LSB Lecture5 (Liner Company)

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PREM KUMAR, H.S. on 24/Aug/2009 (Lecture 5)
 Liner Shipping Company
 As a business entity the company can be either a sole-
proprietorship, a partnership firm or a private/public limited
company.
 It may even be a subsidiary of a foreign company.
 Ship Management and Operational aspects of ship owning
organization is not considered for our scope of study in Liner
Shipping Organization Structure.
 However, the focus will be on the commercial aspects of Liner
business and the common structure used to deliver the services.
 Organization structure & functions
 The size of the shipping undertaking, its organization and cost
structure and the pricing of sea transport service are influenced
largely by the type of service which is operated.
 Though there may be significant variance in organization there
are areas of activity that are common to all liner companies.
 The company will remain customer focused, embracing /
responding and empathizing to the needs of the customer in a
competitive manner.
 In most liner companies there are some key divisions having
individual responsibility and the framing of divisions and their
activities will have more focus to minimize the overlaps and
potential duplication of effort or clashing of responsibility within
the divisions of the company.
 The company will generally have Board of Directors and the
Chairman or Managing Director who will be heading the
company’s activities. It is the board’s decision that will demark
the maximum powers of the Managing Director..
 The following will be few of the areas that will be generally
decided by the top management
 The company’s strategy on Logistics
 The routes on which the company will be operating
 The type and size of the vessels to be deployed in a particular
route.
 Membership of any conference
 Consortium arrangements
 Marketing and pricing
 Financial performance – Overall Budgeting & Monitoring &
Corrective measures in case of any deviations
 Once the above broad policy is established, the management will
delegate the powers to down the line authorities for effective
management.
 The shipping company is managed by a General Manager, who is
responsible to a board of directors and normally sits on the board.
He is responsible for carrying out the board’s directions dealing
with all major issues of policy, including finance, appointment of
senior executives, the introduction of new services, and major
items of capital expenditure including new tonnage, upgrades to
newer systems of information technology and so on.
 Marketing: The area of marketing embraces not only promotion
strategies, but also market research, product development,
including new types of containers, quicker transits and marketing
plans, including budget driven marketing management.
 Logistics: is a growth area in liner cargo companies.
 Information Technology: The impact of information technology
which continues to become more sophisticated and quickens the
pace of decision-making process.
 This extends to all parts of the shipping and in many companies
has resulted in eliminating the middle-level management.
 Diversification: While shipping may remain the core of the
business many entrepreneurs have other interests which include
real estate and construction including ancillary activities of the
core business such as road haulage, seaports, warehouse, ship
broking and so on.
 Third-party ship management outsourcing: This is a growth
sector especially in the area of crew, insurance, ship survey and
bunker management.
 Operating alliance: a tendency to have more alliance with other
shipping companies operating on the same trade routes.
 Mergers & acquisitions: This is exploit the economies of scale
and raise capital to fund new tonnage and infrastructure,
especially information technology. An example if the merger of P
& O Nedlloyed and Maersk Line to form the Maersk Line.
 The outcome of these developments is the emergence of a new breed of shipping
executive who must be thoroughly professional in the shipping business to
which he or she is assigned, professional qualified, market driven in attitude,
very assiduous, culture oriented, multilingual, profit motivated and computer
literate. Moreover, such personnel must be subject to continuous training to
keep ahead of technology, market environment/opportunity and business
techiques/strategy.
 The Liner company serves a mass market.
 Therefore, has a huge customer base from consumer to
industrial shippers.
 This involves expensive organization ashore at all ports
and agents/regional offices are required inland to market
services and process shipments both for import and
exports.
 Such offices are located near an Inland Container Depot /
Container Freight Station and are linked by computer to
the shipping company database.
 In some companies, to facilitate a more prompt decision-making
process and streamline administration, the general manager post
has been abolished and the day-to-day control and management of
the company is vested in the Managing Director.
 Each board director is responsible for a certain aspect of the
business such as finance, marketing, customer service, operation,
documentation, cargo, passengers, information technology,
logistics marine staff, fleet management and human resource
general administration.
 The shipping company must recover the cost of
administrative function which is required to
operate a container.
 A simple way to do this is to “charge out” an
administration cost to each vessel on a
proportional basis which will recover the full
overheads of the company.
 The five main functional activities are as follows:
 Marine operations: This covers the management of
ships, scheduling, cargo stowage, terminal handling.
 Logistics: Responsible for overall management and
control of the company’s own and leased containers,
including maintenance, repair and scheduling.
 Finance: A major activity including voyage
accounts (eg. Booking, rating, tracking, billing
and so on) EDP, management accounts and
budgeting.
 Commercial: This covers booking and
documentation of cargo, plus dealing with
conferences where appropriate.
 Sales: This function sets the pricing, public
relations and deals with the agents.

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