Recommendations to improve the process of bulk carrier operation of VINASHIP joint stock company

- MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING VIETNAM MARITIME UNIVERSITY STUDENT NAME:DANG DINH DUNG DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS RECOMMENDATIONS TO IMPROVETHE PROCESS OF BULK CARRIER OPERATION OF VINASHIP JOINT STOCK COMPANY HAI PHONG – 2015 MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING VIETNAM MARITIME UNIVERSITY STUDENT NAME:DANG DINH DUNG CLASS: GMA02 DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS RECOMMENDATIONS TO IMPROVETHE PROCESS OF BULK CARRIER OPERATIONOF VINASHIP JOINT STOCK COMPANY Supervisor: LecturerVuong Thu Giang Division: Global Study and Maritime Affairs Faculty: Economics HAI PHONG – 2015 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company PREFACE This dissertation has been accomplished upon three month working experience in OperationDepartment of VINASHIP Joint Stock Company This writinghereby will demonstrate the full process of bulk carrier operation of the company Besides, I will analyze the process and also evaluate its efficiency in performance comparing to the standard process which is stated in Chapter hereby recommend possible solutions for improvement I hope that this dissertation can help readers in gaining somewhat general knowledge but also features about bulk carrier operation I declare that this report is my own unaided work It has not been submitted before If violated, I am solely responsible for and bear the punishments of the Institution and University Student Name and Signature ĐặngĐìnhDũng i ĐặngĐìnhDũng GMA02 Page i Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company ACKNOWLEGEMENT Firstly, I would like to express my sincere gratitude to my advisor Prof Vuong Thu Giang for the continuous support of my study and related research, for her patience, motivation, and immense knowledge Her guidance helped me in all the time of research and writing of this thesis I could not have imagined having a better advisor and mentor for the accomplishment of this dissertation Besides I would like to thank sincerely Vice General Director, Shipping Manager and colleagues in Operation Department at VINASHIP Joint Stock Company for being very supportive and cooperative to myself during my internship I am grateful that they have provided me the best opportunity to learn and experience in a professional working environment i ĐặngĐìnhDũng GMA02 Page ii Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company TABLE OF CONTENTS Preface i Table of Contents ii List of Symbols, Abbreviations iii List of Tables and Graphs iv List of Figures v INTRODUCTION CHAPTER 1: Literature Review 1.1Definitions of bulk carrier and ship operator 1.2Method of bulk carrier operation 1.3 Ship’s particulars 1.4 Documents and Certificates required to be carried on board ships 1.5 Concerned parties 1.6 The international convention and national regulations related to the responsibilities of the parties 10 1.7 Contract to be used 10 1.8 The process of bulk carrier’s operation (voyage charter) 12 CHAPTER 2: The practical process of bulk carrier operation at VINASHIP Joint Stock Company 16 2.1 Overview of VINASHIP Joint Stock Company 16 2.1.1 History 16 2.1.2 Organization 17 2.1.3 Personnel and Infrastructure 18 i ĐặngĐìnhDũng GMA02 Page iii Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company 2.1.4 Business Sphere and Department ofOperation 19 2.2The bulk carrier operation at VINASHIP 20 2.2.1 Chartering 2.2.2 Pre-voyage 2.2.3 Vessel Departure to Port of Loading 2.2.4At Port of Loading 2.2.5 Departure and Sailing to Port of Discharge 2.2.6At Port of Discharge 2.2.7 Post-voyage CHAPTER 3: Recommendation to improvethe process of bulk carrieroperation of VINASHIP Joint Stock Company 28 3.1 Advantages and Disadvantages of the bulk carrier operation of VINASHIP JSC 28 3.2Business Result and Analysis 29 3.2.1 Strengths 3.2.2 Weaknesses 3.2.3 Opportunities 3.2.4 Threats 3.3 Recommendations 32 CONCLUSION Reference / Bibliography 36 Appendices 37 i ĐặngĐìnhDũng GMA02 Page iv Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company LIST OF ABBREVIATIONS OBO Oil-Bulk-Ore Carrier SOLAS Convention for Safety of Life at Sea LOA Length Overall LBP Length Between Perpendicular LWL Length on Load Waterline DWT Deadweight Tonnage GRT/RT Gross Register Tonnage/Gross Tonnage NRT/NT Net Register Tonnage/Net Tonnage STCW Standard of Training, Certification and Watchkeeping MARPOL International Convention for the Prevention of Pollution from Ships AFS International Convention on the Control of Harmful Anti-fouling systems on ship CLC International Convention on Civil Liability for Oil Pollution Damage MSC Maritime Safety Committee ROROC Report on Receipt of Cargo B/L Bill of Lading MLC Maritime Labor Convention C/P Charter Party BIMCO Baltic and International Maritime Council NYPE93 New York Produce Exchange Form GENTIME General Time Charter Party COA Contract of Affreightment i ĐặngĐìnhDũng GMA02 Page v Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company VOLCOA Standard Volume Contract of Affreightment for the Transportation of Dry Bulk Cargoes ETA Estimated Time of Arrival NOA Notice of Arrival NOR Notice of Readiness LOI Letter of Indemnity COR Cargo Outturn Report SOF Statement of Facts TPP Trans-Pacific Partnership i ĐặngĐìnhDũng GMA02 Page vi Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company LIST OF TABLES/FIGURES TABLE 1: VINASHIP Fleet 16 FIGURE 1: Ship dimensions FIGURE 2: Loadline and Plimsoll Mark FIGURE 3: Company struture 15 i ĐặngĐìnhDũng GMA02 Page vii Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company INTRODUCTION Shipping is one of the most important industries having close ties with the development of foreign trade The country which has a developed shipping industry can perceive many advantages in foreign affair as well as increase the national revenue Moreover, it also promotes the interchange of diverse cultures between regions worldwide Vietnam is a coastal country with a long coastline of 3200 km and has many favorable geographical locations for the development of maritime transportation The national shipping industry, therefore, requires a continuous innovation and improvement in terms of scale, organization, quantity and quality, productivity, professionalism… in order to keep pace with the growing demand Considered as a typical model, the VINASHIP Joint Stock Company (VINASHIP) is the leading corporation amongst many that operate within the industry Amongst different departments in a shipping company, Department of Sales and Operationcan be considered as the most essential body of the company that it contributively assists the board of director in making decision towards their business As the shipping industry is requiring from participants to comply with more new legal, commercial, technical and operating standards, research on professional competence and working practice of the departmentthus is highly necessary especially for myself as a student of Vietnam Maritime Universitywhereby I had a deeper understanding of their business and been aware of strengths and weaknesses Current strengths must be made the most while existent shortcomings must be minimized and remedied as soon as possible.Hopefully all the recommendations proposed for improvementof productivity and efficiency shall be taken into considerationby the company managers This dissertation includes three main chapters as what I mentioned in the content above In the first chapter which is the Literature Review, I will introduce the basic knowledge of shipping, technically by giving out sufficiently broad concepts, terms and some particulars This chapter is supposed to clarify the technicalities used in the operation and provides various basic stagesin bulk carrier’s operation On the other hand, the next chapter focuses on what I actually obtained through research, work and observation during my apprenticeship at Department of Operation of VINASHIP, containing the background of the ii ĐặngĐìnhDũng GMA02 Page Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company as visa, passport, air tickets, crew supply schedule… while these tasks are supposed to be completely handled by Personnel Department 3.2Business Result and Analysis The 2012, 2013 and 2014 business result of the company provided by Accounting and Finance Department are given respectively as below: Table 2: TOTAL VOLUME OF FREIGHT AND FREIGHT TRAFFIC IN 2012, 2013 and 2014 (Source: Department of Accounting and Finance, VINASHIP JSC) During the three consecutive years from 2012 to 2014, the total volume of freight decreased because of two main reasons The first reason was the reduction of the company fleet and the second one was about the tremendous reduction in dry bulk transportation demand In 2012, 2013 and 2014 the total tonnage each year was about two million tons of cargo transported which is mainly on international routes in which the quantity of cargo transported under voyage C/P is about half of the quantity under time C/P One of the reasons that can be used to explain is that in the majority of time-charter, the performing vessels were the largest size amongst the company fleet ranging from 23,000 to 27,000 dwt The fact that 2012 – 2014 was still in a downturn trend for freight market as the freight kept plunging meanwhile the transportation demand for preferred cargo such as agricultural cargo also decreased In the period of 2014 – 2015, the company has made the sale of three merchant vessels, reduce the number of vessel from thirteen to ten, therefore the expected total tonnage in 2015 tend to be lower than two millions ever which is about one million and eight hundred tons ii ĐặngĐìnhDũng GMA02 Page 29 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company 3.2.1 Strengths - Close and consistent relationship with clients and agent network: already established reputation has facilitated the company in dealing and liaising with regional broker and agent network, whereby shorten the connection time between parties during the performance of a contract With respect to the domestic market, the company has made the most of advantages inherited from being a subsidiary company of Vietnam National Shipping Line (Vinalines) thus receive preferential formalities when working with national ports and other auxiliary enterprises which belongs to Vinalines This fact has saved a considerable amount of time for ship dispatching at port - Managing team: The board of director works with passion, closely supervise the operation of the fleet and advise the coordination between departments especially the vice general director who acts as the sale manager of the company The interaction between managing team and operation team is very frequent as report on daily fleet situation is required to hand in departments daily and the board of director at least twice a week - Personnel: operators and staffs of other departments are qualified holding bachelor degree and some with master degree from shipping major, who are eager to improve their knowhow in every aspect of shipping ranging from technical operation, import/export procedure to financial problems related to payment method for instance - Operation: The bulk carrier operation at VINASHIP has been well-organized in both side ship-shore and shore-shore and minimized the possibility of systematic fault 3.2.2 Weaknesses - Communication skills: Fluent communication in English is a must for people working in the shipping industry due to wide business coverage in terms of geography The capability of communicating through English in Operation Department is quite an issue in which there are only shipping manager and vice shipping manager who are able to communicate in English efficiently and spontaneously Therefore, the absence of these key roles in the department because of personal reason will most likely to delay the business process which requires a ii ĐặngĐìnhDũng GMA02 Page 30 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company frequent interaction with foreign parties including charterers, brokers, agents…This is also a necessary skill for crew onboard especially Captain who directly interact with oversea parties during the voyage - The company fleet is mostly classified as overage – which means that the majority of them were built in 1990s and 1980s Due to this condition, there are two main drawbacks imposed on the company Firstly, the telecommunications system onboard is old and costly while the transmitting capacity is very limited compared to the internet system on newly built ship This coordination between shore side and ship side is mainly conducted via two main systems called “Skyfile” and “Inmarsat” Secondly, the utilization of overage fleet causes the company to pay Overage Additional Premium which is insurance cost additionally paid by the shipowner as the performing ship age is more than ten years old In addition, because of the breakdown of equipment, gear and engine onboard is frequent, raising the repairing cost whereby reducing the lucrativeness of the business not yet to mention that the requirement of performing vessel on international routes are increasingly higher 3.2.3 Opportunities - Vietnam and neighboring countries such as Thailand, Philippine, Indonesia… possess a developed agriculture so that there is still plenty of demand for sea transportation in bulk especially import/export agricultural products and fertilizer Besides, the shipping also benefits from advantageous geographical location of Vietnam as a hub of Southeast Asia region - In regard to the domestic market, demand for coal transportation from heat power plants is a lucrative business of the company The company resolution is to continue seeking for more COA for these cargoes According to a forecast of Vietnam Maritime Bureau, until 2020 Vietnam target to become an industrialized country whereby the cargo transported for industries such as coal, cement…is expected to double the 2010 - Vietnam along with 11 other countries recently have reached the final consensus of the Trans-Pacific Partnership (TPP) – the largest free trade agreement ever on the globe – which is going to have a massive positive impact on Vietnamese trade ii ĐặngĐìnhDũng GMA02 Page 31 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company volume VINASHIP as a major member of the national shipping industry is going to obtain more opportunities in terms of market, not only within the Southeast Asia region but further to the South of China, Japan, Korea and trans-pacific routes heading to the US, Canada and Mexico The booming import/export activity with these major countries will foster the improvement of the company with respect to the market coverage and internal factors including management, science and technology… 3.2.4 Threats - In the past few years since the 2009 crisis, the freight market has been highly volatile pushing the freight rate to drop deeply – one of the main reason why the company made the sale of three vessel so that they can able to balance the accounts, liquidate major debts and invest for future business activities In addition, there are threats from international exchange rate which is fluctuated, for example recently due to the impact of Chinese currency devaluation, while the main revenue of the company is converted from foreign payment remitted by foreign parties -It is an acknowledgement in the shipping contract that the proper delivery of cargo shall be conducted only against the presentation of one of the three original Bs/L rather than against letter of guarantee or bank guarantee or letter of indemnity However, in practice at VINASHIP, most of international voyage usually take place within one week which is not long enough for the regular accomplishment of transaction in international trade due to documentation process from banks Consequently this situation compels VINASHIP – as the shipowner – to deliver cargo to the consignee in return for LOI and ask for B/L afterwards Though this is a flexible solution for parties, the situation still imposes threat on shipowner by being considered as a violation of contract And if so, the shipowner might not be indemnified by the Protection and Indemnity Club (P&I Club) It can be worse if it is a misdelivery of cargo or the cargo delivered is still under conflict between the seller and the buyer - In terms of payment, the information exchange for remittance in operation process is currently taken through email especially in transaction with foreign parties The fact has shown that this situation is vulnerable as the high-tech crime involving in online transaction has occurred frequently It is possible for this kind of criminal to ii ĐặngĐìnhDũng GMA02 Page 32 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company access into the email box of any party then steals or alter the payment information such as account number, bank slip to payee… 3.3 Recommendations - In order to improve communication skill of current operators, the company should encourage them to attend short English courses outside working hours and these courses should be concentrated on the communication which are mainly listening and speaking skills, thus will raise the accuracy in pronunciation as well as the confidence during operator’s conversation with foreign clients Another solution could be online English courses which are more flexible and not require movement For outstanding staff, the company can sponsor him by sending oversea for study.For the recruitment, requirements for candidate in terms of English should be clarified for example candidate must possess a valid English qualification with good speaking and listening skill On the other hand, these solution should be applied for the company crew especially position of captain and chief mate - Restructuring the company fleet is my second recommendation Newbuilding, purchase of newly built vessel as well as sale of current overage vessel are highly necessary The Operation Department should be proactive not only in freight market but also in sale and purchase market seizing competitive advantages when TPPis officially signed because the company might operates on longer routes like the trans-pacific In case of budget limit, the company should consider other financial solutions including permission for access to the company capital, whether public or private as VINASHIP is still considered as a state-owned company with Vinalines to own 51 per cent of the shares Thus, other institutional investors who are willing to invest should be recognized as an important body of the company - The freight market is still in the recession though in recent years the freight rate has been more stable Thus, not only utilizethe broker network but the company should have incentive policy on major clients in both domestic and international market in order to ensure the source for cargo transported, consolidate long-lasting business relationship and minimize negative impact from the market In addition, operators should be appointed to join business trip to the negotiations with clients so that they can have solid relation with parties, get to know the practical situation of the market and create a sound basis to expand the market coverage ii ĐặngĐìnhDũng GMA02 Page 33 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company - During the operation process, operators should inform concerned parties with full information, accurate vessel daily report, ensure the company reputation against partners via diversified means of communication Thus, the company should not rely only on internet but also others such as phone calls, fax, express delivery… This might cost more money than usual but the company can reduce the risk of high-tech crime during transaction process ii ĐặngĐìnhDũng GMA02 Page 34 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company CONCLUSION Perhaps one of the most important specialist skills in shipping is operation because it mainly covers the business activity of a shipping company At VINASHIP, it determines the existence and development of the company Having a deep understanding on this professional knowledge is also the purpose of my dissertation Through this dissertation, I hope that I can gain the basic concept of the work of an operator With my recommendation above, hopefully the company and the Operation Department will consider and improve its performance as soon as possible ii ĐặngĐìnhDũng GMA02 Page 35 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company REFERENCES Dokkum, K V (2008) Ship Knowledge: Ship Design, Construction and Operation Dokmar Maritime IMO (1974) International Convention for the Safety of Life at Sea (SOLAS) ISS Shipping Glosarry (n.d.) Retrieved from ISS Shipping: http://www.issshipping.com/cargo/cargo_library_glossaryb.asp J Bes, Norman J Lopez (1992) Bes' Chartering and Shipping terms London: Barker & Howard Ltd Organization, I M (n.d.) International Convention for the Safety of Life at Sea (SOLAS) chapter IX www.seabreezes.co.im www.globalsecurity.org www.vinaship.com.vn ii ĐặngĐìnhDũng GMA02 Page 36 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company APPENDIX Fixture Note ii ĐặngĐìnhDũng GMA02 Page 37 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company ii ĐặngĐìnhDũng GMA02 Page 38 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company Bill of lading ii ĐặngĐìnhDũng GMA02 Page 39 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company Mate’s Receipt Statement of Fact ii ĐặngĐìnhDũng GMA02 Page 40 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company ii ĐặngĐìnhDũng GMA02 Page 41 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company Stowage Plan ii ĐặngĐìnhDũng GMA02 Page 42 Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company Draft Survey ii ĐặngĐìnhDũng GMA02 Page 43 ... process of bulk carrier operation of VINASHIP Joint Stock Company CHAPTER 2: THE PRACTICAL PROCESS OF BULK CARRIER OPERATION OF VINASHIP 2.1 Overview of Vinaship Joint Stock Company 2.1.1 History The. .. iii Recommendations to improve the process of bulk carrier operation of VINASHIP Joint Stock Company 2.1.4 Business Sphere and Department ofOperation 19 2. 2The bulk carrier operation at VINASHIP. .. 3: Recommendation to improvethe process of bulk carrieroperation of VINASHIP Joint Stock Company 28 3.1 Advantages and Disadvantages of the bulk carrier operation of VINASHIP JSC 28 3.2Business