Diploma in

Ship Management

Module 1: Introduction to the Shipping

Industry and the Role of the Ship Manager

Assessed and Awarded by

Academic Course Director

and Module Author

Captain John W Dickie

Contents

1. Introduction to the course..........................................................................................6

1.1 About Your Course Director .................................................................................... 7
1.2 Structure of the Course ........................................................................................... 8
1.3 Knowledge and Experience ..................................................................................... 9
1.4 Studying the Course ............................................................................................... 10
1.5 Tutor Marked Assignments and Case Study ........................................................ 12
2. Introduction to the module ......................................................................................13
3. Introduction to the Shipping Industry ....................................................................16
3.1 A Truly Global Industry .......................................................................................... 20
3.2 Cyber Security ......................................................................................................... 21

3.2.1 The Top Five Cyber Risks at Sea ................................................................ 21

The Most Vulnerable Ships Systems ..................................................................... 22

3.2.2 The Cyber Security Officer ......................................................................... 22

3.2.3 5 Key Cyber Threats Explained .................................................................. 24

3.3 Supply and Demand for Ships ............................................................................... 25

3.3.1 The Shipowner ............................................................................................ 25

3.3.2 International Trade Terms (INCOTERMS) ................................................. 27

3.4 The Four Main Types of Charter Party .................................................................. 30

3.4.1 The Bareboat Charter................................................................................. 30

3.4.2 The Time Charter ........................................................................................ 30

3.4.3 The Voyage Charter .................................................................................... 30

3.4.4 The Continuous Voyage Charter ............................................................... 30

3.5 Liner Trade and Tramp Trade ............................................................................... 30

3.5.1 Liner Trade .................................................................................................. 31

3.5.2 Tramp Trade ............................................................................................... 31

3.6 Seaworthiness and Cargoworthiness ................................................................... 32
3.7 Contracts of carriage and bills of lading - The Hague Visby Rules ..................... 33

3.7.1 Breakeven Point.......................................................................................... 34

3.7.2 Ships, Ship Types and Cargoes .................................................................. 35

3.7.3 What is a TEU?............................................................................................. 37

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 2
 3.7.4 A 20 Foot Dry Bulk Container .................................................................... 37

3.7.5 Ships and Legislation.................................................................................. 38

3.7.6 Top Five Shipowning Countries ................................................................. 38

3.7.7 The Relationship between Ownership and Flag State ............................. 39

3.7.8 The Top Five Leading Financial and Legal Centres of the World for the
Maritime Industry ....................................................................................... 40
3.8 The Shipping Industry Bodies................................................................................ 43

3.8.1 The World .................................................................................................... 43

3.8.2 The Shipping Industry ................................................................................ 43

3.8.3 The Customers (Shippers).......................................................................... 44

3.9 The Shipping Industry Regulators ......................................................................... 45

3.9.1 Regulators ................................................................................................... 45

3.9.2 Legislators ................................................................................................... 45

3.9.3 The Inspection Bodies ................................................................................ 45

3.10 The Maritime Legislation Framework ................................................................... 46

3.10.1 The IMO Council Members ........................................................................ 47

3.10.2 Using Maritime Law as a Ship Manager ................................................... 48

3.11 The Differences between the Shipowner and Ship Management ..................... 51
3.12 Legal Responsibilities ............................................................................................. 54
3.13 Conclusion............................................................................................................... 55
4. THE ROLE OF THE SHIP MANAGER ............................................................................56
4.1 What is Ship Management? ................................................................................... 56

4.1.1 Functional Manager.................................................................................... 57

4.1.2 Operational Manager ................................................................................. 58

4.1.3 Strategic Manager ...................................................................................... 58

4.1.4 Planning....................................................................................................... 58
4.2 Management Control ............................................................................................. 59

4.2.1 Planning....................................................................................................... 60

4.2.2 Establishing Standards of Performance ................................................... 60

4.2.3 Monitoring Actual Performance ................................................................ 60

4.2.4 Comparing Actual Achievement Against the Planned Target ................. 60

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 3
 4.2.5 Rectifying and Taking Corrective Action ................................................... 60
4.3 Organisations and Their Structure ....................................................................... 61
4.4 Leadership Styles in Management ........................................................................ 64

4.4.1 The Authoritarian Style .............................................................................. 65

4.4.2 The Democratic Style.................................................................................. 65

4.4.3 The Genuine Laissez-Faire Style ................................................................. 65

4.5 The Do’s and Don’ts Leaders Should Keep in Mind ............................................. 66
4.6 Motivation ............................................................................................................... 69
4.7 What Does a Ship Manager Do? ............................................................................ 70

4.7.1 Effective Communications ......................................................................... 71

4.8 Relationship with Other Departments.................................................................. 72
4.9 Maintenance Systems ............................................................................................ 75

4.9.1 IACS Members............................................................................................. 76

4.10 Maintenance and the Ship Manger in Respect of the ISM Code ........................ 77

4.10.1 Planned Maintenance ................................................................................ 83

4.10.2 Condition Based Maintenance (CBM) ....................................................... 83

4.10.3 Shock Pulse Monitoring ............................................................................. 84

4.10.4 Vibration/Noise Monitoring ....................................................................... 84

4.10.5 Machinery Condition Monitoring .............................................................. 85

4.10.6 Non Destructive Testing............................................................................. 85

4.10.7 A Strategic Approach to Maintenance Systems and Their Uses ............. 86

4.11 Purchasing .............................................................................................................. 87
4.12 Just-In-Time Purchasing ......................................................................................... 88

4.12.1 What Does Just-In-Time Mean? ................................................................. 88

4.12.2 How Does Just-In-Time Work? ................................................................... 88

4.12.3 Advantages .................................................................................................. 88

4.12.4 Disadvantages............................................................................................. 88
4.13 Inventory Management ......................................................................................... 89

4.13.1 How is Inventory Management Achieved? ............................................... 89

4.14 Supply Chain ........................................................................................................... 89

4.14.1 How Does a Supply Chain Work? .............................................................. 89

4.14.2 Five Tips to Improve Supply Chain Efficiency ........................................... 90

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 4
 4.15 Blockchain Technology .......................................................................................... 93
4.16 An Introduction to the Big Data Concept ............................................................. 95
4.17 Additional Costs of Purchasing Practices ............................................................. 96

4.17.1 ShipServ ....................................................................................................... 96

4.17.2 TradeNet...................................................................................................... 97
4.18 International Marine Purchasing Association (IMPA) Stores Guide ................... 97

4.18.1 IMPA Stores Coding .................................................................................... 97

4.18.2 Conclusion ................................................................................................... 98

4.19 Checking Crew Numbers, Qualifications, Experience for Manning Contracts .. 99
4.20 ISM Code – Part A – Implementation .................................................................. 100

4.20.1 Part A - Section 6 – Resources and Personnel........................................ 100

4.20.2 “Certificated” ............................................................................................. 103

4.20.3 “Qualified” ................................................................................................. 104

4.20.4 “Medical Fitness” ....................................................................................... 104

4.21 Lines of Communications for Efficient and Effective Operation of Ships ........ 110
4.22 Preparing Reports and Presentations ................................................................ 115
4.23 Sale and Acquisition of Ships .............................................................................. 117

4.23.1 Ship Broker................................................................................................ 117

4.23.2 How to Buy or Sell a Ship – Getting the MOA Penned........................... 118
5. CONCLUSION ............................................................................................................121
BIBLIOGRAPHY ................................................................................................................122
APPENDIX A – ENVIRONMENT, SOCIAL, GOVERNANCE (ESG) .....................................125

Please Note

Directed Learning questions have been provided periodically throughout the module.
These questions are designed to direct you to undertake some personal study and
research, and to also think through the application of what you have been learning within
your own work setting or country. You are encouraged to discuss the topic and share
feedback on the discussion forum.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 5
1. Introduction to the course

Learning Outcomes

On successfully completing this course, you will be able to:

• Identify the role of the ship manager within the context of the marine industry
and in any relevant organisation.
• Explain both the ISM and ISPS Codes and their relationship with the manager.
• Understand the importance of the Four Pillars – SOLAS; MARPOL; STCW; and MLC.
• Describe the linkage between quality, health, safety management and
environmental systems.
• Assess the management of resources and operations for vessel activities and
shore resources.
• Understand and apply the different demands of various ship types.
• Understand and apply the relationship between Flag State; PSC; Class; Other
industry bodies.
• Analyse core business requirements such as accounting, customer service, law
and insurance.
• Create and present professional written business reports.

Welcome to your course!

Over the next 12 months and ten modules, plus a final case study, we will be exploring
and learning about the key elements in “Ship Management”.

This important professional development course from North Kent College in partnership
with Lloyd’s Maritime Academy is designed to equip existing and perspective ship
managers, and the professionals working alongside the ship management sector, with
the fundamental knowledge and skills they need to stay current and succeed in their
role.

You will gain the core skills in the following areas:

• Business management
• Crew management and recruitment
• Vessel support services
• ISO standards, safety and security
• Finance and accounting for the marine industry
• Maritime law and insurance

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 6
The shipping industry is constantly evolving and for those working within its many
facets, one major problem is keeping up-to-date with the pace of these changes. This
distance learning programme furnishes you with the skills, knowledge and tools you
need to keep up to date and assist your career to either becoming or understanding the
essential role of the ship manager.

As the course director, I welcome you to the course and your first module. I will be with
you throughout the course, both through the content written in the modules, the online
discussion forum and in the various assignments you will be undertaking. Please do not
hesitate to contact me, either via the online forum or via email to the course team at
Lloyd’s Maritime Academy.
I wish you good luck with your studies

Captain John Dickie, BA

Course Director

1.1 About Your Course Director

Captain Dickie has spent the last 50 years in the maritime industry. This has
encompassed 20 years at sea from cadet to command and on various ship types from
oil, chemical and gas including combination carriers, bulk carriers, and container ships.
John was manager of the Marine Technical Division for a survey company in the middle
east which he helped set up, as well as having been a marine superintendent and
operations manager. Five years were spent in an IACS member as head of the ISM Code,
which involved being Chairman of the IACS ad hoc Group ISM Code, plus liaison
manager to the USCG and CEFIC for ISM Code matters on behalf of IACS. John has
qualifications in auditing to the following standards, ISO 9000, 14000, 18000, SA8000
and ISM Code.

Becoming a lecturer was an important step and the years spent teaching were most
enjoyable. During this time John took the opportunity to enhance his own credentials
with various teaching qualifications as well as completing a BA degree in Adult
Education. In the summer of 2010 John set up his own company, JDass Ltd, providing
bespoke training to companies, ensuring the client requirement is met whilst still
meeting the many requirements of legislation within the maritime industry.

Directed Learning 1.1

If you have not already as part of the induction week, now is a good time to go onto the
course forum and introduce yourself to the other course participants. Tell everyone a bit
about yourself – for example, who you are, where you are based, what your work involves,
what you hope to gain from the course, etc.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 7
1.2 Structure of the Course

During the course, we will explore the many facets of ship management in 10 modules,
which are outlined below:

Module 1 – Introduction to the Shipping Industry & The Role of the Ship Manager

The first module sets the groundwork for our study with a look at world trade, ship
types and the cargoes carried, the structure of the shipping industry, legal requirements
for the safe operation of ships. It then introduces ship management, charterpaties, and
reports and presentations from a ship manager’s perspective.

Module 2 – The Skills Set of a Ship Manager

This module outlines what a ship manager needs to be able to function and do the job
required. These are diverse and need to be refined as a ship manager seeks promotion.

Module 3 – Maritime Legislation

Maritime legislation is multi-faceted and must be looked at from various points of view.
The ship manager does not need to be a lawyer, but must understand the law and its
application to the work that they do.

Module 4 – The Four Pillars of Quality Shipping

These are the four conventions that form the bedrock of the shipping industry for the
ships and their crews. The ship manager will need to understand them and apply the
contents relevant to the ships that are being managed.

Module 5 – The ISM Code - ISPS Code – PSC – IMDG Code

These three codes and Port State Control set the standard for a company to operate
both safely and securely and to pass Port State inspections.

Module 6 – Maritime Certification and the Inspection Bodies

Every ship needs to hold a complete and valid set of certificates to be able to trade. The
diversity of the certification carried and the inspection bodies who will conduct
inspections, surveys and audits against them needs to be understood and applied by
the ship manager.

Module 7 – Maritime ISO Standards and their application

The International Organization for Standardization (ISO) is having an increased

application in the maritime industry. The ship manager needs to know the various
standards and how they are applied to the ships and company that they are employed
in.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 8
Module 8 – Financial Controls – Budgeting

Shipping is an industry that involves large sums of money and capital investment. The
ship manager does not need to be an accountant but must be able to understand what
the contents of a spreadsheet are and to ensure that the ship is operating within the
budget allocated to it.

Module 9 – Ship Types and their Operation

The ship manager needs to be aware of the various and diverse ship types that are
operated, and the specific needs required operating them.

Module 10 – Introduction to Cargo Calculations

Every ship is required to carry the maximum cargo as per the charter party
requirements. The ship manager needs to be aware of the specific needs of the ship
types and the cargo carried. Most ships carry approved software packages for their
operation. This module gives an insight of where these software packages take the
information from.

Case Study – Managing a Ship Management Company

The final module is a project designed to bring together the various areas of study that
form the core modules. Participants are cast in the role of General Manager of a small
ship management company and asked to complete a variety of tasks.

A large degree of thought has gone into the chronology of the modules and their
sections/chapters – the “running order”. The chapters in the modules have been built
upon one another, and you will find that some subjects introduced in the earlier
modules are then re-emphasised or expanded on in later modules. I would encourage
you to read them in chronological order to put you in the best position to comprehend
the main concepts of every section. In addition, a summary of the key elements is
displayed at the end of every module. Furthermore, you will have your preferred pace of
reading and study and you may choose to dip in and out of the text, which is your
prerogative!

When undertaking the study required by this course, you should remain mindful that
the shipping industry is an international business which is unique in its setting,
operations, and controls and which is not necessarily homogenous in its approach
across the globe. Care must be taken in this respect when discussing the industry and
that local requirements are both observed and complied with.

1.3 Knowledge and Experience

This course will provide a sound basis and knowledge of many of the key aspects of ship
management. However, as for any subject area, it needs to be applied and coupled with
further directed study and practical experience. There is no substitute for combining
knowledge with actual experience “on the ground” for those who aim to develop their

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 9
role in ship management, whether it is via their work in a shipping business in a
seagoing and shore-based role, or other maritime industry.

If you are fortunate enough to be working in the sector already, ensure you take
advantage of this by observing what is happening around you and applying what you
learn. If you do not work in the relevant industry yet, use every opportunity you can to
develop your practical knowledge, so that you can see the activities and build up a better
picture of the business. There may be talks or presentations you can easily attend online
and easy access to online articles, which will all help to build your knowledge.

The roles of those maritime professionals who are involved in ship management are
extremely varied, but all will usually require the incumbent to frequently exercise their
or her practical judgment. Different challenges will arise, which requires anyone in a
ship management role to assess each situation, weigh up the facts, apply experience
and come to a decision as to what should be done.

It is in accommodating all these wide issues that understanding and judgement is often
called for – judgement which draws on sound knowledge and appropriate experience.
Appropriate experience will come from your own efforts, the fundamentals of sound
knowledge are provided in this programme.

1.4 Studying the Course

We all have our preferred learning styles and tackle reading and learning activities in our
own unique way.

As the course director, and the author and tutor for this and the most of the modules, it
is my responsibility to keep you “interested” in the content and to try and help you
remain motivated to learn. This will be achieved in part by the text, which will take you
through a thorough introduction to the subject, and through the online forum, but you
also must take responsibility yourself. Your responsibility is to set aside sufficient time
and a place where you can undertake your study of the modules, be it at home, while
you are travelling, or during quiet periods at work.

For optimal personal development though, you need to fully engage in the learning
process – part of this is to apply your responsibility to work diligently through the
materials, thinking about what you read, reflecting on it, and no doubt at times
challenging it. Most importantly, you must exploit the opportunity to learn about
yourself, what aspects of this course you can apply to your character, your circumstance
and your aspirations, in order to determine what type (and how good) a chartering
businessman you wish to/will become in the future.

I, and the teams from North Kent College and Lloyd’s Maritime Academy, aim to
thoroughly cover the subjects addressed in the course, but you may at times wish to
consult other sources on the internet, or maybe in a library, to delve deeper into an
issue that particularly interests you. Your responsibility for your learning also extends to
making use of the online course forum.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 10
Here you can post a question if there is something you do not understand or disagree
with, you can read what others are asking or saying in a daily digest of posts which will
be sent to your inbox (and you can amend to receive forum alerts immediately), you can
add your comments in order to allow others to benefit from the particular knowledge
you have, or you can share your own experiences of a particular issue. It is anticipated
that the chartering experience across the group of students will be varied and
throughout the maritime domain – we need to seek to capitalise on our experiences by
sharing them and learning from each other. Again, exploit the opportunity to learn what
is best for you; as you will find out throughout the course, something that is ‘right’ for
one person may not be ‘right’ for all or any other people on the course, or in comparison
with other maritime professionals that you know.

Please remember that the course forum is what you, and everyone else on the course
makes of it. If you do not engage, you (and everyone else) will not maximise your
learning opportunities. I strongly recommend that even as you note the various
exchanges taking place via the forum in digest emails, you also visit it on a regular basis
to post items of interest along with your personal thoughts and experience, as well as
respond to posts by others. Distance learning can be an isolating feeling, engaging on
the forum will provide you with the company of like-minded people. Use it!!!

Hopefully you have taken the above on board!

The worst thing you could do with this course is to just read the content of each module,
learn it “parrot fashion” and then move on, without further thought or discussion with
others.

During this module (and the others), you will come across various directed learning
activities. Pause at these points and have a think about the questions raised. You may
need to do some research on the Internet or ask others in order to get answers.
Remember to not post any information that may be confidential to your employer or
yourself – you may want to check with your company to be sure before posting.

As a final note, a great idea that suits many people when studying by distance learning is
to consider writing their own summary of the key learning points being taken away at
the end of each major chapter – which is sometimes called an “elevator pitch”. Where
does the term “elevator pitch” come from?

Imagine you are travelling a few floors in an elevator with your boss and they ask you
“what do you hope to get from this course that the company is paying for you to go on?”
In the time the elevator travels between those few floors you must succinctly tell them
the main points that convinces them that you are the right person from the company to
be attending the course!

Have a go at drafting one - assume it is about a 20-second journey between floors.

Remember that whatever you produce will probably vary from someone else – this is
not a problem as you will probably have a different priority or focus on what is
important to you throughout the course. Additionally, the disciplines of summarising
and prioritising are very important for people to practice. This concept will be refined
throughout the course, it will be in your best interest, once again, to exploit the

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 11
opportunity to generate (and even practice) many “elevator pitches” throughout the
course. As a maritime professional involved in chartering business, you will need of
“elevator pitches” in the future.

1.5 Tutor Marked Assignments and Case Study

During the course you will be expected to demonstrate that you have learned by
completing three tutor-marked assignments (TMA) and a final case study (CS). The TMAs
will be released with modules 4, 7 and 10. These assignments will get progressively
more challenging as you move forward. Finally, a case study must be undertaken.

When each TMA is released, I strongly urge that after studying that module you then set
everything else aside and submit your assignment before even looking at the next
module or, in the case of TMA 3, the case study. It is a requirement of completing the
course that you must attain a minimum pass mark of 50% in all TMAs and the case
study. If you do not gain 50% you will be allowed to take account of the feedback and
rewrite and resubmit your assignment but only twice during the course.

Some students leave it all to the end and submit all the assessments at the same time.
This is very risky. If the TMA does not attain the 50% mark there is a string chance the
other TMAs will not either. The greatest benefit of submitting your TMAs in a timely way
is that you will be able to improve by using the feedback comments I will give you as I
mark them. A satisfactory mark in the first one could lead to an outstanding mark in the
next one by making use of the feedback notes.

As I have said above, this Diploma is not all about committing information to memory
and writing it down. It is about analysing the information, understanding how it affects
you as a maritime professional and giving your own opinion in the form of arguing the
pros and cons in order to reach a practical conclusion.

Achieving the pass marks required in the TMAs and the Case Study achieves two things;
firstly, it guarantees you achieve the Diploma and secondly, it goes some way to giving
you new knowledge about ship management that can be applied. Whilst it is essential to
pass the course, you should find it will be all the extraneous activity; forum discussions,
the research that you do, points of views, discussions you have with work colleagues,
interesting stories/anecdotes you hear and read, and the sharing of experiences with
others, that will truly attain your interest and that will become the aspects of the course
that you most enjoy and apply in order to become a successful ship manager.

Enough of the preparation and guidance for this course, let us turn our focus to the first
module which sets the environment in which the principles of ship management are to
be applied.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 12
2. Introduction to the module

Learning Outcomes

On successfully completing this module, you will be able to:

• Discuss the structure of the shipping industry.

• Describe the key players in the shipping industry and their function.
• Define the role and responsibility of the ship manager.
• Discuss the central diversification of knowledge needed.
• Discuss the changing face of the shipping industry and how it operates.

Welcome to Module 1!

As we start this course it is essential you understand the demands that the course
places on you.

It is not easy to study alone, but with proper use of the support systems and materials in
place it should ease the burden on you. This course content is geared towards
establishing the core elements of what it takes to become a ship manager.

This is necessary as everyone taking part in this course comes from various
backgrounds which in turn raises different skills sets as well as knowledge and
experience of the maritime industry.

For those who progress on to being a ship manager or working in a ship management
company after completion of this course, be aware of this job and the expectations
placed on you is not about working Monday to Friday, 09:00 – 17:00 hours. Additional
hours will be needed depending on the operational demands of the ships under your
care.

Ships operate 24/7 and trade all over the world, so you can expect from time to time to
receive calls and emails in the middle of the night with problems or at weekends or
pubic holidays. It is demanding and it is rewarding. For those who want to make it a
career, this is just the first step on a career path that will take you on a journey to many
places you have not dreamed of.

The hard work starts here. Those coming from the shipping industry may want to come
ashore; others may be working ashore and want to improve their career prospects;
some may have come from outside the shipping industry and view this qualification as
an entry to the industry.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 13
Whatever your option is, welcome and it is hoped that although this course makes a lot
of demands on you that it is an enjoyable experience and by the end of the course you
have succeeded in taking your career in the required steps and direction that you want
to take.

The variety of the contents of the materials in the different disciplines covered will tax
you if you are not familiar with or have a limited experience of what is required. What is
recommended is for you to search the internet and read publications relevant to the
topics that are being discussed in the course content.

Also, you must be aware that not all websites are correct and that the content can be
erroneous. Regrettably, the internet can show sites that are out of date or the content is
now obsolete. Great care should be given to what you read and use in your work.
Particular attention must be paid when using Wikipedia as it sometimes does not
differentiate between opinions and facts.

The previous years have seen the rise of the coronavirus pandemic and the effect it had
on everyone from every walk of life. Shipping has been no exception and in many ways
the problems encountered for example crew change has been very difficult and
sometimes non-existent.

There is also the not so small matter of the issue of cyber security being part of every
company’s Safety Management System (SMS) and audits commenced from the 1st
January 2021, at the first Document of Compliance (DOC) audit to be conducted.

All I can do is reassure all of you that the support staff and myself are here to assist you
and resolve any issues. You are not alone and this course should provide you with the
necessary tools to progress your career to the next level.

There is also the option, if this is not enough, to use this qualification to take your
studies to the next level via a postgraduate qualification. This will be dependent on how
you feel and what you want to do and the direction that you want to take with your
career. The options are endless and it will be for you to choose.

A not so new concept and compliance to it is gaining traction in the shipping industry
and that is of “ESG.” This abbreviation stands for “Environment, Social and Governance”.
Many of the aspects of this standard are already being met but to meet the full
requirements of this standard it requires all companies to rethink how they operate and
how they meet each section in isolation and as part of greater overarching standard that
the company must meet and be able to prove that it is in fact meeting this and not
paying lip service to the concept. More information on ESG has been provided in
Appendix A.

The concept of “greenwashing” has become a real problem which is affecting the ESG
concept and its requirements. One definition is “to make people believe that your company is
doing more to protect the environment than it really is” (Cambridge, 2023).

The 3 most common types of greenwashing that are found fall into the following
categories:

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 14
• the use of environmental imagery,
• misleading labels and language, and
• hidden trade-offs (This is where the company emphasizes one sustainable aspect of a
product but fail to mention they also engage in environmentally damaging practices)

This is minefield to navigate and control and determine who is being completely truthful
and who is not.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 15
3. Introduction to the Shipping Industry
The shipping industry is a very complex and demanding industry. This can be seen by
the variety of ship types that trade and the cargoes that they carry.

In addition, there are all the support organisations and industry bodies as well as third
party interested organisations.

Due to the various aspects of shipping, it is not possible to know everything and even to
know where to find relevant details is a huge endeavour. The most important item is
knowing where to find the relevant details/legislation and apply it.

That is why so many people specialise in specific ship types and trades and become to
some extent an expert in their chosen speciality.

Ship management has a few core elements that are common to all ship types and this
forms the central theme of this course.

But it is not enough, there is so much more to know about the industry and the
demands made to ensure global trade continues. It should be noted that over 90% of
goods and materials that are traded are carried on board ships.

Examples of some of the ships that are operating right now are shown in Figures 1 to 4.

Figure 1 – Heavy Lift Construction Vessel – Pioneering Spirit (Ship Technology, 2019)

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 16
 Further Research

For a video of the operation of the Pioneering Spirit visit: [Link]

For the specification and operation details, visit:

[Link]

Figure 2 – Cruise Ship – Harmony of the Seas (Hochberg, 2018)

Further Research

For a video of Harmony of the Seas, visit: [Link]

The vessel’s particulars are:

• Decks 16
• Staterooms 2,747
• Passenger Capacity 5,479
• Crew 2,100
• Gross Tonnage 226,963 t
• Max Speed 23 knots

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 17
 • Length 362.12 metres (1,188.1 ft)
• Beam 47.42 M (155.6 ft) waterline
• Max beam 66 M (217 ft)

• Draught 9.322 M (30.6 ft)

• Depth 22.6 M (74 ft)

Figure 3 – Liquid Natural Gas (LNG) Carrier – Q-Max (devopstom, 2010)

Further Research

For further information on the Q-Max, watch the video at: [Link]

Read more at: [Link]

ships-in-the-world/

Vessel particulars:

• Length 345 m (1,132 ft)

• Beam 53.8 m (177 ft)
• Height 34.7 m (114 ft)
• Draft 12 m (39 ft Installed power 21,770 kW at 91 rpm, per engine

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 18
 • Propulsion 2 × MAN B&W 7S70ME-C two-stroke low speed diesel,
electronically controlled
• Cargo Capacity 266,000 m3 (9,400,000 cu ft)

Figure 4 – Bulk Carrier/Ore Carrier – Vale Brasil (Chia, 2011)

Further Research

For more information on the Vale Brasil watch: [Link]

Vessel particulars:
• Tonnage 198,980 GT; 67,993 NT; 402,347 DWT – cargo capacity
• Length LOA 362.0 m (1,187.7 ft) LPP 350.0 m (1,148.3 ft)
• Beam 65.0 m (213.3 ft)
• Draught 23.0 m (75.5 ft) (moulded)
• Depth 30.4 m (99.7 ft)
• Crew 33

The above detail gives some indication as to the diversity and complexity of the ships
operating round the world and this will be looked at in greater depth in a later module.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 19
As a ship manager it is important to know the ship type that you are responsible for and
the legislation that is relevant to it. This is the core requirement for the job description
and all that you do revolves around what is needed.

In addition, as a ship manager you will need to identify the legislation that is required for
the ships you are responsible for, by the flag administration of the flag state where the
ships are registered. This is only the starting point of putting all of the pieces of the jig
saw together to manage a ship.

3.1 A Truly Global Industry

The shipping industry has no boundaries and the different parties involved in moving a
cargo from one country to another can be staggering. Co-ordinating the voyage and
ensuring all parties are informed is very demanding, and when time zones are included,
it becomes more difficult. Modern communication systems make matters a lot easier,
but there are still a lot of organisations that need to be informed and agreement
reached so that the voyage can be successful.

Shipping never stops. Ships work 24 hours a day, 7 days a week, all the year. There are
repair periods and dry docking to be carried out and this is when the ship is not working.
There may be times when a ship is at anchor, but the point is that even then, the ship is
still working.

The crew work in shifts to cover this 24-hour-a-day cycle and by association the
personnel in the office ashore who support the ships need to work more than just a
Monday to Friday with normal office hours of 9am in the morning to 5pm in the evening.
Ship managers cannot work round the clock every day of the week. It is just not
possible, but if you are contemplating working in the shipping industry then you must
be prepared for working long hours and being on call even when at home.

The shipping industry is global and anyone working in it must be prepared to work with
many people of many nationalities, cultures, and religions. There is no place for
prejudice and everyone must be treated as an equal no matter what rank or position
they hold. Business is difficult enough without having such matters raised which create
barriers and reduce the effectiveness and efficiency of the business.

The core issue is that you will be judged on your professional ability and that of being
able to work with others to achieve a successful outcome in everything that you do.

Regrettably, for every plus there is a minus. At this time the maritime industry has
woken up to the fact that there is a new and potentially devastating attack on the
industry and all sectors contained in it. This is the threat from hackers and other
dangerous entities that want to endanger ships and the business that they are engaged
in. An introduction to this and how the shipping industry is fighting back is found in the
following section.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 20
3.2 Cyber Security

This is now a major new development for all ships and companies and it is not enough
to pass this on to the Information Technology (IT) department and expect them to cope.
It requires personnel with specialised training to be able to cope with and protect the
company and its assets.

Other industries such as banking and other major industry sectors have been exposed
to this menace and it has only been a matter of time before the criminals found the
opportunities to work their way into the lucrative business of shipping and the money
that is involved. This is going to be a war without end and as the industry gears up to
respond and cope with the attacks it will experience, it will always be waiting for the next
new attack.

To give you an idea of the damage that is done in 2017 Maersk suffered a major hacking
incident and it cost them over US$ 300 million. In 2019 Australia reported that
companies (non-maritime) had suffered over AUD$652 million in losses due to cyber-
attacks. The list goes on and on and the amount damage being done and the cost in
financial terms keeps rising.

Further Research

To assist you, I would recommend going to the following UK Government website and
viewing all its content and sign up (it is free of charge) and use it as a way of keeping up to
date with the latest incidents that have occurred. The website includes a short video to
watch which is very good as an introduction to cyber security and some of the issues to
be remembered.

The website is: [Link]

The UK Government has amended its response to cyber security issues and the National
Cyber Security Centre is at the core of how it responds to the ever-changing cyber
security landscape.

Every month there is a short publication which can be downloaded with the relevant
content.

The most important point to note is that people are the weak link in the system and it is
errors by people which cause most cyber security incidents. Think first before you
engage in actions which could compromise the office(s) or the ship(s) of the company.

3.2.1 The Top Five Cyber Risks at Sea

The top five risks have been quoted (BeCyberAwareatSea, 2016) as follows :
Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 21
• Lack of cyber training and awareness
• Vulnerable, outdated control systems
• Lack of information security policies
• Insufficient separation of data exchange networks
• Poor network protection between onshore and offshore operations

It is important to note that these items are being repeated year on year and the
message does not appear to be getting through too many companies and personnel.

Further Research

Watch the video on Maritime Cyber Security at: [Link]

The Most Vulnerable Ships Systems

The most vulnerable ships systems are as follows (HIS Maritime and Trade, 2016):

ECDIS 51%
VDR 18%
IBS 12%
Positioning System 52%
BNWAS 9%
GMDSS 24%
Cargo Control Systems 36%
Engine Control and Monitoring 40%
Systems
Other 10%

These figures do not stay constant but they do remain in a finite range and so remain in
the same order.

3.2.2 The Cyber Security Officer

The UK Department for Transport (DfT) has produced the following publication: “Ship
Security: Cyber Security Code of Practice.” In addition, there is a further publication which
every ship manager should be aware of: “Cyber Security for Ports and Port Systems: Code
of Practice.”

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 22
 Further Research

Both Codes can be found and downloaded free of charge at 2 following web addresses:

• [Link]
achment_data/file/642598/[Link]
• [Link]
security-code-of-practice

There is a lot of useful information to assist companies and individuals in understanding

the cyber security threat. Although this is published by the UK MCA it can be used on a
global scale and only minor amendments required for other specific flag states.

At this point it is important to stress the need for having someone within the
organisation who is responsible and accountable for managing cyber security.

The role of a Cyber Security Officer (CySO (DfT)) requires that:

• the role sits between the technical and IT teams
• the risk management function
• the legal and regulatory stakeholders
• is aligned to business objectives

The CySO should have responsibility for implementing a cyber security plan that
incorporates the following:
• Prevention of cyber incidents by educating senior and frontline management and end
users
• Detection of incidents with a blend of technology and analysis of data
• Execution of a response and recovery programme by implementing the business
continuity
• Disaster recovery plans (use of ISO 22031 - Business Continuity Management assists
in this matter)

This dedicated person needs to have the seniority to manage supply chain cyber risk for
secure procurement activities and be accountable to contracts set by clients in relation
to their cyber exposure. Depending on the size of the company it may be that more than
one CySO is required.

Whilst this is a UK publication it can be used on a global platform by those who can see
the value of the content for their company and the exposed dangers that they face.

This is one of the biggest threats facing the global shipping industry at this time and will
use up a lot of resources to protect and keep the company safe.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 23
The 2018 Edition of the ISM Code has under IMO Resolution MSC.428(98) identified that
Cyber security had to be integrated into the Company’s Safety Management System by
no later than 1 January 2021.

Further Research

A very good industry publication to use is “THE GUIDELINES ON CYBER SECURITY

ONBOARD SHIPS” produced by BIMCO, CLIA, ICS, INTERCARGO, INTERMANAGER,
INTERTANKO, IUMI, OCIMF and WORLD SHIPPING COUNCIL. It is currently presented as
the 4th version which was released on 01 – January - 2022.

It can be found at [Link]

guidelines-on-cyber-security-onboard-ships and is free to download.

The publication contains a lot of useful information.

There are several other publications and students are advised to take care in which
publications that they use and the content found in them. There are a number that are
the opinions of the author of these papers and do not reflect current thinking and
legislation by recognised bodies.

3.2.3 5 Key Cyber Threats Explained

As cyber security and specifically cyber threats, are becoming more imminent
worldwide, the shipping industry gets affected as well. In order to help understand some
of the basic terminology of cyber-attacks, the Korean Register of Shipping explains what
five key cyber terms mean (Safety4Sea, 2019):

“1. OT (Operating Technology)

This is hardware and software that detects or causes a change in physical processes through
direct monitoring or control of physical devices such as valves, pumps, etc. OT systems on
board ships include propulsion, power generation and distribution, steering, navigation,
communications, and cargo operations systems.

2. Zero-Day Threat

This is a technical security threat that leverages vulnerabilities in computer software. It is an

attack that takes place when a patch for the vulnerability is not developed yet. A 1-day
vulnerability is an attack that happens when a patch has been released but has not been
applied because of validation and various other reasons.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 24
3. Brute Force Attack

In order to obtain an account for a user, it tries all the character combinations of usernames
and passwords by repetitive manner until the user's account are matched to get the account
information.

If a password has a specific pattern, such as a user password, the range of values to be
assigned can be greatly reduced. In such a case, a dictionary attack is used in which
dictionary words are combined and assigned. Thus, it is crucial to make password patterns
irregular and not to be linked to personal information.

4. Session Hijacking

This is an attack that intercepts the connection state of the attacked object already connected
to the system and accesses the system. It also uses resources or data without knowing the ID
and password.

5. Rogue Access Point (AP)

Rogue access point is a wireless access point installed in a secure network without the explicit
permission of the local network administrator. In a corporate wireless LAN environment,
proper regulation is necessary, as an external user or an illegal intruder can access all
resources with the same qualification as an internal employee through a wireless AP.”

This is only an introduction as there is an ever-increasing vocabulary for cyber security

issues. The language and abbreviations and acronyms used do take time to come to
terms with.

To assist all students, included on the course page on the VLE in “Appendices for Cyber
Security” is a document titled “Cyber Security: Glossary of Terms”. This will assist you in
gaining an understanding of the complex techno-language of cyber security.

3.3 Supply and Demand for Ships

There is a lot of finance required to build a ship and the money involved is large and as
shipping is a commercial enterprise there needs to be enough money being made to
pay back the investment along with the interest incurred as well as operate the ship to
meet all relevant legislation as well as the demand placed by having an office and staff
to support the ship and, finally, once everything is paid that a profit can be made.

This is a lot harder to achieve than you might think and raises a core issue in respect of
being a ship manager and that is being able to justify every penny, cent or whatever
currency is used. If the ship cannot make a profit, then the business will not last very
long at all.

3.3.1 The Shipowner

The shipping industry revolves around the shipowners and they are the most important
persons or entities in the shipping industry. The reason is simple; if there are no

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 25
shipowners then there are no ships and if there are no ships there is no trade. But the
opposite can be held to be true and that is if there are no cargoes to be carried there is
no need for ships. Each depends on the other to exist and for business to take place.
Each depends on the other to exist.

The profile of the shipowner has changed over the years and some basic facts still hold
good. These are:

• The shipowner can be:

o A single person
o A company
o A group of companies
o A bank or other financial institution
o A financial investor or group of investors
• The shipowner may:
o Manage and operate the entire company
o Subcontract individual parts or groups of parts of the operation (e.g., crew
management)
o Subcontract the “ownership” of the ship through a bareboat charter party.
This is also known as a “Demise Charter”
• The shipowner:
o Will decide how the ship(s) are to be used or be responsible for the ship(s)
in use
• The shipowner:
o Is the ultimate beneficiary of the net revenue (profit) generated by the ship
or ships?

The money that a ship can earn is based on what a charterer is willing to pay for it to
carry the required cargo from one place to another. There are also several different
ways that a ship can be utilised by the charterer and this gives rise to the need for
“charter parties” which are the contracts between the shipowner and the person (entity)
that wishes to use the ship to carry goods.

In many cases the sum of money paid for the cargo to be carried is termed “freight.”

This can be identified as:

• An amount of money based on:

o Cargo quantity
o Or as a lump sum
• The time allowed for payment can be based on:
o Common law
o Usual provisions
• The shipowner will have a lien over the cargo which will be:
o For the sum due for the cargo on board
o Possession retained
o Owner’s agent

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 26
In exercising this right, the shipowner needs to choose where to exercise this lien in
respect of either the charter party or the bill of lading (B/L). Much of this is already
covered by the INCOTERMS 2020 for the carriage of cargo.

3.3.2 International Trade Terms (INCOTERMS)

It should be noted that a new version of INCOTERMS was released in 2020. The title is
INCOTERMS 2020. There were several amendments to accommodate the changing way
that business is now conducted.

Rights and liabilities for parties involved in sea transportation of goods forming links in
the transport chain.

It is important for the seller and buyer of goods, as well as their bankers, cargo insurers
and the various carriers who may be involved in the total journey to know precisely
when the right to ownership and risk of loss or damage passes from seller to buyer, so
that the respective obligations, rights, and liabilities of each party can be determined,
and disputes avoided.

The obligations of the seller and buyer with respect to delivery of the goods and the
division of functions, costs and risks related to the delivery should be contained in trade
terms incorporated in the contract of sale.

Misinterpretation of trade terms and uncertainties may result where there are different
trading practices in the respective countries of the buyer and seller which are not known
to each other.

The trade term “FOB” (Free On Board), for example, has a different meaning to a
merchant in the USA than to a UK merchant.

Language differences between buyer and seller, or lack of a common language, may
also cause misinterpretation of contract terms.

INCOTERMS is a set of rules, published by the International Chamber of Commerce

(ICC), for the uniform interpretation of the most used trade terms used in international
trade contracts.

The main purpose of INCOTERMS is to clearly set out the obligations of the seller and
buyer with respect to the delivery of the goods and the division of functions, costs and
risks associated with delivery.

Using INCOTERMS misinterpretations or uncertainties described above may be avoided

or reduced.

INCOTERMS are published in various languages used by the chief trading nations. The
latest edition of INCOTERMS should be used but it is always prudent to check which
edition is being used for any particular contract.

A sales contract should contain an express reference to the edition used.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 27
Thirteen INCOTERMS are defined, which can be arranged in four groups: E, F, C and D
according to the seller’s basic obligations, as follows:
• Group E: Where the goods are to be made available to the buyer at the seller’s
premises.
• Group F: Where the seller and buyer must deliver the goods to a carrier appointed by
the buyer.
• Group C: Where the seller must contract for the carriage of the goods without bearing
the risk of loss of or damage to the goods or additional costs following shipment.
• Group D: Where the seller must bear all costs and risks required to bring the goods to
their destination.

INCOTERMS can be further grouped into two basic categories:

• terms suitable for use in contracts involving water transport; and
• terms suitable for all transport modes.

An outline meaning of commonly used INCOTERMs is shown in the following

paragraphs:
• EXW – Ex Works (named place) [for any mode of transport]:
Seller to place goods at disposal of buyer at seller’s premises or another named place,
not cleared for export, and not loaded onto any collecting vehicle. Title and risk pass
to buyer at seller’s door
• FCA – Free Carrier (named place) [for any mode of transport]
Seller to deliver goods, cleared for export, to carrier nominated by buyer at named
place. Title and risk pass to buyer on delivery to carrier
• FAS – Free Alongside Ship (named port of shipment) [for sea and inland waterway
transport]
Seller to place goods, cleared for export, alongside vessel at named port of shipment.
Title and risk pass to buyer alongside ship
• FOB – Free on Board (named port of shipment) [for sea and inland waterway
transport]
Seller delivers goods, cleared for export, when they pass ship’s rail at named loading
port. Title and risk pass to buyer as goods pass ship’s rail
• CFR – Cost and Freight (named port of destination) [for sea and inland waterway
transport]
Seller delivers goods when they pass ship’s rail at named loading port and must pay
costs and freight necessary to bring goods to named port of destination. Buyer bears
all additional costs and risks after goods have been delivered over ship’s rail at
loading port. Title and risk pass to buyer when goods delivered on board ship
• CIF – Cost, Insurance and Freight (named port of destination) [for sea and inland
waterway transport]
Seller’s obligations same as under CFR with addition that seller must obtain insurance
against buyer’s risk of loss/damage during sea carriage. Title and risk pass to buyer
when goods delivered on board ship
• CPT – Carriage Paid To (named place of destination) [for any mode of transport]
Seller delivers goods to nominated carrier and pays cost of carriage to named
destination. Buyer bears all additional costs and risks after goods delivered to
carrier. Title, risk and insurance cost pass to buyer when goods delivered to carrier.
• CIP – Carriage and Insurance Paid To (named place of destination) [for any mode of
transport]
Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 28
 Obligations same as under CPT with addition that seller procures insurance against
buyer’s risk of loss/damage to goods during carriage. Title and risk pass to buyer
when goods delivered to carrier.
• DAF – Delivered at Frontier (named place)
• Seller to place goods at disposal of buyer on arriving means of transport, not
unloaded, cleared for export but uncleared for import, at named border point. Title,
risk, and responsibility for import clearance pass to buyer when delivered to named
border point by seller.
• DES – Delivered Ex Ship (named of destination)
Seller delivers when goods are placed at buyer’s disposal on board ship, not cleared
for import, at named port of destination. Title, risk, and responsibility for vessel
discharge and import clearance pass to buyer when seller delivers goods on ship at
destination port.
• DEQ – Delivered Ex Quay (named port of destination)
Seller delivers when goods are placed at disposal of buyer, not cleared for import, on
quay at named port of destination. Title and risk pass to buyer when delivered on
board ship at destination point by seller who delivers goods on dock at destination
point cleared for import.
• DDU – Delivered Duty Unpaid (named place of destination)
Seller must deliver the goods to the buyer, not cleared for import, and not unloaded,
at the named place of destination. Title, risk, and responsibility of import clearance
pass to buyer when seller delivers goods to named destination point. Buyer is
obligated for import clearance.
• DDP – Delivered Duty Paid (named place of destination) [for any mode of transport]
• Seller must deliver goods to buyer, cleared for import, and not unloaded, at named
place of destination. Title and risk pass to buyer when seller delivers goods to named
destination point cleared for import.

There are a couple of terms that have now come into being in INCOTERMS 2020. These
are:

• DAP – Delivered at Place (name of place of destination) [for any mode of transport]
• DPU – Delivered at Place Unloaded (name of place of destination) [for any mode of
transport]

The ship manager needs to be aware of these terms and how they affect any charter
party. It is not a matter of becoming an expert in them and their application but more of
being able to understand and apply them.

It is important to note that while the language used may have subtle differences there
are major implications in the conduct needed to carry out the function. As the course
progresses the various individuals who will be involved in the process to buying and
selling of cargoes will become clear. All of them will use INCOTERMS as the common
language of doing business.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 29
 Further Research

The following provides a PowerPoint presentation with a major explanation of what is

involved in the use of INCOTERMS 2020: [Link]
content/uploads/2022/07/[Link]

3.4 The Four Main Types of Charter Party

A charter party is the contract by which the owner of a ship lets it to others for use in
transporting a cargo. There are four main types.

3.4.1 The Bareboat Charter

This can be considered as the shipowner letting the charterer have his/her ship for a
stated period of time where the charter becomes the demise owner of the ship.

3.4.2 The Time Charter

This can be considered as the charterer purchasing the usage of the ship for a specified
period of time, and paying a daily rate whether the ship is in use and carrying cargo or
not. Important points to note are that of on-hire and off-hire as well as charterers’
orders.

3.4.3 The Voyage Charter

This can be considered as the charterer hiring the use of the ship for a specific voyage to
carry a cargo from port A to port B. In most cases this will require the charterer to pay
the owner a set amount of money per tonne of cargo carried. Important points to note
are laytime and demurrage as well as the differences between time and voyage
charters.

3.4.4 The Continuous Voyage Charter

This is the same as the voyage charter except that in this case the there is a quantity of
cargo greater than that the ship can carry in one voyage and requires the ship to return
for additional voyages until the total amount of cargo has been shipped.

There are points to be considered depending on the trading pattern of the ship. There
are two distinct types of trade for ships although there can be some variations. The
following identifies some of the characteristics involved.

3.5 Liner Trade and Tramp Trade

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 30
3.5.1 Liner Trade

According to Manaadiar (2020), under this type of trading pattern, the ships follow a
planned rotation of ports at set times and cargo can be booked against published
freight rates.

The term Liner is said to have been derived from the term “line traffic” and represents
ships that operate on a schedule with a fixed port rotation and published dates (and
sometimes named day) of calls at the advertised ports.

Example: A service that calls the South African ports of Durban, Cape Town and Ngqura
on a fixed weekly schedule carrying cargo to the UK/NWC ports of London Gateway,
Antwerp, Hamburg, Le Havre, and Rotterdam.

Liner shipping is not restricted to just container ships but also applies to other types of
cargoes that have a regular and fixed routing/service like Ro-Ro services, Bulk cargo
services.

In liner shipping, it is normal to have blank sailings every now and then depending on
various conditions.

Conference Lines were an important historic feature of ocean liner transport. It is

mentioned as “was” because the conference liner arrangements are no longer in
practice in the container shipping industry.

Conference agreements were formal agreements between shipping lines engaged on

various trading routes. This agreement involved shipping lines fixing freight rates
between the various trade lanes.

Across the years, although hundreds of conference agreements were established, they
were not seen to be anti-competitive but rather as a mechanism to stabilise freight rates
and avoid the fluctuations and variations in the supply and demand of ship capacity.

Some are even of the opinion that under Conference arrangement, BCOs (Beneficial
Cargo Owner) were protected from volatility in freight rates, and carriers competed
against each other more on the basis of service than on the basis of freight rates.

The conference system has given way to VSA (Vessel Sharing Agreement) and Global
Alliances where shipping lines come together to form strategic partnerships and offer
joint services by pooling vessels on many of the trade routes.

These new arrangements allow the carriers to limit their commitment of the number of
vessels deployed on a service, while enjoying the benefits of the service, some even
without operating any ships.

Global alliances operate on the same liner principles and cooperate only on the
operational aspects of the business while maintaining their commercial integrity and
independence.

3.5.2 Tramp Trade

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 31
Under this type of trading pattern ships are hired to carry cargo from one port to anther
for a negotiated lump sum.

A Tramp Service or “tramper, on the other hand, is a ship that has no fixed routing or
itinerary or schedule and is available at short notice (or fixture) to load any cargo from
any port to any port.

“Trampers” usually carry break bulk or bulk cargoes that arrive at a port to discharge
some cargo and in some cases will be looking for return cargo or cargo to other regions.
But these ships can carry many other types of non-contracted cargoes such as
Containers, Ro-Ro, etc.

Example: A ship that arrives at Durban from Korea to discharge cargo might carry some
other cargo from Durban to Oakland in the West Coast of the USA, which is in an entirely
different direction. From Oakland, it could carry some cargo to Bremerhaven.

It is important that the term Tramp is not misconstrued as something inferior.

That is just the name that is used in the industry, because of the fact that the ship does
not have a fixed home (route) and is free to generally wander (sail) around the world in
search of cargo fixtures or carrying cargo.

Similarities in Liner and Tramp services

In terms of vessel operation, Liner’ and Tramp services both have below similarities.

Vessels on both service types are:

1 Proper seaworthy ships capable of carrying various types of cargoes depending

on the trade route
2 Classed by reputed classification societies
3 Could be using open registry or FOC (Flag of Convenience)
4 Covered by reputable P&I clubs (Protection & Indemnity)
5 Manned by a crew with the required expertise to handle the operations and the
voyage
6 Vessels that may be custom built for a specific route/cargo or may be used on
any route to carry any cargo
7 Subject to the same immigration, customs, health and port requirements, and
regulations, except in case of liners, where there might be a berthing window
scheme in place at certain ports which allows it to berth at the nominated berth,
at the nominated date/time

3.6 Seaworthiness and Cargoworthiness

The concept of seaworthiness and cargoworthiness are important and require that
when engaging in hiring out a ship or ships that the shipowner has ensured that the
following can be met, and the ship or ships are fit to carry the cargoes they are being
employed for.
Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 32
If a ship is not seaworthy then it is not possible to be cargoworthy. These two concepts
are interlinked and why this is important is laid out below.

The concept of seaworthiness is derived from a legal context where it relates directly to
the shipowner’s right to limit liability to the following:
• An act of God
• The enemies of the monarch
• The inherent vice of the goods

3.7 Contracts of carriage and bills of lading - The Hague Visby

Rules

The Hague/Hague Visby Rules are a mandatory framework of rights and obligations that
apply to the carriage of goods by sea. Outside of this basic framework the parties to a
contract of carriage are free to negotiate additional terms as they wish.

The Hague rules were brought into English law by the Carriage of Goods by Sea Act 1924
and were subsequently updated by the Carriage of Goods by Sea Act 1971 which
brought into force The Hague Visby Rules.

Before the Hague Rules were introduced, parties to a contract of affreightment had
freedom to negotiate whatever terms they wanted.

This often led to wide-reaching exclusions of liability by sea carriers who could take
advantage of their stronger bargaining position.

The shipping industry therefore needed a set of codified rules to ensure a fairer system
which both defined the rights and obligations of the parties and specified maximum
exclusions of liability.

[Link]
[Link]

The Standard P&I Club gives a full introduction to The Hague Visby Rules and their
application as well as limitations. The Hague-Visby Rules, Rule 1 of Article III states
(Standard Club, 2018):

“The carrier shall be bounden, before and at the beginning of the voyage to exercise due
diligence to:

(a) Make the ship seaworthy.

(b) Properly man, equip and supply the ship.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 33
Make the holds, refrigeration and cold chambers, and all other parts of the ship in which
goods are carried, fit and safe for their reception, carriage, and preservation.”

Through this stipulation, the shipowner is obliged to ensure that:

• The ship is supplied on a mutually agreed date and time to the agreed location
• The ship will meet the description as laid down in the charter party clauses
• The ship is in good condition to discharge all the legal requirements of the charter
party
• That any problems that the ship has have been identified and do not affect the
charter party
• The ship is in a seaworthy condition and meets all:
- express obligations
- implied obligations
- absolute obligations
• The ship will be maintained so that:
- it is in a thoroughly efficient state
- it can deal with any problems encountered during the voyage
- it can meet all remedies
• The ship will follow charterers’ orders of where/what and quantity of cargo:
- legitimate orders
- illegitimate orders (this bullet is in place due to the technical legal determination
“illegitimate. This when an order is not sanctioned by law or custom. It may not be illegal
but care must be taken when applying it)
- with utmost dispatch

All the above contained in this section are bound by legislation. It is this legislation
which acts at an international, regional, and national level that ensures that the
standards set are maintained and that a ship can comply with them.

After a ship is built and put into service it ages and as time passes the legislation is
reviewed and amended and the ship must be maintained to meet these amendments.
In addition, maintenance is increased as the ship and its systems are used and exposed
to the hostile maritime environment in which it works.

An important point to note at this time is that the maritime conventions, codes,
guidelines, and standards set out the lowest acceptable level of attainment for a ship to
trade, not the highest. This needs to be borne in mind when studying this and the other
modules of the course.

3.7.1 Breakeven Point

This is one of the important points of doing business when having a ship chartered. If
this is not calculated correctly then the charter party could result in the ship incurring a
loss. If the ship has earned more than the breakeven point, then it will have made a
profit. The following simple calculation followed by a diagram (figure 5) shows how this
is achieved.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 34
The formula for calculating the breakeven point is to take the fixed costs and divide by
the margin percentage. Thus, if the fixed costs in the example above were £3.5 million
then the ship would breakeven when revenue:

Fixed costs × £3.5 million = £7 million

Revenue = -------------- ---------------
Margin % 50%

Profit Profit

Breakeven Point

Total Costs
Variable Costs

Loss
Revenue
Fixed Costs

LOSS PROFIT

Figure 5

• Fixed Costs: These must be paid whether production takes place or not.

• Variable Costs: Rise when production rises and falls when production falls.
• Total Costs: The sum of the fixed costs added to the variable costs.

Figure 5 should be self-explanatory. When a calculation is made as to what the ship can
achieve then the breakeven point will determine the minimum amount of freight that
has to be earned for the voyage to be successful. This is a simplistic view at this time
and financial matters will be dealt with in greater detail in other modules. Remember,
shipowners do not go into business to make a loss.

3.7.2 Ships, Ship Types and Cargoes

Ships are the only viable option for the transfer of raw materials and finished goods, in
large quantities, which make up most of the world trading system.

International trade is constantly evolving to meet the demands of the nations of the
world whether as an individual state, or part of a group of regional states or as part of
the global community.

The advancements being made in communications and the reduction in transportation

costs has brought about an increase in tradeable goods on the world output. This has
been in conjunction with trade liberalisation initiatives, despite the financial crash of
2008 – 2009. This was further felt due the slowdown in the global economy which then

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 35
had to deal with the COVID pandemic. In addition, the war in Ukraine has had far
reaching effects which is still being felt throughout all sections of industry on both the
national and international stage.

The internet has played its part in e-commerce for networking across the world.

The result has been an expansion of both goods and services. The core issue here is a
matter of how to transport large quantities around the world and shipping is the only
viable means of achieving such requirements at reasonable costs.

Factors that need to be considered are:

• No nation is self-sufficient
• International trade allows nations to maintain living standards
• Global trade brings with it a large variety of resources to be accessible

This all sounds very good, but there is a very finite need to ensure that the correct
number ships of each type are available that meet the requirements of the movement
of goods or materials to each sector of the market across the world.

A matter of concern is the changing scale and size of ships to deliver goods. An example
of this is the containership sector where from humble beginnings in 1956, where a
second world war tanker was converted to carry containers, to the massive 400-metre-
long giants that ply their trade and the future growth and size of container ships and
their capacity.

The following table gives an overview of the progression in containership capacities

(Saxon and Stone, 2017 and later additions). This makes for interesting reading and lays
out certain calculated predictions of where the container ship trade will evolve and the
fact that there exists the possibility of the 50,000 TEU capacity containership by the year
2050.

There is no doubt that this may well come true but the need for the whole of the
container infrastructure to be overhauled from ports and harbours to the terminals
themselves and the need for a feeder ship system to handle the capacity to ports that
cannot handle such large ships.

There is also the need to look at the reduction of the number of ships needed and the
reduction in manpower to operate them.

Year Capacity in TEUs

1956 58
1964 1,000
1981 3,050
1985 4,458
1996 6,000
1997 7,226
2003 8,083
2005 9,200
2006 14,770

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 36
 2012 16,020
2013 18,270
2014 19,100
2015 19,224
2017 21,413
2021 24,240
2022 24,240
2023 24,346

Other ship types have moved in a similar direction of bigger being best. The question
that does arise is to whether it is. As a ship manager you need to know the ship types
that you can operate and understand the needs that they have to operate.

3.7.3 What is a TEU?

In the container sector of the shipping industry the standard size around which all
others are measured is one TEU, which is one Twenty Foot or Equivalent Unit for a
container. A forty-foot container is two TEUs.

3.7.4 A 20 Foot Dry Bulk Container

Figure 6

Dimensions Metric Imperial

External dimensions 6.10m × 2.44m × 2.62m 20’ × 8’ × 8’6”
Tare Weight 2,300 kgs 5,071 lbs
Maximum Payload 28,180 kgs 62,126 lbs
Maximum Gross Weight 30,480 kgs 67,197 lbs
Internal dimensions

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 37
 Length 5,900 mm 232.28 in
Width 2,345 mm 92.32 in
Height 2,390 mm 94.09 in
Door opening
Width 2,340 mm 92.13 in
Height 2,292 mm 90.24 in

What must be appreciated is that containers come in many shapes and sizes and their
ability to be loaded with most cargoes makes it a great medium. But to be loaded onto
any container ship the base dimension comes back to 20 feet × 8 feet × 8 feet 6 inches.

This will be gone into in greater detail later in the course in other modules.

3.7.5 Ships and Legislation

This means that the ships being built must be able to service the requirements of the
industry and the trade it will be involved in. If this is not researched properly and there
are delays in a ship coming into service, whether it is by being built or being purchased
as a second-hand ship, the consequences can be disastrous for the company.

The result will be that a ship is no longer an asset to the company but a liability as it will
not be able to meet the demands needed for the trade it is engaged in.

There are also certain functions that must be met. A ship can be built to certain
specifications but if it is not built to recognised standards and applications it will not be
used. The important context here is that most of the ships trade on the international
market and carry cargoes between various countries and in doing so must meet
recognised standards.

Therefore, before going any further a few core issues are raised that any ship manager
must understand.

As stated, before the most important entity in shipping is the shipowner and everything
revolves around them. The legislation which the ship must meet as a minimum is that
of the flag state (nationality) of the country where the shipowner has decided to register
the ship.

3.7.6 Top Five Shipowning Countries

According to United Nations Conference on Trade and Development (UNCTAD) report,

the top five shipowning countries are responsible for over 49.5% of the global dwt
tonnage. The following list was taken from VesselValue as of February 2019. These are:
• Greece
• Japan
• Peoples’ Republic of China
• Singapore
• Norway

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 38
Reports further revealed that at the beginning of 2017, the world fleet’s commercial
value amounted to $829 billion, with different countries benefiting from the building,
owning, flagging, operation and scrapping of ships. This included that:
• Only one country from Latin America – Brazil – is among the top 35 shipowning
countries; none are from Africa.
• The five largest flag registries are Panama, Liberia, the Marshall Islands, Hong Kong
(China) and Singapore; together they have a market share of 57.8%.
• Three countries – the Republic of Korea, China, and Japan – constructed 91.8% of
world gross tonnage in 2016; among these, the Republic of Korea had the largest
share, with 38.1%.
• Four countries – India, Bangladesh, Pakistan, and China – together accounted for
94.9% of ship scrapping in 2016.

Further Research

The latest annual UNCTAD Review of Maritime Transport (and past editions) can be read at:
[Link]

This document is released each year to show the changes in the shipping industry and to
identify trends that are taking place, such as the global shift to the far east for a number of
disciplines in the shipping industry

The COVID-19 pandemic has set out some anomalies which while thought to be
temporary may become permanent. The trends and evidence have been severely
disrupted by the effect of coronavirus on trade and trading pattern. This will need time
to settle down and a proper assessment of the situation after the pandemic can be
made.

3.7.7 The Relationship between Ownership and Flag State

The vessel’s nationality is determined by the flag state it is registered under. There is
very little relationship between the flag state nationality and the nationality of
shipowner or the nationality of the crew.

National trade can be carried on foreign ships owned by foreign nationals.

To bring to light the international mixture of international shipping the following short
table can be used to show how diverse the bodies involved are:

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 39
 Description Nationality
Flag state Liberia
Shipowner Germany
Ship operator Singapore
Classification society DNV – Norway
Ship manager Netherlands
Shipbuilder Japan
Insurance UK
Mortgage lender Germany
Crew officers Greek/Indian
Crew ratings Filipino
Cargo owners Many depending on trade

To add further to this mixture of nationalities and actors in maritime trade the following
need to be reviewed to obtain a clearer picture.

3.7.8 The Top Five Leading Financial and Legal Centres of the World for the
Maritime Industry

A report by Menon Economics (Fathom, 2017) , with amendments to bring it into line
with the requirements for this course, noted the top cities for carrying out different
maritime business activities.

Top 5 financial centres were:

1 Singapore
2 Hong Kong
3 London
4 Shanghai
5 Dubai

There several cities that are reported as being in the top 5 financial centres for shipping.
This will change year on year depending on how successful they have been in the
previous year. It is best to check certain websites each year when they release their
chosen list.

These rankings are based on leading bookmakers, mandated lead arrangers, total
lending portfolio, number of maritime firms on the stock exchange, and the market
capitalisation of maritime firms on the stock exchange. There are some variations
depending on which publication is cited but in overall performance the 5 centres quoted
remain with some fluctuation. Singapore displaced London in the top spot and this is
attributed to the growth in the Far East of business and trade.

The following cited cities give some indication of what it takes to rise through the ranks
and the infrastructure required to make it in the shipping industry. This is an important
fact and it is the need to make it an attractive choice that makes many of the final
decisions of where to locate.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 40
London: Menon ranks London as the top financial centre of the world and has been
ranked number one by the Global Financial Centres Index. Both its law related services
and marine insurance are ranked highly and it is home to world class maritime
brokering services.

In terms of innovation and maritime technology, London is ranked ninth by Menon,

falling behind Oslo and Shanghai. This is based on industry experts selecting London as
a leading centre for maritime technology, which considers R&D, education, ship building
and maritime equipment.

While it remains high on Menon’s list, its ninth place in maritime technology and
innovation is largely driven by its maritime education and research institutions, in which
it achieves second. However, it is less highly rated by industry experts that mention the
city as a place to find companies producing world-class specialised maritime equipment,
reaching twelfth place behind Singapore, Shanghai, and Oslo.

Oslo: Oslo has a strong financial position thanks to Norway’s historical position in the
maritime industry and the development of world leading financial centres. Two leading
shipping banks are in Oslo – Nordea and DNB. It also has a strong and focused
maritime stock exchange and leading insurance and brokering entities.

Its financial position is helped by the Oslo Stock Exchange, which is the largest securities
marketplace for shipping in Europe. Furthermore, Norway benefits from a willing
community of shipping investors and has a solid maritime cluster. Menon also reports
that Oslo is the most important centre in the world for syndicated financing, by which
most ships are financed in order to reduce risk for individual lenders.

In terms of innovation, Oslo fares well. According to Menon, it has the strongest
position in brokerage, shipping finance, maritime law, insurance, and technology.

New York: New York ranks as number three on the list, partly due to the world’s largest
maritime stock exchange being located here, which helps it to finance maritime
operations. It is the largest equity market in the world for maritime stocks, according to
Menon. New York, Oslo, and London are cited as having highly specialised maritime
competence within their banks and financial services.

The US city is also home to more than 250 shipping companies with more shipping
companies listed on the New York exchange than any other exchange. While it has a
significant maritime community, including financial institutions, law firms, brokerage
and more, it does not quite make Menon’s top 25 in terms of maritime technology and
innovation.

Singapore: Singapore takes fourth place as a maritime financial centre and is stated by
industry experts as being home to world class brokering services. In particular, the
Singapore Maritime Foundation has been used to develop the Singapore’s own Ship Sale
Form and has worked to build a modern Charterparty form with BIMCO and ASBA,
indicating its growing importance as a leading international maritime legal centre. It is
also supported heavily by the Maritime Innovation and Technology Fund since 2003.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 41
In terms of maritime technology, Singapore has climbed higher on Menon’s ranking,
from fifth in 2015 to second in 2017. Singapore has attracted many R&D centres to the
city, which is expected to increase its status as a maritime technology hub in the future.
Menon ranks it highly because it is a place where buyers and sellers can meet without
the companies necessarily producing ship equipment and technological products in
Singapore.

According to Wong Weng Sun, President and CEO, Sembcorp Marine, Singapore is a
technology-driven arena. Marine and offshore entities are increasing in the city, and
support from research bodies and tertiary institutions has helped expand its
technological boundaries and enhance its competitiveness.

Shanghai: Menon reports that Shanghai has a strong stock exchange, with the second
largest market capitalisation of maritime stocks. It is ranked fifth overall for maritime
finance and law, with one or two major companies dominating the value of maritime
stocks. China Shipbuilding Industry combined with Shanghai International Port Group
has a combined market capitalisation of US$51 billion.

Shanghai also has highly specialised maritime competency, ranking seventh, with
London, Singapore and New York beating it to the top spot. In terms of education and
R&D, Shanghai is ranked seventh by Menon as having some of the best educational
institutions in the world.

Technological innovation in Shanghai is promising, largely thanks to its shipbuilding

status and producer of maritime equipment.

While the technical capacity is increasing in China, Menon reports that Chinese yards
import 50% of the equipment installed in vessels, indicating that the most advanced
parts of the equipment industry are found in places outside of China.

Menon experts rank Shanghai as the number one place for quantity of maritime
orientated personnel working in the leading classification societies in the city.

The above content may be argued about depending on which stance you take. But,
more importantly, the content shows the diversity of locations for the shipping industry
to operate and deliver on the various disciplines that the maritime industry demands.

To be successful and continue to remain competitive against other major cities it is

necessary to invest in the infrastructure and continue to move forward and wherever
possible expand the services on offer.

The shipping industry has so many different types of business in support of it that it
needs a broad spectrum of business activities to be a successful maritime hub as has
been shown by the above 5 named cities.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 42
 Directed Learning 1.2

1. Where does your shipping company have its office or offices?

2. Try to find out how this decision was arrived at and how the company finds
these arrangements.

There is no right or wrong answer; this is about finding out more about the
company that you work for.

Feel free to post your thoughts to the forum, review what others post, and add
your comments or questions in response.

Note that this can only be done after checking with your company that the
information posted does not affect it or breach confidentiality.

3.8 The Shipping Industry Bodies

The groups to be addressed and understood are:

• The world
• The shipping industry
• The shipping industry regulators
• The shipowners – this has been discussed earlier in this module
• The customers/clients
• The inspection bodies

3.8.1 The World

• Governments which set out and:

o Ratify international conventions
o Ratify regional conventions and
o Ratify their own national regulations by statute law
• The Public
o Hold perceptions of the shipping industry whether good or bad
• The Media
o Forms the opinion set before the public and in many cases has its own
hidden agenda

3.8.2 The Shipping Industry

• The Customers
o Organisations which require the services of the shipping industry
Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 43
 o These are commonly referred to in the industry as “the Shippers”
• The Insurers
o Underwrite the potential risks involve in trading a ship
o Some of the various types are:
– Hull and machinery
– Protection and indemnity
– Freight, demurrage, and defence
– War and strike risk
• The Banks
o Responsible for financing the venture

3.8.3 The Customers (Shippers)

• The Shippers
o Are the entities that have an item or many items to be carried by ship(s).
o They can be identified as sellers, buyers, or freight forwarders of items to
be shipped.
o This is a complex relationship between the shipowner and the carrier.
o This can be explained further by stating in general terms that the shippers
hire ships or space on a ship to carry their cargo from one port to another.
o The cost of this carriage may be borne by either the seller or the buyer.
o The shipper can use a carrier to carry its own cargo (oil companies using
their own ships to carry their own cargo).

In addition, ships can be hired to provide services; a few examples are listed
below:
o Seismic survey vessels hired to provide surveys of possible oil or gas
deposits.
o Anchor Handler, Towing and Supply (AHTS) vessel to work in the off shore
sector to carry out specific items of work associate with rigs and rig
movements.
o Bunker barges used to supply bunker oils at a port to ships engaged in
voyages.
o Passengers may hire a ship for a specific function.

• The Banks
o Ship finance is a major part of some specialist banks’ portfolios.
o This includes several services of which the mortgage of a ship is normal
practice.
o Should the shipping industry experience a downturn in the market then
the banks may become the owner due to foreclosure of the shipowner.
o Should this occur then the bank will seek to find a demise owner for the
ship to be responsible for their assets.

This has been a very trying time and the shipping industry has had to come to terms
with the COVID-19 pandemic and the result of ships being unable to trade and then
the industry being under great pressure as economies re-opened. This is especially
so in the cruise ship sector and banks have had to bear the brunt of financial chaos
that ensued.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 44
3.9 The Shipping Industry Regulators

These are bodies that bring about an expected global minimum standard for ships in
the commercial industry.

3.9.1 Regulators

Examples of these are:

• The United Nations (UN)
• The International Maritime Organization (IMO) which is a UN agency
• The International Labour Organization (ILO) which is also a UN agency
• The International Organization for Standardization (ISO)
• The Maritime Industry
• National Governments
• Non-Governmental Organisations (NGOs)

3.9.2 Legislators

These bodies are responsible for implementing the standards set by the regulators.

Examples of these are:

• National administrations (flag states)
• Classification societies (normally this is set by the member societies of IACS)
• Professional bodies
• Trade associations

3.9.3 The Inspection Bodies

These organisations are responsible for visiting both the ships and company offices to
ensure that the following are being complied with:
• Operational Safety
o Statutory
o Flag state
o Port state
o ISM audits
o ISPS audits
o MLC audits
• Financial
o Insurers – H&M, P&I etc.
o Cargo owners
o Charterers
• Crew Competence
o Manning levels
o Training
o Certification of seafarers
• Technical
o Classification society rules
o Type approvals
o Shipowner requirements

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 45
 o Ship yard regulations
o Approved suppliers

All the above brings the topic back to the designing and building of ships to the required
statutory regulations. This can be expressed in the steps:
• The shipowner will translate a business need into the context of the required
legislation with assistance from naval architects, engineers, and ship yard specialists
• Once the standard is met and accepted a contract is awarded for the construction of
the ship
• The owner or his operator or manager of the ship will oversee and/or monitor the
construction. This will also involve the chosen classification society being in
attendance

The hull structure will require:

• Project managers
• Naval architects
• Production engineers
• Draughtsmen (much of this is now done by computer software)
• Designers
• Interior designers
• A skilled workforce

The equipment and systems will require:

• Marketing
• Design
• Research and development
• Manufacturers
• Installation
• Integration of systems
• Commissioning of the equipment, systems, and hull

Once all of this has been met and all tests have been successful the ship can be handed
over to the owner or his/her representative, then the ship must be brought into service
by providing, supplies, consumables, manning, bunkers, harbour services and passage
support which will include security, weather routeing management, vessel traffic
management services, navigational aids, technical advice, and the full set of aids to
navigation for a ship of its size and type.

More importantly, a properly and suitably, qualified, experienced, and medically fit crew
is required to operate the ship. This is an ISM Code and STCW Convention and Code
requirement.

3.10 The Maritime Legislation Framework

The United Nations (UN) has set up the International Maritime Organization (IMO) as
the agency to deal with all matters pertaining to the maritime industry. The initial piece
of legislation that is set in place and amended as required to meet the ever-changing
demands of the shipping industry is:

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 46
 “The United Nations Convention on the Law of the Sea, as amended”

This document is known as UNCLOS and has a large and varied content, and a ship
manager will become more familiar with certain parts of its content than others
depending on the ship types and trades that they are involved in. Even then this is only a
small part of the Convention.

The IMO has an extensive and varied work load to perform to ensure that ships are built
and maintained to suitable standards and the impact of these ships on the environment
is reduced / minimised as far as possible.

As its remit changes to meet the demands being placed on it, the only way to fully
understand and bring about a working knowledge is through the IMO itself and the
various conventions, codes, guidelines, and standards that it produces and the way it is
constructed to function.

Further Research

The ideal way to research the IMO is by interrogating its website at: [Link]

It will take a bit of time to become familiar with its content and where to find relevant
information.

This will give an idea of how the flag states play their part in the running of the IMO as
well as paying towards its funding: the following has just been updated.

It should be noted that the structure of the IMO website was amended a few years ago
due to the IMO suffering a cyber-attack which did a lot of damage to it and the member
states at the IMO.

3.10.1 The IMO Council Members

The IMO Council, which creates the biggest oversight of the IMO has been selected by
the IMO Assembly. All 175 IMO member states, plus three associate member states are
allowed to attend the Assembly meeting.

Council membership is considered an important position for member states that seek to
be engaged with the IMO decision making position as it makes many of the important
decisions around the plans and functions of the IMO. Council positions are for two
years, in line with the IMO budget biennium.

There are three categories of members.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 47
• The first is the “Big 12” with the largest interest in providing international shipping
services
• The second category is the 12 that have the largest interest in seaborne trade
• The third category is the final 28 being the countries with special interests in maritime
transportation or navigation, and which ensure geographic representation of
maritime nations

The diversity of the countries shows the extent to which the IMO is committed to global
representation of its work and outputs.

Ship managers need to understand the basis on which the IMO brings conventions into
force and how they are managed over their lifetime. The best way to do this is by going
to the IMO website to the page:
[Link]

The title of this document is:

“Adopting a Convention; Entry into Force; Accession; Amendment; Enforcement; Tacit
Acceptance Procedures.”

In addition, on this web page on the left-hand side there is a new window that can be
opened to show the list of IMO Maritime Conventions. This list is broken down into
several sections where related conventions are presented as a group. A review of this
list of conventions and their Protocols gives the reader a basic introduction to what is
being required.

Directed Learning 1.3

1. Visit the IMO website and search for items and topics that interest you. The only
way to become familiar with the contents of the website is by using it.
2. Choose one flag state that a ship of the company is registered under and try to find
out as much as possible about its commitment to the IMO by way of the
conventions it is signatory to. Also, where is it in the hierarchy of the IMO in terms
of its membership category (as stated above in the notes)?

3.10.2 Using Maritime Law as a Ship Manager

The various conventions, codes guidelines and standards are going to be reviewed in
depth in later modules of the course. The core element here is that shipowners are
governed by Maritime Law and ignorance of the law cannot be used as a defence.

Ship managers need to develop and understand the relevant laws and other standards
that apply to the ships that they are responsible for. This is not only for the IMO but
also the legislation created by the flag administration of the country where the ship has

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 48
been registered. This must be in line with or above the IMO standard set. It must be
equivalent or above but it cannot be below if its ships are to trade internationally.

There is also the need to be familiar with certain industry standards which need to be
met for the ships to trade and not be restricted. An example of this is the Oil Companies
International Marine Forum (OCIMF) and its Ship Inspection and Reporting (SIRE)
Scheme which oil tankers and other bulk liquid carrying ships need to pass to be able to
carry major oil company cargoes.

In addition, the OCIMF has the Tanker Management Self-Assessment scheme (TMSA -3),
which is on its 3rd Edition, and this is used to assess the offices of the company and its
performance against set criteria. Although this is focussed on companies operating
tankers of any kind, it can be amended and used for other ships, if required.

If you are new to the maritime industry this may appear to be a daunting task and the
question is how can you know everything? The answer is simple – you cannot know
everything, but more importantly you need to know where to find legislation and be
able to interpret it or find someone who can assist you.

You need to stay focused on what is relevant to you and the responsibilities you have
been given. When time allows you can expand your knowledge.

Some of the IMO maritime legislation:

• Safety of Life at Sea, 1974, amended – Convention (IMO)
• Marine Pollution 73/78, as amended – Convention (IMO)
• Standards of Training and Certification of Watchkeepers 1978, as amended –
Convention (IMO)
• Maritime Labour Convention 2006, as amended – Convention (ILO)

The four conventions listed above form what is commonly known as the “Four Pillars of
the Maritime Industry.” These are dealt with in depth in a later module of this course.

There are also a few other conventions such as the:

• Convention on the International Regulations for Preventing Collisions at Sea
(COLREGs) 1972
• International Convention on Load Lines (LL) 1966
• International Convention on Tonnage Measurement of Ships (TONNAGE) 1969
• International Convention for the Control and Management of Ships’ Ballast Water and
Sediments 2004

Some of the Codes are:

• The International Safety Management (ISM) Code made mandatory by SOLAS
• The International Ship and Port Facility Security (ISPS) Code made mandatory by
SOLAS
• The International Maritime Dangerous Goods (IMDG) Code made mandatory by
SOLAS and MARPOL

When dealing with the Carriage of Goods certain other documents and rules need to be
understood such as:
• Bills of Lading (B/L)

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 49
• Hague and Hague-Visby Rules
• Sale of goods
• Disputes and resolution

The Hague–Visby Rules is a set of international rules for the international carriage of
goods by sea. They are a slightly updated version of the original Hague Rules which were
drafted in Brussels in 1924.

The premise of the Hague–Visby Rules was that a carrier typically has far greater
bargaining power than the shipper, and that to protect the interests of the shipper/cargo-
owner, the law should impose some minimum affreightment obligations upon the carrier.
However, the Hague and Hague–Visby Rules were hardly a charter of new protections
for cargo-owners; the English common law prior to 1924 provided more protection for
cargo-owners, and imposed more liabilities upon "common carriers".

The official title of the Hague Rules the "International Convention for the Unification of
Certain Rules of Law relating to Bills of Lading". After being amended by the Brussels
Amendments (officially the "Protocol to Amend the International Convention for the
Unification of Certain Rules of Law Relating to Bills of Lading") in 1968, the Rules became
known colloquially as the Hague–Visby Rule

There are many facets of these pieces of legislation that apply across all ship types, but
there are several items that are relevant to only particular ship types.

At this time there are approximately 124 sub-types of ships which can be broken down
into the following short table:

Tankers 18 categories
Bulk carriers 14 categories
Dry cargo/passenger 23 categories
Specialist 69 categories

Breaking down these sub-types and the cargoes that they carry will be reviewed in depth
later in the course.

With such a diversity of ship types comes the diverse need for the operating instructions
for each ship type and the relevant legislation that applies to it. While certain legal
requirements are set for all ship types, the range of specialist legislation that applies
only to specific ship types needs to be reviewed and understood so that the ship
manager can be fully efficient and effective in their work.

To give examples of the differences in ships and their cargoes:

• Liquefied Natural Gas Carrier: A liquefied natural gas carrier carries its cargo at –
162°C. At no time should the cargo and the crew come into contact with each other
and the ship has highly specialised equipment to monitor and control the cargo and
its environment to keep it cold.
• Livestock Carrier: A livestock carrier carries 20,000 sheep. The crew have additional
livestock specialists who monitor, care for, and feed the cargo of sheep or other

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 50
 animal species. This is hands-on and requires the disposal of dead carcasses and the
removal and control of waste products from the sheep.

Both are ships but how they operate and the controls for keeping them safe and secure
and how the cargo care is carried out are completely different. That is why no one can
know everything about all types of ships and their cargoes.

Because of the diversity and the need for safe ships and protection of the environment
there is a need to ensure that there is a process for bringing new legislation to the
shipping industry that meets the demands being made of it and is acceptable to the flag
states who are represented at the IMO along with the various industry bodies that need
to translate the legislation into actual working ships.

3.11 The Differences between the Shipowner and Ship

Management

There is a general premise that the shipowner can also be the ship manager if he/she is
so inclined to keep the various management aspects of the ship in-house and keep sole
control of all aspects of operating the ships that are owned.

The other option is to own the ship and place it under the care of a ship manager who
will carry out various functions in relation to each ship that have been agreed in a set
contract for set costs. What must be understood here is that the ship manager will carry
out only the items placed in the contract. If any further work is required by the
shipowner, then this must be agreed between the owner and the manager and the fees
agreed before work will commence.

But there is one item that must be reviewed and be in place should the shipowner be
looking at placing their ships under the management of a third-party company and that
is the ISM Code Part A - section 3 – Company responsibilities and authority:

3.1. “If the entity who is responsible for the operation of the ship is other than the owner,
the owner must report the full name and details of such entity to the Administration.”

(IMO, 2018)

This requires the shipowner to identify the entity who has taken over the
management/operation of the ship to the flag state. This includes full details of name
address and contact details.

The information should be presented in such a manner as to be readily identifiable.

This would be that the shipowner has sent a correspondence addressed directly to the
flag administration containing the following facts:
• Name of shipowner

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 51
• Address of shipowner
• Ship’s name
• IMO number
• Port of registry
• Call sign

This ensures that the identity of the ship cannot be confused.

Then the details of the responsible operator:

• Full name (as would appear on a Document of Compliance)
• Full address (as would appear on a Document of Compliance)
• Contact numbers:
o telephone number
o fax number
o email
o telex (if applicable)
• Contact person

The correspondence should include a clear statement from the shipowner to the flag
administration that the company named has assumed the full responsibility for the ship
as imposed by the ISM Code.

A request to the flag administration for a reply to the correspondence acknowledging

the appointment of the responsible operator should be included.

When a reply is received, this information should be kept for each vessel in the office
and a copy on board each ship.

Some flag administrations have a pre-formatted message to be completed. This may

also include the requirement of naming the designated person and a 24-hour contact
telephone number.

A letter titled “To Whom It May Concern” has been found unacceptable at some audits
and at Port State Control inspections.

A copy of this correspondence should be placed on board the ship as proof that this
section of the ISM Code has been addressed. The company should ensure that when
any changes are made to this information that the flag administration is informed and
the ship. This is unless the company has already written a procedure to cover this item.

There is more to this this than just a general letter making a statement of intent. The
shipowner cannot choose only some sections and sub-sections of the ISM Code for the
ship manager and keep the rest under the control of the shipowner.

The ship manager becomes the responsible operator for the ship and must be able to
present the ship for auditing to a relevant Flag administration or Recognised
Organisation (RO) under the terms and conditions of the ISM Code to obtain the
relevant Document of Compliance (DOC) for the company and Safety Management
Certificate (SMC) for the ship.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 52
If this is not the case, then even though a ship management contract has been agreed
the RO will audit the shipowner to ensure compliance to the whole of the ISM Code has
been met and that certification can be awarded.

The situation becomes more complex when you add in the variable for manning the
ship or ships. If the ship manager does not carry this out in house but has awarded a
contract to a manning agency or crewing agency, then the ship manager must be able to
show how it keeps control of manning and that the crews supplied to the ship or ships
meet the full requirements of the STCW 78 Convention and STCW Code as amended.

There is also the matter of showing the requirements of the Maritime Labour
Convention 2006 (MLC), as amended are also met in respect of employees serving on
board the ships.

Other matters which need to be decided on and made clear are:

• Flag state registration of the ship
• Classification society to be used
• Recognised organisation to be used for the ISM Code
• Recognised organisation to be used for the ISPS Code
• Recognised organisation to be used for the MLC 2006
• Nationality of officers
• Nationality of crews
• P&I clubs to be used
• H&M insurance company to be use
• And many other items which will be contained in the ship management contract

This will be gone into in more detail in other modules contained in the course.

There is another option where by the shipowner hands over all aspects of operating the
ship to what is called a disponent owner under a demise charter party. This can also be
known as bareboat chartering. To place this in its simplest form the shipowner retains
ownership of the ship and the disponent owner pays a fee for the use of the ship and is
responsible for all costs involved in running and operating the ship for the life of the
charter party.

There are many questions to be asked as to why a shipowner would choose to use a
ship management company instead of keeping the ships under direct control. The
answers are varied and many and there may be other complex legal reasons for making
such a choice. It is not possible to give one answer which would cover all permutations.

One factor that can be seen is that of the economy of scale and the bargaining power of
using a ship management company which has a lot of ships under its control. When it
comes to negotiating fees and services, if a shipowner has only one or possibly even five
ships it is limited in what can be achieved. Whereas a large ship management company
with hundreds of ships under contract has the power to reduce fees and costs due to its
size.

The same can be said of office/shore staff and premises for conducting business. It
does not matter how many ships the owner has, the greater the number of ships the
easier it is to offset the cost of the office and its staff against each ship.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 53
This is achieved by dividing the total costs involved against the number of ships. It
sounds simple, but it is not, but you must start somewhere.

The important point here is to note the core issue of the shipping industry. Shipowners
are involved to make money (a profit). They are business people who have assessed the
risks and rewards and believe that they can make it happen. They do not operate the
ships for the benefit of others. How they achieve this is by using the business model
that best suits their organisation and the rewards they hope to achieve.

It does not matter whether you are a shipowner managing your own ships or a
shipowner who has given your ships to a third-party ship manager, the skill set and
demands made to successfully manage one ship or a group of ships are still the same.
How the objectives are achieved may vary but the final outcome is still the same.

As the course develops and modules are added it is hoped that a better understanding
of commercial shipping is understood and that everyone is in a better position to be
able to manage ships.

This is a never-ending learning curve and after learning there is the correct way to
execute the knowledge attained whether it is by revision of legislation, new ship types or
dealing with computer systems being used to support ship operations.

3.12 Legal Responsibilities

A ship manager must ensure that that the ship or ships that they are responsible for are
always meeting the legal requirements for a ship of a particular type and size under
both the law of the flag state that it is registered under and international legislation set
via the IMO.

There is additional legislation to be considered which is regional legislation where a

group of countries have banded together to achieve a common consensus. One such
set of regional legislation is that of the European Union (EU).

Regional legislation and application can also be found in Port State Control (PSC). Under
its title groups of countries come together using Memoranda of Understanding (MOUs)
and apply the requirements to the same standard for all members to give parity to how
PSC conducts and applies their inspections to ships visiting the ports of member states.

Ignorance of the law is no defence and failure to meet the law is a serious matter.
Therefore, as a ship manager, it is important to carry out all checks and ensure that all
ships under a ship manager’s control are fully certified and meet all requirements
needed to complete every voyage.

This cannot be achieved by the ship manager working in isolation but as part of a group
or team to ensure that all demands can be met. Depending on the qualifications,
knowledge, and experience of the ship manager the movement forward can be slow but
never fast. There is too much to learn and know to allow for gaps to perpetuate which
can jeopardise the career of anyone.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 54
This results in the ship manager needing to be a good communicator if they are to be
successful.

There are many varied skills required and through the materials of this course it is
hoped to impart knowledge and understanding to be used as the foundation of what
will be needed to be just a successful ship manager, but a continuously successful ship
manager.

3.13 Conclusion

The shipping industry is very demanding while at the same time it can be very
rewarding. It is constantly evolving, and the skillset of the ship manager must evolve to
meet the demands of the industry.

There is a great demand made of everyone who works in the industry and ship
managers play a vital part in bringing together all of the facets to ensure that the ship
or ships they are responsible for operate to the optimum level of efficiency and
effectiveness.

There is, of course, the career of the ship manager to grow and be promoted and move
into other avenues that were not at first thought of when they entered this part of the
industry. The only limitation on what you can achieve is set by you alone. If you have the
drive and determination to succeed, then you will. It is hard going, but so is anything
that is worthwhile.

All the above being said, all that remains to be said is “Welcome to the wonderful world
of shipping.”

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 55
4. THE ROLE OF THE SHIP MANAGER
In the previous chapter we looked at the variety of ships, legislation, applications a ship
manager needs to know about to function to the desired standard required by the
company and the demands of the industry.

You will never stop learning and one very important point here is to note that being able
to recite legislation or other requirements is not important. The importance is being
able to find the relevant legislation and then interpret it correctly and apply it correctly
to a work place situation.

Always remember that it takes time and brain power to learn certain materials. The
problem lies in the fact that when the materials are revised and changed you need to
unlearn the old and then learn the new revision. This requires a lot of time and effort
for very little return.

What is important is that you learn to be effective in time management to ensure that
you can perform to the standard required and discharge the responsibilities given to
you in the position that you hold. Good time management can only take you so far.

Working longer and longer hours each day is not good for your health and relationships
in the longer term. Working every day and being afraid to take holidays is also
detrimental to your wellbeing.

It is important to find an accommodation of the work – life balance that is needed for
you. Every single person is different in how they meet this challenge and cope with the
demands placed on them. It is more difficult in the shipping industry and ships work
24/7/365. Crews change, cargoes are loaded, carried, and discharged, dry docks take
place.

One of the few constants is the ship manager, you will see these changes taking place
and will be responsible for ensuring that all is kept in order and that nothing has been
lost during change over periods and that all records are received and recorded as per
the Safety Management System (SMS) that the company has put in place.

Being a ship manager is not for everyone and there is no disgrace in moving on if you
find that your health and relationships are suffering or that you are suffering from being
over-stressed. That is why finding the correct balance that suits you is so important.
There is not one single solution to this problem. Each person must find what works for
them and apply it to their own professional and personal life.

4.1 What is Ship Management?

This has already been introduced earlier in this module and it is now time to expand on
this topic to give a better understanding of what is taking place.

Management is a discipline used for companies and organisations to operate more

efficiently and effectively.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 56
The fundamentals of management are the same no matter what the discipline is and
type of company using it. There has been so much written about management and, of
course, as time passes it evolves and new concepts and ideas are brought forward.
Many will have a short lifespan and once it has been identified that it has no long-term
application it will be discarded.

There are many sub-sets of management that must be looked at and decided on as to
their relevance to the functions of the shipping company and the services and
operations it delivers to itself and its clients.

A review of services that shipping companies may offer as management services are:
• Ship management
• Operational management
• Technical management
• Crewing management
• Financial management (including accounting)
• Safety management
• Security management
• Commercial management
• Quality management
• Environmental management
• Cyber Security Risk management

These are some of the core management disciplines that may be used. There are other
maritime disciplines of management that are being brought forward and will be used.
The company needs to have identified the management disciplines it will be using and
how it deals with them through policies, procedures, work instructions, and how these
are translated into forms, documents, and records. There is also the need to educate
and train staff on each application so that they can discharge their duties to a higher
level of efficiency and effectiveness.

With the maturity of the computer and the software packages available most companies
will use the electronic format for the use of all this information and recovery of relevant
pieces of information needed at set times.

Of course, there is also the need to produce documents, reports, analysis, etc. for the
demands of the company in assessing its performance and predicting the future
direction of the company and what it can attain.

This moves the personnel from working at:

• a functional management level
• an operational management level
• a strategic management level

4.1.1 Functional Manager

The functional manager is one who may not be involved with strategic management but
can be a sub-set of operational management. This may be in conjunction with limited
specific tasks but not the overall operational management of the organisation.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 57
4.1.2 Operational Manager

The operational manager must implement the chosen strategy in relation to his or her
operation or functional area, dealing with everyday problems that arise in the
management of functions or personnel.

4.1.3 Strategic Manager

The strategic manager is concerned with the design, rather than the implementation of,
the strategy or long-term plan; setting objectives that position the organisation, so it
may operate more efficiently and effectively. So, depending on the position the ship
manager holds in the company, the exposure to different functions of management will
exist.

When a person reaches the level of being involved in strategic management, then a
different world exists where predicting the performance of the company and returns on
investment become very important.

An example of this is that a company states that it has made a loss but when the figures
are viewed it has made a profit for the year at both gross and net figures. When the
strategic management had carried out their review and plans for the forthcoming year
or further into the future certain factors were taken into account and their effect on the
company.

To give a very simple explanation, the company projected that the net profit for 2020
was to be US$100 million. When the figures for 2020 were completed, the net profit was
US$90 million. Therefore, there was a loss of US$10 million against the projection. This
will result in stakeholders (such as shareholders) receiving a reduced dividend for the
year.

This will be looked at and compared with other companies and how they performed and
their final figures for the year, and what the return on investment would have been.
Having done this, it is possible that the shareholder will move their money from the
company to the other, better performing company.

If a lot of shareholders do the same, then the company could be in deep financial
trouble. At a functional and operational level everyone has worked hard and performed
very well but the final financial figures will determine the future of the company.

This is why it is important for everyone to work to the best of their abilities. They have
no control over the strategy and implications of the company and in many cases will be
totally unaware of the impact on the company.

4.1.4 Planning

Planning is carried out to ensure that everyone involved in an operation is aware of

what is going to happen and what is required of them during the operation, to ensure
that sufficient resources are available and to ensure that there are contingencies in the
case of unforeseen occurrences. Planning should include the following activities:
• Setting objectives

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 58
• Collecting and collating information
• Identifying risks and hazards
• Preparing contingencies
• Establishing communications
• Identifying resources required
• Managing time

The traditional approach to planning is to use a very structured or linear approach

where lists are drawn up, perhaps under the headings listed above. This approach is
said to be very “left brain dominated”, i.e., it uses that part of the brain that governs
language, sequential thinking, and analysis, all of which are essential to effective
planning.

However, this approach also means that the assets located in the right side of the brain
that include the ability for simultaneous thinking, or “seeing the big picture”, are not being
used. To bring this ability into play a technique called Mind Mapping may be employed.

To create a Mind Map, the main concerns or aspects of an operation or activity are
placed around the central theme and then links are formed to the next level of concerns
associated with each of the main concerns. The advantages of mind mapping are that it
provides a good, quick reference and record of discussion, it allows a wider aspect of the
operation to be appreciated and mind maps can be easily expanded in case of
developments.

This holistic approach to planning moves towards the concept that people, and life in
general, are not rational and mechanistic. A more adaptable approach is better suited
to what might transpire in the actual event.

4.2 Management Control

Control is concerned with gauging the measure of success in achieving the goals and
objectives of an organisation. The manager needs to understand the nature of control
and how best to implement control systems in order to improve performance.

Mullins (1983, p30-32) identified five essential elements in a management control

system:
• Planning
• Establishing standards of performance
• Monitoring actual performance
• Comparing actual achievement against the planned target
• Rectifying and taking corrective action

Although these 5 elements were written many years ago, they still hold good for today
and management controls to be used in business.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 59
4.2.1 Planning

As discussed in the previous section, planning involves the clarification of the

objective(s). Planning provides the framework against which the process of control can
take place.

4.2.2 Establishing Standards of Performance

Standards of performance must be identified in order to measure the level of “goal

achievement”. Unless the objectives are clearly stated by planning and standards of
performance identified, there can be no effective control.

4.2.3 Monitoring Actual Performance

Monitoring actual performance requires accurate and relevant information to be

available at such time intervals and in such a form that will enable management to
identify any deviations from planned performance.

4.2.4 Comparing Actual Achievement Against the Planned Target

To make a comparison between the planned targets and the actual achievement, the
information noted above must be processed to provide progress indicators and to
identify deviations from the plan and their probable causes. This information must then
be related back to those concerned, which provides feedback, is a vital part of the
management process.

4.2.5 Rectifying and Taking Corrective Action

If objectives are not met or other non-conformances occur, corrective actions must be
implemented. The implementation of a corrective action programme begins with the
detection of a problem and the immediate action(s) taken to restore or mitigate the
consequences of the problem. Longer-term actions are to determine the root cause and
put in place measures to prevent recurrence.

The above gives an indication of the minimum requirements of a manager to consider

when working. Depending on the management style chosen by the company the
manager must ensure that they are following the style and disciplines that go with it
when performing their duties.

There is so much information in books, periodicals, and the internet that anyone doing
research into this will be awash with information. It is essential to look for what works
for you or the management style that the company has chosen so that by developing
these skills a ship manager can be more effective and efficient in completing their
responsibilities.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 60
 Directed Learning 1.4

1. What style of management is in use in your company and how well does it work?

2. What type of manager and leader do you perceive yourself to be?

Feel free to post your thoughts to the forum, review what others post, and add your
comments or questions in response.

4.3 Organisations and Their Structure

A ship manager needs to understand how organisations (companies) function and their
structure.

To be able to manage effectively, any person must understand the principles behind
organisations and structures.

From this understanding, they can then identify their place within the organisation and
how they will interact with the other persons making up the organisation.

It is of no concern as to what the organisation is or how it is made up and the functions

that it performs; the one thing that remains constant is that human beings are involved.
Even if the organisation is “fully automated”, there is still a human presence to oversee
and control the automation.

An organisation is made up of individuals who are then formed into groups.

The structure of an organisation can be shown in an organisational chart or organigram.

The structure of an organisation is the pattern of relationships that exists between
individual members and groups within the organisation.

The complexity of this structure depends upon the number of individuals involved and
the structure of the management to control it.

The structure divides the work of the organisation among its members and co-ordinates
their activities to ensure that all are working to a common goal in the most effective and
efficient way.

The tools for ensuring that the framework created will operate effectively are:

• Identification of activities
• Planning
• Organisation
Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 61
• Direction
• Control
• Clear definition

This can be further understood and controlled by identifying clearly what effects these
will have on the personnel required to perform the work. These are:

• Tasks
• Responsibilities
• Roles
• Relationships
• Lines of communications

As the structure exists to co-ordinate the effort expended and to improve organisational
performance, the need for a formal structure increases with the size of the organisation.

The structure itself should be continuously reviewed to ensure that it remains effective,
as well efficient, and it is in keeping with the internal and external environmental
developments of the organisation.

The organisation and structure are there to assist and develop the personnel involved to
become better and more efficient at how they perform their work, and this in turn
benefits what the organisation is trying to achieve.

There are several models that can be used as a basis for any organisation. The models
that stress a rigid structure are viewed as “bureaucracies” or “hierarchies”.

An example of this may be the traditional structure on board a ship.

Hierarchies share the following characteristics:

• The presumption of a clear logic between the organisation’s goals and the actions
needed to achieve them. There is a belief in a rational approach to the operation of
the ship or office
• A specialised workforce is created by clearly defining the responsibilities and duties
• Centralising the decision making at the most senior level ensures harmony among
the specialists
• Clear procedures are laid down for the specialists to follow
• A hierarchy of staff is established to enforce the requirements, resulting in a typical
pyramid staffing structure
• Lines of accountability are clearly drawn between the levels in the structure
• Accountability is between one holder of office and another, rather than between
individuals
• Vertical, rather than horizontal, communication between specialists in the structure is
encouraged

The responsibilities within a hierarchical structure must be clearly defined. This style of
structure is required on board ship. A ship operates 24/7 and when out at sea requires
being self-reliant, especially when it encounters emergency situations. This requires
that someone must make decisions on information received.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 62
There is no time to call a meeting and discuss the situation. The Master is required to
make decisions and stand by them and be held accountable at a later date. Regrettably,
there is no time to hold discussions to find the best resolution to an emergency. Actions
taken at the time are based on the information being supplied to assist in the decision-
making process.

The ISM Code requires that certain of these structures must be identified and
documented so that the SMS can function effectively.

The following sections have been taken from this document to explain the need for
organisation and structure on board ship.

This is not new, but legislation has made the demand that it be identified and placed in
an orderly manner. This is mandatory for all ships and companies affected by the ISM
Code. (See SOLAS 74, as amended, Chapter IX – Management for the Safe Operation of
Ships.)

The idea of an organisation based on a hierarchy seems straightforward, and it is

probably the type of organisational model that dominates our own concept of an
organisation. However, attention must be given to the different elements of
organisational activity and how each can influence the actual shape that an organisation
can take, these are outlined below:
• Structure: This is related to the goals of the organisation and the tasks that must be
performed to achieve them. The structure will be influenced by what must be done
and the operational context in which they have to be done.
• Human Resources: This includes all the members of the organisation. This includes
all personnel who work in the office(s) and ship(s). The ways in which personnel are
managed, and the leadership style(s) of the managers, are fundamental to the actual
shape and effectiveness of the organisation.
• Politics: This is interlinked with the diffuse and perhaps competing nature of
individual and organisational goals. The way in which individuals pursue their own
goals within the organisation can be to the benefit or the detriment of other
individuals and the organisation.
• Culture: This is based on the assumptions, the norms and the values that are
deemed acceptable and desirable and give the organisation its distinctive character.

These elements cannot be considered in isolation as each has an influence on the other
elements.

Considering the elements above, it becomes apparent that the individuals and groups
making up the organisation, and the way they are managed and led, has a great bearing
on the effectiveness of the organisation and the structure that is adopted in practice.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 63
4.4 Leadership Styles in Management

The position of being a manager can bring with it the responsibility of being a leader and
directing those working under you. The advances made in social responsibility and
corporate social responsibility is bringing about changes in how leadership is
understood and many of the old adages are being replaced.

Managers can no longer rely solely on their position of authority, “pulling rank”, within
the organisational structure to effect good leadership. To obtain the best results from
people, a manager must have regard to factors such as encouraging and maintaining
morale and engendering a spirit of involvement in, or perceived “ownership” of, a system
of work.

In the context of shipboard management there are also issues such as the necessity to
obtain a prompt response to commands given in the interests of safety. To manage
effectively, the style of leadership that is adopted must be carefully considered. It may
be that a mixture of various leadership styles is used to obtain the best results.

Leadership is a fashionable word and is basically concerned with having the ability to
influence others. However, there is also another element to leadership; recognising that
others may have influence by way of valuable contributions. To ignore this element
would be to move towards the view of leadership as the exercise of power to influence
and control others without any regard for their own views and needs.

A leadership style is basically the behaviour typically shown by someone towards other
members of the organisation or group, in an attempt to influence and achieve goals.
There are many possible ways to describe styles of leadership, for example:
• dictatorial
• unitary
• benevolent
• bureaucratic
• charismatic
• consultative
• participative
• abdictorial

However, the styles of managerial leadership are usually classified within three broad
groups:
• Authoritarian (or autocratic)
• Democratic (or consultative)
• Genuine laissez-faire

Beyond these restrictive styles of leadership, there is a growing movement and

understanding of relatively new concepts such as ethical and transformational
leadership are important to being an effective leader.

There is also the need for leaders to be environmentally aware and allowing for
environmental issues to become part of the process for taking a company forward.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 64
These items can no longer be ignored and the public perception of a company may be
influenced by such matters.

This is when the concept of “ESG” becomes central to how a company operates and the
way that the leadership has responded to this demand and has amended the way the
company operates in response to this expectation. This will have an effect and impact
on each of the following styles shown below as they can no longer exist in the form that
they are now in.

4.4.1 The Authoritarian Style

The authoritarian style of leadership is very much centred on the leader, with all
activities under the leader’s direction. The authoritarian leader makes all the decisions
related to work activities, policy, rewards, and punishment.

This style of leadership is sometimes divided into three sub-groups:

• Autocratic: This is a dominant personality, perhaps charismatic and seductive, but
definitely “the boss”.
• Paternalistic: Traditional style of management, possibly dynastic, less threatening
than the autocrat but still unwilling to devolve any powers.
• Bureaucratic: This relies on the exercise of an impersonal style of authority, relying
on the system, rules, and regulations of the organisation for his/her authority.

4.4.2 The Democratic Style

This is less leader-centred than the authoritarian style; the focus of power being more
with the group. The functions of leadership are shared within the group and the leader
becomes part of the team. Also known as consultative or participative, group members
are included in the decision-making process and the determination of policy.

This style is seen to be more responsive and adaptive and, therefore, more effective in
dealing with change. The leader encourages, supports, and assists the group, while still
maintaining overall control.

4.4.3 The Genuine Laissez-Faire Style

The genuine laissez-faire style of leadership is employed when the leader identifies that
the group are working well on their own abilities and a conscious decision is made to
pass the focus of power over to the group. This allows the group to have freedom of
action without interference, but the leader is always available to them for guidance and
assistance.

The word “genuine” is included to make a distinction from that style of leadership that
involves the leader intentionally avoiding difficult decisions and situations and letting his
or her subordinates deal with them without providing any assistance. This style of
leadership is better described as abdication.

A greater understanding of the needs and expectations of personnel have prompted

studies of leadership styles. Factors such as changing social values, more inclusive
education and training, trade unionism and new legislation have also been factors that

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 65
have combined to raise awareness of management and leadership styles and generally
create a resistance to the more autocratic style of leadership.

The three broad classes of leadership style discussed above are perhaps better
represented by a continuum of possible leadership behaviour. This is basically a “sliding
scale” of leadership-centred authority, ranging from the autocratic to laissez-faire, or
from the leader making the decision and announcing to the group through varying
degrees of consultation and participation to the leader allowing the group to function
without interference.

Three forces have been identified for consideration when choosing which style of
leadership to employ:

• Forces in Self: This is the personality, background, knowledge, experience, and

confidence in the group
• Forces in Others: This is the strength, responsibility, interest, understanding
knowledge and experience
• Forces in the Situation: This is the type of organisation, group effectiveness, nature
of the problem, time constraints

A successful manager is one who is perceptive and flexible, who is aware of the forces
that are relevant to their behaviour at any given time and behaves appropriately in the
given context.

However, leadership may be exerted at various levels within an organisation, and not
only by those holding a formal position indicating power and influence.

Some commentators conclude that the exercise of leadership throughout an

organisation is in fact vital to organisational effectiveness. This must be tempered with
awareness of and the application of ethical management principles which are linked to
the Corporate Social Responsibility (CSR) of the company / organisation. This manifests
itself to a higher level when the company operates to a “Just Culture” mentality and
applies these set of principles to how it operates and the behaviour of everyone at all
levels.

4.5 The Do’s and Don’ts Leaders Should Keep in Mind

Leadership is one of the most critical components to overall effectiveness; either the
effectiveness regards the safety of a ship at sea or the overall efficiency of a company on
shore. But what exactly is leadership and what makes a proper leader? And which
leadership model is effective when it comes to today’s complex environment?

A well know quote is: “The greatest leader is not necessarily the one who does the greatest
things. He is the one that gets the people to do the greatest things.” Ronald Reagan, President
of USA

In its original definition, leadership is about controlling people and dividing them into
leaders and followers. But in today’s cognitive-oriented society, where services and the

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 66
tertiary sector are at the top, traditional motives surrounding leadership must be re-
assessed.

In his 2013 book “Turn the Ship around” (Marquet, 2015), Captain Marquet, former
Captain of the nuclear-powered submarine USS Santa Fe, describes how following the
‘traditional lines’ of a leader could not address the crew’s poor performance: Giving an
impossible order, he was surprised to find out that the crew would realise it anyway
without questioning it.

This made him write for a radical transition from the conventional leadership to a new
model of ‘giving control’, in full contrast with traditional military principles.

In the same context, other current approaches on leadership see the well-established
culture of ‘one leads - the others follow’ being gradually replaced by a new system
where everyone is equally engaged and fully committed to solving issues and making
decisions.

Taking into consideration the new model described in Captain Marquet’s book, let us see
what leaders of today should do and avoid in a bid to make the most of their teams!

Do’s and Don’ts

Give orders and leave room for questioning instead of giving resolute orders: Giving
orders is sometimes inevitable for the effectiveness of the work outcome. However, this
can be more difficult than it sounds: Crews or employees must feel respected and must
be able to understand the orders, for this effectiveness to be achieved. This is where
the need for efficient communication enters the game. Effective listening is an integral
part of communication. Great leaders should be great minds and great minds always
leave some space for productive feedback and an open discussion to take place.

“Leadership is a way of thinking, a way of acting and, most importantly, a way of

communicating.”

The above quote from Simon Sinek cannot be attributed to any single publication or
speaking event. What does this mean:

- Give control instead of taking control: No good result has ever been achieved by
a lone person controlling everything. The profit of sharing control is that
organizations become significantly more resilient when they do not rely on the
designated leader always being right. As Roosevelt said, a boss drives but a
leader leads their workforce.

- Have conversations instead of having meetings: This is another integral part of

proper communication. Short conversations are opportunities for the crews or
employees to get early feedback on how they were tackling problems. This
allowed them to retain control of the solution. On the other hand, having
meetings is stressful and creates pressure to the participants.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 67
 - Focus on people instead of focusing on systems: People are the A and Z of any
experience. Satisfied employees are the key pillar for satisfied customers and
focusing solely in numbers is the recipe for disaster. When companies focus on
people, their people – employees first, then customers – the numbers will follow.

- Think long-term instead of thinking short term: Famous leaders of the world,
from Elon Musk to Steve Jobs, are known for emphasizing on long-term visions as
the key of their organization’s success. Focusing short-term is like constantly
chasing time and confuses employees, while long-term thinking helps a more
spherical appreciation of the situation and better planning and investment.

- Want not to be missed after you depart: The secret ingredient success of a good
leader is to inspire knowledge and build a relationship of confidence with the rest
of the team. You don’t have to be there 24 hours a day to make things work, the
success is the team to achieve results even when the leader is not ‘there’.

- Remember: Leadership is a marathon, not a sprint.

- Have low repetition and high-quality training instead of having too many low-
quality trainings: Providing subsequent training triggers fatigue and boredom,
impeding motivation and overall production.

- Be curious, instead of questioning: In the age of smartphone, the answer to any

question may be only one Google away. But this is not the point. Leaders do not
need to know everything to be leaders, but they do need to never stop being
curious about the constant changes around. “I have no special talent. I am only
passionately curious”, Einstein once told, and we have nothing else to add.

- Eliminate processes that do not add value instead of making inefficient

processes efficient: Eliminating wasteful activities is one of the most important
prerequisites for building something successful increasing profitability, as a key
part of the Lean Management Concept, which seeks to support the concept of
continuous improvement, by continuously improving all work processes and by
minimizing all waste in the business processes.

- Reduce instead of increasing monitoring and inspection points: This comes in line
with the building of trust and confidence. When the leader has established a
relationship of mutual understanding and appreciation with the team, the need
for “monitoring” becomes secondary.

The above advice could apply to every organisation as well as to ships and shipping
organisations. Every business should focus on creating a workplace which engages all

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 68
people, where everyone is taking responsibility for their actions and everyone feels
motivated. And respectively, every leader can add these ideas in their leadership toolbox
to promote motivated people in healthy working environments.

In the ever-evolving workplace there needs to be a radical shift in how leaders operate
and how this is filtered down to the rest of the work force. An example of this is the
rising position of the “Ethical Leader” and how this will impact on how the company
operates and does business.

4.6 Motivation

The discussion has outlined organisational concepts; some generally accepted

management tasks and has also introduced the concept of leadership, not as a separate
function to management but as an element of management, which is crucial to the
conduct of successful inter-personal relations, which are at the core of effective
management. Throughout the discussion there has been frequent reference to the
human factor, and we will examine this more closely in a discussion on motivation.

One factor involved when choosing an appropriate leadership style is an understanding

of what motivates the people around you. What their needs and aspirations are. Each
person is likely to have a different pattern of needs and aspirations, but among any
group there probably exist the needs listed below.

They need to be:

• Supported
• Heard
• Noticed
• Encouraged
• Trusted
• Appreciated and valued
• Informed
• Helped to clarify ideas
• Helped to develop skills and abilities
• Challenged and extended

(Whitaker, 1993)

While the above still hold good there has been some change and application of these
bullet points as publications have been revisited and amended to meet changing trends
in education.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 69
Studies suggest that people work harder and show more commitment when the culture
within the organisation satisfies the needs listed above. Such a culture would show the
following characteristics:
• work is satisfying and challenging
• workers have a decision-making role
• workers are involved in the management of the organisation
• successful work is recognised
• career advancement is possible

On the other hand, organisations where the staff member is badly motivated may have
the following characteristics:
• workers are over-supervised
• too many rules govern personal and professional activity
• relationships between workers and senior staff are difficult
• bossy attitudes cause frustration
• relationships between co-workers are poor and divisive
• working conditions are poor
• workers’ morale is low

Although a manager can attempt to provide a culture where people will be motivated, it
is important to remember that motivation is ultimately down to the decisions of the
individual. The amount of Energy, Enthusiasm and Excitement (the “E” factors) that an
individual decides to invest determines their motivational “output”. In order to maximise
this output, the factors outlined above should be considered and sensitive attention
given to the thoughts and feelings of staff.

A successful and effective manager is one who has the capacity to sense a pattern of
needs in co-workers and adapt his or her working style accordingly. The important
lesson here is that no one can do everything by themselves. They need other people to
be successful and how these people are handled will be critical to the success of the ship
manager. Lessons learned early on will develop relationships with others.

4.7 What Does a Ship Manager Do?

A ship manager has a title and job description linked to that title. This should include
the responsibilities, authorities, who they report to, who reports to them. In addition,
there should be a description of the qualifications, knowledge and work experience
needed to fulfil the position.

Depending on which department the ship manager is working in there will be specific
skillsets needed to successfully complete the work.

In this section we are going to look at what an operational ship manager will need to do
and how it can be accomplished. This will include the need for good communications
skills to ensure that the flow of information in any direction is complete, conducted in a
timely manner without delays and all parties are comfortable with each other. This
reduces the potential for communication barriers which will reduce the efficiency and
effectiveness of what is trying to be achieved.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 70
4.7.1 Effective Communications

Effective communication is the key to the successful performance of any function

involving a group of people:
• One function of communication is to make our needs and desires known, to get our
message across
• Another function is to facilitate understanding of the needs and desires of others

It is important to remember that any communication will contain much more than the
literal meaning of any words; communication consists of an exchange of messages
expressed by various “codes” such as speech, writing, gestures and expressions.
Research has indicated that the total impact of a message is roughly only:
• 7% verbal (the actual wording)
• 38% vocal (tone and inflection)
• 55% non-verbal expressions and actions (body language)

To understand the real meaning of a message the receiver must translate the code, and
the translation of the code depends very much on the context in which the message is
delivered and the cultural language of both the transmitter and the receiver.

A different “cultural language” does not necessarily mean a different linguistic language;
it may be a difference in race, gender, class, geographical origination, rank, age, or
context, e.g., time spent with another company or on another trade.

To transmit a message effectively the transmitter must be sure of the content and
consider how best to deliver it. Being aware of the tone used, having an appreciation of
the importance of personal space and being sensitive to the use of body language can
all help to prevent any instinctive barriers to inter-personal communication from
forming.

Before transmitting a message, the transmitter must:

• Appreciate the receiver’s cultural language
• Establish what the receiver knows prior to the communication
• Establish what the receiver needs to know to comply or reply to the communication
• Check the message to minimise the risk of ambiguity
• Allow for the availability of the receiver to deal with the communication

When receiving a message, the receiver must:

• Try to receive and understand the message
• Reply by some means to clearly demonstrate that the message has been understood,
or request clarification
• Continue with any previous activity correctly (management of interruptions)

Barriers to effective communication may include:

• Autocratic or egocentric leadership style
• Different professional or competence levels
• Stress
• Fatigue
• High workload
• Race, culture, and gender issues

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 71
Being aware of the pitfalls of communicating wrongly is a major step in the right
direction. The way that an individual interacts with the world round them is part of the
structure of what they become. What is important to understand is that the way an
individual interacts with the world is for them and it will be very rare to find another
person who has the same interpretation of the world?

Good communications and relationships take time to build and must be worked on and
not taken for granted. It only takes one error to destroy the relationship and put in
place barriers which will take a lot of time and effort to remove. In some cases, they
might never be removed. Consideration of others is an important part of
communications.

Every person is unique and they have good days and bad days. Tolerance, patience, and
support will go a long way in establishing and continuing effective communications.

Figure 12 gives an indication of how the communication loop works and where there is
the potential for barriers to communication to be activated. As stated above in the
course materials, it is so easy to make a mistake and raise these barriers in an instant
and then spend a lot of time rebuilding relationships. In many cases the relationship will
never return to its former status.

Figure 12 – Barriers to Communication

Figure 12 is only the initial understanding of what the barriers can be and where they
are placed in the communication cycle.

4.8 Relationship with Other Departments

A successful ship manager will have built up a good professional relationship with
everyone who will be needed to assist them in completing the work load as identified in
the job description and beyond. Through this interaction, some relationships may also
become personal. This is good so long as it does not impinge on the professional side.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 72
It must be remembered that relationships require input from all parties and if you only
have contact when you want something and are not very helpful when others are asking
for assistance from you then the efficiency and effectiveness of how you complete your
work will be compromised.

This does not mean that everyone is your best friend, but that you are respected and it
is known that you will assist others when required.

This is done in a cordial manner without any hint of suggesting that they will owe you. It
is not a matter of who owes whom and keeping score, but more about building
relationships and working together as a team.

In Section 2.5 of this module, leadership styles were discussed and, in some situations,
you will be the leader, in other matters you will be the follower. It is important to
understand one single premise and hold it true to everything that you do. This is:

“Have people work with you, instead of work for you.”

This important simple concept will bring big dividends for you. It will also mean that you
achieve a greater degree of consistency in your relationship with your co-workers.

This allows others to know where they stand with you and if it is known that your
manner is consistent and professional you will receive the professional courtesy that is
relevant. People do not like working with someone who is volatile and it is never known
from day to day what kind of mood they will be in. This puts people on edge and as a
result it starts putting barriers in place.

When people work with you and know that you respect their professional expertise and
support them as well as taking an interest in their personal life then they will go that
extra mile to assist you when needed. This is a two-way street and the need for you to
support them and take up the strain when there is a heavy work load in progress will
strengthen the relationship, not weaken it.

Directed Learning 1.5

1. Review your relationship with other people that you work with and try to identify
the positive and negative points of your relationship.

As a ship manager you will need to work with the Technical Department, Crewing

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 73
Department, Purchasing Department, Commercial Department, Health, Safety and
Environmental Department along with Bunkering Department, at a minimum. If you are
managing tankers there may also be a Vetting Department to work with. The additional
part now is working with the Cyber Security Department which may be an individual unit
or part of another department such as IT.

The actual situation is that all departments depend on each other for information,
decisions, and combined support to be effective. You are just one part of a complex set
of relations that ensure that the ship or ships are operated to the maximum of
effectiveness and efficiency while keeping costs down without compromising safety or
the environment.

How you have developed your relationships and working arrangements will come to the
forefront when there is a need for you to either lead or be part of a team that has been
given a project to complete on behalf of the company. You will be judged not only on how
well the project was completed but also on your contribution as a team member or how
the project team was led if you were in charge.

Such events will either stand you in good stead for promotion where you have been
successful or hold you back where the results were not so good, or even bad.

One of the main components to this is understanding where you fit into the
organisational structure of the company and how you have developed the direct
relationships needed to complete your work as well as expanding your knowledge with
those set further apart from you but who are still directly and indirectly affecting how
you complete your work in general and for specific additional tasks.

This topic will be continued in more depth in Module 2 where the work of the ship
manager is looked at in depth and the additional skills needed to succeed are discussed
and guidance is given on how to attain the best for yourself and those around you.

Directed Learning 1.6

1. Look at the position you hold in the company that you work for. This is not
limited to shipping companies. Then look at the company’s structure and your
direct and indirect association with other employees in the company.
2. From this, make an honest assessment of your relationships and identify what
needs to be improved.
3. There is no right or wrong answer to this question it is more about exploring
yourself and your relationship with others that you work with.

Feel free to post your thoughts to the forum, review what others post, and add your
comments or questions in response.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 74
4.9 Maintenance Systems

Improvements over the years have made maintenance systems rely on electronic
systems to record the work done, as well as its planning.

The maintenance of the ship covers every part of the structure from the keel to the top
of the main mast along with every part from the bow to the stern. This includes all
systems and equipment used by the ship to operate in accordance with the legislation
that is relevant to it.

As a ship manager you would normally be expected to support the technical

superintendent for the vessel to ensure that all work that is identified has been
completed or understand the reasons behind delays. This should be discussed with the
technical superintendent, without provoking or causing any friction. You must make
sure that you are there to help and are not trying to take over.

Companies have choices to make and these can be varied from a system that has been
created and maintained in house; or a system which will include the software which can
be purchased and then installed into the company. These systems will have to be
updated at regular intervals and will incur additional workload for everyone who uses
them.

There are maintenance systems which have been produced by the classification society
members of the International Association of Classification Societies (IACS). More
information about this can be found by referring to the IACS website and the website of
the member societies.

Further Research

IACS Recommendation 74 – “A guide to managing maintenance in accordance with the

requirements of the ISM Code” is a useful starting point. This PDF file is free to download at:
[Link]

Class NK in October 2017 published a useful document which is titled “Good Maintenance on Board
Ships – Maintenance Checklist for the Master”. This document is free to download at:
[Link]

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 75
The cost of maintaining a ship in good order becomes more expensive as the ship ages
with all the wear and tear it is exposed to in maritime weather systems and the cargoes
that its carries on board.

Therefore, it may be best to use the maintenance system of the classification society
that the ship is registered with.

4.9.1 IACS Members

Classification Society Abbreviation Email Address

American Bureau of Shipping ABS abs-worldhq@[Link]
Bureau Veritas BV veritasinfo@[Link]
m
China Classification Society CS ccs@[Link]
Croatian Register of Shipping CRS iacs@[Link]
DNV DNV iacs@[Link]
Indian Register of Shipping IRS ho@[Link]
Korean Register of Shipping KR krsiacs@[Link]
Lloyd’s Register LR Lloydsreg@[Link]
Class NK NK xad@[Link]
Polish Register of Shipping PRS iacs@[Link]
Registero Italiano Navale RINA info@[Link]

The Russian Maritime Register of Shipping used to be a member of IACS but IACS
decided their ongoing membership was no longer tenable due to Russia’s invasion of
Ukraine.

It should be noted that the societies named above account for the classification of over
90% of the world’s commercial shipping by tonnage and size.

Further Research

To better understand classification societies and their position with regards to

maintenance, the introduction document from IACS titled – “Classification Societies –
What, Why and How?” should be read. This document can be downloaded from:
[Link]

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 76
 Directed Learning 1.7

1. Which of the IACS members does your company use and what services do they
provide?
2. Have you found any ships which are registered with a classification society other
than an IACS member?

Feel free to post your thoughts to the forum, review what others post, and add your
comments or questions in response.

4.10 Maintenance and the Ship Manger in Respect of the ISM Code

The above gives details of where and how maintenance systems can be found and
interrogated. But there is so much more going on with maintenance systems and
improvements in the reliability of equipment and their running hours. Whatever system
the company is using, the ship manager needs to have as a minimum a lay man’s
understanding of what system is being used and how it operates. In some cases, there
may be more than one type of system being used to deliver what is needed.

The big question is why is maintenance needed and how does it impact on ship
operations and why is the ship manager involved? This is easily explained by the ISM
Code Part A Section 10 – Maintenance of the Ship and Equipment.

The link between Port State Control (PSC) Inspections and the ISM Code cannot be
dismissed and this is particularly relevant when it comes to maintenance. Every time a
port state control inspector raises a deficiency against the ship, he/she should
automatically raise an additional deficiency against the non-implementation of the SMS
on board and against this section of the ISM Code. The view taken is that if the SMS is
implemented correctly there should be no deficiencies on board or at least no major
deficiencies that affect safety or pollution prevention.

In the following sections the items between the blue lines are the actual parts of the ISM
Code.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 77
“10.1 The company should establish procedures to ensure that the ship is maintained in
conformity with the provisions of the relevant rules and regulations and with any additional
requirements which may be established by the company.”

(IMO, 2018)

The company needs to choose a method for its planned maintenance system. This can
be either electronic or paper. The choice is for the company to make dependent of how
it operates and the systems that it uses. The options are to create a planned
maintenance system from scratch or buy one of the many that are on the market. The
ship manager should be aware and able to operate and understand whatever system is
in use.

He/she should be able to assist the technical superintendent in the operation of the
system as found on board each vessel. It is important that the ship manager can work
with the master and chief engineer on board each ship to assist with concerns that may
be raised.

This will include referring any enquiry to the appropriate person in the office who can
deal with it and ensure that the information is passed as quickly as possible without
delay.

The maintenance system shall include all the ship and its equipment – that is hull and
machinery as well as all equipment on board whether it is on deck, engine room, radio,
galley or storerooms.

In meeting this requirement, the following must be considered:

• National conventions
• International conventions
• Regional conventions “These may be denoted such as EU Directives or other such
equivalents.”
• Flag state regulations
• Port state regulations
• Classification society rules
• Manufacturers’ requirements
• Damage reports (from vessel)
• Defect reports (from vessel)
• Malfunction reports (from vessel)
• Failure reports (from vessel)

To ensure that these requirements are met, the company must produce objective
evidence. How this is produced is for the company to decide. But, once any system is
initiated, the company must ensure that the records are always maintained correctly.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 78
“10.2 In meeting these requirements, the Company should ensure that:

.1 inspections are held at appropriate intervals.”

(IMO, 2018)

The appropriate inspection interval should be in accordance with that advised by the
manufacturer, classification society, or international convention. If the interval is found
to be different from that stated, then the company must be able to justify why it has
deviated from the stated requirement.

In identifying the appropriate intervals, the company should ensure that the crew
members are aware of these requirements and that the system identifies routine
inspections and maintenance. This is to cover the machinery, equipment, hull, and
systems. This formal method should ensure that there is an integration of this work to
avoid duplication and waste of time and effort by the crew.

“.2 any non-conformity is reported, with its possible cause, if known.”

(IMO, 2018)

Non-conformities as referred to in this section of the ISM Code are not related to
deficiencies in the SMS as per the audit process, but are referring to damage, defects,
malfunctions, and deficiencies of the ship and its equipment.

The company must ensure that it has put in place a system for the crew to report such
occurrences and take the necessary actions to rectify the situation. When it is not
possible for the crew to rectify any non-conformity for reasons beyond their control, and
this does not affect safety or pollution prevention, the company should ensure that
there is a methodology in place for producing and updating a list that reflects the
current status of such non-conformities. This must be available to both ship and shore
staff.

Additionally, when any non-conformity affects safety and pollution prevention then the
company must ensure that an instruction is in place for the crew to contact the
appropriate shore-based person. In contacting this person, it is hoped that the crew
would have proposals for the resolution of such a problem.

All the above needs to be properly documented and recorded within the SMS.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 79
“.3 appropriate corrective action is taken.”

(IMO, 2018)

The company should ensure that there are documented procedures in place to guide
the ships’ staff in dealing with non-conformities. This should include work instructions
on the steps to take if the crew cannot perform the corrective action on board.

The procedures must also include a system for recording routine maintenance work and
a method of ensuring that these records are available to the shore offices.

Corrective actions taken should also include preventive action, whenever possible. This
will advance the maintenance system in preventing re-occurrence of the non-
conformities that have been recorded.

This is a major step forward in achieving continuous improvement. Preventive action

does not always fully work the first time it is applied but it will assist the crew in
understanding what has occurred and what can be achieved to reduce repetitive work.

“.4 records of these activities are maintained.”

(IMO, 2018)

The company must ensure that there are comprehensive records, which include the
relevant objective evidence, of all actions taken in respect of the planned maintenance
system operating on board every vessel. This will also include the details of and actions
taken in respect of non-conformities as detailed in this section of the ISM Code.

“10.3 The company should identify equipment and technical systems the sudden operational
failure of which may result in hazardous situations. The safety management system should
provide for specific measures aimed at promoting the reliability of such equipment or systems.
These measures should include the regular testing of stand-by arrangements and equipment
or technical systems that are not in continuous use.”

(IMO, 2018)

The company is required to construct a procedure to identify the equipment and

systems which if they suddenly fail can result in a hazardous situation. This, in effect, is
carrying out a detailed “risk analysis” of the vessel. The company can produce its own
system or purchase one of the systems already available. IACS has produced such
systems. One example of this is the Bureau Veritas “VERISTAR MACHINERY” system.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 80
After identification of such systems, the company will then implement appropriate
procedures and tests will be required to reduce or remove potential hazards. Where
this is not possible then an increase in reliability should be targeted.

The maintenance and testing systems for stand-by equipment should be implemented.
This will involve a combination of inspections and tests. The company will be required
to identify all equipment and systems and the required inspections and testing
schedules. These shall be incorporated into the planned maintenance system of each
vessel.

The following list of examples of such systems is not exhaustive and is presented as an
initial guide for doing an in-depth check and completing an exhaustive list for each
vessel.

Examples of such systems are:

• Audio and visual alarms
• Emergency shutdown and trip systems
• Bunker system integrity (lines, valves, pumps, gauges)
• Emergency equipment:
o EPIRB
o SART
o portable VHF radios
o lifeboat engines
o CO2 smothering system (engine room and/or cargo holds)
• Safety equipment:
o portable O2 detectors
o explosimeters
o portable CO2 detectors
o Draeger tube gas detecting systems

• Arrival and departure checks:

o emergency steering
o emergency generators
o emergency fire pumps
o whistles
o telephones
o telegraphs
o tannoy systems. (These public address (PA) systems on board for transmitting
messages)

“10.4 The inspections mentioned in 10.2 as well as the measures referred to in 10.3 should
be integrated into the ship’s operational maintenance routine.”

(IMO, 2018)

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The company is required to ensure that the planned maintenance system in operation
on board each ship is integrated to include inter-departmental work.

This will ensure that the requirements indicated in the previous sub-sections of this
section of the Code are included in the daily work routines. The system should be
checked to avoid duplication or even triplication of the identified work.

This is a lot to take in if you are not familiar with ships and how they work but as time
progresses this will become more apparent.

The changing face of how ships are operated and the minimum time in port when linked
to the changing process of officer qualification and training regimes has altered the
operational requirement and placed totally different constraints on the maintenance of
ships’ machinery.

There were other factors to be considered such as the lowering of the experiential time
in the qualifications of engineering officers and the use of crews that had only received
the basic minimum education and training which has been set out in international
standards though the STCW 78, Convention, as amended. And the STCW 95 Code, as
amended.

New phrases have started to be spoken about and examples of this are:
• “Maintenance induced failure”
• “Increases in main engine failure”
• “Main engine failed to run astern”

All these changes have meant that, the industry has had to embrace a new way of
looking at the maintenance of ships’ machinery.

Planned maintenance and stock control are an essential part of the process but more
and more technical departments are embracing the lessons learned from other
branches of engineering and incorporating the ideas of condition-based maintenance.
This is further imposed through the STCW Convention by the STCW Code, Part A Chapter
VIII – Part 2 Voyage Planning. The selected points placed here are of relevance to
maintenance.

“4. The chief engineer officer shall, in consultation with the master, determine in advance
the needs of the intended voyage, taking into consideration the requirements for fuel, water,
lubricants, chemicals, expendable and other spare parts, tools, supplies and any other
requirements.”

(IMO, 2018)

The ship needs to be maintained and kept at its most efficient operation in respect of
the charter party it is operating under.

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From this there needs to be some indication of what type of maintenance system is
being used on board the ship. Examples of these follow.

4.10.1 Planned Maintenance

At the heart of this is to ensure that the planned maintenance systems which are vital
for the safe and efficient management of the ship can produce evidence for the marine
engineer.

In the past the traditional maintenance systems evolved from breakdown maintenance
and evolved forward to time-based planned maintenance systems. These systems could
be calendar based, running hours based or a combination of the two.

At the core of any system should be the ability to record and identify all systems that will
need to be in place so that all properly authorised structures and equipment are
identified. If this facility register is computerised, then information produced from it will
be readily available to authorised managers at a level of complexity appropriate to their
management function.

As this register is constructed and expanded, then the real-time senior management
control of their respective areas of responsibility will emerge and become more
apparent as the system grows. Currently the move to real-time use and accountability
as well as remote review of the ship and its systems is becoming necessary to increase
the returns on maintenance by reducing repairs and breakdowns along with identifying
trends.

One important necessity at the core of all maintenance systems is having true and
accurate records of the running hours of all systems and machinery. It is not enough to
use remote data loggers or other devices unless they will ensure that such records are
kept as accurately as possible.

There are various systems available for uses which depart from the traditional forms of
maintenance and it is for the technical department to have made an informed choice
and reached agreement with the shipowner and the relevant classification society to
ensure that the best results are delivered.

4.10.2 Condition Based Maintenance (CBM)

This can be considered as maintenance when the need arises. It is performed after one
or more indicators show that equipment is going to fail or that equipment performance
is deteriorating.

This concept is applicable to critical systems that incorporate active redundancy and
fault reporting. It is also applicable to non-critical systems that lack redundancy and
fault reporting.

This system was introduced to try to maintain the correct equipment at the right time.
CBM is based on using real-time data to prioritise and optimise maintenance resources.
Such a system will determine the equipment’s health, and act only when maintenance is
necessary.

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Developments in recent years have allowed extensive instrumentation of equipment,
and together with better tools for analysing condition data, the maintenance personnel
are more able to decide what is the right time to perform maintenance on a piece of
equipment. Condition-based maintenance will allow the maintenance personnel to do
only the right things, minimising spare parts cost, system downtime and time spent on
maintenance.

CBM has some advantages over planned maintenance:

• Improved system reliability
• Decreased maintenance costs
• Decreased number of maintenance operations causes a reduction of human error
influences

Its disadvantages are:

• High installation costs, for minor equipment items often more than the value of the
equipment
• Unpredictable maintenance periods cause costs to be divided unequally
• Increased number of parts (the CBM installation itself) that need maintenance and
checking

There are arguments for and against the use of CBM for less important parts of
machinery despite obvious advantages. However, it can be found everywhere where
increased reliability and safety is required.

4.10.3 Shock Pulse Monitoring

Shock Pulse Monitoring (SPM), is a patented technique for using signals from rotating
rolling bearings as the basis for efficient condition monitoring of machines.

From the innovation of this method, it has now been further developed and broadened
and is now a worldwide accepted philosophy for condition monitoring of rolling bearings
and machine maintenance.

Further Research

A simple explanation of how SPM works can be found at:

[Link]

4.10.4 Vibration/Noise Monitoring

Vibration Analysis is used to detect early precursors to machine failure, allowing

machinery to be repaired or replaced before an expensive failure occurs. This includes
the early detection of mechanical fatigue and breakdown.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 84
All rotating equipment vibrates to some degree, but as older bearings and components
reach the end of their product life they begin to vibrate more dramatically, and in
distinct ways.

Ongoing monitoring of equipment allows these signs of wear and damage to be

identified well before the damage becomes an expensive problem. This type of
monitoring will accurately monitor the health of all plant machinery.

4.10.5 Machinery Condition Monitoring

Condition monitoring can be considered as the process of monitoring a condition

parameter in machinery (vibration, temperature etc.), in order to identify a significant
change which is indicative of a developing fault.

It is a major component of predictive maintenance. The use of condition monitoring

allows maintenance to be scheduled, or other actions to be taken to prevent failure and
avoid its consequences. Condition monitoring has a unique benefit in that conditions
that would shorten normal lifespan can be addressed before they develop into a major
failure.

Condition monitoring techniques are normally used on rotating equipment and other
machinery (pumps, electric motors, internal combustion engines, and presses), while
periodic inspection using non-destructive testing techniques and Fit for Service (FFS)
evaluation are used for stationary plant equipment such as steam boilers, piping and
heat exchangers.

As can be seen from this system, there are many carry-overs from one system to
another.

4.10.6 Non Destructive Testing

Non-Destructive Testing (NDT) is a wide group of analysis techniques used in science and
technology industry to evaluate the properties of a material, component, or system
without causing damage.

The terms non-destructive examination (NDE), non-destructive inspection (NDI), and

Non-Destructive Evaluation (NDE) are also commonly used to describe this technology.

Because NDT does not permanently alter the article being inspected, it is a highly
valuable technique that can save both money and time in product evaluation,
troubleshooting and research. The six most frequently used NDT methods are:
• eddy-current
• magnetic-particle
• liquid penetrant
• radiographic
• ultrasonic
• visual testing

NDT is commonly used in:

• forensic engineering

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 85
• mechanical engineering
• petroleum engineering
• electrical engineering
• civil engineering
• systems engineering
• aeronautical engineering
• medicine
• art

NDT methods rely upon the use of electromagnetic radiation, sound, and other signal
conversions to examine a wide variety of articles for integrity, composition, or condition
with no alteration of the article undergoing examination.

Visual Inspection (VI), the most applied NDT method, is quite often enhanced by the use
of magnification, borescopes, cameras, or other optical arrangements for direct or
remote viewing.

4.10.7 A Strategic Approach to Maintenance Systems and Their Uses

Technical departments should take a strategic approach to the planning of the

maintenance systems to be used on board. Modern computerised systems make this
an achievable task for even the most highly complicated ships.

With the introduction of field bus technology and the proposed wireless collection of
data, a lot of the mundane and time-consuming tasks of data collection and recording
which is already undertaken can allow for the shift towards automatic analysis and
validation of information.

It is not for the ship manager to become an expert on these systems but to have a
working knowledge of what they are and how they work to understand what the
technical superintendent is talking about.

One important item that needs to be reviewed is the importance of producing the
evidence to protect the ship manager from accusations of having caused an
infringement of the pollution regulations.

Being able to provide proof of up-to-date planned maintenance will be vital evidence in
a court of law where the shipowner and/or manager will be required to provide
evidence of a well-run ship.

In reaction to the possible accusations of not complying with legislation such as

polluting the oceans owners are being advised to place tamper-proof devices on board
each ship that will record any emissions from the vessel.

These systems are linked to the ship’s Global Positioning System (GPS) giving a precise
time, date, and position of the vessel when any operation has taken place.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 86
 Directed Learning 1.8

Try and identify which type or types of maintenance are being used on board the ships in
your company. Talk with a technical superintendent, when he/she has time to show you the
basics of what is being used and ask them for their opinion of how good or bad it is and
where improvements could be made.

Feel free to post your thoughts to the forum, review what others post, and add your
comments or questions in response.

4.11 Purchasing

Every company will either have its own purchasing department or will have outsourced
it to a major purchasing organisation with its own software component. There will be of
course the cost and time required setting this up but if it is operating correctly, it will
save both cost and time for the ship operation.

Purchasing is a key component to cost control and identifying where the money is going
and its effect on the budget of each ship. It is important to note that purchasing is not
only about obtaining materials but also about having in place the relevant services to
allow the ship to be operated safely and decrease any experienced delays.

To be fully effective the purchasing strategy for each ship should be looked at as part of
the life-cycle of the ship and through the nine stages of its life.

These are:
• Specification
• Design
• Construction
• Launch
• Fitting-out
• Handover to owner
• Operation
• Withdrawal from service
• Scrapping

Ships can have a lifecycle of over 20 years from the time that the specification was
agreed to the day it is scrapped. This lifespan will affect what machinery and systems
are placed on board.

What must not be forgotten is that over the life of the ship much of its machinery and
systems will evolve to adapt to changes in legislation or be scrapped and replaced with
new systems that comply with the latest requirements. There will come a time when it is
no longer possible to carry out the changes required and retain a financially viable ship.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 87
There is a need to ensure that the purchasing strategy meets the demands of the ship
and that there is not a lot of dead stock, which equates to money, lying on shelves. Yes,
there must be a minimum stock to be able to trade the ship but excessive stock is a
thing of the past. Communications and travel arrangements can resolve many of these
issues.

4.12 Just-In-Time Purchasing

4.12.1 What Does Just-In-Time Mean?

Just-In-Time (JIT) is an inventory strategy companies can employ to increase efficiency

and decrease waste by receiving goods only as they are needed in the production
process, which results in reducing inventory costs.

This method means that producers are required to forecast demand accurately. This is
not only quantities but also the dates when they will be needed.

This inventory supply system is a move away from the previous just-in-case strategy,
which required producers to carry large inventories due to the possibility that a higher
demand had to be met.

There are certain logistical problems for ships that trade openly on the global
marketplace. What must be factored in here is how to ensure that items are placed on
board ships in time for use and there are no delays in transporting items as well as
conforming to local customs requirements such as import and export licenses. All these
items cost money plus having individuals to handle the items on your behalf.

4.12.2 How Does Just-In-Time Work?

An example of this could be a car manufacturer that operates with very low inventory
levels. The manufacturer relies on its supply chain to deliver the parts that are needed
to build cars. The parts needed to manufacture the cars do not arrive before or after
they are needed; instead, they arrive on time, just when they are needed.

There are certain differences in how this is applied in the shipping industry because
ships are on the move all the time and parts can only be supplied when the ship is in
port. Even then, due to certain regulations, it is not possible to place materials and/or
parts on board in certain countries or port areas.

4.12.3 Advantages

Just-In-Time inventory control has several advantages over traditional models. This will
result in production runs remaining short, which in turn means that manufacturers can
move from one type of product to another very easily.

This method reduces costs by reducing or even eliminating warehouse storage needs.
Companies also spend less money on raw materials because they buy just enough to
make the products they need and no more.

4.12.4 Disadvantages
Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 88
The disadvantages of Just-In-Time inventories involve potential disruptions in the supply
chain. If a supplier of raw materials has a breakdown and cannot deliver the goods on
time, one supplier can shut down the entire production process. A sudden order for
goods that surpasses expectations may delay delivery of finished products to clients.

This is where the ship manager needs to work well with the purchasing and technical
department so that they are kept up to date with any changes to the ships’ schedules,
port rotations and expected time in ports. There is also the need to identify if there are
any potential delays in sending the materials to the country and then the process to
have then moved from the point of import to the ship.

4.13 Inventory Management

This refers to the process of ordering, storing, and using a company’s inventory: raw
materials, components and finished products.

4.13.1 How is Inventory Management Achieved?

A company’s inventory is one of its most valuable assets. In retail, manufacturing, food
service and other inventory-intensive sectors, a company’s inputs and finished products
are the core of its business, and a shortage of inventory when and where it is needed
can be extremely detrimental. At the same time, inventory can be thought of as a
liability.

A large inventory carries the risk of spoilage, theft, damage, or shifts in demand. It is
recommended that the contents of an inventory are insured, and if it is not sold in time
it may have to be disposed of at clearance prices – or simply destroyed.

4.14 Supply Chain

A supply chain is the network between a company and its suppliers to produce and
distribute a specific product, and the supply chain represents the steps it takes to get
the product or service to the customer.

Supply chain management is a crucial process because an optimised supply chain

results in lower costs and a faster production cycle.

4.14.1 How Does a Supply Chain Work?

Business logistics management refers to the production and distribution process within
the company, while supply chain management includes suppliers, manufacturers and
retailers that distribute the product to the end customer.

Supply chains include every business that comes in contact with a particular product,
including companies that assemble and deliver parts to the manufacturer.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 89
 Further Research

For more information and details of how the JIT concept works and the various sub-
sets of this process you can read more at Just-In-Time (JIT):
[Link]

This website is regularly updated to reflect the changes in trade patterns and
requirements.

The following sections are presented to provide useful information on how the supply
chain works.

4.14.2 Five Tips to Improve Supply Chain Efficiency

The following information is from Manaadiar (2019). It should be noted that the shipping
and freight resource web site covers many different items and concepts and their
impact of the shipping industry as a whole.

“An efficient supply chain is known to provide a great competitive advantage over competition
and make the process of supply chain seamless.

But to improve the efficiency of supply chain management and create effectiveness,
companies need to create and improve predictability, optimize the supply chain costs, reduce,
or minimize working capital, do due diligence, and risk analysis and have a proper handle on
the data.

A resourceful and successful supply chain helps the business to achieve quicker delivery time,
shorter processing time, better inventory management, all of which leads to better revenues.

Shipping exerts certain additional demands to the supply chain and these must be considered
when using it for the needs of ships. The greatest demand is when a ship is trading world-
wide and it is a matter of ensuring that the items required are in place for the ship.
Consideration must be made not just of having the items at the country but also that custom
clearance has taken place and the materials are in place to be placed on board the ship
during its stay in port. This can have many complications in completing this act and an
example of this when there may not be access to the terminal that the ship is at. Therefore,
the items cannot be delivered to the ship.

What is supply chain efficiency?

At the core of it all, supply chain efficiency is the standard of performance of the organisation.
Supply chain efficiency is measured by the ratio of work performed in a process while
ensuring that process follows best practices making the most of the available resources.

Perhaps the most pressing issue in the manufacturing sector is the movement of products.
Each manufacturer asks how to approach this more competently. It is obvious that any
Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 90
business is dependent on various resources, whether people or organizations. It is necessary
to transport the products of production into the hands of consumers and that is why you
need a system that will solve this issue.

One of the priorities of manufacturers is to reduce the cost and time of production. To save
all these resources you need to build an efficient supply chain. Also, an important advantage
of the supply chain is to improve the quality of customer service, which also affects their
satisfaction. You will learn some additional steps to improve the company supply chain.

If you are focused on success, then the effectiveness of the supply chain directly affects it.
Poor performance in this area will affect the inferiority of the services being offered.

Accordingly, an effective supply chain marks your success in all areas, including adequate
pricing, as well as the continued availability of products and services. This needs to be kept
under constant review.

Here are 5 tips to improve supply chain efficiency

1) Improve Visibility and Information Sharing

Let us say you are a supply chain Manager; you are looking for better strategies. You probably
already know the concept of “supply chain visibility”. The essence of this concept is the ability
to track each piece of the product, from the beginning of its path to the end point (from
suppliers to you).

So, you are focused on meeting the demand, but you have a question: “How to do it?”.
However, nothing is excessively complicated, you only provide access to your suppliers to
track your resources in real time, so they can better describe the whole situation from the
outside looking in, and most importantly to meet the emerging demand.

Note that this will allow your team to keep track of all the details of the calculations that were
completed. This is based on the data, so they may well create a strategy on their own, without
resorting to unnecessary risk.

Also, the above steps simplify the communication of suppliers, which is reflected in the future
planning of reserves.

2) Communicate More Efficiently

In order to avoid any misunderstandings, incidents, and other negativity on the part of the
group you must make some commitments. For example, you could meet with your group
weekly to resolve any issues or upcoming logistical situations.

3) Implementation of a Quality Project Plan

Improving the efficiency of the supply chain is a rather complex and continuous process,
hence we can conclude that you need a correct comprehensive plan to create some
guarantees of success.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 91
The correct plan will serve as a support for you in complex strategic investment areas, as well
as the development of strategies. Also, the creation of a plan will reduce all kinds of risks and
will contribute to the improvement of the project.

Think about where the central reference point is in your plan. You need to take the initiative.
Prioritize your goals and make sure they are fully aligned.

Next, the question of payback is growing in front of you. The role of cooperation between
teams and departments is very important in this matter, but it is needed. This will lead to
increased visibility in the supply chain, as well as the development of a project plan.

The project plan will show you the way throughout, the result will be the company embarking
on a new path – the path to achieving goals, and reaching objectives.

4) Try to Keep All Necessary Parts Well-Managed and Automate Where it Counts

There is no secret that the introduction of automated components in the warehouse can
improve efficiency, but remember that this is purely individual for each business.

The next step you must decide whether automation is right for you? Discuss this with your
team and management. Stick to the correct questions about future goals, the possibility of
achieving goals now.

Make sure all automated parts are functioning correctly. As a rule, this verification format
requires additional skills of suppliers, managers, etc., as well as job descriptions, which
slightly complicates the supply chain management process.

5) Train Your Workforce Widely

First, the issues of internal and external importance of the customer service should come first.
Try to take care of the productivity of training, in order to avoid the fact that your experts will
not learn anything more than where the toilet or recreation room is; give them specific tasks
to complete.

Share a comprehensive plan with them to reduce costs and increase productivity.

Your employees should have a specific goal that fits the purpose of your business, in order to
create a clear understanding of the values of the business. The combination of these priorities
will play an important role in creating successful agreed goals to improve supply chain
productivity.”

This sounds very good. It can be a highly efficient and effective way to control spares
etc. but, and it is a big but, this has been designed for factories where the site is static
and does not move so distribution to the site can be easily accounted for.

A ship is another matter it moves from place to place, country to country. It can have a
change of orders which changes the destination and the date when it is to be there. This
creates a lot of extra work and then there can be the problems of clearing the items with
customs for entering a country and then placing them on board.

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Shipping always raises a lot more questions than it supplies answers to. This is why
there are specialist companies who work within the maritime industry and conduct the
business of the supply chain to ensure that parts, materials etc. do make it to the ships
on time and in the correct location.

4.15 Blockchain Technology

The blockchain is an undeniably ingenious invention and is the brainchild of a person or

group of people known by the pseudonym, Satoshi Nakamoto. It has evolved into
something greater, and the main question everyone is asking is: “What is a blockchain?”

The following notes provide an introduction to blockchains.

By allowing digital information to be distributed but not copied, blockchain technology

created the backbone of a new type of internet. Originally devised for the digital
currency, Bitcoin, the tech community is now finding other potential uses for this
technology.

Blockchains can make other types of digital value, like the internet (or your car), you do
not need to know how the blockchain works to use it. However, having a basic
knowledge of how this new technology shows why it is considered revolutionary and it is
here to stay.

Imagine a spreadsheet that is duplicated thousands of times across a network of

computers. Take this image and place it in a network that is designed to regularly
update this spreadsheet and you have a basic understanding of the blockchain.

Information held on a blockchain exists as a shared and continually reconciled database.

This is a way of using the network that has obvious benefits. The blockchain database is
not stored in any single location.

This means that the records it keeps are truly public and easily verifiable. No centralised
version of this information exists for a hacker to corrupt. Hosted by millions of
computers simultaneously, the data is accessible to anyone on the internet.

Blockchain is part of the “Big Data” concept and is being brought into the shipping
industry and is here to stay and is being accepted by more and more entities in the
shipping industry. It is growing and is becoming a core part of doing business now and
in the future and will certainly influence purchasing and supply.

The following notes below are part of a far larger document (Manaadiar, 2018). The
main point here is to show how the industry is evolving and the effect on trade and in
turn the operation of the ship manager.

“CargoX Smart Bill of Lading based on Blockchain – how it works

Smart Computers, Smart Phones, Smart Cars and now Smart Bill of Lading!

Shipping documentation in its current form has been around for many decades and has been
working quite well.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 93
There are several factors that are involved in the preparation, checking, transmission, hand
over, payment and many of the intrinsic activities involved in the process of a bill of lading.

When we first heard of the Smart Bill of Lading and Blockchain, it was bit unconvincing as to
how technology will replace all the above as there are several products trying to break into
the shipping and freight industry in the name of innovation, digitisation, IoT, SaaS, etc.

So, when CargoX requested we have a look at how the Blockchain based bill of lading system
works, it was looked upon with a bit of scepticism.

But before I share my experience, impression, and opinion, let us look at what is a bill of
lading, what is a Blockchain and how these when taken together may fit into the process of a
shipment.

Bill of Lading

As part of global trade, currently more than 130 million containers with an estimated value of
more than $4 trillion are traded around the world.

There are several things that link the parties involved in this global trade.

But nothing links the parties involved in this global trade like a piece of paper. Yes, a piece of
paper called a Bill of Lading.

What is a bill of lading?

Bill of Lading (abbreviated to B/L) is one of the MOST important documents in the whole
shipping and freight chain.

It comes in various types and forms and is one of the most commonly used documents in the
shipping and freight chain.

A bill of lading has 3 basic purposes or roles:

1. Evidence of contract of carriage
2. Receipt of Goods
3. Document of title to the goods

This is the one document that:

• Is issued by the shipping line to the shipper in exchange for freight
• Is issued by the shipping line as acknowledgement of the receipt of the goods from the
shipper
• Is required by the shipper to get his money from the consignee
• Is required by the bank in exchange for releasing the cost of goods to the shipper
• Is required by the bank in order to ensure they get the money from the consignee
• Is required by the consignee to get release of the cargo at destination
• Is required by the shipping line in order to ensure they release the goods to the correct
party

Of course, there are several permutations/combinations involved in the transaction of a bill of

lading, especially when an original bill of lading is involved, but these are the main
transactions.

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The main message here is that bill of lading = money and/or goods.”

4.16 An Introduction to the Big Data Concept

Big data refers to data sets that are so voluminous and complex that traditional data
processing application software is inadequate to deal with them.

Big data challenges include capturing data, data storage, data analysis, search, sharing,
transfer, visualisation, querying, updating and information privacy. There are three
dimensions to big data known as:
• volume
• variety
• velocity

Lately, the term “big data” tends to refer to the use of predictive analytics, user
behaviour analytics, or certain other advanced data analytics methods that extract value
from data, and seldom to a particular size of data set. Analysis of data sets can find new
correlations to spot business trends, prevent diseases, combat crime and so on.

Scientists, business executives, practitioners of medicine, advertising and governments

alike regularly meet difficulties with large data sets in areas including Internet search,
financial technology (fintech), urban informatics, and business informatics.

Data sets grow rapidly – in part because they are increasingly gathered by cheap and
numerous information-sensing “Internet of Things” devices such as mobile devices, aerial
(remote sensing), software logs, cameras, microphones, Radio-Frequency Identification
(RFID) readers and wireless sensor networks.

Relational database management systems and desktop statistics and visualisation

packages often have difficulty handling big data. The work may require “massively
parallel software running on tens, hundreds, or even thousands of servers”.

What counts as “big data” varies depending on the capabilities of the users and their
tools, and expanding capabilities make big data a moving target:

“For some organisations, facing hundreds of gigabytes of data for the first time may trigger a
need to reconsider data management options. For others, it may take tens or hundreds of
terabytes before data size becomes a significant consideration.”

(Big Data, 2023)

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 95
Note – The author does not generally recommend the use of Wikipedia websites for support of
studies unless they can be verified as accurate and are from reliable sources that can be
confirmed.

4.17 Additional Costs of Purchasing Practices

One major consideration that needs to be reviewed as to its impact on purchasing

budgets is the costs involved in obtaining materials, parts etc. and having then sourced
at one location placed on board the ship at another location. This location is constantly
changing due to the ship’s movement as it complies with charter party requirements.

Therefore, it is important to know if materials, parts, and other items can be sourced
locally and supplied to the ship, and by doing so reduce costs.

The purchase price of an item relates to the cost of that specific item in relation to the
total cost for the finished product. It should be noted that the purchase price itself can
include several items.

These are:
• Materials cost
• Labour costs
• Overheads
• Administrative costs
• Profit
• Cost of shipment (transportation by various methods)
• Insurance (should not be ignored especially for international shipment)

The person who is made responsible for the procurement of goods or services will have
to ensure that when testing for “value for money” that all the costs are included in the
comparison. They must remember that this is a COST comparison and not a PRICE
comparison.

The difference in cost may not be that much but when it is repeated for thousands of
transactions the final difference can be very large indeed. To this end, there are some
important organisations and websites that should be considered.

4.17.1 ShipServ

Helps marine and offshore buyers to find the best suppliers easily, trade efficiently and
build trusted relationships. ShipServ’s products and services bring buyers and suppliers
together online, in print, on ship and in person. They offer a large online trading
platform, the most used supplier search engine, a leading ordering guide and the first
online ad network: [Link]

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4.17.2 TradeNet

Part of S&P Global, it easily integrates with all the major purchasing systems in the
marine industry including any custom systems thanks to the Marine Trading Mark-up
Language (MTML) standard. The average TradeNet customer is fully integrated in days,
not weeks or months. If more integration is required then ShipServ’s integration team
make sure there is no disruption to the purchasing processes:

If you have no purchasing system, you can still benefit from TradeNet because of:
• ShipLink: The shipboard software that lets ships’ personnel browse catalogues,
create requisitions, manage delivery status, and develop reusable templates.
Requisitions are transmitted to shore personnel via TradeNet for fast approval
and action: [Link]

• Web Buyer: This is a web-based tool that allows buyers to review requisitions,
manage RFQs, solicit bids, award, and place orders – all without any software to
buy or maintain.

• ShipServ Pages is the search engine for operational ship supplies. It works just
like Google except, since it specialises in ship supplies, it only delivers relevant
results to busy buyers. ShipServ Pages is a time-saver, making it easy to find new
suppliers in any port in the world.

4.18 International Marine Purchasing Association (IMPA) Stores

Guide

IMPA was formed by a group of senior purchasing executives who wanted to create an
industry “voice” to represent the interests of the purchasing profession within shipping
and promote close co-operation and understanding between buyer and supplier.

Over the past 40 years the association has grown significantly and now represents over
850 members from across the world; shipowners, operators and managers account for
purchaser members and manufacturers and ship suppliers make up the supplier
members.

The Association is run by a council of eight individuals comprising five from the
purchasing profession and three from the supply side, the council is responsible for
directing the duties of the Secretariat and formulating the strategy for the association.

4.18.1 IMPA Stores Coding

This is used in the marine industry. The system consists of a 6-digit code for marine
products. This aims to bridge the language barrier and offer worldwide shipping
companies an easy way to order goods. Related products are grouped in product
classes.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 97
 This system has been used for over 40 years, growing from a small item list to a list of
40,000+ unique items. It is the leading reference guide for maritime purchasing and
supply.

The catalogue of the items contained in this system is found in the IMPA Marine Stores
Guide (MSG) which provides a universal coding system to facilitate communication
between ships’ crew, their owner/manager, offices, and their marine suppliers. This
coding system has been acknowledged for many years to overcome language barriers
and to ensure the accurate specification of marine stores.

This publication is on its seventh edition and is under constant revision and update to
supply all users with accurate and recent data. More details can be found at:
[Link]

It cannot be assumed that every item that you will need for a ship will be
instantaneously available and consideration must be made for certain fluctuations
which can occur and disrupt carefully planned purchasing practices and strategies. Such
items to be considered can be:
• Unavailability of supplies
• Cost fluctuations
• Delays in delivery of materials
• Sudden exit of suppliers from the market
• Quality issues
• Unforeseen changes in specifications

This could have a major impact on a ship’s operation and fulfilment of a charter party.
Therefore, careful consideration must be made as to how this can be managed. It is not
easy and will be forever changing in its demands and needs.

4.18.2 Conclusion

The above has been an introduction to purchasing and the various factors to be
considered.

All of you who aspire to be a ship manager need to have a basic understanding of how
these systems work and the money that is involved to keep a ship running and how the
demands increase over time, no matter how well the ship is run.

Directed Learning 1.9

1. For all of you who work for a shipping company, it is suggested that you investigate how the
purchasing strategy is accomplished for your company and identify if any of the options and
organisations mentioned in the notes are being used.
2. For those of you who are currently working outside of the shipping industry, look at how your
company controls and tracks the purchasing of materials and items for its operation and see
if any of its practices are the same as those of the shipping industry.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 98
Feel free to post your thoughts to the forum, review what others post, and add your comments or
questions in response.

4.19 Checking Crew Numbers, Qualifications, Experience for

Manning Contracts

The crewing department or human resources department or a manning/crewing agency

will have the direct responsibility for the recruitment and placement of the crews on
board the ships that the ship manager is responsible for.

The ship manager has the responsibility of checking the crew serving on board the ships
they are responsible for. This includes checking the crew numbers and the
qualifications and experience of each crew member being appointed to ensure the
demands of the safe manning document is being met. Working with the crew
department will ensure that both parties benefit and that the correct personnel are
being recruited.

At the core of this dialogue is:

• the SOLAS Convention
• the STCW Convention
• the MLC Convention

Regard must be given to SOLAS 74 as amended, Chapter V – Regulation 14 – Ships’

Manning, along with IMO Resolution A.1047 (27) – Principles of Minimum Safe Manning.

The Minimum Safe Manning Document (MSMD) as per SOLAS 74, as amended Chapter V
regulation 14.2 needs to be addressed.

A full copy of the Resolution including the model format of the Minimum Safe Manning
Document can be found at:
[Link]

This can be downloaded free of charge to support your studies.

The whole of this IMO Resolution needs to be read and understood to identify the
manning levels required for any ship and this is dependent on its trading pattern.

The contents are:

• The Resolution
• Annex 1 – Guidelines for the Application of Principles of Minimum Safe Manning
• Annex 2 – Guidelines for Determination of Minimum Safe Manning
• Annex 3 – Responsibilities in the Application of Principles of Minimum Safe Manning
• Annex 4 – Guidance on Contents and Model Form of Minimum Safe Manning
Document
• Annex 5 – Framework for Determining Minimum Safe Manning

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 99
There is a direct link between SOLAS V Regulation 14, IMO Resolution A.1047(27) and the
ISM Code. There is also the correlation with the STCW Convention, STCW Code as well
as MLC 2006.

Currently a look at the ISM Code is required. The reason for this is that the ship
manager needs to be aware of what is required and what the crewing department will
be doing to ensure that the ship is properly manned.

4.20 ISM Code – Part A – Implementation

4.20.1 Part A - Section 6 – Resources and Personnel

This section of the ISM Code holds the main responsibility for ensuring that the crew
serving on board a vessel meets the requirements of the STCW 95 Code and all its
amendments.

There is also the requirement of becoming familiar with and introducing the Maritime
Labour Convention (MLC) 2006, which is now in force.

The company is still responsible under the ISM Code for the crew no matter that it has a
contract with a sub-contractor for the supply of the crew. The crewing agency will not
be audited and the company is responsible for ensuring that it has all the records and
requirements for crew members to meet the ISM Code.

If the company cannot produce the objective evidence to show how each part of the ISM
Code applies in respect of the crew members, then the auditor has the right to raise a
major non-conformity.

In the modern era it is possible to have an online live link to the crewing manager so
that a 24/7 access to the relevant crew member data can be viewed. In effect this gives
a real time information format even if the crewing manager is located half way round
the world from the ship manager’s office.

Additionally, port state control inspectors are very interested in the standard of the crew
on board. It does not matter that the ship is in good condition, if the crew does not
meet the requirements of the legislation, then it will take a very short time for the
standard of the vessel to deteriorate.

Many vessels are detained because although all the paperwork was in order, the crew
could not perform simple emergency drills.

Whoever has taken on the title of “company, in respect of the ISM Code must ensure that
every ship is manned by crew members that can meet the requirements laid down for
all sections of the Code for safe operation and pollution prevention.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 100
“6.1 The company should ensure that the master is:

.1 properly qualified for command.”

(IMO, 2018)

The company is required to establish a methodology for checking to ensure that the
master meets all the legislation and the company’s criteria for command.

How this is achieved is up to the company, but suggested minimum criteria are set out
below:

• Certificate of Competency

– Validity

– Authenticity (original should be sighted)

– Complies with flag state requirements

– Complies with STCW 95, as amended requirements

– Relevant endorsements still valid

– Medical certificate valid

– GMDSS certificate
• Experience

– Duration of sea time

– Sea time on ship similar to the proposed ship

– Elapsed time since last on-board similar ship

• Appraisal Reports

– Company reports

– Reports from previous employers (if available)

• Company Requirements (Possible Examples)

– Specific requirements

– Language

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 101
 – Previous experience with nationality of crew

– Computer literacy

“.2 fully conversant with the Company’s safety management system.”

(IMO, 2018)

The company must ensure that the master is fully conversant with the SMS. How this is
achieved is for the company to decide.

What is important is that company records show how this is to be achieved and what
will be the objective evidence to show that this was checked.

If the master is not fully conversant with the company’s SMS, then the system will not
function on board the vessel that the master will command.

PSC inspectors and ISM Code auditors will expect the master to demonstrate his/her
familiarity with the company’s SMS and to show the records of his/her training in the
system. If this cannot be demonstrated to the satisfaction of the inspector or auditor
the vessel could receive a major non-conformity or detention or deficiency. Either of
these will stop the vessel from operating.

The company will need to show how the master meets this requirement. Possible
solutions are:
• Training on board the vessel before assuming command
• Service on board the company vessels for a set time before promotion to master
• Training in the office of the company before joining the vessel. This should be a
structured training regime, not three or four hours in the office talking to shore
personnel

“.3 given the necessary support so that the master’s duties can be safely performed.”

(IMO, ISM Code, 2018)

The support as indicated in this section comes in two parts:

• The first part is from the shore staff
• The second is from the crew serving on board

The shore staff needs to be able to respond to any questions or deficiencies raised by
the master. This is especially important where the master is in communication with the
ship manager and/or the designated person. The level of confidence that the master

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 102
has in the shore support will affect his/her decision-making capacity. The company may
also be called to give support from their own sources of expertise.

The ship staff needs to be able to support the master in the discharge of his/her duties.
This can only be achieved when the master is surrounded by professional seafarers who
are experienced and have knowledge of the company’s SMS.

The ship should also be manned to the level of not less than that nominated on the
minimum safe manning document, as per SOLAS V/14 – Ship’s Manning and IMO
Resolution A.1047(27) – Principles of minimum safe manning.

The normal working complement of crew should reflect the workload experienced by
the current trading pattern of the vessel. In many instances the company will carry
more personnel than the minimum safe manning document due to experience and
external factors affecting the safe operation of the ship.

“6.2 The company should ensure that each ship is:

1. manned with qualified, certificated and medically fit seafarers in accordance with
national and international requirements.”

(IMO, 2018)

The company needs to ensure that every vessel that it is responsible for meets the
legislation for manning as laid down in the flag administration’s minimum safe manning
document. This will detail the minimum requirements for manning for the ship to
operate.

Once these ranks and quantities have been identified, it is then the responsibility of the
company to ensure the seafarers chosen to meet the necessary standards.

The company must also remember that the manning document is the minimum
required. It may be that due to changes in trading patterns or ship operations that
additional personnel will be required for the vessel.

4.20.2 “Certificated”

The STCW 78 Convention remains intact but the certificates required have started to
change during the changeover to the requirements of the STCW 2010 Amendments.
This process started on 1 January 2012 and came into force on 1 January 2017.

Seafarers with old certificates will need to produce certificates meeting the new
curriculum; without these new certificates they cannot sail.

Therefore, the company will be required to ensure that it has a procedure in place to
cover these requirements for the crew members selected to sail on its ships. The
company may employ a manning agent but the third-party auditor will be looking to the
company to supply the required objective evidence.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 103
The company may decide to have a policy for the recruitment, selection, and training of
seafarers to ensure that all national, international and the company’s own standards are
met. This would be further strengthened by the appropriate procedures and work
instructions to ensure that it functioned properly.

4.20.3 “Qualified”

Once the certificates have been checked and confirmed to be valid and relevant, the
company should check the following:
• Evaluate the CV of each person
• Check previous employment records/employers
• Interviews
• Previous history with company (if applicable)
• Experience with similar ship types as contained in the company fleet

If a manning agent is used the company must have a procedure in place to ensure that
the procedure is capable of checking the information supplied by the agent and
ensuring that each person meets the criteria set by the company.

4.20.4 “Medical Fitness”

The STCW Code, Part A – I/9 Medical Standards, which is also supported by Part B – I/9
Guidance Regarding Medical Standards, needs to be met as the minimum standard. The
International Labour Organisation (ILO) and the World Health Organisation (WHO) are
contributors for establishing the internationally accepted medical standard for
seafarers.

The company should ensure that every seafarer joining a vessel has a valid medical
certificate that will remain valid for the duration of the contract. Additionally, each
seafarer should have in their possession a full set of medical vaccinations. The lack of
such causes delays for vessels when arriving at certain ports.

Medical fitness is not just about having a medical examination at certain time intervals.
It is about being able to perform the necessary duties on board the vessel whenever
required. Drugs and alcohol have become problems at sea and many companies have
introduced a drug and alcohol abuse policy to try and combat this problem.

In certain ship types such as oil tankers, the inspection system known as SIRE developed
by the OCIMF requires that the company conducts drug and alcohol tests and that
records are available for inspection.

If this is introduced into a company then it must have the correct procedures and a work
instruction to ensure that it is effective. This will include how to handle any person who
tests positive.

Care must be taken in respect of the result of tests and that custody transfer procedures
have been met. In certain charter parties if a positive test has been found can result in
the charter party being cancelled or the ship placed “off hire” until such time as a
replacement crew member can be found and placed on board. This can be a very costly
exercise for the company.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 104
The ship manager must ensure that they are aware of the crews serving on board the
vessels they are responsible for, especially the senior officers who will be their day-to-
day link with the vessel. If the company has a crewing department, then the ship
manager should work with them to ensure that the best possible crew members are
recruited.

“.2 appropriately manned in order to encompass all aspects of maintaining safe

operation on board.”

(IMO, 2018)

IMO Resolution A.1047(27) – Principles of Minimum Safe Manning, should be consulted.

All ships should ensure that the crewing level on board is adequate to respond to any
emergency situation at any time. This becomes even more important when the ship is
in port and the crew want to have shore leave. In doing so the ship should not be left
under-manned should an emergency develop.

“6.3 The company should establish procedures to ensure that new personnel and
personnel transferred to new assignments related to safety and protection of the
environment are given proper familiarisation with their duties. Instructions which are
essential to be provided prior to sailing should be identified, documented, and given.”

(IMO, 2018

The company needs to establish separate procedures for each requirement of this
section of the code. How this is carried out and recorded is for the company to decide.

The different categories are:

• New Personnel to the Company

These persons will need to be introduced to the company’s system of operations and
management. The company will be required to give them enough time to ensure that
they become familiar with the shipboard equipment, operating procedures, and any
other arrangement that impacts on their ability to carry out their duties and job
description.
• Personnel Transferred to New Assignments

These persons may have achieved promotion or been transferred to another ship or
ship type within the company. They will require time to become familiar with the
duties that the new assignment requires.

Essential instructions should be understood as those are the instructions that the
seafarer must be able to conduct before being assigned duties on board the vessel.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 105
Familiarisation requires that the seafarer be given instruction in the ship, its equipment
and machinery and operations, so that he/she can conduct his/her duties effectively on
board. This familiarisation training can be conducted by various methods.

The company may choose one or more or combine them all into one special system.
The need for familiarisation cannot be expressed strongly enough.
• Option 1: Sailing on board the vessel and receiving training in the duties required for
a given position before taking up those duties.
• Option 2: Receiving instruction in a language that the seafarer readily understands to
ensure that the job description is fully comprehended takes additional time and
resources to establish unless the company has set its own standard of language
required for each rank.
• Option 3: This will include shore-side training prior to joining the vessel. This will not
be complete, as there are certain duties and tasks that can only be carried out on
board.
• Option 4: Spending time on board a vessel in port and being given instruction. This
could also be utilised as a hand-over period.
• Option 5: The use of training aids such as videos, manuals, and instructions.

This should also be applied to shore staff as well as ship staff to ensure that they are
able to conduct their duties effectively. A ship manager should ensure that he/she has
received such training before assuming his/her duties.

The requirements for sea staff, “prior to sailing” require that the company identify
exactly what is required. This is identified, documented, and recorded. This may vary
from ship type to ship type, but should include at least:
• fire station duties and responsibilities
• boat station duties and responsibilities
• SOLAS life-saving training manual
• SOLAS fire training manual
• SOLAS training manual
• emergency signals
• muster points
• other essential life-saving and firefighting information
• security duties as required in the ship security plan (SSP) for the rank being held
• Be able to operate the equipment essential to maintaining a safe watch whether at
sea or in port. This will vary from ship type to ship type but must be followed to
ensure that any watchkeeping will be conducted in a safe manner. This applies to
both deck and engine room departments
• Be aware of and apply all relevant procedures and work instructions relating to the
company’s cyber security plan and operational constraints

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 106
“6.4 The company should ensure that all personnel involved in the company’s safety
management system have an adequate understanding of relevant rules, regulations,
codes and guidelines.”

(IMO, 2018)

The company must decide the level of knowledge and understanding required for each
job description contained in the SMS.

Each person must be made aware of the rules, regulations, codes, and guidelines that
affect their work. At each promotion, there should be proof that the person involved
has demonstrated that they have reached a new level of understanding and application.
The company needs to ensure that it has a methodology of checking this and records of
how this was achieved.

“6.5 The company should establish and maintain procedures for identifying any
training which may be required in support of the safety management system and ensure
that such training is provided for all personnel concerned.”

(IMO, 2018)

The company needs to ensure that this section is applied to both ship and shore staff. It
needs to put in place the methodology for ascertaining the requirements and the needs
of individuals and ensuring that the company can provide the means for this to be
accomplished.

Factors that can be used to identify training needs can be:

• Performance of personnel during drills and exercises
• Appraisal reports
• Internal audits
• Third-party audits
• Request by individuals for training
• Performance in operating the ship’s equipment
• Records of previous training
• Experience and elapsed time since last training occurred

Training aids can be utilised to assist in training programmes. These can be:
• Supervised tuition
• Distance learning
• Interactive learning (computer assisted)
• Manuals

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 107
• Videos/CD ROM/DVD
• Operating instructions

The ship manager should be involved in assessing the requests for training and the
assessments for training.

“6.6 The company should establish procedures by which the ship’s personnel receive
relevant information on the safety management system in a working language or
languages understood by them.”

(IMO, 2018)

The company needs to establish which language or languages are to be used by the
personnel. The more languages used the more complex the system becomes, but the
company needs to identify the nationalities employed on board the ships and in the
office.

The company has the option of choosing one particular language for its use and then
making it a condition of employment that all persons employed by the company must
have a certain level of aptitude in the language before they can hold a position or be
promoted.

Whichever method is chosen the company must ensure that the procedures produced
reflect this and that they are effective in their execution.

The company must ensure that every person has received and understood the relevant
information connected to the duties described by their job description. If such
information has been given by training, then the appropriate records should be
available to substantiate what has taken place.

Common language and the ability to communicate effectively during times of

emergency by all crew members become highly relevant and need to be tested during
drills and exercises.

It should be noted that during the Estonia disaster that the tapes of the communication
between the bridge of the ship and the potential rescuers deteriorated as the situation
became worse. In the beginning it was in English and well-spoken and as the disaster
evolved the language broke down and the officers reverted to their native language.
This is not a criticism of these persons but an observation of how stress levels increase
the ability to retain communication in another language decreases. What was going
through their minds as the ship heeled further and further from the vertical and what
was going on around them will never be fully known. The crew and the passengers were
brave people.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 108
“6.7 The company should ensure that the ship’s personnel are able to communicate
effectively in the execution of their duties related to the safety management system.”

(IMO, 2018)

This section has two parts to it:

• The first is between crew members
• The second is between crew members and interested parties

The first is the ability of the crew to communicate effectively between themselves.
There is no problem when the crew is made up of one nationality. The problems occur
with multi-national crews.

The company is responsible in this case for providing the means for this to be
successfully achieved. It is not the responsibility of the master to work out how this is
being achieved, but rather that he/she has been given the necessary tools by the
company to ensure that this task can be successfully completed.

The second (communication between the crew and interested parties) becomes more
complicated. Ships can trade all over the world and notice must be taken of the national
legislation of any country that the ship is trading to.

Legislation that is being produced is showing that there is a tendency for one language
to become more dominant. This is English. The STCW 2010 and port state control
procedures have made reference to the English language as a common language.
Future legislation may further impose this.

From 1 February 2002, no watchkeeping officer was able to profess zero knowledge of
English and hold a valid STCW 95 certificates. If they do, then PSC inspectors will take an
even closer look at qualifications of the officers.

The main factor for this section of the code is the ability of the crew to work as one
cohesive unit, especially in matters concerning safety and pollution prevention:
• How is this to be achieved?
• Is it for the company to decide and provide proof of how this was achieved?

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 109
 Directed Learning 1.10

1. After reading this section, reviewing IMO Resolution A.1047(27) and looking
at the model format of a minimum safe manning document, you should
look at the minimum safe manning documents of ships from different flag
states.
2. The contents will be the same, but how they are presented will vary from
flag to flag.

Feel free to post your thoughts to the forum, review what others post, and add
your comments or questions in response.

4.21 Lines of Communications for Efficient and Effective Operation

of Ships

In this section the focus is on the communications between the personnel in the office
and also between the office and each ship.

We have discussed in this module how important it is to have good communications

that are effective and efficient for the operation of the company and its ships.

We have explored the communications in the office and all of what has been said in this
respect is carried over to the ships.

The primary point of contact is between the captain of the ship and the ship manager.
Lines of communication are laid out in the company’s SMS and these are to be always
followed.

There is the matter of keeping everyone aware of what is being communicated and it is
important that a circulation list details the complete list of personnel who are to be
copied in to the communications.

Regrettably, in many instances the ship manager will be corresponding in a negative

way. This will be for late or not yet received reports, records and other communications
required from the ship to be reviewed and checked before being forwarded or
questioned and when all is in order to be filed away in the appropriate manner. This is a
difficult problem, but it will depend on how the request is worded and how it is received
on board ship. It is not possible to let such matters slide as it can result in important
information being missed and if an incident occurs there will not be a complete set of
records available to show that the ship was kept in order. It needs everyone to work
together to achieve the desired results.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 110
In communications between the ship and the office one person who should receive a
copy of all communications on safety and pollution prevention is the DP who is
responsible for that each ship that they are responsible for. The permutations are so
numerous that they cannot be laid out here but it is one that the ship manager must
think about is when the ship manager is the DP.

But there are others who need to be put in copy or should have the ship manager
placed in copy of any of their correspondence.

It is critical that everyone is kept in the loop as far as possible to ensure that there are
no mistakes when information has not been passed on and the result is a problem for
the ship and meeting its charter party requirements.

Sometimes communications go completely awry and cause all kinds of problems. It is

not done through malicious intent, in fact in many cases it is the exact opposite. I will
give you a short story that happened to me and my crew and nearly caused a break up
of some marriages and relationships.

“The story started when the second engineer asked me to come to the bridge. He was on the
phone to his wife who was giving him a hard time about not seeing him. I was somewhat
baffled by this as the ship was only 50 miles from our port of call of Das Island in the Arabian
Gulf. It is an offshore terminal and had very little means of access.

After speaking to the second engineer’s wife and reassuring her of where the ship was and its
orders she calmed down. I then managed to find out why she was so angry. A person from
the Human Resources department had been speaking to her about when her husband was
due home and had mentioned why she was not going to see him as the ship was going to Das
Island.

All good so far but the kicker was that the HR person had thought that Das Island was on the
Thames Estuary, not the Arabian Gulf. Regrettable, but it did not end there.

The ship started receiving phone calls from wives, partners, and girlfriends trying to find out
what was going on. In the end I had to allow all crew members a short call to their loved ones
to explain what was going on.

The next day I called the office to explain what had taken place and to speak to the HR person
and explain the importance of distributing correct facts and the problems that their good
intentions had caused. No harm done to the ship but there were certainly some extremely
stressed crew members.”

The importance of this story is that it is important to ensure that all information is
accurate and correct and that if anything appears to be missing or untoward then it
must be clarified and resolved. Nowadays the use of communications systems from
ship to shore and vice versa can lead to errors which can have long term implications.

Every ship manager should try to build a good relationship with the master of each
vessel that they are responsible for. This can be through telephone conversations and
making sure that when any Master is passing through the office that the ship manager

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 111
takes time to sit down and talk with them and start the process of building a rapport
between both parties.

Another opportunity can be to build the relationship if the ship is coming to a port which
is relatively near to the office and it is possible for the ship manager to make a visit on
board. This also allows the ship manager to see the ship for real and how it is operated
along with meeting all the crew.

The cost of this might be prohibitive, but if the ship manager is suitably qualified to carry
out internal audits or certain inspections and make the reports then the income for
doing such work can be off set against the ship’s budget. There are many different
creative ways to meet challenges and these should always to be looked at.

Time zones can have a major impact on how communications are conducted and cause
delays with passing on information to the ship and receiving it. As has been previously
stated, ships work 24/7/365.

They can be operating anywhere in the world and be on route from one region to
another. A ship manager is employed to work from an office which has a static location
and operates in a designated time zone.

This results in the ship manager being on call 24/7 and having access to
communications equipment that allows the ship access to him/her at any location at any
time.

In addition, normal office hours are required for a working week of Monday to Friday
from 09:00 – 17:00 hours on each of these days. As a ship manager you can forget
about it if you think that is all that will be required of you.

That is why time management and keeping on top of things is so important. Devising
daily work routines which include sending and receiving communications is important
and when efficient and effective communications are in place a lot of the spurious
messages can be dispensed with.

It is also important to be part of a good team who share and support each other and by
doing so reduce the work load for each other by eliminating duplication or even
triplication of routine work tasks.

This centres on the ethos of team building but instead of being linked to a particular
project it is about a long-term working strategy to run the ships by having confidence in
each other’s professional abilities.

Directed Learning 1.11

1. For those working in a shipping company, review who you consider would be part of the
team to operate a set of ships. This should be looked at as the core members who are
responsible for the day to day running of the ships. Then, who are the other members

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 112
 who are needed at only certain times but have a recurrent interface with the team?

2. For those of you who are not working in the shipping industry does your work involve
being part of a team, and does it work?

3. In addition, what are the various communication options available to you to complete
your work load and who pays for their use if it is out of office hours?

Feel free to post your thoughts to the forum, review what others post, and add your comments or
questions in response.

A charter has been agreed and the ship is expected to perform to the standard set in the
charter party and failure to do so can mean that there are financial penalties which can
have a major financial implication for the ship and company.

When a ship is chartered the relevant charter party will be in place. The ship manager
will receive a complete copy of the charter party with all clauses available to be read and
understood.

The ship will receive a document known as the charter party “recap”. In this case, recap
is the abbreviation for recapitulation. This means that the ship receives an abridged
copy of the charter party with certain clauses having been removed.

The charter party, whether it is a time charter, voyage charter or bareboat charter, will
have specific clauses relating to the ship’s performance and these items must be met to
ensure that there are no penalties against the ship and the company later.

Ships will change charter parties at different times and the ship manager must keep
themselves up to date with the requirements of each charter.

So, they need to keep an open mind to receive new information and discard the old and
obsolete data that was relevant to the previous charter party.

There is also the need for the ship manager to have a frank and open discussion in
respect of the charter party with the master to ensure that they agree on the content of
each clause dealing with the required ship’s performance in discharging the agreed
clauses.

This is especially important when the master, officers and crew are of different
nationalities and English is their second or third language.

Most charter parties are written in English, so all credit must be given to all persons with
varying job titles who have attained a high standard in English to be able to hold the
positions that they do.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 113
But there is still the potential for errors to creep in when the actual meaning against the
literal translation is lost in the process of translating from one language to another.
That is why exact interpretations are needed to remove this potential problem.

A lot of the ship manager’s time is spent reviewing each ship’s performance for the
voyage which includes sea passages, in port times, passing through traffic separation
schemes as well as changes in performance due to the weather systems being
experienced.

This is why weather routeing is being used more to assist in avoiding inclement weather.
For some voyages it cannot be avoided but manoeuvring the ship around the weather
systems will reduce the delay and any possible weather damage.

There is still the requirement of ensuring that speeds, distances, engine revs and
consumptions of fuel and water stay within the charter party requirements, where
applicable.

Ship performance varies between the ship being in ballast or loaded condition; this is
understood as well as consumptions when at anchor compared to when operating
cargo.

For certain ship types there is a large difference in fuel consumptions between when the
ship is loading compared to when it is discharging. These need to be understood and
recorded. An example of this is a crude oil tanker. Loading is covered by receiving cargo
and deballasting. When discharging there is still the need for ballast pumps but also
cargo pumps, inert gas, stripping systems, all of which increase the demand for energy
which is turn increases fuel consumption. This will be factored into the charter party but
there will be limitations on the fuel used and time allowed to complete the various
operations required.

These and many other items will be discussed in detail in other modules of this course.

Directed Learning 1.12

1. For those students who are working in the shipping industry, try to review a
copy of a current charter for a ship they are either serving on or controlling from
the office ashore.
2. For those of you who are not working in the shipping industry they are guided to
the following BIMCO website: [Link]
clauses/bimco-contracts From the page that comes up, review the various
sections and contents available to non-members to give an initial understanding
of the various contracts and clauses that are available.
3. Those of you working in the shipping industry may find that a review of the
above-mentioned website may be helpful too.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 114
 Feel free to post your thoughts to the forum, review what others post, and add your
comments or questions in response.

4.22 Preparing Reports and Presentations

This is only part of a ship manager’s work, but it is an important one. There will be a
constant process of preparing and presenting reports on set time scales which must be
met and not delayed.

A lot of the working time of each day is spent updating these report formats so that
there is not a major disruption at the end of the month (or whatever time scale is being
used) to write up the relevant data and prepare it for management review and comment.

A ship manager will know what date reports are required for. This will be found in the
SMS and laid out in detail. With the use of computers many of the reports and
presentations will be pre-formatted and will require data to be entered in a required
sequence.

There will be:

• Weekly reports
• Monthly reports
• Three monthly reports
• Six monthly reports
• Annual reports

There will also be a succession of reports on shipboard activities such as the monthly
shipboard management meeting which may include safety, health, and environmental
reports on the ship.

These will be varied and many and there will be a complete set for each ship and all
must be reviewed and checked by the ship manager.

As you can see there are a large number of documents, most will be in electronic format
so that this will save some time and effort.

There will also be reports sent in for the end of a voyage and start of or end of a charter
party. There will be on-hire and off-hire reports. Then there will be:
• vetting reports for tankers
• port state control reports
• charterer reports
• insurance reports

There will also be flag administration inspection reports, which is different from port
state control reports.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 115
If the ship is being managed there will ship reports to be constructed and sent to the
shipowner.

Now, not all these reports and their contents will be required to be completed by the
ship manager, but a prudent ship manager would read every one and mark up items of
interest or defects that need to be resolved. This will give the complete picture of how
the ship is performing and whether it is meeting the requirements expected of it or not.

When a ship is not performing to the standard required the reasons need to be
identified and remedial action taken.

One important section of reporting and actions to be taken is that of how the ship is
operating against its budget. In most cases the technical superintendent or technical
manager will have the primary responsibility for this, but the ship manager needs to be
involved to know what is taking or has taken place and the money involved, and may be
required to supply supporting evidence to support the technical superintendent in
preparing his/her report on this matter.

There may also be times when a ship manager has been tasked to prepare and present
a report to certain members of the company or third parties. This will be time
consuming and must be completed to the highest professional standard.

All the information being presented must be accurate and correct and be able to be
supported by available objective evidence. How the ship manager and the reports that
they have presented are received along with potential career prospects cannot be
understated.

Do not worry about this when becoming a new ship manager and settling into the job,
but it is there on the horizon and there will come a time when you may be involved in
projects and have been a team leader and be required to make a presentation to senior
management or interested third parties.

This is an introduction to what a ship manager can expect to work with as part of their
responsibilities. This topic will be gone into at a greater depth in other modules of this
course.

Directed Learning 1.13

1. Speak with a ship manager, if possible, and identify the various documents and
reports that they must attend to as part of their job description. There will also be
reports and documents where you will supply certain data along with others to
create a final complex report.
2. If there is the possibility of inspecting a complete safety management system then
the opportunity should not be missed and inspection of the contents will reveal what
and when are the reports and other documents required to be completed and the
time window allowed under the system.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 116
 Feel free to post your thoughts to the forum, review what others post, and add your
comments or questions in response.

4.23 Sale and Acquisition of Ships

This is a very specialised skill and needs to be handled by expert personnel, but there
are certain disciplines that a ship manager will need to have to be able to function
effectively in this process. This can be either for a ship being bought and brought under
the management of the company or sold to another company.

There is another part of the sale of a ship and that is when it is going to a scrap yard and
will no longer be traded. There is no sadder an operation for any seafarer than taking a
ship to the scrap yard and running it up on to the beach as its final resting place before
being broken up for scrap:

In respect of the title of this section there needs to be clarification of the various aspects
of the sale and acquisition of ships.

There is one process for having a ship built so that it is a new ship when it enters service
and begins to operate and make money to repay the investment.

The next process is in connection with purchasing a second-hand (used) ship and how
that is processed.

The next is the sale of a used ship to a new owner or manager.

The final option is for the disposal of a ship that has met the end of its lifecycle and will
be sent to the breakers yard to be dismantled and sold as scrap.

The ship manager will be involved in any or all these processes at some stage of their
career.

The good news is that there are specialists who conduct this work and need input from
the ship manager to ensure that all is in place and accurately recorded. There is still a
lot of work to be done but many companies have procedures, work instructions, and
check lists in place to ensure that the required work is completed by company staff and
meets all the requirements.

4.23.1 Ship Broker

A ship broker is a person who acts as the agent for a shipowner and is responsible for
the business of the ship including obtaining cargo and passengers, permits, insurance,
embarking and debarking. A ship broker can also be referred to a person in the
business of selling ships.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 117
 Further Research

To learn more about Ship Brokers and Shipbroking, visit:

[Link]

For this section of the module, it is important to focus on the buying and selling of ships.

The process of looking at the design and building of a new ship will be looked at in more
detail later in the course.

When dealing with second-hand or used ships there are several steps that must be
taken to ensure that the process is completed and all is in order. This is why specialists
are hired to do most of the work. Many of them work for a fee which is based on a small
percentage of the price realised for the transaction of buying or selling the ship.

Due to the coronavirus pandemic a lot of ships have been sold for scrap and this has
been especially high in the passenger ship sector of the industry. This is showing up as
the industry in all sectors realigns itself to cope with the demands of global trade in the
post COVID-19 era.

4.23.2 How to Buy or Sell a Ship – Getting the MOA Penned

A useful document to consult to give guidance as to the process of buying or selling

ships is at: [Link]

The MOA in the title stands for “Memorandum of Agreement” which is an important part
of the process which will allow the transaction to be completed:

The terms of the sale of the vessel are determined by the MOA which most likely is
based on the Norwegian Sale Form of 1993 (Saleform 1993 or plainly NSF 93). There is
also Norwegian Sales Form 2012 which takes the 1993 version and updates it and
includes on line connectivity for completion and printing out of completed hard copies.

Students are recommended to go to the following web site:

[Link]

This will give them an in-depth analysis of the procedures and sequential sequence for
the sale of a ship with many potential questions being answered.

The NSF 93 has sixteen main clauses and special or additional terms are incorporated in
the addenda. In the preamble, there is an introduction and the definitions of sellers,
buyers, and the vessel, of banking days and the classification society. Since sellers and
buyers can be Special Purpose Companies (SPC), usually there is a need for a guarantee
for the performance by the parent companies:

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 118
 Clause 1 Purchase Price
Clause 2 Deposit (usually 10% of the purchase price)
Clause 3 Payment
Clause 4 Inspections
Clause 5 Notices, Time and Place of Delivery
Clause 6 Dry-docking and Divers’ Inspection
Clause 7 Spares and Bunkers
Clause 8 Documentation
Clause 9 Encumbrances
Clause 10 Taxes
Clause 11 Condition on Delivery
Clause 12 Name/Markings
Clause 13 Buyers’ Default
Clause 14 Sellers’ Default
Clause 15 Buyers’ Representatives
Clause 16 Arbitration

A lot of the content of each of these clauses does not have a direct effect on the ship
manager but it is important to know the steps of the process and what information will
be required and what must be put in place for the purchase of the ship so that it can
operate. An example of this is the certificates that need to be obtained.

A Certificate of Registry is the prime document and all other certificates and documents
for a ship require the information contained on this certificate to be able to present the
other certificates needed for the operation of the ship; in many cases full-term
certificates cannot be issued.

There may be provisional and interim certificates issued so that the ship can trade. The
full-term certificates will be issued only after certain inspections, surveys and audits
have been completed.

There is also the need to check the flag state that the ship is to be registered under and
that the crewing department has organised the minimum safe manning document and
recruited the required crew members in the numbers per rank with certification for that
flag state along with experience of the company’s SMS.

A checklist of the full list of certificates and documents for a ship of a certain type will
need to be completed. There is also one very important point to note at this stage and
that is all certificates and documents on board a ship must be the originals. Copies will
not be accepted.

The only exception to this requirement is in respect of the ISM Code and that is for the
DOC which is issued to the office that controls the ship in question. A copy of this DOC
should be endorsed and placed on board so that a full set is on board.

SOLAS 74, as amended Part 2 Annex 1 – Certificates and documents required to be

carried on board ships should be consulted for guidance.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 119
 In addition, MARPOL 73/78 as amended Additional Information – 6 – Certificates and
documents required to be carried on board ships should be consulted.

These are the main certificates and documents but there is so much more in the way of
certificates and documents that a ship requires to be able to meet all its obligations
under the various legislation and operational parameters.

Examples of these are:

• Synthetic mooring ropes
• Steel wire mooring ropes
• Steel wire mooring ropes – synthetic rope tails
• All shackles and lifting equipment

The list is extensive and involves the identification of everything on board from deck
operations, engine room machinery and spare parts, galley equipment, the navigational
equipment, the GMDSS station and its operation and maintenance, but this can be
included in the maintenance system for the ship and the dates for inspection, testing,
certification, and replacement can be included to work in with the ship operational plan.
It can also be included in the planned maintenance system used for the ship.

In addition, when the crew are joining a ship, they must be in possession of a complete
set of original certificates and documents for the rank that they hold and these should
remain valid for the duration of the contract on board. This should include a complete
set of vaccinations.

Directed Learning 1.14

1. Try to review a copy of the policy, procedures, work instructions, checklists and records
required for the sale and acquisition of ships to and from the company.
2. If you do not have access to such materials then you can search the internet and will find
a lot of websites with good information to assist in the understanding of what is taking
place and where responsibilities lie.
3. More importantly, there is the need to understand the position of the ship manager in
assisting with this process and what work can be required of them.

Feel free to post your thoughts to the forum, review what others post, and add your comments or
questions in response.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 120
5. CONCLUSION
That’s it for the first module. I hope you have enjoyed it and learnt a lot. It had the aim
to open the shipping industry and a number of the facets that make up its operation
and continued viability, and we have introduced the shipping industry and introduced
the role of the ship manager.

The content has hopefully made you think of what is required of the ship manager in the
shipping industry and what can be expected of a person as they progress to becoming a
ship manager and then progress that career.

There is a lot of information to be absorbed and a large number of questions to be

asked through the Directed Learning questions. These were not made up for fun but to
give some structure to your studies and the way forward to complete this diploma. The
simple fact is that the more you put into this course the more you will get out of it.

This module is only an introduction to materials and concepts. The rest of the modules
deal with an in-depth study of what will be required and how it can be achieved. This is
not intended to demotivate you, but instead to assist you in rising to the challenges
ahead.

And finally, learning should be an enjoyable experience, not a chore. Regrettably, there
is a lot of reading to be done to complete the course and the materials contained in it.
So, when you complete this module and feel ready to move forward the next step will be
to complete the online test of 20 questions to see how well you have learned the
contents of this document.

Please note that the result of this test of this module are not used for awarding your
final diploma. But it must be completed so that we are aware of the progress you have
made over the course. In many cases the content of this module has been an
introduction and in future modules a more in-depth explanation is given.

So once again welcome to the course and enjoy the experience.

In the next module, module 2, titled “The Skills Set of a Ship Manager” we will investigate
in more detail what a ship manager needs to be able to function and do the job
required. These are diverse and need to be refined as a ship manager seeks promotion.

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 121
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Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 124
APPENDIX A – ENVIRONMENT, SOCIAL,
GOVERNANCE (ESG)
The concept and application of ESG has been about for many years and it is only
recently that it has become part of the maritime industry and the way that it does
business.

In most cases, this will be in respect of the financial implications of operation a company
and attracting investors. But and this is a big but, there needs to be a trail to show how
the concepts of this matter are being integrated into the company and its daily
operating practices. This will also need to be supported by objective evidence to prove
that this is actually being followed.

What exactly is ESG?

At a recent (October 2021) Price Waterhouse Coopers (PwC) meeting one of the hot
topics for the Boards of most companies is that: ’Key stakeholders, such as investors, banks
and charterers, will soon expect that ESG reporting will be part of a shipping company’s
ongoing reporting and will drive the basis of their relationship with the company.” This is
changing the demands for investment is shipping and how it will be financed.

The development of a successful ESG strategy, driven by key executives and the Board
of Directors, will provide for impactful ESG reporting which is the next crucial step for all
maritime stakeholders. This cannot be ignored.

The Poseidon Principles are the world’s first sector-specific, self-governing climate
alignment agreement amongst financial institutions. The principles establish a global
framework for assessing and disclosing the climate alignment of ship finance portfolios.
They are consistent with the policies and ambitions of the International Maritime
Organization (IMO), including its ambition for greenhouse gas emissions to peak as soon
as possible and to reduce shipping’s total annual GHG emissions by at least 50% by
2050. These principles fit seamlessly into the ESG format. The full content can be found
at: [Link]

Understanding ESG

ESG stands for Environmental, Social and Governance factors assessing the progress of
companies on their Corporate Social Responsibility (CSR). The ESG was established as
late as 2005, when the UN Environment Programme Finance Initiative and the UN Global
Compact launched the Principles for Responsible Investment Initiative (PRI), which has
turned into the world’s leading proponent of responsible investment for enabling the
companies to understand the investment implications of ESG factors. ESG reports seek
to unveil performance on three areas that are important for the company’s operation:

Environment: Green sustainability is a more and more relevant topic for every business
as the world is struggling to get in line with Paris Agreement. For instance, although
shipping is less polluting than respective modes of transport, like trucks or aviation, it is
still accounting for more than one billion tonnes of GHG emissions each year. ESG

Module 1 – Introduction to the Shipping Industry and the Role of the Ship Manager 125
reporting in maritime covers GHG emissions, but extends to more topics such as
recycling, waste management, energy efficiency, etc.

Society: This pillar covers business ethics and a wide range of potential societal
obligations, such as human rights, diversity, labour standards, animal welfare, and more
routine issues, such as adherence to workplace health and safety with accident and
safety management. This is where the ‘social license to operate’ (SLO) also applies, which
expresses the acceptance of a company’s practices by the public.

Governance: This has to do with a set of rules or principles defining rights,

responsibilities, and expectations between different stakeholders in the governance of
the companies.

If we take the three titles, we can link them to various maritime legislation and to ISO
standards we can see how much is already in place within the maritime industry but is
no being related to ESG. The table below gives an initial indication of how the structures
interact.

Maritime Legislation ISO Standards

Environment IMO - MARPOL Convention ISO 14000 – Environmental
IMO - Ballast Water Management Management Systems
Convention ISO 5001 – Energy Management
IMO - Antifouling Convention Systems
IMO – International Convention
for the safe and environmentally
sound for recycling of ships

Social ILO - MLC 2006 – Maritime Labour ISO 26000 – Social Responsibility
Convention SA 8000 - Social Accountability
ISO 45001 – Occupational Health
and Safety Management Systems

Governance Currently there is no direct ISO 3700 - Governance

maritime legislation on
Governance

The above table is just a starting point and as the company does a revision of the Safety
Management System (SMS) it will identify more standards and publications which will
enhance its need for integration into an overall ESG policy – Procedures – Work
Instructions to supply the objective evidence required to meet the demands of ESG to
interested parties outside of the company.

The amount of relevant legislation that needs to be addressed will only increase over
time; never decrease.

The ESG Policy

This is the cornerstone document for setting out how the company / organisation is
going to tackle the demands of ESG. There are many pitfalls that companies need to be

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aware of and also what might be the acceptable minimum content and commitment
needed to be accepted
The following are five issues that businesses should consider as core issues when drafting
a new ESG policy that will have the reputation of the company at the fore.

Be Realistic in What you want to achieve and What you can achieve

The problem: The biggest problem with most ESG policies is the breadth of issues that
it must encompass. These are from socioeconomic issues such as social inclusion and
the carbon footprint, to sector specific concerns like reusable plastic. The remit of ESG
can be and is broad – therefore full compliance to all relevant issues is unachievable.

Small, actionable, and achievable changes are the best options that can built on over
time. If there is likely to be a gap between what you say you will do, and what you will
achieve then it will be identified. Journalists and other interested parties can justify their
scrutiny into the gap between claims and reality on the grounds of public interest. This
can result in allegation of hypocrisy in relation to ESG claims made and is more
damaging than ever.

The solution: You cannot have a policy on everything – choose the issues that mean the
most to your company, staff, and customers, and aim for small, achievable changes that
can be met.

Establish Both Commitment and Metric at the Same Time

The problem: Not specifying the date when you will achieve something, and how you will
even know when you have achieved it. This is a potential accident waiting to happen. If a
commitment is not accompanied by a timescale and some form of measurement, it will
be more vulnerable to challenge from interested parties. Aligning proposed
commitments or policy to common ESG metrics – such as the UN Sustainable
Development Goals, World Economic Forum’s Common Metrics, and the Sustainability
Accounting and Standards Board – should result in the company’s aspirations being less
likely to be questioned. This means that by adopting common ESG metrics will mean an
increase in the chance that your performance will be directly compared to companies
and organisations.

The solution: Meet your set targets or be prepared to state why you missed them.
Make your commitments measurable and with a deadline, so that your policy is less
vulnerable to questioning. An example of this is that at COP26 there have been good
examples of targeted aims, such as Sports for Climate Action Framework agreeing to
halve greenhouse gas emissions by 2030: this shows a clear measurement and timeframe.

Align Your ESG Policy with Your Values

The problem: Most stories of big corporate wrongdoing stories start from
dissatisfaction within the corporation. There is a need to align the external
commitments to the internal stakeholders’ priorities, if not this is a big mistake.
Whatever the ESG policy states needs to correspond with internal strategies and culture.
Employees want to work for companies with a clear purpose and ESG credentials, so

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aside from affecting the external reputation, ignoring internal corporate values could
impact the hiring and retention of employees.

The solution: ESG begins at home. It is necessary to ensure the stance being taken is
consistent with the corporate culture and values that have been set. When drafting an
ESG policy, it can be beneficial to include the experience and views of the internal
stakeholders to determine which items should be prioritised.

The ESG Paradox

The problem: The breadth of ESG issues often throw up paradoxes and unintended
consequences which can be misreported. The damage to reputation can largely be a
result of regulatory compliance. Example of this can be some food and drink
manufacturers are “attacked” in the media for their reliance on single-use plastic. But
food regulations mean that in certain cases, these producers have no option, and must
use these materials to comply with the current legislation.

The solution: While it is not possible to affect the regulation, it is possible to ensure that
these paradoxes are highlighted, so reputational damage does not occur. All aspects of
an ESG policy need to be reviewed by a multidisciplinary team so that any paradoxes are
captured and properly understood and appropriate action taken.

Unpredicted Risk

The problem: There are risks you just cannot see coming. The more the company trains
on how to deal with the problems you can be predicted, then the more able the
company is to improvise when an unpredictable event occurs. The backdoor risks for
ESG policies can be found in the supply chain. Supply chains can be compromised
regarding due diligence and reporting. It should be noted that a letter signed by Greta
Thunberg and other climate activists has called for businesses to publish emissions data
not just about themselves, but also their supply chains. This is a major point for
consideration. It shows a commitment not just to the company but also to those that
wish to work with the company.

The solution: A supply-chain audit. Request and review all vendors and sub-contractors
ESG policies and gather information to understand the degree of alignment between the
company ESG policy and that of the suppliers. Companies need to be continuously
checking for potential backdoor risks that may arise and rehearse a game plan in case it
occurs.

Drafting an ESG policy does not occur overnight and the creation one without
consideration of the reputation can lead to many issues later. By taking the time to
ensure that the policy and commitments are as watertight as possible and reducing the
minimal reputational risks with small, achievable goals is the priority. This will mean that
the company is less likely to suffer reputational damage due to holes in your ESG
agenda.

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The Human Factor is the Key to ESG Success

The concept of ESG is not new in shipping world but the complexity of shipping business,
which includes particularly numerous and global stakeholders along with growing
discussions on decarbonization and regulatory pressure, along with the more recent
challenges amplified by the COVID-19 pandemic, have all increased the shipping industry’s
attention to ESG from multiple stakeholders like regulators and financiers.

Shipping companies are continuously required to comply with multiple and constantly
changing ESG related standards and regulations which result in significant impacts on
the operations. For example, COVID-19 has shed light on issues around seafarers and
their labour and human rights, with several stakeholders increasingly demonstrating
their interest in addressing these issues which form part of their social performance.

There is also the matter of the complex and continuously changing maritime
environmental regulations. An example of this is the IMO GHG strategy; the 2020
sulphur cap on fuel oil; the EU MRV; Inventory of hazardous materials; and others which
drive investor uncertainty and require a significant investment in capital expenditures
for allowing the maritime industry to comply either in the short, medium, or long-term.

ESG performance is now linked directly to traditional shipping industry risks. These
include accidents, vessel detentions, pollution incidents and financial loss due to fines or
reputational damage.

Financial stakeholders, which include banks, investors, and insurance entities, seem to
be increasing the ESG requirements from maritime companies who wish to access
finance or attract investments.

This suggests that key stakeholders, such as investors, banks, and charterers, will soon
expect that ESG reporting will be part of each shipping company’s ongoing reporting.
This will result in a robust set of ESG metrics that does not only boost the company’s
social standing, but also enhances long-term business performance.

Understanding Stakeholders

Stakeholders are broadly defined as any group of people directly affecting and affected
by the companies’ objectives. These include its employees, customers, partners,
competitors, regulatory authorities, media, NGOs, etc. An example of this are the
stakeholders of a ship owning company which includes, but is not limited to, the
company’s employees, ship operator, charterer, broker, the IMO, classification societies,
investors, and more.

Leading companies have come to realize that people are the strongest advocates and
enablers of an ESG strategy, and are a key force for change. Companies cannot be
considered separately from their stakeholders and certainly their employees, who
typically act as advocates and enablers of ESG strategies. Research has proved the link
between an organization’s consistent ethical profile with its employees’ desire to retain
organizational membership. Policymakers are the key drivers of how the shipping
industry currently navigates the complex environmental challenges.

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This becomes more evident when the three parts of ESG are interconnected by human
capital. Examples of human capital metrics include employee experience and wellbeing
which is currently a hot topic in shipping which includes but not limited to the pay gap,
diversity, retention, investment in skilling programs, and more.

The Potential Way Forward

It is becoming clearer that ESG is linked to sustainability and expresses identifying the
fine balance between financial returns, social interests, and the environment. Finding
the right balance results in better results for both the company and society. Shipping is
under increasing pressure to meet constantly evolving requirements and shipping
companies are now called to respond to the new ESG monitoring and reporting
requirements which can measure the ESG impact of their operations and adapt the way
they operate.

ESG is linked to the journey towards sustainability and requires commitment going
beyond the regulations. The World Economic Forum is growingly ethically conscious
world demands from organizations to put ESG principles at the centre of their human
capital management strategies. In a changing world, human capital must be seen as an
asset with associated metrics which establishes a holistic model that will benefit the
whole spectrum of stakeholders from investors to business leaders.

It should be noted that the ESG movement has grown into a global presence after the
2005 UN Environment Programme Finance Initiative and the UN Global Compact
launched the Principles for Responsible Investment Initiative (PRI). This provides a
framework for improving the analysis of ESG issues in the investment process. This is
aimed at assisting companies to comprehend the investment implications of ESG
factors. It must be noted that PRI is recognised as the global leader for responsible
investment.

Conclusion

This is just an opening introduction to ESG and how it will impact on the shipping
company and the ship manager. The result will be an increase in workload and
accountability and every company is going to have to go through a transition to meet
the demands that must be met.

Over time this will evolve and become part of everyday life and working practices, but
during the transition there will be painful choices to be made and revision as well as
restructuring of the SMS to meet the demands being placed on it which are not optional
if the company wishes to survive and continue to trade.

Every company will need to find its own unique way to meet these obligations.

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