Term Paper on "Shipping Chartering"

Term Paper 55 pages (13729 words) Sources: 55 Style: Harvard

[EXCERPT] . . . .

Future of Shipping

The shipping industry has a long history, but the nature of the business changes over that history. It has been changing in recent years because of the pressures for change caused by internationalization, globalization, technological advances, economic shifts in different parts of the world, and so on. Where the tradition has been for companies to sail their own ships, carrying cargo for a fee, more and more companies are finding different ways to accomplish the same business, such as by chartering vessels for the job at hand, or having other companies handle the procedures as a form of third-party management, or some other approach to cut costs, reduce risk, and yet increase business all at the same time. The changes in the global marketplace can mean bringing in more and more local players who can handle some of the difficult tasks involved in working through the bureaucracy, while chartering for shipping can involve more experienced people for certain specific runs.

The nature of competition now is such that shippers are no longer in the traditional port-to-port operations. Today, shipping goes further as shippers look for effective and credible ways to reduce costs, reduce transit times, increase flexibility, improve customer services, and, most importantly, remain competitive. In these circumstances, outsourcing their logistics needs to professional third party logistics providers serves the goal of supply chain management, which is to link the marketplace, the distribution network, the manufacturing process, and the procurement activity in such a way that customers are serviced at higher levels and yet at a lower total cost. Logistics on the other hand is all about gaining competitive advantage in the marketplace.

Some combination of the two approaches is not uncommon, either, as the shipping company may use a third-party management outfit to handle the chartering as well. It is important to ascertain the kinds of changes taking place at this time and to be able to make a more reliable forecast of how the business will be conducted in the future and how to take advantage of any changes that are made. The Greek shipping industry is a key one in the world, and as will be seen, much of the rest of the world follows the lead of the Greek companies, especially other European companies. An analysis of the state of the business today and the sorts of changes being made leads to a consideration of the forces shaping the course of shipping for the future. It is hypothesized that the major impetus for major changes today is economic, indicating a desire to cut costs and improve efficiency at the same time, and it is also believed that this trend will continue so long as charter shipping in all its forms continues to lower costs.

Methodology

The method of analysis begins with database searches followed by hand searches of various printed materials to develop an idea of the nature of the shipping industry, how it is change in the Greek industry, and what these changes say for the industry as a whole. In addition to descriptive analyses by various writes on the subject, the research will consider any relevant government documents, industry data, and other information that can be accessed and that then can be used in gaining a better picture of the issues involved, the changes being made, and what might be coming in the future. There are limitations to such an approach, but it is also the best approach when there is no likelihood of developing original data without a good deal of time to gather data directly. Industry reports and the like are useful because they take a longer term perspective than the individual is able to do without an organization backing the gathering of massive amounts of data over a period of years. The historical data in any case has to be gathered from what has already been published, and information on the current business climate can be gleaned from a variety of sources dedicated to keeping track of just that sort of change.. The analysis begins with an extensive review of literature and then analyzes the data found on the basis of careful reading, comparison, and a consideration of the sorts of data found, any themes that emerge, and a contrast between data from the past and data from the present, the organization of the industry in the past vs. that in the present, and trends that can be seen in any change.

Review of Literature

The Shipping Industry

The nature of the shipping industry today is demonstrated using data from the publication of Maritime International Secretariat Services Ltd. (2005), stating that there are some 10,000 companies operating some 50,000 ships worldwide, with shipping being an international industry (p. 3). The ships used in this industry are high-value assets often costing more than $150 million to build. Merchant ships can generate an estimated annual income of more than $380 billion in freight rates, and this makes up approximately 5% of the total global economy (Maritime International Secretariat Services Ltd. 2005, p. 2).

Maritime transport of goods has been a necessity for centuries, increasing in importance as the countries of the world have developed, and it is also a competitive means of transport in terms of costs today. The industry changes as needed and makes use of new technologies adapted for shipping, including the switch to new types of container and high-tech navigation systems. Most such changes bring benefits, and increasing automation has also been used to achieve greater cost savings because improved cargo-handling techniques produce shorter turn-round times. New types of container enables ship, road, and rail transport to be integrated more effectively, allowing for the transport of goods in a single container over each of these methods of transport. At the same time, ships have increased in size and achieved a substantial reduction in unit costs. Communications have also been greatly improved with the advent of space satellites, allowing for navigators and monitors to fix a ship's position to within a few meters by a GPS (global positioning satellite) system. Spoeeds have been increased as ships have been redesigned, and this can be a strong advantage on short-sea routes where speed is especially important. Some of the innovations made do have drawbacks, as can be seen with reference to the giant tankers carrying vast amounts of oil, though their use also means that an accident can produce pollution over a wide area. While the use of radar has helped reduce the number of collisions, radar has "also resulted in the new phenomenon of the radar-assisted collision. The roll-on/roll-off ship led to dramatic improvements in short-sea services, but the design features that are essential to its success have also led to major tragedies. It is now possible for a distress message to be sent automatically if something goes wrong, but up to 99 per cent of the distress messages sent by emergency position-indicating radio beacons turn out to be false, because of faults in design or operation. High-tensile steel was introduced in the early 1980s because it is stronger than conventional steel and enables the plates with which ships are constructed to be thinner (and cheaper), but it corrodes at the same rate. Serious concern is being expressed about the condition of some ships built of high-tensile steel" (Shipping: The shoreline of time and technology 1997, p. 85).

Technology only benefits shippers when they also take account of the necessary safety and environmental elements and not just the economic benefits. Economic benefits can be lost if a tanker leaks massive amounts of oil and costs the company for cleanup, for example. In the sixties and seventies, shipping did have several years of economic growth, but this ended suddenly when there were steep rises in the price of oil in the 1970s. this meant a decline in demand and a resulting massive oversupply of tankers, a problem that continues to this day. After the change in demand, there followed two decades of economic depression. With the decrease in the demand for new tonnage, many shipyards closed, after which the average age of the world's ships in 1997 was 19 years, a major increase from 12.8 in 1980. Owners faced with less business and falling profits had to find ways to cut costs, and unfortunately this was often accompanied by a lessening in safety (Shipping: The shoreline of time and technology 1997, p. 85).

The industry faced other changes as well, including a more international focus than had been true before:

Fifty years ago, shipping companies generally registered their ships in the country in which they themselves were based, recruited personnel from the same country, and classed and insured the ships with companies that were of the same nationality. There were relatively few countries involved in shipping and they had nearly all inherited several centuries of experience. Procedures, systems and institutions were all well established. This meant that however competitive they were, they were organized on a national basis and therefore… READ MORE

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