Introduction
As the 20th century draws to a close, the yachting sector has become increasingly popular and prosperous worldwide. The most noticeable improvement is the increase in yacht size. The production market for mega yachts and superyachts has expanded due to the rising wealth created by globalization, which is driving business operations to own or rent boats with the latest and most outstanding amenities.
The safety and security of the shipments and cargo are top priorities for yacht owners and charterers, leading to a search for crews with relevant experience and training (Størkersen, 2021). Therefore, there is increased spending on yacht and ship management, particularly crew service outsourcing. Similarly, the iron ore mining company wishes to launch its shipping branch by purchasing a fleet of ships for business.
This paper aims to summarize the most essential facts about vessels and explain their relevance. It will also detail the expenses factored into a budget estimate, including both fixed and operational costs. Ship and yacht management necessitates a thorough understanding of both fixed and variable costs, as well as the importance and effectiveness of the STCW Convention, to ensure the safety, security, and efficiency of a vessel’s operations.
Budget
Operating Budget for a Small Fleet of Ships
The team must first gather important vessel information to prepare a budget for the ship fleet. This includes vessel type, size, and age, the number of crew, cargo capacity, fuel consumption, the route and duration of the voyage, insurance costs, and any additional expenses such as maintenance and repair costs. The vessel’s type, size, and age are crucial factors, as they determine the vessel’s capabilities and safety standards (Gundić et al., 2020). This information is also necessary for determining the vessel’s crew size and cargo capacity.
The number of crew members is critical for ensuring the ship’s safety and operational efficiency. The capacity is essential in determining how much cargo can be carried and thus, how much revenue can be generated from each voyage (Abaei et al., 2018). Fuel consumption is a critical factor in estimating vessel operating costs, as it is one of the most significant components of these costs.
To ensure that the vessel’s operating costs remain within budget, all costs associated with its operation are carefully tracked through a cost control system, which is the most effective method for doing so. This system should include detailed records of the vessel’s operating costs, such as fuel consumption, crew wages, port fees, maintenance and repair costs, and any other costs that may be incurred (Bösch et al., 2018).
The cost control system should also have a budget for each voyage, allowing the team to compare actual to budgeted costs and identify potential savings. Furthermore, it should track fuel consumption and other operating costs, allowing the team to identify any areas of inefficiency (Bösch et al., 2018). A budget estimate and review of the STCW Convention for a small fleet of ships can be created by following the steps outlined in this report. This will allow the company to effectively manage the costs associated with vessel operation while ensuring that the crew is adequately trained to meet maritime industry standards.
Analysis of Fixed and Operating Costs for Fleet Operations
Fixed and daily operating costs are typically associated with operating a fleet of ships. The cost of purchasing the vessel, as well as any associated expenses such as registration and insurance, is fixed. Daily operating costs include fuel, crew wages, port fees, and other expenses incurred while the vessel is in operation.
One of the most significant components of daily operating costs is the cost of fuel, which is influenced by the type and size of the vessel, as larger vessels typically consume more fuel than smaller ones. Crew wages are also a significant component of daily operating costs, and the number of crew members is determined by the vessel’s type, size, and age. Port fees vary significantly depending on the route and duration of the voyage, and can be quite high, particularly for ports of call. Other costs may include maintenance and repair expenses, and any additional expenses associated with the vessel’s operation.
Cost Management and Monitoring
Establishing the project’s goals beforehand can help keep costs down and prevent either overestimating or underestimating expenses. A project with clear goals and boundaries is easier to manage financially and is more likely to yield a positive return on investment for its initiator. As the forecast indicates, unexpected costs can be handled promptly through cost management and monitoring. Cost management employs various cost accounting techniques to control business expenses better or limit their rate of increase (Qader et al., 2021). A well-implemented system for managing costs facilitates the detection, collection, categorization, and aggregation of data that managers can use for cost-containment planning, control, and informed decision-making.
The decision-makers of the vessel should capitalize on technology. One of the ways this helps the company run more smoothly is by capitalizing on technology. Through the use of cutting-edge technology, the company will be able to achieve higher levels of quality, reduce production time, and maintain a manageable workforce. The total of all these factors significantly affects the cost of running a firm.
Company managers should also utilize inventory management skills to monitor both fixed and operating costs (Kanyago et al., 2017). Inventory represents both a significant expense and a potential source of revenue. As a manager, one should outline the inventory needs, including vendor costs and appliances that require restocking. This aids in understanding the company’s requirements, reducing the likelihood of storing excessive quantities of goods and freeing up cash that would otherwise be held in inventory.
Managers should also utilize outsourcing to monitor the vessel division’s costs. Outsourcing is valuable for bringing in outside help in temporary or third-party positions for one-off projects. This prevents the company from having to absorb the expense itself. This is done with utmost care to ensure that the outsourcing partners’ standards do not compromise the quality of services provided to the company’s clients. Outsourcing not only helps save money on hiring and training new workers, but it also provides access to new skills and cutting-edge equipment that can be used to optimize the company’s resources.
Managers should ensure they stay updated on market trends. Given that a market is where only the strongest can survive, managers must keep up with the latest developments. It is essential to maintain contact with suppliers and monitor contract renewals to ensure they remain in line with price changes. Rather than wasting time haggling over the fixed rates of long-term contracts, this will let managers negotiate the best costs possible.
Managers should also devise ways to manage the number of employees (Kanyago et al., 2017). The cost of employees is the company’s second-largest expense after rent. Although managers view their staff as valuable assets or the company’s foundation, some expenses arise from having a large number of staff members. Workers’ costs include office space, software licensing fees, base pay, and salaries. For this reason, the manager must know how to reduce staff costs, whether by hiring fewer people or more individuals at lower wages.
STCW
For various reasons, including technologically advanced vessels with international crews and an ever-increasing toll of maritime accidents attributable to human error, it has become imperative to raise the bar for seafarer competence worldwide rather than in any one maritime nation in particular (Gundic et al., 2020). The International Maritime Organization (IMO) established universal minimum criteria for seafarers’ competency through the International Convention STCW in 1978, and administrations must ensure conformity with its mandate.
The training, certification, and watchkeeping standards for seafarers (STCW) Convention establish the skills and knowledge required to perform various tasks on board and how these skills and knowledge can be demonstrated and evaluated. The STCW Convention mandates that all maritime education and training (MET) institutions contain specific basic standards in their programs for seafarers (Etman, 2020). By raising the bar on performance levels and creating universal minimum criteria for seafarers’ proficiency, the convergence helps increase maritime safety and environmental protection (Etman, 2020). The STCW 95 Convention gives shipping businesses a voice for the first time by incorporating them into the regulatory framework. By the rules of the agreement, it is the responsibility of the shipping firms to ensure that all seafarers under their employ satisfy the minimal international standards of competence and that each seafarer is adequately trained to do their assigned tasks while at sea.
The requirements set by the STCW convention are medical fitness, safety training, rest hours, special training, measures to prevent fatigue, using stimulators, and the qualification of maritime assessors and instructors. The STCW convention mandates that all seafarers receive basic training in first aid, firefighting, personal safety, survival, security awareness, and social responsibility (Fanam & Ackerly, 2019). The training ensures that crew members are aware of the dangers they face on the job and are equipped to handle any situation that may arise. In cases of certification, Certificates must be granted, approved, and reauthorized in line with the updated STCW Convention (Barnett, 2021). To award certificates, each government must implement a mechanism for determining a candidate’s fitness for duty based on education, age, sea service, training, and other factors specified in the convention.
The convention mandates that administrations certify the acknowledgment of the certificates by granting an endorsement, and each certificate of competency must detail the role, level, and restrictions within which the bearer is entitled to serve. Certificate holders are responsible for making sure original certificates are always accessible on board the vessel they are operating on (Etman, 2020). The seafarer’s knowledge and competency certificate must be revalidated at intervals not to exceed five years to ensure continued maintenance and up-to-date information. Each convention member must keep meticulous records of every certificate it issues, which must be provided to any other party requesting it.
Each party is responsible for establishing administrative procedures and legal processes for investigating allegations of incompetence and, if necessary, taking appropriate disciplinary action. When accepting and approving certificates from third parties, the convention places the onus on the administration to ensure they follow the rules (Gundic et al., 2020). Administrations are responsible for supporting, supervising, and monitoring the management program of MET institutions. This includes approving, managing, and monitoring onboard training courses, programs, and assessments. Training managers must be familiar with the overall goals and aims of the program they oversee on land and at sea. They should also be familiar with practical training approaches and instructional strategies.
Assessors must be similarly qualified to ensure that the assessed competence meets requirements through computer-based training (CBT), practical testing, simulators, or oral assessment examinations. The administration must keep a close eye on training methods and simulator performance to ensure that simulators used for training are up to par with the convention’s standards (Barnett, 2021).Administrations are ultimately responsible for guaranteeing continued compliance with the provisions of the STCW 95 convention by implementing a standard quality system, as stated in the convention.
Effectiveness of STCW
Before the International Maritime Organization (IMO) standardized the requirements in 1978, countries had varying standards for the minimum training seafarers needed before being allowed to work on a commercial ship. In light of the transnational character of the shipping industry, this was impracticable and inevitably led to problems, as officials from different countries needed help communicating and coordinating with one another and the ports they docked at.
Now that uniform minimum training standards have been set, maritime officers can go to sea with more confidence that they and their colleagues are at least proficient in the most fundamental safety practices. As a result, the rules make the ship a safer place for everyone on board and improve response times in an emergency (Gil et al., 2019). The International Maritime Organization (IMO) is committed to assisting officers in keeping up with the ever-evolving technology used on commercial vessels, so the new amendments to the convention in 2010 mandate that the STCW requirements be reviewed every five years (Etman, 2020).This is crucial because it guarantees seafarers can handle themselves professionally using brand-new tools they have never encountered. There is a good reason why this training is mandatory before joining the merchant navy, so prospective recruits should give it their full attention.
Conclusion
To summarize, the report provides a detailed overview of the key information that must be gathered to prepare an operating budget and review the STCW Convention in preparation for purchasing a new fleet of ships. The vessel’s size, type, and condition, the number of crew members required to operate the vessel, the estimated fuel consumption, the estimated maintenance costs, the estimated port fees, the estimated insurance costs, and the estimated cost of dry dockings are all required. A budget estimate for fixed and daily operating costs must also be prepared. Finally, it is critical to monitor all of these costs during vessel management to ensure that the budget is followed. Overall, it is critical to gather and analyze the necessary information before making an informed decision on purchasing a new fleet of ships.
The paper also discusses the managerial skills needed to monitor the abovementioned costs. The skills discussed are outsourcing, ensuring they are updated on the prices, managing the employed team, and capitalizing on the technology.The second part of the paper introduces the STCW convention and provides the essential requirements dictated by the convention. The STCW convention requires all seafarers to be instructed in first aid, firefighting, safety practices, survival techniques, security awareness, and social responsibility.
The report also explores the importance of the STCW convention and its effectiveness in achieving the goals.The STCW Convention defines the necessary skills and knowledge for carrying out different tasks on board and how they should be demonstrated and assessed. Therefore, the report provides crucial information for the iron ore mining company to consider establishing its shipping division.
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