Introduction
Humans have used waterways for centuries, if not millennia. When travelling at sea, there are no roads, trails, or landmarks to use as guides, making it more difficult than travelling on land. Early explorers and sailors navigated coastal waters and entire ocean basins using various techniques. Navigation skills are still important because ships transport billions of dollars worth of goods around the world. These ships should not only be able to float on water but must also be carefully designed to move quickly and remain stable during severe storms. In the current case, the goal is to transport iron ore in bulk; therefore, large, volume vessels are required. Accidents or mistakes in transportation can lead to damage, destruction of property, loss, and even death of operators. It is, therefore, necessary to consider all factors related to vessel safety and ensure they are taken care of before the company starts shipping the iron ore.
Important Information about Vessels
Quality and Value
The majority of businesses base their carrier selection on cost. Businesses will use a less expensive carrier wherever possible to make a profit. However, as a shipper, it is important to note top commercial requirements to select a carrier that will fulfil orders on time while not harming or losing cargo in the process. While choosing the cheapest vessel may save money in the short term, it may cost more in the long run. According to Dzionk, Przybylski, and Ĺcibiorski (2020), important considerations of quality are based on improved components and performance, such as improved fatigue durability of the Ship Propeller Shaft. While expensive, high-quality vessels do not require much maintenance and last longer, reducing replacement costs.
Reliability
As previously noted, choosing a low-cost carrier to save a few dollars may not be worth the trade-offs. Reputation management necessitates a dependable carrier just as much as it needs dependable staff on the inside. Before selecting a carrier, it is critical to confirm their dependability. The provider’s level of service (LOS) rates are an excellent measure of this facet of reliability. A good LOS rate indicates a trustworthy service provider (Utne, Schjølberg, and Roe, 2019). In this case, the vessel chosen should be able to ship the iron ore without breaking down, ensuring timely delivery.
Safety
Almost all international trade occurs across the oceans. Companies should select a transportation firm and entrust them with their goods, which may be worth hundreds or millions of dollars. Except in the case of extreme weather or armed conflict, the package will be delivered securely and without loss or damage. However, safety issues are more prevalent when a company decides to own shipping vessels. The company becomes responsible for the goods shipped as well as the lives of the operators. In a study about autonomous ships, de Vos, Hekkenberg, and Banda (2021) argues that safety is the most important factor in any sea shipping. When uncertain about the safety of a vessel, it is better to choose another means of transporting goods to avoid the associated costs, for example, insurance costs, and avoid losing valuable goods.
Sustainability
Because businesses and customers are becoming more environmentally sensitive, carriers must demonstrate their environmental sensitivity. Customers are willing to pay more to buy from companies that use sustainable practices, so many businesses prioritize sustainability throughout the supply chain (Christodoulou and Woxenius, 2019). Sustainability is no longer a trend but a need, and businesses are rapidly responding to this new reality. A company should engage with a transportation business concerned with decreasing its environmental impact and working in compliance with sustainability standards. Working with environmentally conscious carriers is an excellent approach to demonstrating a commitment to sustainability while improving public perception of the supply chain. The company, in this case, can choose ships that utilize electric power rather than oil. According to Nguyen et al. (2021), such vessels contribute to sustainability by not emitting CO2 into the environment.
Relevant Costs
The ship manager’s principal responsibility is to oversee all operational expenditures. In certain aspects, the costs of running a ship can be regarded as semi-variable. Certain operating expenses are immediately related to the ship’s utilization, while others fluctuate over longer time scales. The ship manager is largely responsible for keeping a suitable operational budget, which consists of the vessel’s average daily operating expenses, also known as running or daily operating costs. As a result, the shipowner can simply predict the profitability of any vessel. Ship operating costs include all expenses incurred for the vessel’s operation and maintenance, including but not limited to crew salaries, repairs, insurance, and administrative wages.
Maintenance Costs
The cost of deck and engine repairs and speciality spare parts to replace broken or worn-out equipment are all included in the overall cost of ship maintenance. The cost of shore staff required to complete repairs in port and any riding crews contracted to do repairs onboard ships at sea is included (Ros Chaos et al., 2021). The cost of routine maintenance for automation, electronics, and navigational systems might be high. Ship survey fees and classification expenses are examples of ship maintenance costs. Ship owners and operators must also anticipate and account for the costs of routine drydocking.
Insurance
Marine insurance is a legally binding guarantee of compensation. It proves that the goods shipped from their home country to the destination country are insured. Marine insurance covers financial losses caused by the loss or damage of vessels, cargo, terminals, and other transportation facilities used to transport goods. There are several risks associated with sea transport. If something were to happen to your boat, insurance would cover repairing or replacing it. Vessel owners typically pay a portion of the insurance premium, though the exact amount depends on the policy and the parties’ agreement. Insurance premiums are typically 0.5 per cent of the total value of the shipment (Constantino Chagas Lessa and Bulut, 2020). Though it is a small percentage, it ensures a great deal of safety in the event of an accident.
Administrative Costs
Payroll, rent, utilities, insurance, and telecommunications costs are included in administrative expenses, as are periodic dues, subscriptions, and fees, as well as agency fees for shipowners’ commodities, if applicable. If the ship is managed independently under contract, administration costs include the ship management fee (Huang et al., 2019). A responsible shipowner will offer a fair proportion of resources to each vessel in the fleet, taking into account the overhead of the ship management division, assuming it is an internal division.
Monitoring Costs
Track Costs Operations can consolidate and streamline ship operations, making them more efficient and cost-effective. Ship digitization is a strategic approach that can help achieve two goals: increased technological investment and more efficient use of data gathered from monitoring and tapping systems. This enables large-scale fuel optimization, performance monitoring, and predictive diagnostics. Correlating data from several devices, such as boilers and pumps, can help track the source of alarms and notifications. Shipping companies may benefit from analyzing machine and equipment data in various ways, including enhanced decision-making, higher performance, better problem prediction and resolution, a clearer definition of key performance indicators, and reduced machine failure and downtime. The company can use the following methods to monitor operating costs.
Predictive analytics
Predictive analytics may help plan various operational, managerial, and operational tasks by giving data to back up every option. This tool may be used to better organize and track their supply chain (Yang et al., 2019). Ship owners can monitor their boats’ schedules, plan for the replacement of spare parts, and perform planned maintenance. This data can be used to determine vessel performance, machine and engine wear and tear, openness, and, most importantly, equipment monitoring. Upper fleet management may use it to make educated financial and operational decisions.
Route Optimization
Data can help fleet owners and operators optimize routes by considering the weather, traffic, and other factors like fuel change. An algorithm can plot a sailing course with excellent precision and efficiency (Zhu et al., 2018). The navigational equipment on board the ship can offer real-time data on the vessel’s performance, allowing for comparative evaluations of individual ships or the entire fleet. This data can also be used to better understand patterns in fuel use, weather, and other data, which collectively can lower operational costs.
Predictive Maintenance
Any unexpected outcome is anticipated and solved through predictive management technology before affecting the company’s operations. Unexpected or spontaneous repairs cost vessel owners and operators a lot of money. Current machine data and the vessel’s past performance data help the owners plan better (Jimenez, Bouhmala, and Gausdal, 2020). With precise and trustworthy data, precautions may be taken ahead of time to avoid breakdowns and downtime. With this information, the company can perform asset-specific maintenance on engines, pumps, and other equipment, preventing costly breakdowns, wasteful repairs, and asset loss.
Because of various machine learning approaches, data is increasingly becoming a driving force for the industry in establishing the standard for operations. Data has long served as the foundation for important administrative decisions. Having a central hub to gather data, perform analytics, and keep track of operations using several displays is critical. Overall, digitizing the maintenance of the vessels will ensure timely maintenance and lower maintenance and administrative costs.
Budgeting And STCW Convention in Shipping: STCW Convention
STCW Convention
The International Maritime Organization (IMO) created STCW in 1978 to ensure that all seafarers worldwide have the same level of training before being promoted to the officer rank. Before beginning work on a commercial ship, all crewmembers, from the Captain and First Officers to the galley cooks, must complete the STCW basic safety course (Drown, 2021). These cover the fundamentals of staying safe on any ship, from cargo ships to cruise liners. The four modules of the fundamental training include individual survival tactics, firefighting and fire prevention, basic first aid, personal safety, and societal responsibility. These courses provide students with the knowledge and skills to identify potential risks, take preventative measures, and respond effectively in the event of an accident, thereby protecting themselves and others.
All commercial vessel crew must have completed STCW training, with additional requirements for certain departments and jobs. An engineer, for example, should be able to demonstrate proficiency in operating and maintaining engine equipment and remain calm in a crisis. Lower-ranking officers require less training than chief officers, who in turn require less training than captains, and so on. However, larger degrees of competency certifications are also necessary as an officer climbs through the ranks. STCW is divided into two sets of regulations for ship owners and seafarers. The first part of STCW is mandatory for all sea users, whereas the second is suggested for anyone willing to operate past the code’s standards. The major goal of such code is to simplify the process of changing technical standards. The STCW regulations are changed every five years due to revisions made to the convention in 1995. The personnel chosen to operate the new vessels should complete the STWC courses to have the appropriate skills and competence.
Importance of STCW
Prior to 1978, when the IMO published the first rules, countries had vastly varying expectations for the education and experienced a seafarer needed to be eligible for employment aboard commercial vessels. This was unworkable due to the worldwide nature of commercial ship activity and compounded problems due to differing degrees of training among officers from different countries (Drown, 2021). There are now uniform minimum training standards for maritime officers, guaranteeing that everyone on board is at least competent in the most fundamental safety precautions (Muirhead, 2021). These restrictions have made the ship safer for everyone on board by reducing the possibility of accidents and enhancing response times in an emergency. The revisions on the STCW allow the IMO to better assist officers in keeping up with the rapid growth of technology used on commercial boats (Lunkka, 2021; Zhu, 2020). This is critical because it ensures law enforcement officers can do their duties even when confronted with unfamiliar equipment. In light of the company’s prospective boat purchases, the curriculum must be adjusted to guarantee that all boat operators receive the required training. Using this method, the company may be able to avert future tragedies and setbacks in its operations.
Effectiveness of STCW
Several causes, including the increasing incidence of human error-related maritime mishaps and the sophistication and diversity of today’s ships and crews, have combined to force a global increase in the competency requirements expected of seafarers. In 1978, the IMO made the International Convention on STCW for Seafarers to set global minimum standards for seafarers’ skills and to give governments the power to make sure those standards are met. Unfortunately, the STCW 78 agreement did not reach its goals because each administration was given the freedom to set its own standards and because there were no clear requirements about the skills needed to run shipboard operations (Etman, 2020). It not only failed to meet the industry’s anticipated needs, but it has also produced new ones.
The updated STCW agreement specifies minimum competency standards for maritime professionals and methods for implementing its norms. The new STCW 95 strategy aimed to increase environmental protection and maritime safety by improving human performance. Converting specific technical requirements into computer code was a big step towards achieving this goal (Knapp and Franses, 2022). In addition, it helps MET institutions, governments, and shipping firms determine the skills and knowledge necessary for sailors. It gives instances of how the convention can be used in practice. The code is simple and has helped significantly transform the shipping industry. Accidents have reduced, leading to an increase in its adoption. The increased use of the STCW shows it effectively solves many risks associated with shipping via the sea.
STCW 95 is the first convention to give the shipping industry a say in its implementation. The pact now includes provisions for medical fitness, rest periods, specialized training, safety training, simulator use, fatigue avoidance techniques, and instructor and assessor certifications (Bounou, 2020). The International Convention on STCW aims to prevent shipboard accidents caused by human error, which accounts for most such incidents. These depressing figures can be improved with the correct training and evaluation.
Conclusion
Conclusively, choosing the sea for shipping is a wise decision for the company. However, there is a need for a well-developed budget, including all operational costs, such as maintenance, insurance, and administrative costs. Fortunately, these costs can be minimized by digitizing preventive and corrective maintenance. Modern technology can help detect a failure in time, allowing timely repair to reduce maintenance and administrative costs, which are the most prevalent in the industry. Additionally, because shipping is, by definition, a worldwide industry, all shipping professionals must have the same high level of training. The model courses developed by IMO are intended to serve as guidance in this regard. However, each STCW-95 signatory state can define its training criteria. As a result, there are differences in the manner and content of actual training conducted in various parts of the world. The occurrence of marine accidents and environmental damage has decreased as a result of STCW and other treaties’ requirements. However, it should be noted that, in addition to these laws, current technology breakthroughs have improved maritime safety, making it one of the most preferred means for bulk shipping.
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