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The role of a ship management company in shipping business

In today's fiercely competitive business environment, ship operators often seek diversification. Many independent shipowners who have their own vessel operating capability, investors, banks, and leasing companies also buy ships but lack the necessary expertise. Some cargo owners also choose to own or control a portfolio of tonnage themselves, partly as a strategy to hedge risk. All such business entities, therefore, may choose to delegate various managerial functions to be third party ship managers. The shipowner and third party manager enter into a ship management contract that describes the services to be provided, the fee to be paid, and much more. The services delegated to the managers may roughly be divided into three categories:
  1. Technical Management
  2. Commercial Management, and
  3. Crewing management.

containerships operational matters
Oil Tanker Safety Guide
Ship management companies are located in the world's maritime centers. Many companies manage large fleets on behalf of numerous ship owners. Many of the larger management companies also own vessels. Essentially, the decision to outsource a ship management function is a financially driven one. In most cases, outsourcing of ship management services means that the shipowner can conduct business at a reduced cost, primarily due to reduced in-house staff and resources. Another advantage to a shipowner in delegating management to a third party ship manager is that the manager will be able to bring all fleets under its supervision to the table for purposes of negotiating contracts for maintenance and repair stores, marine insurance, etc. It generates savings via economies of scale. The ship management company can also represent the ship owner’s interests before industry groups and government.
Panama flagged MSC Jasmine at berth
Panama flagged MSC Jasmine at berth

Technical Management

The management contract may require the manager to provide technical management services such as:
  1. Insuring that the vessel complies with the requirements of the Flag State;
  2. Insuring compliance with the ISM Code;
  3. Insuring compliance with the ISPS Code;
  4. Providing competent personnel to supervise the maintenance and general efficiency of the Vessel;
  5. Arranging and supervising dry dockings, repairs, alterations and the maintenance of the vessel;
  6. Insuring that the vessel complies with all of the requirements and recommendations of the classification society;
  7. Arranging the supply of necessary stores, spares, and lubricating oil;
  8. Appointing surveyors and technical consultants as needed;
  9. Arranging for the sampling and testing of bunkers;
  10. Providing other related services.

Crew Management

Crew Management services may also be required such as: Commercial Management

Some owners choose to delegate commercial management functions as well. For example, a bank that forecloses a ship mortgage and repossesses the vessel may choose to operate it while waiting for a more substantial resale market. The bank will ask professional managers to perform commercial management functions, which could include securing vessel employment under charter or other contracts of carriage, as well as the obtaining of proper marine insurance and tending to other risk management issues. People working as ship manager in New York, Connecticut, Singapore, Rotterdam, or anywhere else, routinely provide services at the request of ship owners from all parts of the world that enable them to operate fleets more efficiently.

  1. Download for free the Shipman 98 ship management agreement found on the BIMCO web site. This is a standard form of the ship management contract. Reading it helps understand the duties and responsibilities of a ship management team.

  2. Crewman Standard Crew Management Agreementused frequently by crew managers.

  3. The International Ship Managers Association (ISMA) was founded in 1991 and is an association and both ship and crew managers.

  4. There are many managers in maritime centers around the world. For example, Norstar Shipping provides ship management services and has offices in the U.S.A. and abroad. Their experienced shore and ship-based team provide a full range of services with complete emphasis on safety of the crew, environment and the vessels under management.

  5. Wallem (very large manager) has offices around the world including a new office in Singapore. Wallem operates globally with a shore-based team of 1,000 and more than 7,000 highly qualified seafarers, serving nearly all vessel segments.

  6. V.Ships Ship Management is the world's largest provider of personalized ship management services. It supports a fleet of around 1,000 vessels with more than 70 offices in over 25 countries, employing around 2,000 office staff and 30,000 seafarers.

Note of Reference

Types of losses - Total or Partial or general average losses
A Loss can be described as being either Total or Partial (Particular Average). A Total Loss may be either an Actual Total Loss (ATL) or a Constructive Total Loss (CTL). An Actual Total Loss is where the vessel is actually destroyed or wrecked or where the owner is irretrievably deprived of his vessel e.g. when a ship is sunk in deep waters where any salvage attempt would be impossible. A Constructive Total Loss is when it appears that the vessel is unlikely to be saved or recovered or when she can only be recovered and repaired at a cost, which exceeds her insured value....

P&I Clubs guideline
The P&I Clubs are correctly called Protection and Indemnity Associations and number around 20 worldwide with the majority being United Kingdom based. The ship owner in taking out insurance with a particular association becomes a member of that Club. The Clubs are mutual in nature, which means that all costs involved in providing cover or paying out a claim to any one member is shared by all members. This is achieved by setting a rating or premium for the owner, known as an “advance call”, and is based on the owner’s history and exposure to risk.

War risks areas -related advisory
There are additional trading restrictions placed on the ship regarding so-called war risk areas. War risk areas do not necessarily mean an area where there is a war and may include hostile environments such as areas where civil commotion or revolution is taking place.

Cargo ship procedure - Deviation clause and port of refuge
A deviation is a departure from the intended voyage or contract of carriage. This can occur either where the course of the voyage is specifically stated and is departed from or where the course of the voyage is not stated but the usual route or customary route is departed from. However it should be noted that deviation does not necessarily mean a physical change in the course and can occur in a simple case of slowing down to receive stores at an intermediate off-port-limits call. ...

Salvage contract -Using The Lloyd’s Open Form for “No-Cure-No-Pay” salvage contract
The Lloyd’s Open Form or “LOF” is the most widely-used “No-Cure-No-Pay” salvage contract. In return for salvage services, the salver receives a proportion of the salved value (the value of the ship, its cargo and bunkers).

Role of ship classification society
Classification societies verify the structural strength and integrity of the ship’s hull and its fittings, as well as the reliability and function of the propulsion steering systems, power generation, other systems on the ship....

The Master’s Responsibility during Salvage Operation
Request for Salvage - The Master shall normally request salvage after consultation with the Company. However he has complete authority to seek salvage assistance without reference to the Company if he considers this necessary.

Requirement of towing arrangement in oil tankers, readyness, & training onboard
All Oil, Chemical and Gas Tankers above 20000 DWT, constructed on or after 1st July, 2002, are equipped with an “Emergency Towing Arrangement (E.T.A.) both Forward And aft to provide the ship with a rapidly deployed towage capacity in an emergency.

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