships. Eventually, shipowners would
have a fleet of ships. Shipowners would have the crews which
are employed directly by the company and crews would be a
career path for those that remained with the shipping
company. However, these days,

a shipowner may be a bank, a hedge fund manager, or another
type of investor in the shipping business. This type of shipowner
might have no shipping knowledge or experience. In many
cases, these investors who own the ships have no expertise in
shipping. In such cases, these investors need to find a good
ship management company and it is extremely important to
ensure that there is a return on their investment. A shipowner
may manage and operate the entire company or sub-contract
parts of the organization to a third-party ship management
company. In some cases, a shipowner may be a financial
institution that may sub-contract the ownership of the ship by
bareboat charter.

Economies of Scale in Ship Management:
In the shipping business, it has been extremely difficult for ship-
management companies with a small number of ships to
survive. This is not because these ship-management
companies are not good at what they do, but because the
number of employees required to meet all of the legal demands
is raised. A number of people required to operate the ship-
management office divided by the number of ships operated or
under the control of the ship-management company. Therefore,
the higher the number, the greater the costs involved.
Consequently, today we see the rise of a few ship-management
companies with a large number of ships under their
management due to economies of scale in ship management.
Now, giant ship-management companies are managing
hundreds of ships. Ship-management companies are providing
service to shipowners with a diverse set of options at a
competitive price such as V-Ships,

Bernhard Schulte Shipmanagement, C Transport Maritime
SAM, Unicorn Management Services.
Buying and Selling Ships at the Right Time:
Spot charter rates should be a factor of minor importance in the
decision of buying or selling a ship. Buying a ship is a long-term
Investment and implies a long-term engagement to the project
horizon of S to 15 years. An investor who is financially ready to
support a long-term shipping project should not pay too much
attention to current freight levels. Traditional Japanese
shipowners, who usually commit ships on remarkably long time
charter ) contracts, make use of hedging instruments for bunker
pricing and future payments and follow a strict strategy with
regard to their fleet utilization and renewals. On the other hand,
Greek shipowners like to keep their options open and love the
spot market. In recent decades, Greek shipowners have
mastered the concept of tramp shipping in most segments. Most
Greek shipowners do not set a specific, predetermined horizon

on the lifetime of their projects but instead react to the spot
market levels and follow their intuition. Ship owning is an
extremely risky business due to the volatile market. Moreover,
in the shipping industry, it is crucial to invest at the right time. it
is not a smart move to buy a modern cape size bulk carrier at
the peak levels of the shipping market. But it would be smarter
to invest in shipping at the bottom of the market.
Ship Manager
The original name of Ship Manager is by no means new
although the even older name of Ship's Husband is the one
that emerged in the Merchant Shipping Act 1894. The
requirement for a Ship Manager dates back to the custom
ships were owned in the very early days when a voyage to the
other side of the world was an extremely risky venture and it
was common for a ship to be acquired for one specific round
trip. The investment for the trip would be divided amongst
several

traders who customarily accepted to give the management of
the ship to one of their colleagues. The amount of capital
needed to acquire a ship is still such that the ownership was
often spread amongst various people. Today, there is a reminder
of this practice because a British Bill of Sale for a merchant ship
not only provides for more than one name under buyer but still
refers to how many sixty-fourths (64ths) each part-shipowner is
subscribing to the total. At that time, they never expected more
than sixty-four (64) people to become involved. The dilemma
caused by this range of ownership was that of identifying who to
accept responsibility. Furthermore, Merchant Shipping Act
(Section 59) dictates that when a ship is registered under the
British Flag the name and address of the Managing Shipowner
shall be presented and if there is not a Managing Shipowner,
there shall be so designated the name of the Ship's Husband to
whom the management of the ship is entrusted, similar
regulations apply in other maritime countries.

The ship management business is the result of the economies
of scale in which ship management professionals can offer
services to shipowners that have a small fleet. Besides, flagging
out by shipowners increased the demand for the ship
management business. The appointment as Ship's Husband or
Ship Manager should be taken seriously particularly in the light
of some of the more recent legal moves taken against those
involved in shipping casualties. Great responsibility is resting on
the shoulders of a Ship Manager. A Ship Manager should take
out suitable insurance to cover its errors and omissions and
those of its sub-contractors.
Ship Management Agreement
Depending upon the requirements of the shipowners, the Ship
Manager's Duties may differ broadly. Ship Manager's Duties
may range from only one function such as Crewing or Technical
Management to Total Ship Management. BIMCO Standard Ship
Management Agreement (SHIPMAN)(Boxes 5 to 14 of Part 1)

divides Ship Management into ten separate management
functions. Nevertheless, there are many more clauses and sub-
clauses in the BIMCO Standard Ship Management Agreement
(SHIPMAN) that specify how those duties will be managed.
Essentially, BIMCO Standard Ship Management Agreement
(SHIPMAN) is an agency agreement. BIMCO Standard Ship
Management Agreement (SHIPMAN) introduces specific
problems unique to ship management. The first issue to be
decided is who will be designated as the Ship's Husband (Ship
Manager). If the Ship Management Agreement is for a
somewhat limited range of duties, then the shipowners
themselves may nominate their manager as a Ship's Husband
(Ship Manager), however, if the Ship Management Agreement
covers almost all the functions, the shipowner has to nominate
someone to perform all these functions. The ship managers are
agents but have placed themselves in the position of a principal
in the eyes of the law with prominent responsibilities involved.

1 Essentially, BIMCO Standard Ship Management
Agreement (SHIPMAN) is an agency agreement. BIMCO
Standard Ship Management Agreement (SHIPMAN) introduces
specific problems unique to ship management. The first issue
to be decided is who will be designated as the Ship's Husband
(Ship Manager). If the Ship Management Agreement is for a
somewhat limited range of duties, then the shipowners
themselves may nominate their manager as a Ship's Husband
(Ship Manager), however, if the Ship Management Agreement
covers almost all the functions, the shipowner has to nominate
someone to perform all these functions. The ship managers are
agents but have placed themselves in the position of a principal
in the eyes of the law with prominent responsibilities involved.

BIMCO Standard Ship Management Agreement (SHIPMAN)
Clause 11 tries to ensure that the shipowners are no better but
no worse off than if they managed the ship themselves. After
receiving such indemnification from the shipowners, it is
important that the ship managers then insure against claims
resulting from their Negligent Acts or Omissions and also those
of sub-contractors that the ship managers may have accurately
contracted in the accomplishment of their obligations under the
contract. The protection and indemnity insurance in favor of the
ship manager covers any liabilities to the shipowner or other
parties arising under the second part of BIMCO Standard Ship
Management Agreement (SHIPMAN) Clause 11. This should
not be confused with the numerous procedures relating to the
ship which are expressed in favor of both the shipowners and
the ship managers as set out in BIMCO Standard Ship
Management agreement (SHIPMAN) Clause 6. Even though
Ship Managers may be given quite extensive discretion in the
to risk the consequences.

ordering of supplies and services and enjoy encouraging
reassurances in their deals with suppliers, Ship Managers are
still only Agents.
Ship Agent may deny liability for debts incurred on behalf of the
principal if the shipowner cannot or will not pay the debts. In
some cases, this situation has provoked big concern to Ship
Agents who have taken instructions in good faith from a Ship
Manager whose principal has subsequently become insolvent.
In some cases, like this where it has been proved that the Ship
Managers never made their role clear and allowed the Ship
Agent to believe they were the Actual Principals. Therefore,
Ship Managers should reveal their agency status unless Ship
Managers are prepared

Similarly, an unpaid debt of the shipowner affects the
shipowner's PM Club (Protection and Indemnity Club). If the
Ship Manager is not liable for P&I Club (Protection and
Indemnity Club) Calls, then the P&I Club (Protection and
Indemnity Club) will limit the extent to which they include the
Ship Manager in the P&I (Protection and Indemnity Club)
Cover. The Ship Managers need to be co-insured in all other
insurances relating to the ship whether the insurance is
arranged by the Ship Managers or the Shipowners themselves.
Clause 6. Whilst there is no certainty that the Ship
Management Agreement between the Shipowners and the
Ship Managers will be on the BIMCO (Baltic and International
Maritime Council) Form such as BIMCO Standard Ship
Management Agreement (SHIPMAN). BIMCO Standard Ship
Management Agreement (SHIPMAN) was compiled after
extensive analysis and SHIPMAN provides an outstanding way

of understanding the duties and responsibilities of both the
Shipowners and the Ship Managers to a Ship Management
Agreement.
Ship Management Agreement and Legal Problems
Clause 13 obliges the Ship Manager to deal with any legal
obstacles which may arise. Dealing with various legal obstacles
will eventually be handled by the P&I (Protection and Indemnity
Club) but negligence or the erroneous initial response to a legal
obstacle by the Ship Manager may make a bad condition worse
and may result in losses against which there is no insurance.
In the dry cargo shipping business, a common problem may be
a claim for Cargo Shortage or Cargo Damage. Usually,
charterers, shippers, receivers' insurance companies start a
claim against shipowners. The charterers know that their claim
will be time-barred under the Hague or Hague-Visby Rules
within a year. The charterers' recourse in the absence of a

satisfactory reaction to the claim is to bring suit which in most
jurisdictions means obtaining a writ that can be used to arrest
the ship if necessary.
Ship Arrest
In Latin, In Rem means Against a Thing to distinguish it from In
Personam means Against a Person. The prominent advantage
of proceeding Against a Ship (In Rein) is that it is not necessary
to track all over the globe looking for the shipowner and then
realizing that the shipowner lives in a country where taking
legal action against the shipowner would be expensive and
challenging. By taking action Against a Ship (In Rem) it is not
necessary even to name the shipowners however the
conditions which allow action in rem are limited and the most
reliable method to envisage these is to see it limited to debts
owed by the ship. Taking action Against a Ship (In Rem) differs
from nation to nation however the procedure for arrest is similar

in most nations although the courts and officials concerned may
differ. There are some maritime nations where the procedures
for arresting a ship are especially straightforward including The
Netherlands and South Africa for instance.
In the United Kingdom, taking action Against a Ship (In Rem) is
regulated by the Admiralty Marshall. In the old days, the
Admiralty Marshall himself nailed a writ to the ship's mast.
Today, these procedures are more civilized, but the effect is
quite the same. Customs officers who act as 1 agents for the
Admiralty Marshall, board the ship and attach a notice to a
noticeable place inside the ship's bridge. When the Admiralty
Marshall attaches a writ, no one can move the ship at all
without risking a charge of Contempt of Court for which the
penalties still include imprisonment. Furthermore, it is extremely
challenging simply to move the ship off the berth to allow the
terminal operator to use the pier for other ships. The Admiralty
Marshall has the liberty to remove some important part of the

ship's machinery to ensure its immobility if there is any risk of
the ship leaving despite the risk of penalties. The writ can only
be removed on the order of the , Admiralty Marshall.
To release the arrested ship, the shipowner's P&I Club
(Protection and Indemnity Club) provides a guarantee to pay
whatever is found to be legally due under the claim. P&I Club's
(Protection and Indemnity Club) guarantee will satisfy the
plaintiff who is obliged then to instruct the Admiralty Marshall to
release the ship from arrest.
In most cases, the claimant informs the shipowner that he has
the writ and threatens the ship arrest unless the guarantee is
forthcoming, but the shipowner still has to move immediately to
avoid the threat being turned into action.
Mareva Injunction (Freezing Order)

Mareva Injunction (Freezing Order) is another legal device
that gets its name from the title of one of the defendants
Mareva Compania Naviera SA which was involved when the
procedure was first summoned by Lord Denning in London in
1975. In reality, the procedure stops the defendant in a legal
dispute from moving assets out of the court's jurisdiction. For
example, a defendant is not a United Kingdom resident but has
funds in the United Kingdom. The plaintiff may worry that while
the action is continuing, the defendant might transfer funds to
another country. Therefore, even if the plaintiff wins the case
there might be no funds to settle. To circumvent such an
injunction paralyzing the defendant's operations is for an
arrangement to be made to allocate sufficient funds in some
form of a joint account or to provide a bank guarantee or some
such irrevocable undertaking. This allows the injunction to be
lifted and the remainder of the defendant's funds can be freed.
The defendant may let funds come into the country without the

risk of that being frozen. Immobilizing of assets or funds may
be the case of such an injunction. For example, a Ship Agent
with disbursement outstanding against a lime Charterer. It is
difficult to arrest the ship as the debts were not due by the
shipowner, but the ship is still on hire to the Time Charterer and
so some of the bunkers in her were the Time Charterer's
property and it was that bunkers that matched the subject of a
Mareva Injunction (Freezing Order). There is no way for the
immobilized ship to be moved away without taking the bunkers
outside the jurisdiction. Judges are very cautious in such cases
because innocent third parties should not be adversely
affected.
Unpaid Freight Vs Unpaid Hire
All Voyage Charter Parties stipulate when freight has to be
paid. If a Voyage Charter Party stipulates that freight is payable
Before Breaking Bulk (BBB),there is a troublesome choice to
be made if the ship is at discharging port but there is no sign of

the payment.
If cargo discharging is permitted to proceed, shipowners start
losing hold on the means to enforce payment (lien on cargo) as
there is no obligation to deliver the cargo under weights paid.
While the cargo is in the ship, shipowners do not have to resort
to any legal proceedings, shipowners merely refuse to
discharge the cargo. The ship is not earning income when
solely sitting idle at the berth. Therefore, the shipowner may
ask for help via an agent from a local maritime lawyer. Another
method could be discharging the cargo ashore but placing a
lien on the cargo so that the receiver cannot take possession of
the cargo until the freight is paid. However, this is not an easy
method in many ports. n every chartering fixture, the shipowner
is taking an estimated risk. The shipowner is using the
judgment as to whether the charterer will comply with his side
of the bargain and, if the charterer does not, whether recourse
to legal action will be effective.

All Time Charter Parties stipulate when hire has to be paid. It
is important to be sure that the Time Charterer is able and
willing to meet his obligations. The immediate recourse if a hire
payment is late and any time allowed for Technical Delay
(Anti-Technicality Clause is designed to moderate the severity
of the Withdrawal Clause) has expired is to withdraw the ship
from the service of the Time Charterer. Withdrawal of the ship
from the service of the Time Charterer is not easy as it sounds
because the ship may be full of cargo that unquestionably
belongs to an innocent third party. If the charterer has not yet
paid the freight, then it should be possible to ensure that the
charterer pays the freight direct to the shipowner and in the
unlikely event of this being more than is necessary to settle
what is due then the balance can be handed over to the
charterer. Unfortunately, when the Time Charterer defaults, one
usually finds that the cargo in the ship is the subject of the
Freight Paid Bill of Lading. In this case, the maritime law
explicitly states that the ship has

to deliver that cargo to the consignees named in the Bill of
Lading without in any way being able to demand any payment
from the consignees. Freight Paid Bill of Lading grants the
holder of that Bill of Lading (B/L) a clear title to the goods
and the shipowner's failure to hand the cargo over to the
consignee would be an offense under maritime law. Therefore,
it is important to identify the background of a Time Charterer.
The fraud of taking a ship on time charter, paying the first hire
with excellent promptness, loading the ship with cargo, issuing
Freight Paid Bill of Lading, pocketing the freight, and
disappearing is by no means an unusual situation. Ship
Managers and Shipowners must be careful when checking the
background of a Time Charterer.

Ship Manager and Port Agents
Ships require Port Agents at every port of call. Port Agent is
appointed by the Shipowners or Time Charterer. The charterer
may secure the right to nominate the Port Agent as a clause in
the charter party. There are various reasons why a charterer
may demand to nominate the Port Agent:
1. Efficiency: some major charterers operate extremely
sophisticated terminals which necessitate solid information
from and communication with Port Agents to perform efficiently.
These major charterers insist upon one Port Agent with expert
skills for harmonious service.
2. Secrecy: the concern a charterer may have of his cargo
being handled by, and his trading secrets being disclosed to, a
local rival and charterer may avoid this by insisting on the
nomination of Port Agent.
3. Money: some charterers try to insist on nominating the Port
Agent to enable them to sell the agency to whichever agent will

offer the charterers the highest share of the Agency Fee.
No matter who nominates the Port Agent, the Port Agent is
legally the servant of the Shipowner or Time Charterer. In
some Charter Parties, Charterer's Agent Clause grants the
charterer the right to nominate the Port Agent who will act on
behalf of and be paid by the shipowner.
Generally, the Port Agent provides just as good a service to the
shipowner as if the Port Agent has been a shipowner's
appointment. Sometimes, the Port Agent nominated by the
charterer is simply not providing a good enough service.
Therefore, the shipowner may appoint a Supervisory Agent to
keep an eye on things with only the shipowner's interests in
mind.

The shipowner should contact and give adequate instructions to
the Port Agent. The shipowner needs an estimate of how much
the call at that port will cost. The Port Agent provides a Pro
Forma Disbursement Account (Pro Forma D/A) according to
the ship's Net Tonnage (NT) and Gross Tonnage (GT). The Port
Agent must be informed about loading or discharging
operations, the shipper or consignee name, cargo details so
that the Port Agent can estimate the length of time the ship will
be at the port. Generally, important information such as who
pays for the stevedoring has to be declared.
The Port Agent's Pro Forma Disbursement Account (Pro Forma
D/A) is divided into three (3) main sections:
1. Port Charges
2. Cargo Charges
3. Ship's Items

1- Port Charges:
Dock Dues: charges made by the operator of the actual berth
being used. Dock Dues are based on the length of the ship
(WA), Net Tonnage (NT), Gross Tonnage (GT), the time likely to
be alongside.
Conservancy Dues: charges made by the authority who
controls the river or total port area. Conservancy Dues are
based on the ship's Net Tonnage (NT) and Gross Tonnage
(GT).
Pilotage: compulsory in many places but if the ship is a regular
caller at that port the Ship Master may have an exemption
certificate. Pilotage is often levied on the ship's draft.

Towage: tug company may have a direct contract with the
shipowners so advise the agent if this is so.
Boatmen: are employed for handling the lines for mooring and
unmooring of the ship but boatmen are employed broadly if the
ship is not alongside a jetty all the time she is in port.
2- Cargo Charges: Port Agent should inform an estimate of the
stevedoring costs if stevedoring costs are for the shipowner's
account.
If the ship has to discharge part of the cargo into barges to
decrease the draft (lightering) sufficiently to come alongside,
lightering costs should also be detailed. The Shipowner or Ship
Manager must inform Port Agent about the use of shore cranes
and who pays for them. Alternatively, if the ship is going to load
or discharge with its gear, the Port Agent should clarify whether
the labor regulations in the port permit these to be operated by
the ship's crew or whether shore labor has to be employed.

In various ports, if tallying is required, the labor regulations
insist that tallying is performed by shore workers which once
again may be an item for the agent to include in the Pro Forma
Disbursement Account (Pro Forma D/A).
3- Ship's Items: cover all the charges which relate to the
domestic requirements of the ship such as Cash to Master
(CTM). The other ship% items are freshwater, stores,
provisions, medical and dental treatments. Minor Repairs
and servicing of ship's equipment may also be included here
but it is unusual for the Port Agent to become involved in Major
Repairs.

Pro Forma Disbursement Account Invoice (Pro Forma D/A
Invoice) should also clearly present the Port Agent Fee that is
going to be charged for his services. If the Port Agent is one that
Shipowners and Ship Managers regularly use, Port Agent Fee
probably has been agreed well in advance. Most Port Agent
Associations announce a scale of Agency Fees for their
members and the Ship Manager should be familiar with
maritime nations where the scale of Agency Fee is mandatory,
and that scale is utilized for negotiations. On the other hand, in
some maritime nations, the publication of the Agency Fee scale
is illegal under anti-trust or fair competition rules. It is vital to
have the Agency Fee agreed in advance. The Ship Manager
should not drive an extremely hard bargain with a Port Agent for
Agency Fee. The Shipowner and Ship Manager should
remember that you get what you pay for and the difference
between an enthusiastic service and something just barely
enough to get by may be difficult to define but can make a great.

deal of difference. An enthusiastic Port Agent could fight tooth
and nail to get the ship completed and sailed tonight, a
disappointed Port Agent may assure the Shipowner and Ship
Manager that he has done all possible, but the ship has lost half
day which can cost far more than was saved in hard bargaining
The Port Agent asks for funds in advance from the Shipowner
and Ship Manager according to Pro Forma D/A Invoice. This is
accepted as a customary practice because it would be
impracticable for any Port Agent to finance all the ships calling
to their agency. Many of the costs under the Port Charge title
have to be paid in advance otherwise the Port Authorities do not
let the ship depart. The Ship Manager should consider the cash
flow and interest so that there is a great temptation to delay
sending funds to Port Agent until the last plausible minute,
however, time should be allotted for the banking system delays.
In various maritime nations, there are regulations to protect Port
Authorities from bad debts.

If the Shipowner and Ship Manager's funds have not reached
the Port Agent, the ship is held by the Port Authority until the
funds are received. Port Authority does not have to obtain a
writ or effect an arrest, to have the power to immobilize the
ship. When the ship is departed, the Port Agent gathers all the
accounts that are paid on behalf of the ship and presents them
with a Disbursement Account (D/A). This process may take
several weeks because some suppliers can be slow to submit
their bills. The Shipowner and Ship Manager require that every
item in Disbursement Account (D/A) is explained.
Especially, miscellaneous expenses such as car mileage,
telephone charges, etc. Fairly, any credit balance should be
repaid immediately as indeed the Port Agent will expect the
Shipowner and Ship Manager to settle any debit balance.
Ship Manager and Shipbrokers

Ship Manager and Shipbrokers
Depending upon the extent of the Ship Management
Agreement, the Ship Manager communicates with shipbrokers
who are responsible for negotiating employment for the ships. If
the Ship Management Agreement covers everything including
arranging employment, then Chartering Department may take
place within the same office of the Ship Manager. The Ship
Manager authorizes either the in-house shipbrokers or Ship
Manager authorizes panel shipbrokers to give and receive firm
offers from the charterers. Even if the commercial issues are
dealt with by the Shipowners with shipbrokers or In-House
Chartering Department, the Ship Manager will still become
involved. When a business is proposed, there will be questions
for the Ship Manager's departments and if the ship is in the
process of negotiations, the answers are expected immediately
due to fast communication.

Ship Management: What is the most effective style?
One of the most fascinating and frustrating aspects of
leadership and management is that there is often no right
answer. We hear phrases like “It depends” or “In what
circumstances?” or “On the one hand …” Sometimes the
situation drives us to make quick decisions and move on, but
it’s often helpful to pause and think about what caused us to
make those decisions and to question some of our underlying
assumptions.
What is the best management or leadership style?
This is a recurring question and one that generally provokes
both inspirational and terrifying tales of past managers.
People share stories of the powerful and autocratic manager
who created order out of chaos, led people safely through
dangers, and built a loyal and high-performing team. Others
talk with some degree of dread of the bully and tyrant who

ruled with a rod of iron and whose word was deemed law. Many
form the conclusion that it’s important to adjust your style to the
needs of the people and the situation, but if you ask slightly
different questions, it’s amazing how the answers can vary.
We generally offer four management styles and ask two
questions. The answers often follow a similar pattern. The
styles we offer are:
 Autocratic – manager makes the decisions and gives
instructions.
 Consultative – manager talks to people, listens, and then
decides and gives instructions.
 Participatory – manager discusses with people, they make
a decision together and allocate tasks.
 Delegating – manager gives objectives to people and lets
them decide how to achieve them.

(There are many different models of management styles, but
they tend to illustrate a similar sliding scale: from one end where
the manager retains power and makes decisions to the other
where power has moved to the people, and they make
decisions.)
Which is the best management style to use on board?
The most frequent answer to this question is that the manager
needs to retain control and make the decisions. They might do
some consulting, but only with certain people who have relevant
experience and can be trusted. Comments frequently made in
response to the question include:
• “Safety is critical, and you need to be in control.”
• “People don’t have the experience they did years ago.”
• “People don’t want to take responsibility.”
• “If you take your eye off them, they will take short cuts.”
• “It is not a democracy on a ship.”

• “People respond best to clear instructions and som
authority.”
• “You have to check everything.”
• “I want it done my way.”
Which management style do you like your manager to use
with you?
If we change the question to the above, the answers tend to be
quite different. People often want more involvement, participation
and delegation and say that this helps them to carry out their best
work. Answers frequently include:
• “Trusted to use my experience and knowledge.”
• “Involved in decisions.”
• “Asked for my opinion and have it respected.”
• “Feel like part of the team.”
• “Have an influence on how things are planned and carried out.”
• “Allowed to practice and gain experience.”
• “Treated like an adult.”

People sometimes say there is a difference depending on the
level of those being managed, but we have used the same
model and questions with junior officers, senior officers and
shore-based managers and witnessed a similar pattern. We
seem to believe that we like to be managed in one way when in
fact people need to be managed in a different way.
This is not a new discovery – Douglas McGregor identified his
famous Theory X and Theory Y model back in the 1960s. He
looked at various organizations and suggested that you often
see an underlying set of assumptions about how people work
best. Depending on which assumptions the organization held
and encouraged, you would see people being treated in very
different ways.

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