Introduction
The cash flow prediction that is generated from the Ship Budget Preparation typically details the expected expenditures on a monthly or quarterly basis and spans a period of 12 months. Whenever a ship is put into operation, expenses are incurred, and invoices must be paid, a new step known as Ship Budget Processing is initiated (Demirel and Bayer, 2016). Usually, the ship manager is responsible for compiling a Ship Budget Report on a regular basis, in which the actual costs incurred on the ship owner’s behalf are compared with the budget projections. The budget projection for the next year will be based in part on an examination of how closely the planned expenditures match up with the actual expenditures (Utureanu and Dragomir, 2016). This essay will discuss the budget information and costs for an mine ore organization and a short report presenting the key requirements, importance and effectiveness of the STCW Convention.
Main Information Needed About the Vessel and their Significance
There is always a need for considering some of the key factors about a vessel before making a purchase (Utureanu and Dragomir, 2016). Some of the information about the ship that need to be considered before making the purchase decision include:
Shipping and Delivery Information
Shipping charges can vary greatly depending on the origin and destination of a vessel. There is always a need to check the shipping costs if users locate a piece of vessel or a piece of technology that they are interested in buying. One should factor in the cost of hiring an installer if they do not have one already before purchasing the fleet. There is also need to inspect the vessels thoroughly for any signs of damage or missing components before making the purchases since some vessel may lack vital parts (Du et al., 2019). The shipping organization should replace or repair damaged items if reported within a specific number of days after delivery. One should also contact the organization where they bought it, or even the manufacturer, to get a replacement part if one is broken or missing.
Information on the Material used in Ship Construction
The material selection procedure is crucial to the success of any vessel purchase decision. There is no way to overstate the importance of using the best material for a specific vessel (Mitroussi, 2018). As the price of materials is determined by their respective costs, it is susceptible to market forces and demands. Almost all modern ships have steel hulls due to the material’s outstanding strength and malleability. However, steel is quite expensive and therefore there will be a need for the company to consider purchasing those made from Aluminum alloy. There could be disastrous results from using the incorrect material for a ship (Mitroussi, 2018). This is why users need to give careful consideration to the quality and compatibility of the material you use for their vessel.
Maintenance and Warranties Agreements
Reviewing the shipyard’s and retailer’s guarantees is a smart move before purchasing a new fleet. It is always a good idea to read the fine print of any manufacturer’s warranty to see what is and is not covered (Cariou and Wolff, 2018). It is also a good idea to look into the vessel’s extended warranty options and decide if it is worth it to pay more up front. It could be helpful to compare the duration of the warranties offered by two different options for the same piece of equipment (SinoTech Marine, 2021). Additionally, it is important to give serious thought to the whole cost of upkeep.
Ship Fuel Consumption
There is also a need to acquire detailed information from the manufacturers concerning the vessel fuel consumption levels considering the current high fuel prices. The rising cost of fuel and the worsening state of the environment, especially air pollution, have made improvements to ships’ fuel economy a primary priority for private, governmental, and international agency involved in shipping business (Du et al., 2018). Fuel prices have a significant impact on many businesses, including shipping. However, fuel consumption can be managed to some extent through technical innovation installed on board or through improved ship operation, such as weather routing, trimming, slow steaming, and other (Du et al., 2018). There is a need to have a better understanding of these concepts by the company before making the purchases.
Fixed and Daily Operating Costs Included in a Budget Estimate
An essential component of a ship manager’s job is preparing the ship’s budget. Preparing a budget for a ship that is already part of the managed fleet is typically uncomplicated because the ship manager is familiar with the ship and its features (Demirel and Bayer, 2016). Budgeting for a brand-new ship, or one that has recently been acquired, is a completely different matter. The ship manager can make a more accurate financial projection if they have access to more information about a ship before it comes under their administration (Du et al., 2019). The typical costs included in a budget estimate of the fixed and daily operating cost are as follows:
Ship Store Cost
Ship stores primarily consist of provisions and victuals. The process of provisioning is often managed through a catering contract at a predetermined charge per person per day of service. The second main part of the ship’s store is commonly known as “Rope, Soap, and Dope” (HandyBulk, n.d). In terms of supplies, the ship’s management is responsible for items like wires, ropes, lashing material, packing material, gases, chemicals used in refrigeration plant, boiler or tank cleaning procedures, etc (Visvikis, 2017). Cabin stores, ship stationery, laundry supplies, and drinkable water are all examples of what can be referred to as “stores” (Lin and Shaw, 2017).
When it comes to supply prices, lubricants and greases come in at a close third. The amount of lubricating oil required can be simply determined by the size and kind of engine, as well as the annual number of operation days.
Ship Maintenance Cost
The budget for maintenance includes the cost of labor for any deck or engine repairs, as well as the cost of ordering and obtaining any necessary replacement parts (HandyBulk, n.d). To fix ships while at sea requires the use of both riding crews and shore personnel, the cost of which is factored into the total. Automated systems, electrical parts, and navigational aids can require a hefty budget allocation for routine upkeep and repair (Priyanto et al., 2021). The fees involved with a ship survey or classification are considered part of the overall maintenance budget. The cost of routine dry-dockings is another ongoing expense for ship managers.
Insurance Costs
Quotes or renewal negotiations for the insurance plan are used to calculate the premium and P&I call estimates (HandyBulk, n.d). It is important that the P&I budget reflect actual annual call volume. The owner of the ship will be able to account for the actual cost of P&I insurance for the relevant year. Even so, it could result in a slight change to the cash flow picture. Insurance deductibles are ultimately the responsibility of the ship’s owners to decide (HandyBulk, n.d). If the deductible is too high, it may be necessary to just leave the costs where they are. This often occurs with unexpected maintenance or repair bills.
How to Monitor the Costs During the Management of the Vessel
Companies in the shipping industry may increase output and cut expenses by keeping tabs on data generated by machines and other equipment. Moreover, they can develop critical performance indicators, reduce or eliminate unscheduled downtime, and anticipate and resolve any issues before they even arise (Lin and Shaw, 2017). Some of the ways that can be used to monitor the costs during ship management include fleet benchmarking, using a monitoring software, outsourced ship management, route optimization and predictive analysis which have been discussed below.
Weather, traffic, estimated time of arrival (ETA), seca and eca zones, and other elements like fuel change can all be accounted for using data to optimize routes for both fleet owners and operators. With the help of an algorithm, a clear and efficient course may be plotted for the voyage. Live and historical data from the ship’s navigational equipment can shed light on things like fuel consumption patterns, weather conditions, and the ship’s overall performance on each voyage.
This allows ship owners and managers to conduct comparative costs analyses of individual ships or the fleet as a whole. By providing concrete evidence for each decision, predictive analytics may assist our organization streamline a variety of management expenses, operational expenses, and other expenditures (Smart Ship, 2021). With this information at hand, the offshore crew can more easily plan and maintain the supply chain.
Fleet benchmarking means monitoring how every ship does in comparison to the rest of the fleet. It will assist the corporation evaluate the efficiency of each vessel’s operation and the extent to which its operations affect the environment. The information gained can then be applied to other ships as best practices in monitoring the costs above (IMO, 2022). Using the latest in digital technology, ship monitoring software provides real-time updates on the most important performance indicators. The software is accessible both onboard and on the ground by authorized individuals.
The key performance indicators (KPIs) for each vessel in a fleet must be monitored continuously by managers and supervisors (IMO, 2022). The correct software solution may streamline processes by reducing the need for human interaction, synchronizing all vessel performance reports, and providing management with easy access to all relevant data in a centralized location. In its simplest form, ship management is the process of contracting out the oversight of a vessel or fleet of vessels to a trained professional in exchange for payment to cover the aforementioned costs.
STCW Convention
The STCW Convention establishes minimum requirements for the competence of the masters, officers, and watch crew of ships engaged in international commerce and large yachts operating at sea. International Maritime Organization (IMO) delegates met in London in 1978 to adopt STCW, and it became law in 1984 (IMO, 2022). Changes made to the Convention in 1995 and 2010 that are somewhat substantial and become effective on January 1, 2012. For the first time ever, international standards for training, certification, and watch keeping of seafarers were established in the STCW Convention of 1978 (Federation, 2010).
Previously, individual governments defined the bare minimum requirements for the education, certification, and oversight of officers and ratings, often without considering the norms in other nations. Thus, despite the inherently global nature of the shipping industry, minimum standards and procedures differed considerably (Zhu, 2020). The Convention requires all countries to fulfill or surpass minimum criteria for training, certification, and watch keeping of maritime personnel.
Key Requirements of the STCW Convention
Before beginning employment on a commercial vessel, every crew member, from the Captain and Chief Officers to the Chefs in the galley, must take STCW basic safety training. The information presented here is the very minimum for maintaining personal and public safety aboard any ship, be it a cargo ship or a luxury cruise ship (NESTE, 2019). It takes roughly a week to finish the four sections that make up the foundational training, which are: Personal Survival Techniques (PST), Fire Fighting and Fire Prevention (FPFF), Elementary First Aid (EFA), and Personal Safety and Social Responsibility (PSSR) (PSSR) (Zhu, 2020). After completing these sections, the trainee should not only be able to defend himself and others from harm, but also to prevent situations from happening in the first place (NESTE, 2019).
The STCW Convention mandates that all maritime personnel get mandatory basic training in firefighting, first aid, survival, personal safety, social responsibility, and security awareness. Crew members receive training to ensure they are prepared for any emergency that may arise on the job (Safety4Sea, 2019). All officers must have certificates of competence from an approved organization proving that they are qualified for their jobs, have adequate seagoing experience, are physically fit, and are of legal age in accordance with the STCW Convention (Safety4Sea, 2019). If a commercial ship is over 24 meters in length, all crew members, including the cooks, must follow the STCW convention (Safety4Sea, 2019).
If the training and certification one has was earned more than five years ago, they may need to repeat classes and get recertified. Those in positions of authority at sea, such as masters, chief mates, and chief engineers, must have substantial prior experience in their fields before being considered for employment (Zhu, 2020). Other key requirements include medical Fitness, environmental awareness, training and Security awareness, social and personal responsibilities, ship specific familiarisation and training, launching and handling rescue craft.
Importance of STCW Convection
The International Maritime Organization (IMO) is committed to assisting officers in keeping up with the ever-evolving technology used on commercial boats, and the latest amendments to the convention adopted in 2010 ensure that the STCW criteria are reviewed every five years (Viking Crew, 2022). This is important because it guarantees that an officer will be able to do their job competently despite having to use equipment they have never seen before. Now that uniform minimum training standards have been set, marine officers can go to sea with more certainty that they and their colleagues have at least a working knowledge of basic safety measures (Zhu, 2020).
Everyone on board is safer as a result of the greatly reduced chance of accidents and the increased efficiency with which they can respond to any issue that may occur (Viking Crew, 2022). IMO is committed to assisting officers in keeping up with the ever-evolving technology used on commercial vessels, and the new amendments to the convention adopted in 2010 ensure that the STCW requirements are reviewed every five years to facilitate this goal (Viking Crew, 2022). This training is mandatory for the merchant navy for a reason, therefore prospective recruits should give it their full attention.
Effectiveness of the STCW Convention in Achieving its Aim
The STCW Convention was the first international pact to mandate requirements for the education, testing, and licensing of maritime personnel. Formerly, countries made their own choices about how to train and certify officers and ratings, and how to supervise them, without taking into account any international best practices (Safety4Sea, 2019).
Despite being the most global business, shipping had widely varying norms and practices. The Convention establishes baseline requirements for education, accreditation, and monitoring that all member states must meet or surpass (Viking Crew, 2022). The Convention’s applicability to ships from non-party states while calling in ports in states that are Parties to the Convention is a particularly noteworthy aspect of the Convention. Everyone on board is safer as a result of the greatly reduced chance of accidents and the increased efficiency with which they can respond to any issue that may occur (Nautical Campus, 2020). Other strengths of STCW include provision of competence requirement to those involved, modern technology training, certification requirements and provision of guidance to polar water workers.
Some of the weaknesses of the STCW convention according to a literature by Engtro (2022) include unfulfilled intentions and implementation flaws, that require further work and amendment, but its stated goals of assuring marine safety and safeguarding the environment by raising the global professional standard of seafarers are desirable (Nautical Campus, 2020). STCW does not address manning levels, and is not supported by resolution A.890(21) Principles of safe manning, which was adopted by the IMO Assembly in 1999 (IMO, 2022). Additionally, there is a challenge of lack of standards offered by the convention for practical training.
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