FLP2233 Module4 Website

DIPLOMA IN
SHIP MANAGEMENT
2012 / 2013
MODULE 4
Ensure Vessels Are Procured, Maintained,

Supplied and Equipped for Service
AUTHOR
Paul Russell
MSc. BA (Hons), MIMarEST Director
Thamesview Maritime Limited
Lloyd's and the Lloyd's crest are the registered trademarks of the society incorporated by the Lloyd's Act 1871 by the name of ‘Lloyd's’
CONTENTS
Page No.
1. MANAGE THE ACQUISITION OF VESSELS . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 Initial Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1.2 Consultation Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.3 Preparing a Tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.4 Tendering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. MANAGE THE DISPOSAL OF VESSELS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Green Passport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2.2 Procedures for New Ships Related to Ship Recycling. . . . . . . . . . . . . . . . . . 19
3. DEVELOP AND IMPLEMENT VESSEL MAINTENANCE PLANS . . . . . . . 21
3.1 Introduction to Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3.2 Planned Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.3 Condition-based Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.4 Shock Pulse Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 Vibration/Noise Monitoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.6 Machinery Condition Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.7 Non-destructive Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.8 Engine Room Record Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.9 Strategic Approach to Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4. PROJECT MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.1 The Project Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

4.2 Target Setting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.3 Resource Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.4 Progress Monitoring. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Diploma in Ship Management 2012 / 2013 (FLP2233) 4-1

Contents Module 4
5. MANAGE PHYSICAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.1 Collecting the Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

5.2 Managing Planned Maintenance Systems . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.3 Providing and Managing Maintenance Resources . . . . . . . . . . . . . . . . . . . . 51
5.4 Skilled and Unskilled Maintenance Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.5 The Skills Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.6 Purpose and Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.7 Open Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
6. PURCHASING STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.2 Just-in-Time (JIT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.2.1 Basic Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.2.2 Premium Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.2.3 Catalogue Upload . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.2.4 Banner Advertising on Pages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.3 IMPA Stores Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.4 Planning and Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7. ORGANISE AND OVERSEE THE MANAGEMENT

OF CONTRACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.1 When to Use Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

7.2 Contractors and the Ship’s Safety Management System . . . . . . . . . . . . . . . 71
7.3 Contractors and Health and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8. ESTABLISH AND IMPLEMENT SYSTEMS FOR

THE MANAGEMENT OF VESSEL SUPPLIES . . . . . . . . . . . . . . . . . . . . . . 75
8.1 Planning a Company-wide Vessel Supply System . . . . . . . . . . . . . . . . . . . . 75

8.2 Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.2.1 Controlling Budgets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.2.2 Profiling Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.2.3 Reporting Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
4-2 Diploma in Ship Management 2012 / 2013 (FLP2233)

Module 4 Contents
8.3 The Theory of Costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

8.3.1 Direct Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.3.2 Indirect Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.3.3 Fixed Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.3.4 Overheads. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.3.5 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.3.6 Cash Flow Effect on Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
TUTOR-MARKED ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
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1. MANAGE THE ACQUISITION OF VESSELS
LEARNING OUTCOMES
By the end of this chapter the student will be able to:
• Outline the basic steps in the acquisition of a vessel
• State at least five people or organisations that should be included

in a consultation process prior to the purchase of a new vessel
• Describe at least two alternatives to the purchase of a new

vessel
1.1 INITIAL PLANNING
4-001 Ships are in the commercial business of moving goods or commodities around
the world in order to make a profit for their owners. This primary goal can be
achieved in a number of ways. On one end of the scale the vessel could be hired
or chartered to complete a specific task or project and on the other end of the
scale a vessel might be purchased outright by an owner, with the intention of
being operated for 25 years on the same voyage.
4-002 In between these two extremes are a whole host of different combinations and
each of those combinations will attract a different approach to the procurement
and operation of the vessel. For example a potential owner might identify a trade
that could be profitable and make a bid for the business based on operating the
vessel at the lowest possible cost that complies with the regulations and selling
the vessel again after the contract is complete.
4-003 In the second scenario an already established owner might carefully calculate
the income from a long-term project and use an already established support
structure to spread costs and develop a business model based on offering a
quality service that will attract customers in the long term.
4-004 In both of these illustrations there will be some common questions to be asked
but the on-going decision-making and management processes will be quite
different. Therefore the procurement of a suitable vessel will as always centre on
the ideas and aspirations of the owner. The added complication for the ship
owner is about regulation and the public perception about ships and shipping.
She/he will have to think about how much longer it will be possible to operate
older vessels that are environmentally more polluting than newer ones. The
regulations might include clauses so that the older more polluting vessels can
be used but will they actually win any work (Figure 1).

Module 4 Manage the Acquisition of Vessels
Figure 1
© Det Norske Veritas AS. All rights reserved
4-005 Tanker-vetting schemes already mean that charters insist on a minimum level of
quality that could exclude older tonnage especially if the older tonnage is still of
the single skin design.
4-006 Therefore what are the basic questions that all potential owners would need to
ask? The obvious fundamental first question is what type of cargo do I want the
vessel to carry. It is no good specifying an oil tanker to carry cars or a container
ship to carry hundreds of people but there are hybrid vessels that might be
suited to a couple of different duties.
4-007 The second common question that all operators face is what route is the vessel
trading over. Is it a short-sea crossing such as the Dover to Calais or the
inter-island ferry in the Caribbean or is the vessel expected to spend most of its
life on the North Atlantic or sailing from the Middle East to Europe carrying
250,000 tonnes of oil.
4-008 A recent study carried out by DNV and MAN looked at the current situation and
market trends for container ships. Based on their findings, the 9,000-teu range
was selected as the target case for the concept development, together with the
Asia–US east coast trade route through the new Panama Canal.
4-009 This project was very interesting and is of immense value to promote discussion
and illustrate the concepts of vessel procurement planning.
4-010 If an owner was contemplating starting a container ship trade over this area then
they would have to consider the widening of the Panama Canal. The new
arrangement is to extend the existing two lanes with a bigger third lane and a
set of increased-size lock chambers.
4-011 The lock chambers will be 427 m long, 55 m wide and 18.3 m deep, allowing
passage of ships with a maximum breadth of 49 m, maximum passage draught
of 15 m and an overall maximum ship length of 366 m. The new canal is

Manage the Acquisition of Vessels Module 4
scheduled to open in 2014 at the 100th anniversary of the existing canal, and to
be fully in operation in 2015.
4-012 When serving the east coast of USA, there is another limitation that needs to be
observed. Ships entering the Newark container terminal in Port of New York
must pass under the Bayonne bridge. The air draught limitation is currently 151
feet, which imposes a restriction on the bigger ships. There has been news in
the press that the bridge may be raised, giving a new air draught of 215 feet, but
this is yet to be confirmed (Figure 2).
Figure 2
4-013 These fundamental questions of trading pattern and operational profile must be
understood before optimisation of the hull and machinery can be started. It is
vital that the correct project management team is assembled with a range of
strengths
4-014 If the ship is to operate on a specified trade, the operational profile can be
determined on the basis of an average of the complete trade route.
4-015 For example P&O have set up a blog to inform people about their latest new
builds the Spirit of Britain and the Spirit of France. Information from this site
confirms that although it might well have been satisfactory, and cheaper, to order
ships that are principally “off-the-shelf” designs, the extra expense of designing
specifically for the intended route brings immediate benefits.
4-016 The hull form of the ships takes into account the particulars of the route, such
as water depth, and has been arrived at after extensive model tank tests at
MARIN in Holland. The result is a hull form with particularly efficient
hydrodynamics.
4-017 The clever hull, combined with the main engines and other equipment selected,
means that the 49,000-tonne new ships will return similar fuel consumption to
the 26,000-tonne ships they replace. Other energy-saving measures include
boilers that use waste heat from exhaust gas to heat water and power water
purification plant.
4-018 The ships’ engines are designed to operate on low sulphur fuel oil and meet the
latest IMO Tier 2 NOx emissions standards, ahead of regulatory requirements.
4-019 Designing the hull and machinery for a wide range and combination of speeds
and draughts is difficult. Therefore, the ideal situation is to define the route and
then carefully design the ship so that it can operate as close to its optimum design
characteristics, as possible, for as much of the time as possible (Figure 3).

Figure 3
4-020 The required propulsion power and electrical demand is calculated for each part
of the expected route. Obviously this aspect could provide quite a tight brief or it
could involve several “what ifs?”
4-021 The vessel might be replacing a ship already well established on a regular trade.
In which case the operational constraints will be well known. And the hull and
machinery can be optimised to give the highest efficiency over the whole route
rather than only the design speed and draught.
4-022 For the hull, this applies especially when it comes to the main dimensions, block
coefficient, centre of flotation and bulbous bow design. For the machinery, it is
the selection of main engine and auxiliary engines so that the propulsion power
and electric power needed can be produced as efficiently as possible in all the
different sailing legs and different operational modes. Design according to the
operational profile, container ship designers have optimised the ship at the point
of maximum fuel consumption, which is normally at maximum speed and
maximum dwt/draught. Any savings made at this point will probably yield the
maximum gain.
4-023 During the current economic conditions and as shipping is coming under
increasing pressure to control emissions there are other considerations to take
into account when making the final choice of propulsion and/or electrical
power.
4-024 The major engine manufacturers have all looked carefully at the legislation that
is on the horizon and all have new designs and ideas about the technology
required to meet that legislation (Figure 4).

Figure 4
1.2 CONSULTATION PROCESS
4-025 This part of the process is crucial to the success of the project and should be
carried out by the company’s project team led by the CEO.
4-026 The consultation should include internal company personnel as well as relevant
parties outside of the company. The senior operating managers will be able to
provide important information about the commercial climate, the regulatory
position and the operational constraints that will be expected during the trading
period proposed.
4-027 Ships’ staff from all areas might also be able to provide important information.
For example a complex cruise ship might be losing time because the laundry or
the stores cannot be loaded or changed over in as efficient a manne as possible.
Crew members carrying out the tasks on a daily basis might be able to suggest
changes in operation or design of the new vessel that will save time and cost.
4-028 The company trying to replace a vessel will want to have the best deal that it can
get and therefore the initial research must lead through to the place where the
negotiating team is in a position of strength.
4-029 If the vessel is to be owned for an extended period then knowledge of the
possible advancement in legislation would be an advantage when holding
discussions with flag administrations.
4-030 Thought should also be given to the company’s image. It may be that designing
and starting a new build before a change in regulations would save considerable
time, effort and money. However if the changes leave the vessel a step behind
in emissions, for example then although it conforms to the building regulations
at the time it may well attract criticism a few years down the line when ships built
to the newer regulations are much more efficient and are preferred by
charterers.

4-031 Energy efficiency is becoming a very important subject for the industry and an
index will shortly be applied to every new ship that is built. The Energy Efficiency
Design Index (EEDI) is currently being applied to all new passenger ships. See
http://www.ship-efficiency.org/onTEAM/pdf/TUHH2009.pdf for more information
(accessed on 11th June 2012).
4-032 The detailed hull design and choice of machinery decisions are issues that
would be considered by the specialist engineering team and alternatives
discussed at the project management level. More detail about this process will
appear in the specialist Technical Fleet management module at the end of this
course.
4-033 The importance of wide consultation is so that the company can formulate its
own purchasing strategy for the procurement of the correct tonnage. If the
company is to secure the most cost effective solution then they will need as
much information as they can collect.
1.3 PREPARING A TENDER
4-034 Having gathered all the information about the likely trade, put together the
business case, looked at the relevant legislation and assessed the market the
management team will now be ready to put together the specification of the
vessel that they require.
4-035 At this point all the preliminary discussions with class, flag state, concept
designers, propulsion plant manufacturers together with any internal research
carried out, will all be open for discussion until agreement is reached about the
best way forward for the current circumstances.
4-036 In the short term it may be advantageous to charter a suitable vessel until
impending legislation is clarified or it might be that the project team decide to
upgrade existing tonnage to meet short- or medium-term goals.
4-037 However if there is a definite business case for new tonnage then the company
needs to have a clear strategy for procurement based on a detailed specification
drawn up on clearly defined needs.
4-038 It may be an advantage to be looking for more than one vessel as a more
favourable cost per ship can be obtained for a series of vessels designed to the
same specification than can be for a one off.
4-039 The main reason for having a clear idea about what is required before going out
to the builders is because the shipyards will have a “stock” design for say a bulk
carrier or a feeder container ship or a passenger ship. It may well be that this
standard design does not fit the company’s needs very well.
4-040 If this is the case then the project team will need to know where the difference
lies and are able to evaluate the impact of a vessel that does not fully suit their
needs.

1.4 TENDERING
4-041 Having drawn up the tender the owner or management team will have to find the
best vessel to match the required criteria. The services of a shipbroker
specialising in new (rather than second-hand) tonnage would be a good place
to start. Armed with the ship type, intended operation and rough specification
such as size, capacity, speed and power etc, and the availability of finance for
such a purchase, the broker will be able to help with the identification of the
various shipyards capable of building such a ship and in a worldwide market it
is possible that there will be a large number of potential builders. Much, of
course, will depend on the builders’ experience with this type of vessel, and the
yard’s capability to offer a building period that will suit the owner. In 2011, it was
reported that business was starting to pick-up again but it is still a buyer’s market.
However it might still take up to a year to 18 months to take delivery.
4-042 The process might be easier and initially cheaper if the new potential owner
uses one of the shipyard’s “standard” designs that roughly matches the required
specification. It will be slower and a lot more costly if a design has to be worked
up from scratch by a naval architect working for the owner. However some
shipyards are recognising that the customer will require a vessel quite close to
their operational requirements and that the stock or standard design will not be
good enough. This will be especially true if the new owner is going to keep the
vessel for a long time.
4-043 The different shipyard quotations in reply to the specification will vary, in some
cases considerably. This will all have to be considered carefully to work out
which yard is supplying the most cost effective solution, coupled to the best
delivery time. The proposals from the shipyards will have to be considered very
carefully by the owner’s technical team before the winning bid is chosen and the
final terms and conditions agreed between the owner and the shipyard.
4-044 The terms and conditions will have to be part of a contract, which is a very
detailed and important document. It details everything from the technical
specification, the financial arrangements for the purchase and the dates of
commencement, various stages for the construction and the date of delivery.
4-045 Shipbuilders may well have their own contracts but the “Baltic and International
Maritime Council” (BIMCO) have recently produced a balanced, comprehensive
and comprehensible document (NEWBUILDCON) that they hope will be
frequently used in the future. BIMCO is an independent international shipping
association founded in 1905, with a membership composed of shipowners,
managers, brokers, agents and many other stakeholders with vested interests in
the shipping industry.
4-046 The association acts on behalf of its global membership to promote higher
standards and greater harmony in regulatory matters. Therefore it may well be
in the shipowners’ interest to use this form either as the actual contract document
or as a check on the contract offered by the ship builders. However, even if the
yard has a suitable standard design available, it is essential for the owner to
have their own technical expertise on hand, to work out a detailed specification
with the yard. It should be remembered that a ship completely “off the shelf” may
be less than suitable.

4-047 Following agreement of the technical and financial terms the contract will specify
how the owner will pay for the ship. This will normally be in stages, with agreed
percentages of the total being handed over at agreed stages. These could be,
for example, at contract signing, when the materials are first ordered, when the
keel is laid, when the ship is launched and the balance handed over when the
ship is handed over following the success of the trials. Variations from this
schedule can be agreed in the contract and as will be learnt in the legal part of
this course if you want anything then the golden rule is “have it placed in the
contract”.
4-048 The owner will have his own technical team in the shipyard during construction,
to inspect the materials and ensure that the work is done properly, while the
trials of the finished ship will see both the representatives of the builder and
owner aboard, while all the operating equipment is tested and the speed is
checked over a measured distance. If the shipowner is satisfied, then he will take
delivery of the ship from the builder.

2. MANAGE THE DISPOSAL OF VESSELS
LEARNING OUTCOMES
By the end of this chapter the students will be able to:
• State at least three different alternatives to selling a ship for scrap
• Explain two reasons for IMO needing to regulate ship recycling
• Outline the concept of the “Green Passport”
4-049 When a vessel has come to the end of its initial intended use the owner has
several options which may or may not be viable.
4-050 The owner could simply look for another charter. It may be that the vessel was
on the same charter for an extended period and now it will have to go back onto
the spot market.
4-051 Change of use is a possibility. I was once serving on a VLCC that started life
sailing from the Gulf to Rotterdam, however after a short period of time the
vessel was appointed as a floating oil storage tank and situated close to an oil
platform.
4-052 A vessel might be laid up for a short or longer period of time. Companies such
as International Shipcare would take on the task of looking after a vessel. Their
initial experience of working as part of the giant BP Group as BP Shipcare gave
them the background experience, which allowed them to establish a reputation
for being able to cater for both large and smaller clients in the marine industry.
They are able to look after all types of vessels.
4-053 These include oil tankers, LNG carriers, drill ships, cable vessels, container
ships and FPSOs (floating production, storage and offshore-loading
structures).
4-054 This crucial experience gained over the past three decades has allowed them to
tailor lay-up programmes to suit the requirements of each owner and vessel.
They always ensure vessels are returned in optimum condition and their broad,
blue-chip customer base is a testimony to the quality of their services and
success of the lay-up techniques used.
4-055 Lay-up could be an option while waiting for freight rates or second-hand values
to rise.
4-056 Once a vessel is no longer operational, it needs to be dismantled. This has been
highly lucrative for some countries, as almost all of the metal used to build a
vessel can be re-used once the ship becomes redundant.

Module 4 Manage the Disposal of Vessels
4-057 Although ship dismantling is not a new phenomenon but it is now under more
scrutiny to ensure that the dangerous and environmentally damaging practices
of the past are squeezed out of the system.
4-058 The top five ship-breaking countries are currently India, Bangladesh, China,
Turkey and Pakistan. Other countries have found it difficult to maintain ship
dismantling facilities due to the danger involved in the work and the expense of
correct health and safety procedures. It has been argued that in countries such
as Bangladesh and India control over workers rights and health and safety is not
as prominent, allowing ship-breaking companies to pay workers little and make
increased profits.
4-059 Other countries are looking more seriously at investing in high quality facilities
which will become a viable business as the income from precious recycled
material increases. Swan Hunter in the UK for example already de-commission
oil platforms; using the same techniques they could also de-commission ships
as well.
4-060 Media interest on the dangers faced by workers in different countries has
increased greatly over recent years and the practice has not gone unnoticed by
the International Maritime Organisation (IMO). This led the IMO to implement
changes to the shipping industry that would benefit the workers of ship
dismantling yards.
4-061 The IMO recognised that ship dismantling should not be removed, as since most
of a ship’s materials from IMO can be reused and this is a good form of recycling.
Therefore they needed to focus on the current dangers and encourage the
concept of becoming a more environmentally-friendly ship recycling yard more
appealing to the owners of the yards and ships.
4-062 One of the most influential moves involved in this was the Hong Kong Convention
for the Safe and Environmentally Sound Recycling of Ships 2009. The main aim
of this was to reduce the impact of the dangers from ship dismantling. A key
aspect of this convention is the requirement for ships to keep an Inventory of all
Hazardous Materials (known as a Green Passport).
4-063 Ships have, for a long time, been built containing many of what we know today
to be hazardous materials. Substances such as asbestos, PCBs, and TBTs
which, as the dangers of these have become known, are no longer used in
construction of modern vessels. However many ships still in use will contain
these hazards which if disturbed could be deadly. The removal of these
substances from ships will make the de-commissioning job much easier and any
danger to the workers at dismantling yards will be greatly reduced (Figure 5).

Manage the Disposal of Vessels Module 4
Figure 5
4-064 The inventory will be required for all commercial ships from their “cradle to
grave”, and will have to be maintained and updated throughout the ship’s life. As
equipment is added or changed that may contain hazards, so the inventory must
be updated. It will also be required prior to recycling, with all ship recycling yards
not allowing a ship to come into the yard unless it contains an up-to-date
inventory.
4-065 The issue is so serious that it has led to the formation of the International Ship
Recycling Association. The association was founded on the 22 October 2007, at
the Hague in The Netherlands by Tom Peter Blankestijn of Maersk Management
and Bernard Veldhoven, a Dutch Environmental Lawyer. Shipyards wishing to
become a member of the association need to accept a strict level of certification
requirements and to reach the ISRA standard within two years. The association
includes member shipyards from Turkey, China, the USA and The Netherlands.
4-066 All of these movements from the shipping industry are positive steps towards the
regeneration of ship recycling yards. The more awareness that is created from
the media interest in these yards is also an encouraging movement to ensure
the health and safety at yards will be increased.
4-067 The concept of a “Green Passport” for ships is included in the guidelines. It is
envisaged that this document, containing an inventory of all materials potentially
hazardous to human health or the environment, used in the construction of a
ship, would accompany the ship throughout its working life. Produced by the
shipyard at the construction stage and passed to the purchaser of the vessel,

the document would be in a format that would enable any subsequent changes
in materials or equipment to be recorded. Successive owners of the ship would
maintain the accuracy of the Green Passport and incorporate into it all relevant
design and equipment changes, with the final owner delivering it, with the vessel,
to the recycling yard.
4-068 Marine Environment Protection Committee of IMO (MEPC) agreed to refer

certain key outstanding issues to various IMO Sub-Committees for further
consideration.
4-069 The Ship Design and Equipment Sub-Committee (DE) and the Sub-Committee
on Bulk Liquids and Gases (BLG) will be asked to produce a list of potentially
hazardous materials which might be found on board ships. Such materials may
be inherent in the structure of the vessel or its equipment, carried as stores or
spares or generated during the normal operations of the vessel including cargo
residues. The Sub-Committee on Flag State Implementation (FSI) will be asked
to look into the possible future need to examine the issue of last voyages and
port state control.
4-070 The problem with shipbreaking at the moment are the four flaws to the current
method of scrapping ships on beaches, notably in India, Pakistan and
Bangladesh. They are:
• The impossibility of containing pollutants on a tidal beach because where

the hulls of the ships are often breached accidentally or by cutting the
vessel into pieces persistent organic pollutants, heavy metals and oils are
allowed to drain onto the beach.
• The impossibility of rapidly bringing emergency response units, including

fire-fighting equipment and vehicles, ambulances and cranes, to remove
persons hurt inside the hull and alongside the vessel in a shifting and soft
tidal surface.
• The impossibility of allowing cranes to work alongside to lift the heavy, cut
sections of a ship and thereby preventing heavy objects from falling on
persons or directly into the marine environment.
• The incompatibility of conducting hazardous waste management (as ships

contain and are often even painted with hazardous materials) in the
ecologically delicate and vital coastal zone.
4-071 IMO’s Hong Kong International Convention for the Safe and Environmentally
Sound Recycling of Ships, 2009 (the Hong Kong Convention), was adopted at a
diplomatic conference held in Hong Kong, China, from 11 to 15 May 2009, which
was attended by delegates from 63 countries.
4-072 The Convention is aimed at ensuring that ships, when being recycled after
reaching the end of their operational lives, do not pose any unnecessary risks to
human health, safety and to the environment (Figure 6).

Figure 6
4-073 The Hong Kong Convention is designed address all the issues around ship
recycling, including the fact that ships sold for scrapping may contain
environmentally hazardous substances such as asbestos, heavy metals,
hydrocarbons, ozone-depleting substances and others. It also addresses
concerns raised about the working and environmental conditions at many of the
world’s ship recycling facilities the design, construction, operation and preparation
of ships so as to facilitate safe and environmentally sound recycling without
compromising the safety and operational efficiency of ships; the operation of
ship recycling facilities in a safe and environmentally sound manner; and the
establishment of an appropriate enforcement mechanism for ship recycling,
incorporating certification and reporting requirements.
4-074 Upon entry into force of the Hong Kong Convention, ships to be sent for recycling
will be required to carry an inventory of hazardous materials, which will be
specific to each ship. An appendix to the Convention provides a list of hazardous
materials the installation or use of which is prohibited or restricted in shipyards,
ship repair yards, and ships of Parties to the Convention. Ships will be required
to have an initial survey to verify the inventory of hazardous materials, additional
surveys during the life of the ship, and a final survey prior to recycling.
4-075 Ship recycling yards will be required to provide a “Ship Recycling Plan”,
specifying the manner in which each ship will be recycled, depending on its
particulars and its inventory. Parties will be required to take effective measures
to ensure that ship recycling facilities under their jurisdiction comply with the
Convention.
4-076 The principal materials of a ship’s infrastructure (e.g., steel, aluminium) are not
a major concern as far as human health or marine pollution are concerned.
However, there are a number of other potential sources of concern that should
be addressed such as:
• fuel, lubricants, and coolants;

• floatable materials (e.g., plastics, Styrofoam insulation);
• materials possibly containing PCBs such as wiring insulation;
• sludges;
• harmful aquatic organisms in ballast water; and, currently (on older

ships),
• asbestos used as insulation material and in accommodation panelling.
4-077 Items on ships that may potentially contain substances of concern include:
• electrical equipment (e.g., transformers, batteries, accumulators);
• coolers;
• scrubbers;
• separators;
• heat exchangers;
• storage facilities for production and other chemicals;
• tanks, diesel tanks including bulk storage tanks;
• stored solvents, and other chemical stocks;
• paints;
• electrical cabling installed before 1975 (plastic covering may contain

PCBs);
• sacrificial anodes;
• fire extinguishing and fire fighting equipment;
• piping, valves and fittings;
• pumps and compressors;
• engines and generators;
• oil sumps;
• hydraulic systems; and
• light fittings and fixtures.

4-078 When identifying potentially hazardous materials on board ships, there are two
key lists to consider for guidance, which are set out as Appendices 1 and 2 to
these Guidelines: Appendix 1 is entitled “List of Hazardous Wastes and
Substances under the Basel Convention that are relevant to Ship Dismantling”
(Appendix B to the “Technical Guidelines for the Environmentally Sound
Management of the Full and Partial Dismantling of Ships”), and Appendix 2 is
entitled “Potentially Hazardous Materials, which May be on Board Vessels
Delivered to Recycling Yards” (Annex 1 Hazardous Materials, which May be on
Board Vessels Delivered to Recycling Yards (Annex 1 of the Industry Code of
Practice on Ship Recycling).
2.1 GREEN PASSPORT
4-079 The Green Passport should contain, at least, the following information:
Ship details:
• name of the state whose flag the ship is entitled to fly;
• date on which the ship was registered with that state;
• date on which the ship ceased to be registered with that state.
• ships identification number (IMO number);
• hull number on new-building delivery;
• name and type of the ship;
• port at which the ship is registered;
• name of the shipowner and its address;
• name of all classification society(ies) with which the ship is classed;
• ship’s main particulars (length overall (loa), breadth (moulded), depth

(moulded), lightweight);
• shipbuilder’s name and address;
4-080 Inventory of the materials known to be potentially hazardous, containing the

location and the approximate quantity/volume of each identified material on
board the ship, split into the following parts:
Part 1 – Potentially hazardous materials in the ship’s structure and equipment
Part 2 – Operationally generated wastes
Part 3 – Stores

4-081 Any changes relating to the entries referred to above should be recorded in the
Green Passport so as to provide updated and current information together with
the history of the changes.
4-082 Ship details referred to above should be included in the Green Passport by the
shipowner.
4-083 Part 1 of the inventory of potentially hazardous materials should be prepared:
• for new ships by the shipbuilder, in consultation with the equipment

manufacturers, at the construction stage and passed to the shipowner;
• for existing ships by the shipowner, as far as is practicable and reasonable,

by reference to ship’s plans, drawings, manuals, technical specifications
and ship stores manifests, in consultation with the shipbuilder, equipment
manufacturers and others as appropriate.
4-084 Parts 2 and 3 should be prepared by the shipowner prior to the final voyage to
the recycling facility.
4-085 Administrations, designers, shipbuilders, and equipment manufacturers should

take measures to facilitate the preparation of the Green Passport.
2.2 PROCEDURES FOR NEW SHIPS RELATED TO

SHIP RECYCLING
4-086 The use of hazardous substances in the construction of new ships and their
equipment should be minimised. Some of the problems associated with ship
recycling might be addressed at the design and construction stage, not only in
relation to the ships themselves but also in respect of ship’s equipment. The
first step is to identify any potentially hazardous materials, which might be
incorporated, as a matter of routine, in the structure of ships and their
equipment and, where practicable, consider using less hazardous
alternatives.
4-087 The second step is to minimise hazardous materials generated during the
operating life of a ship and at the end of a ship’s life. Shipbuilders should already
be aware of the need to minimise emissions and hazardous wastes to a level as
low as reasonably achievable.
4-088 The initial stages might include an evaluation of:
1. The type, amount and potential hazard of materials utilised and their
location on-board a ship.
2. The activities expected during the operation of the ship and any potentially
hazardous wastes which might be generated.

3. The feasibility of addressing the potential for hazardous waste generation

by considering:
– product reformulation installing components utilising less potentially

hazardous materials.
4. Cleaner production technologies which generate less waste:
– process modification to generate less waste;
– introduce substitution utilising less potentially hazardous consumables

or those which generate less waste.
5. On-site, closed-loop recycling systems that recycle wastes on board the

ship.

3. DEVELOP AND IMPLEMENT VESSEL
MAINTENANCE PLANS
LEARNING OUTCOMES
• Describe all three methods of maintenance
• Give at least three examples of where each maintenance system

would be applied
• Outline the concept of strategic maintenance
3.1 INTRODUCTION TO MAINTENANCE
4-089 The advancement and better understanding of material science is improving the
reliability of machinery. This is particularly true of the marine industry where the
quest for saving fuel, improving energy efficiency and reducing the environmental
impact is driving the research and development within the sector. However these
improvements will only be realised if the machinery is operated and maintained
correctly over its entire life-cycle.
4-090 Engine manufacturers may well be increasing the Time Between Overhauls
(TBO) but this will only happen if the supporting components are kept in good
condition, e.g. the piston and piston rings will only keep in good condition if the
fuel injection equipment is kept in good condition and on a large two-stroke the
good condition will depend very much on the correct operation of the cylinder
lubricating oil system.
4-091 Breakdown maintenance or “Run to failure” is a perfectly legitimate maintenance

strategy if used in the correct way. It is not correct to apply this method to
machinery that is critical to the operation of the vessel. However it may be cost
effective to allow a small transfer pump to run until it is showing visible signs of
failure and then replace the whole pump.
4-092 Ships form a vital link in global transport systems and any failure in this vital link
will have a substantial effect on the supply chain, customer costs and time
schedules, which will continue some time after the technical problems have
been resolved.
4-093 Unplanned loss of critical machinery will not only cause immediate financial
damage, it erodes customer confidence extending the effects of that damage far
beyond the actual event.

Develop and Implement Vessel Maintenance Plans Module 4
4-094 The size and complexity of engineering management within the industry is
infinitely variable ranging from that required for a small coastal vessel to the
large management structures found on a complex state of the art cruise or
trans-Atlantic passenger ship.
4-095 Successful management of this highly complex, 24/7 operation requires a fully
informed, proactive and coordinated management team, with the fullest possible
understanding of their own and other team members’ objectives within a
common framework.
4-096 In the past it was fully acceptable to operate the manual, paper based, systems
in such a way that did not impede on the core business of carrying cargoes
around the world. The ship’s schedules would allow sufficient time for the
maintenance to be carried out in accordance with the manufacturer’s
recommendations.
4-097 The staff on-board were sufficiently experienced to be able to complete any work
necessary to keep the vessel sailing. Sometimes the equipment would be over-
maintained because time constraints were not an issue and it was better to have
the machinery in top condition than to risk a breakdown at the worse possible
moment.
4-098 However with the introduction of containerisation the efficiency gain in carrying
cargo was enormous, mostly in the reduction of time in port or non-operating
time.
4-099 This operational requirement placed totally different constraints on the

maintenance of ship’s machinery. Other factors were also creeping into the
system such as the lowering of the experiential time in the qualifications of
engineering officers and the use of crews that had only received the basic
minimum education and training set out in international standards.
4-100 We now hear of phrases such as “maintenance induced failure” and “increases
in main engine failure”, “main engine failed to run astern”. All of these changes
have meant that, the industry has had to embrace a new way of looking at the
maintenance of ship’s machinery.
4-101 Planned maintenance and stock control are an essential part of the process but
more and more technical departments are embracing the lessons learned from
other branches of engineering and incorporating the ideas of condition-based
maintenance. Both of which are explained in the rest of this chapter.
3.2 PLANNED MAINTENANCE
4-102 One function of higher level strategic management is about creating policy and
controlling future investment and direction. Today’s requirement for accountability
in safety matters and where only short periods of inattention can cause major
financial loss means that senior managers must also have access to current
“real time” information at all levels.
4-103 It is not acceptable for the maintenance department to be continually involved

with breakdown maintenance. The worse situation is for the department to be

Module 4 Develop and Implement Vessel Maintenance Plans
staggering from repair to repair and not having enough time to be proactive and
carry out maintenance that will help to prevent breakdowns from happening.
4-104 All the engineers on-board must become involved with helping the company’s
Technical Services Department in their quest to reduce the down time of
equipment and help to eliminate unscheduled breakdown of machinery.
4-105 In today’s climate of corporate accountability it is vital that senior management

have some appreciative understanding of all disciplines within the ships under
their jurisdiction and are able to exercise a degree of informed real-time control
over the whole operation.
4-106 A recording and identification system will need to be put in place so that all
machinery and equipment are easily apparent. If this facility register is
computerised then the information produced should be made available to
authorised managers at a level of complexity appropriate to their management
function.
4-107 It must be understood that the degree of management and cost control achieved
by computer-disseminated information will be directly proportional to the detail
and accuracy achieved in the preparation and maintenance of the data in the
register.
4-108 Planned maintenance systems are vital for the safe and efficient management
of the shipowner’s asset and the evidence produced by these systems is very
important to the marine engineer.
4-109 Traditional maintenance systems have evolved from breakdown maintenance

and moved towards time-based planned maintenance systems.
4-110 These systems could be calendar based, running hours based or a combination
of the two.
4-111 The heart of any system should be the recording and identification system that
will need to be in place so that all properly authorised structures and equipment
are identified. If this facility register is computerised then information produced
from it will be readily available to authorised managers at a level of complexity
appropriate to their management function.
4-112 Then as the systems associated with this register are constructed, the real-time
senior management control, in their areas of responsibility, will begin to emerge
and become apparent as the system grows.
4-113 For the business to be successful, it is necessary for all the functions to be
available at maximum efficiency and at the most profitable time. There will be an
optimum economic balance between, availability, downtime, cost and safety; the
main requirement is to constantly manage downtime risks that threaten this
economic optimum.
4-114 With these systems it is so important to keep a record of the running hours of
machinery. It is also important that a running total is also kept for each piece of
equipment.

4-115 Often these days this function is not carried out. This could so easily lead to the
unexpected failure of machinery literally because the staff do not know when it
should be maintained. A data logger can of course carry out the monitoring
function. However the responsibility still rests with the engineer in charge.
4-116 The ease with which the system can be used is also critical to its effectiveness.
If the system (paper based or electronic based) is not easy to use or understand
then the chances are that at best it will not be used properly and more likely it
will not be used at all.
3.3 CONDITION-BASED MAINTENANCE
4-117 Planned maintenance systems are vital for the safe and efficient management
of the shipowner’s asset. The evidence produced by these systems is very
important to the marine engineering surveyor.
4-118 Traditional systems have evolved from breakdown maintenance to time-based

planned maintenance systems.
4-119 Time-based (numbers of hours run etc); or consumption of an item (consumable)

required to maintain the machine in service (e.g. lubricating oil); or lifetime of a
filter (e.g.) where the differential pressure is out of range; or condition monitoring,
where a chosen performance indicator exceeds a pre-set level and triggers the
relevant maintenance procedure; or trend analysis of a set of chosen performance
indicators (e.g. the main bearing temperatures in a diesel engine), where the
trend in temperature pattern (from one bearing to the others) or a rate of change
(e.g. when a gradual temperature increase suddenly accelerates).
4-120 A recording and identification system will need to be put in place so that all
properly authorised structures and equipment are easily apparent. If this facility
register is computerised then information produced from it will be readily
available to authorised managers at a level of complexity appropriate to their
management function.
4-121 As the systems associated with this register are constructed, the real-time
senior management control, in their areas of responsibility, will begin to emerge
and become apparent as the system grows.
4-122 For the business to be successful, it is necessary for all the functions to be
available at maximum efficiency and at the most profitable time. There will be an
optimum economic balance between, availability, downtime, cost and safety; the
main requirement is to constantly manage downtime risks that threaten this
economic optimum.
4-123 In this fast moving area of business and with a degree of variable requirement
of equipment and with many of the functions in the United Kingdom and
European Economic Community (EEC) subject to legislative control, historical
data is no longer adequate to keep the vessel’s maintenance on track.
4-124 It is essential to install a system to provide comprehensive real-time information

that will allow all levels of management to monitor performance in relation to the

optimum requirement, and to constantly update the availability demand of

equipment operation in relation to the maintenance requirement.
4-125 As a consequence there is now a move towards condition-based maintenance.
4-126 One of the reasons for this was that with the time-based system there was a
tendency to over-maintain equipment under some circumstances.
4-127 Manufacturers have to ensure that their recommendations for maintenance

intervals are for a worse case scenario. Therefore, naturally if the operating
conditions were light then the maintenance interval could be extended. Operators
would be reluctant to do this, as it would leave them open to criticism.
4-128 If condition-based maintenance systems are adopted then a whole new set
of circumstances will exist. For example, an operator could claim that the
machinery was running well just before a failure, in an attempt to justify an
insurance claim. In the past the maintenance would have had to have been
completed at set time intervals or based on the machinery’s operating hours.
Under a condition-based system much more rigorous testing and monitoring
systems must be employed to justify extending the maintenance periods.
4-129 It must also be remembered that maintenance periods might need to be short-
ened if the machinery is subjected to adverse conditions for a period of time.
4-130 It is vital that the marine engineering surveyor pays attention to the maintenance
system that is used aboard any vessel that they are to work on. This would be a
good question to ask the shipowner before travelling to join the ship.
4-131 Companies such as WÄRTSILÄ are looking to take the system further and have
all the data about the operation of one of their engines sent back to them on a
regular basis. In this way they can ensure correct operation and also advise
about the maintenance required.
4-132 IACS produce a very good “Guide to Managing Maintenance” that gives a clear
statement about the objectives of maintenance, the link to International Safety
Management (ISM), class and flag state.
4-133 It makes sense to collect data about the machinery and place it into one system.
The system should then produce the reports to satisfy the following requirements:
• Safe operation of the machinery
• ISM system
• Classification society.
4-134 The maintenance system is set up initially around the maintenance schedule
recommended by the manufacturers. The intervals can be modified by the
following condition monitoring techniques such as
• Lubricating oil analysis
• Vibration analysis.

4-135 Condition-based monitoring, when applied to planned maintenance is sometimes

referred to as “predictive maintenance”.
4-136 Condition-based monitoring for the purposes of initiating maintenance procedures

is intimately linked to “performance monitoring”.
4-137 Condition-based monitoring means any measurable condition that may be used
as part of a maintenance routine. However, there are practical limitations.
4-138 For a condition-based system to work, the condition being monitored must be
convenient to read with repeatable results being achieved.
4-139 For example, it might seem to be a good idea to measure the surface roughness
of a main bearing journal and use the result as a means of regulating the
planned maintenance on that bearing. However, at the moment, given the
current techniques available, the bearing would have to be dismantled before the
reading of roughness could be made, thus making the roughness useless as a
condition upon which to make the decision about whether maintenance is
required.
4-140 However, it may be possible to embed a small wire in the material of the shell
bearing below the surface, so that when and if the bearing material wears away
then the wire surface is worn and an open circuit made that triggers an alarm.
This is similar to the warning that is built into the braking systems of motor
vehicles.
4-141 Condition-based monitoring can apply to items such as filters. If the condition is
poor, a maintenance routine is executed.
4-142 However, this is also difficult to quantify so as to be useful in everyday situations.

Engineers would normally say that a filter with debris in it means that the
associated machinery needs some sort of examination. How do we judge when
the filter is in a “poor” condition so that a maintenance routine is carried out? Do
we extract and weigh the debris? Can we separate out rubber debris from any
other sort?
4-143 Usually, condition-based monitoring is a term that is applied to monitoring in real

time, that is, some property is monitored as the machine is operating or running.
This is what the operator would ideally want.
4-144 A condition monitoring record can also be used to present to surveyors. If

experience with the equipment is positive, a good record can be used to show
that a particular item of machinery (e.g. pumps) is in good order and does not
need to be dismantled for the survey.
4-145 This approach can have considerable savings in terms of spares and down time,
as well as a saving in terms of the human resource necessary to carry out the
stripping down and re-assembly. Some manufacturers of machinery will offer
such systems as bolt-on enhancements.
4-146 A very dramatic influence on this area of monitoring will be wireless technology.
For example, at present it is difficult to monitor accurately the temperature of the
bearings in a diesel engine due to the need to transmit a reading from the

moving bearing to the static casing of the engine where it can be read or sent to
a remote gauge.
4-147 Some efforts have been made to measure the temperature of the oil as it sprays
from the bearing but by using wireless technology the manufacturers will be able
to send the bearing temperature information to a remote pickup via a wireless
signal.
4-148 The following section offers information about some of the methods on the
market at the present time.
4-149 The website http://www.machinerylubrication.com/Meta/Tags/oil%20analysis

(accessed on 30th May 2012) gives more detail about how this technology is
used.
3.4 SHOCK PULSE MONITORING
4-150 Shock pulse monitoring (SPM is a registered trademark) www.spminstrument.

com (accessed on 30th May 2012) is a system where tiny high frequency shocks
from a bearing are measured by a sensor located as close to the monitored
surface as possible.
4-151 The “shock pulse” describes specific vibration pulse that is set up when a small
protrusion on one moving surface comes into contact with a small protrusion on
another moving surface when the oil film, designed to keep the two surfaces
apart, does not completely separate the two.
4-152 An electronic circuit is used to filter out the background machinery “noise” and
translates the shock frequency into a meter reading. This reading can be
measured either by a hand-held unit, or by means of a hard-wired continuous
monitoring installation. In the latter case, it is usual to include some form of
automatic alarm function.
4-153 A full installation will usually comprise both the hand-held instrument and the
permanently cabled system for critical machinery, so that this can be part of the
continuous monitoring programme of maintenance.
4-154 The hand-held meter could be used by a member of the maintenance crew, who
will regularly take readings and keep a log. The system comes with a decision
support system, which will assist the operator to arrive at a decision concerning
when maintenance or repair is needed.
4-155 One of the disadvantages of the system is that the detector is very sensitive and
can be prone to spurious signals (loose pipe clamps being one source). This is
particularly important if used in online systems where alarm functions are
included. Therefore, interpretation must be carried out with care, and a visual
inspection is necessary before any action is taken.
3.5 VIBRATION/NOISE MONITORING
4-156 Vibration/noise monitoring is similar to the aforesaid system (shock pulse

monitoring) whereby the vibration of the machinery (as a whole) is measured

and monitored, as opposed to filtering out some of the unwanted “noise”. Alarm
hard-wiring possibilities and making a systematic record of levels of vibration are
the same as for shock pulse monitoring.
4-157 In both shock pulse and vibration/noise monitoring the readings are taken by the
same methods. Either the hand-held meter is plugged into a transducer, which
has been permanently installed on the machinery being monitored, or it is
applied directly to a designated part of the machine casing/bedplate.
4-158 This position is indicated by a distinctive marking that ensures that the instrument
is applied as close as possible to the same point on the machine. However, it is
difficult to replace the instrument precisely in the same position for every reading;
there is a consequent loss of accuracy when trends in the readings are observed
using this method.
4-159 The analysis does require sophisticated software and sometimes the harmonics
set up with engines running mean that care has to be taken about when to take
the readings.
4-160 Advancements in this area is are taking place all the time, for example it is now
possible for measurements to be made with accelerometers – this gives a two-
dimensional graph of machine movement. The measurements are achieved with
two-channel simultaneous vibration measurements and two transducers placed
at an angle of 90° to each other, plus a trigger signal from a tachometer probe.
Oil-in-Water Detector
4-161 The equipment monitors the water content in oil giving a reading (display and
recorder if required), with an alarm function, if required. It is suggested that a
warning alarm be fitted when installing this.
4-162 Meters using a “light scatter” method of detection might have difficulty in
distinguishing between oil and dissolved solids. Both scatter the ordinary light
and the detector cannot tell the difference between the two.
4-163 Similarly, if the oil is emulsified in the water the detector may not give an accurate
reading. Another possibility for a false reading is that the optical detector might
become dirty.
4-164 Another type of meter on the market measures the wavelength of the light
reflected from hydrocarbons that are suspended in a flow of the water to be
sampled. The light source is transmitted at one wavelength and detected at
another; therefore light reflected from solids will not be detected as the
wavelength remains the same.
Oil Mist Detector
4-165 The oil mist detector has seen some serious development in recent times, after
many years as a single producer’s standard instrument. The equipment is used
to detect the presence of oil mist that might be in explosive/flammable mixtures
with air. This is done by comparing the optical properties of one compartment
within the engine with the optical properties of the other compartments.

4-166 For many years “Graviner” reigned supreme in this field (see Figure 7). However,
there are alternatives available now (Product Innovations (LOS Oil Mist Detector),
Wormald Fire Systems and Quality Monitoring Instruments (QMI) are three to
name).
3.6 MACHINERY CONDITION MONITORING
4-167 Some of the equipment to be mentioned in this section is the same as that used
for monitoring performance. The difference is that for “condition monitoring” we
are looking for faults in machinery/plant, whereas for “performance monitoring”
we are looking to measure the efficiency of the machinery.
4-168 The purpose in the former case would be to initiate maintenance and in the latter
case we would be (normally) looking to make adjustments to the machinery to
bring it back to full efficiency (Figure 7).
Figure 7
4-169 Engine/machine performance monitoring means that the actual performance of

the machinery is monitored, rather than a specific parameter. There really is no
limit, apart from a financial one, to what can be achieved by this method.
However few shipping owners will go as far as the power producing industry.
4-170 Most modern power stations are fully instrumented, and as such, the manager can
directly view an instantaneous reading of the plant performance as a whole. Any lack
of performance that leads to a reduction in plant efficiency is immediately highlighted,
thus allowing remedial action to be taken straightaway, if required. Alternatively,
the machinery can be left to operate, but within set boundary conditions.
4-171 When the particular property being measured reaches a set point, then
maintenance is performed on that component thus restoring the plant to full
efficiency again. This system of monitoring and maintenance is very efficient and
is in widespread use in the bulk power generation industry.
4-172 However, the operation of marine machinery does not generally reach the
steady-state conditions experienced in the large-scale power generation industry.

For this reason, there is a limit to what is achievable on a ship using such
equipment and, the additional costs are not usually justified.
4-173 The limited human resource usually available onboard is a drawback for the kind
of instrumentation that can be fitted to a ship’s machinery.
4-174 Fitting more instrumentation that is increasingly complicated leads to a

maintenance penalty, namely, the cost of maintaining the instrumentation. If
specialist staff are not available it can lead to the instrumentation not being
used, or the maintenance being “left for someone else to do”, or worse still, to a
situation when maintenance is not carried out at all. However, there is much to
recommend this type of equipment if it can be fitted and operated correctly.
3.7 NON-DESTRUCTIVE TESTING
4-175 Detection of surface cracking would generally be by:
• Visual inspection
• Magnetic particle testing
• Liquid penetrant testing.
4-176 The International Association of Classification Societies’ (IACS) rules state that
any personnel carrying out a visual inspection must have sufficient knowledge
and experience.
4-177 Any person undertaking magnetic particle testing or liquid penetrant testing
must be qualified to the IACS standards. Such persons will have certification to
prove their qualifications.
4-178 IACS give further information about the testing and repair of crankshafts,
propeller shafts and rudder stocks.
4-179 The following link will guide the student to IACS Guidelines No 68 relating to
non-destructive testing (NDT) operations: http://www.iacs.org.uk/publications/
publications.aspx?pageid=4&sectionid=5 (accessed on 30th May 2012).
4-180 Magnetic particle inspection works on the principle that a defect in the metal,
which could be below the surface of the metal, causes a distortion in a magnetic
flux at the point of the defect.The distortion of the magnetic flux is disproportionately
large and extends to the surface of the metal. This leakage of magnetic flux can
then be used to attract coloured iron particles suspended in a solution.
4-181 Liquid penetrant testing is a low-cost method of testing for cracks that break the
surface of a non-porous material. It relies on the penetrating ability of a low
surface tension fluid such as paraffin to carry a dye into a surface crack that may
not be visible under normal circumstances. Figure 8 shows how this could be
used on cracks in a tank or prefabricated bedplate.
4-182 Ultrasonic testing is commonly associated with discussions about NDT. However,
this is more a technique for detecting the thickness of metal than for determining

the extent of any corrosion taking place. This method of testing has the added
advantage of being open to a high degree of automation and, therefore, slightly
less training is needed to carry out the tests successfully (Figures 8 and 9).
Figure 8
Figure 9
3.8 ENGINE ROOM RECORD BOOKS
4-183 All ships should keep proper records about their engineering operations.

4-184 The main log should record the:
• performance of the main and auxiliary machinery;
• time of the stop/start and the running hours of machinery;
• transfer of fuel;
• use of any lubricating oil;
• operating state of the main propulsion motors.
4-185 The oil record book must be kept on board for at least THREE years and,
therefore, should be available for the class of flag state surveyors to examine.
4-186 If the ship has recently changed ownership then the original book might be with
the previous owners. However, a “certified” copy covering the previous six
months should be retained on board.
4-187 The book must record all movements of oil or oily liquids, whether the movement
is by gravity, pump or by hand. The book should never be amended using
“correcting fluid” (tipex).
4-188 MARPOL 73/78 (consolidated editions 2002 and 2006) give a list of the
operations that should be recorded. IMO have recently brought out (November
2010) a new MEPC Circular 736 in an attempt to clarify and standardise ORB
entries with the revision of the ORB under Resolution MEPC.187(59) which
came into force on 1 January 2011. Further information can be found at http://
www.imo.org/blast/blastDataHelper.asp?data_id=26472&filename=187(59).pdf
(accessed on 30th May 2012).
4-189 The Kongsberg group produces an electronic logbook that can be used instead
of the paper version. However, whichever version is used these records could be
very important to the marine engineering surveyor. They are a source of evidence
to be used as part of any investigation. Surveyors will be able to cross refer
these documents against others on board at the time and also against different
statements from crew members.
3.9 STRATEGIC APPROACH TO MAINTENANCE
4-190 Technical departments should also take a “strategic” approach to the planning of
their maintenance system. With modern computerised systems this is an
achievable task even for highly complicated ships such as cruise ships.
4-191 With the introduction of field bus technology and the soon to be implemented,
wireless collection of data, a lot of the time-consuming tasks of data collecting
and recording is already undertaken automatically shifting the emphasis toward
analysis and validation of information.

4-192 The exact system that is put in place will differ depending upon the circumstances
of each company. There are three different scenarios that can be used to
illustrate the point.
Case 1
4-193 The first is the case of the shipowner who has purchased a vessel for a set cost
and intends to operate the vessel for one charter period and sell the vessel upon
completion making a profit on the project.
4-194 The strategy would be to run that machinery using only the spares that were
provided with the vessel. The survey records would be up to date at the time of
the purchase and the intention would be to sell the vessel before the next major
survey is due.
4-195 Adopting this approach the shipowner would have only allocated a small budget
for the maintenance of the vessel and there would be very little left to implement
a complicated planned maintenance system. In fact most of the machinery might
be operated on a “run to failure” basis. Critical machinery and components
would be identified and budgets allocated to ensure that these items do not fail
and cause a breakdown and subsequent fine due to a failure to complete the
charter agreement.
Case 2
4-196 This is where a shipowner might purchase a new or second-hand vessel with the
view of operating over a longer term but with a crew that only hold the basic
relevant STCW qualifications necessary to operate the vessel.
4-197 Here the ship managers or management company will need to ensure that the
vessel is maintained to a good standard for the extended period of time. This will
include planned maintenance or condition-based maintenance systems.
4-198 Having to work with a crew that only have the basic understanding might mean
that a planned maintenance system operated on calendar hours or running
hours would be the best system to adopt.
4-199 As the crew would be less able to operate the condition-monitoring equipment
or complete the trend analysis required a CBM system might prove costly in the
long run. The analysis work can be contracted out to one of the OEMs or to an
independent company who will interpret the data and advise of a maintenance
strategy.
Case 3
4-200 More and more of the well established big name companies are turning away
from the situation described in “Case 2” above and moving toward a different
mode of operation. This is especially so where the reputation of an important
brand is at stake.

4-201 A sophisticated and efficient maintenance strategy can be installed if the

company has sufficient well qualified and motivated staff that have access to an
appropriate staff development scheme.
4-202 Adopting this system means that all the savings can be gained from buying high
quality machinery and maintaining it in the appropriate way that takes into
account the operating conditions and matches the most efficient maintenance
methods depending upon the circumstances of each piece of equipment.
4-203 A full CBM system could be run for most of the major items such as the main
engine and generators, pumps and steering gear. This is especially true for the
machinery where it is a simple procedure to ascertain its condition using any of
the techniques explained earlier in the section.
4-204 Where it is difficult to obtain any meaningful data but the machinery is still
important then a maintenance system based on running hours could be used.
For equipment of less importance or infrequent use then the “run to failure”
method might be the most cost effective. I have even heard of ships where the
air conditioning compressor was operated on this basis.
4-205 This system has high initial set-up costs but the pay back is with reduced running
and operating costs. This can be operated in partnership with an OEM or by just
using the company in-house expertise.
4-206 Using a system such as this is becoming more and more essential as time
moves on because for the new emission reducing equipment to work properly
the engine and supporting equipment must be kept within its design envelope.
4-207 The data collected can be analysed on-board or sent to the company’s office for
analysis by the superintendent. Copies can also be sent to the manufacturers for
a third avenue of analysis.
4-208 One of the most important aspects creeping into the modern ship manager’s life
is that of producing the evidence to protect yourself against accusations of
having caused an infringement of the pollution regulations.
4-209 Proof of having up-to-date planned maintenance will be vital evidence in a court
of law where the shipowners and/or managers will be required to provide
evidence of a well-run ship.
4-210 Owners are now being advised to place tamper-proof devices on-board that will
record any emissions from the vessel. These systems are linked to the ship’s
GPS giving a precise time, date and position of the vessel.

4. PROJECT MANAGEMENT
LEARNING OUTCOMES
After successful completion of this chapter the student will be able to:
• Describe the key steps in project management
• List at least four important tasks of the project manager
• State at least five key features of a tracking and monitoring system

used by project managers
• Outline the importance of evaluation in the project management

process
4-211 The techniques and tools of project management can be applied to all manner
of tasks that would not necessarily be regarded as a project. Therefore the
processes that are described in this chapter can be used more widely than just
when working on a project. For example you might like to apply some of the
lessons learned to planning and completing your next family holiday or decorating
a room in your house.
4-212 Within business project management is carried out to complete functions such
as:
• Moving people
• Installing new IT systems
• New buildings
• Logistics
• Developing a business strategy
• Research and development
• Upgrading machinery.
4-213 Project management is about planning, organising, securing and managing

resources to successfully complete an activity, task or series of tasks that are
commonly know as a project. These basic steps can be broken down further and
approached in different ways. Some definitions will describe these steps in
different ways but the following framework covers the process.

Project Management Module 4
1. Agree a precise specification for the project and draw up the Terms of
Reference.
2. Plan the project using suitable project management tools including:
• time constraints;
• the people required to complete the project;
• activities to be covered;
• resources required;
• budgets.
3. Communicate the project plan to your project team – and to any other
interested parties.
4. Agree plans and delegate project actions.
5. Manage and motivate by informing, encouraging and enabling the project

team.
6. Check, measure, monitor and review project progress – adjust project

plans, and inform the project team and other relevant parties.
7. Complete the project by reviewing and reporting on project performance.
8. Project follow-up – including any change management, staff development,

support, measurement and the reporting of results and benefits.
4-214 If we are considering the procurement or building of a new vessel then the terms
for reference will be drawn up from the information or studies that are described
above.
4-215 Successful deployment of the new tonnage is dependent upon good project
management. Using modern communication tools means that all the interested
parties can be informed about progress and the progress can be tracked to
show that the project is on-time within hours of the schedule.
4-216 This has transformed the management ability of the company because if you can
plan deployment, to within hours, 18 months in advance then by ensuring that
everything is in the right place at the right time, so much cost can be saved.
4-217 Modern communication tools can be used in a number of important ways. The
gathering of planning information can be extensive and used to inform decision
making at each step in the process.
4-218 Another key feature about the project management for a new build is to involve
all the relevant parties at an early stage. This includes:
• Designers
• Builders

Module 4 Project Management
• Owners
• Classification society
• Flag state.
4-219 This is so important with the ever-growing amount of legislation that must be
complied with. The management of the tensions within this group is the key to a
successful project and the way to accomplish this is with good lines of
communication.
4-220 The activity of planning is a very important step on the road to successful project
management and also to the project completion. Planning should be an activity
that is carried out on a daily basis as well as being a longer term strategic
activity. You need to control the potential distracters and move steadily toward
your objectives and with this in mind it is important to view the planning process
as a closed loop activity as shown in Figure 10.
Figure 10
4-221 The project manager needs to take an overview of the work or the project that
is to be completed. This has sometimes been described as the “helicopter view”
or the “holistic view”. She/he must set out the final objective as well as the
intermediate objectives. Look at the time scales for the objectives and use some
form of daily planning guide to help you control your activities leading to your
final goal.
4-222 Planning guides will vary from person to person but some of the most common
are:
• Appointment calendars
• To-do lists
• Weekly planning diaries
• Year planners
• Computerised, especially web-based software is highly efficient.
4-223 Obviously a number of these items might be grouped together. For example your
personal diary might be used in combination with the appointment calendar and/
or the day-to-day or weekly planning diary.

4-224 It is common practice to keep track of your appointments in a personal diary,

however I have found it more useful to use the electronic diaries from integrated
software designers such as Microsoft or Lotus. These systems can be used for
recording more than just appointments, which has a very positive effect on being
an effective manager.
4-225 If linked to a mobile phone then there is the major advantage that it stays with
you and links to your computer. This may sound obvious but it is an important
fact. If you are at seminars or networking events then you can arrange future
meetings with confidence. If you are in a meeting you will need the diary to
arrange the date of the next meeting. It is very frustrating and looks inefficient if
you have to refer back to your office before you can confirm the date of the next
meeting.
Figure 11
4-226 There are two problems that need to be overcome to ensure effective use of the
phone-linked diaries. The first is to guard against the fact that all your information
maybe in one place. If your PC is not backed up then you could lose your
information. It is a good idea to review your diary at regular intervals. The start
of the week would be a good time because it gives you a chance to think about
what you have to do over the coming week.
4-227 The second problem to overcome is forming the habit to record the information.
I found it difficult at first to regularly think about recording information, which is
not always easy using a small phone such as a Blackberry or iPhone. Now
however I find it invaluable and second nature. You have to get to the stage
where you feel uncomfortable without your phone to the same extent that you
would without your watch.
4-228 If used well the e-diary can be used as more than just a record for the
appointments. You can plan more activities by blocking off time for important
tasks, such as planning time for the meeting that is already fixed.

4-229 Projects however are different from everyday work. The project will be an
individual event with a beginning, middle and end. This also means that the
project can be tracked and the progress monitored as such.
4-230 Every project will have intermediate objectives as well as a final objective. These
intermediate objectives can be used as targets.
4-231 After the decision has been taken for the project to proceed the team and
resources will need to be assembled to complete the task. Before starting it is
important that the team of individuals or organisations are signed up to the
objectives and that they are well briefed. This will be particularly important where
different nationals are involved. The management of language and cultural
differences will be as important as the technical management of the project
itself. Misunderstandings at the early stages may only come to the surface
toward the middle or end of the project and cause more problems than if they
are resolved at the start of the process.
4-232 It is a common trait of some cultures not to admit that they do not understand
subject material or information in public. The project manager will have to be
sympathetic to this potential problem and ensure that all parties understand
each step by holding private meetings if necessary. All parties must be signed
up to the project and especially the agreed lines of communication. Individuals
or organisations that fail to recognise the reasons for established procedures
can cause havoc.
4.1 THE PROJECT MANAGER
4-233 The objectives of the project manager are simple: they are to complete the
project to the right quality, in the correct time scale at the agreed cost.
4-234 However the actual tasks that will need to be completed will be much more
complicated because of the tension between cost, quality and time. The following
diagrams can illustrate the tension between these different aspects of project
management.
4-235 If the time is short then the quality and cost suffer. If the quality is higher then
the time taken will be longer.
4-236 As the project gets underway, the project manager must successfully manage
and control the work. Controlling the three contrasting quantities will include:
• Identifying, tracking, managing and resolving project issues;
• Proactively disseminating project information to all stakeholders;
• Identifying, managing and mitigating project risk;
• Ensuring that the solution is of acceptable quality;
• Proactively managing the project structure to ensure that only the agreed
specification is delivered, unless changes are approved by the project
management team;

• Defining and collecting information to give a sense of how the project is

progressing and whether the products are acceptable; and
• Managing the overall work plan to ensure work is assigned and completed
on time and within budget.
4-237 In addition to the technical skills, a project manager must have good people
management skills. These will include things such as:
• Having the self-discipline and general management skills to ensure people

follow the plan set out by the management team and not follow their own
agenda.
• Using leadership skills so that the team willingly follow the leader’s
direction, work together and not against each other. Leadership is about
communicating a vision, having the team to accept it and working to the
same goals.
• Setting reasonable, challenging and clear objectives for people, and

holding them responsible for meeting those commitments. This must
include providing feedback to team members about their progress.
• Team-building skills so that the people work together well, and feel
motivated to work hard for the sake of the project and the other team
members. The larger your team and the longer the project, the more
important it is to have good team-building skills.
• Proactive verbal and written communication skills, including good, active

listening skills.
4-238 Don’t forget that the project manager is responsible for the success of the
project. If morale is suffering or members are missing deadlines, the project
manager needs to get to the bottom of the problems and issues as soon as
possible. If team members don’t understand exactly what they need to do, then
the project manager must act.
4-239 The difficult time is when there are interpersonal conflicts causing the problems.
It is better to try and uncover any possible problems at the recruitment stage by
looking for qualities in individuals that will fit into the culture of the team.

4-240 This will very much be the concern of the leader. Some staff thrive on conflict
and you might get members spurring each other on to higher performances by
the competition that is set up. Other people will not be able to work in an
environment that is a constant battleground. It may be better to choose a slightly
less able candidate for the team just because she/he will fit the particular culture
of the team better than the more technically able candidate. Remember that the
team performance is more important than the individual team members.
4-241 One anomaly that could arise with project management is that you might have
responsibility for a project but without the necessary management authority over
the members of the project team.
4-242 Managing a team in an organisation that has a matrix management structure is
another example. If you are asked to manage a project, where you are utilising
people that you do not have direct management responsibility for, you may find
that your ability to resolve issues is hampered because you are not high enough
in the organisation to get the issue resolved quickly. In other instances, you may
find that your ability to be innovative and flexible is constrained by company
policies or personalities.
4-243 All of these cases can be cause for frustration. One way to deal with this is to
define roles and responsibilities as a part of the project definition. This can help
set and manage expectations. For instance, if you have no budget or expense
approval authority, then note that up front, along with a process for gaining that
approval. Then, if problems do arise later, everyone knows who has the
appropriate level of authority to resolve them. For most project managers, the
frustration level is not caused so much by a lack of power as much as it is
caused by ambiguity. If the project manager does not have the authority, it is
important to know who does, and what process is needed to gain action.
4.2 TARGET SETTING
4-244 The most important thing about setting targets, which has been said time and
time again, is that they must be SMART (Specific, Measurable, Achievable,
Realistic and Time bound).
4-245 This statement on its own raises a lot of questions. If the target is to be specific
then it should be linked to the project as a whole. Possibly a stepping stone to
the overall project objective but definitely a positive move forward.
4-246 How do you measure change? For this to be happen we need to know how far
the project has moved forward. Therefore the base level needs to be defined.
This may be the starting point of the project but also it might be the successful
completion of the previous target that forms the base for the present target.
4-247 A target needs to be achievable, if it is not then the effect will have a demotivating
effect on the project team. The team leader needs to ensure that the timeline is
realistic, any data required is obtainable and also that the methods proposed are
correct to achieve the current target.
4-248 The target has to be realistic and related to the overall project and it is most
desirable not to have open-ended targets that never become realised. If the
project is too big then smaller more frequent targets should be set.

4.3 RESOURCE EVALUATION
4-249 Some of the procedures for project management resource evaluation will be the
same for the superintendent evaluating the requirements of his/her operational
team.
4-250 Based on the objectives of the project the first task to complete is to work out
the skills and qualifications needed to complete the project. Then you can look
for the people that are in possession of those skills and qualifications.
4-251 For example if the company were contemplating a new build how would you
assemble your team to be the owner’s representatives during the building
process. Would you for example select the most experienced Master and Chief
Engineer in the fleet? If so will they be equipped to readily accept the new
technology that would undoubtedly be included these days. Would the staff need
training courses before the project, courses such as gas turbine main engine
operation and maintenance?
4-252 Your human resource evaluation should include the following questions:
• Can the objectives be met with existing staff?
• Will they need staff development training?
• Does the project require specialist skills and will this be for part of the
project or the whole project?
• How many different types of skills are required? Can tasks be combined
to become the responsibility of one person?
• Is there sufficient overlap of skills to cover any sickness problems?
4-253 Any skills gap needing to be filled by either additional recruitment or by staff
development should be determined by the Training Needs Analysis (TNA). When
carrying out the TNA don’t forget employees’ interests and hobbies outside of
their formal training and job function. It may be that navigation or engineering
staff are highly conversant with computer technology because of interests
outside of their everyday work.
4-254 If this is the case then you might be able to use that additional skill in the
planning of the IT strategy on-board. This might be better than expensive
consultants employed to tell you what you already know or could find out using
existing staff.
4-255 It is natural to concentrate on the human side of your project, as nothing will be
accomplished without skilled personnel. However skilled personnel will not be
able to carry out their task without the appropriate tools. Therefore an evaluation
of the equipment and financial resources required is as equally important for the
successful completion of the project.
4-256 The original objectives of the project might have to be re-evaluated in the light
of the human, physical or financial resources available. Some textbooks talk
about double-loop learning as opposed to single loop shown in Figure 12.

4.4 PROGRESS MONITORING
4-257 The Institute of Project Managers have a very informative website at www.
allpm.com (accessed on 30th May 2012). The site outlines the history of project
management, which started in the 1950s and 1960s when very large, complex
projects had to be managed to important deadlines (Figure 12).
Figure 12
4-258 Institute of Project Managers the website also put forward the notion that project
management has the danger of focusing too much on the checking and
monitoring of progress. Senior managers latch onto the fact that they can see
progress from the reports that are produced by the planning process. The
Institute suggest that the project leader would be better employed in inspiring the
team, concentrating on motivating the team members and managing the
relationships between both inside and outside of the team. The Institute is
promoting “project leadership” in favour of “project management”. There is now
growing discussion about the subject of computing and how well it is understood
by organisations.
4-259 The Gantt chart has been used, for many years, for displaying a project visually.
It has been a favourite tool of the project planners because it shows an overview
of the project as well as the tasks and their length.
4-260 A simple chart appears below the triangles representing the critical events and
when they should happen. If these events do not happen on time then the project
will not be completed on time.
4-261 Further examples can be seen on the following website: http://www.suggestsoft.

com/soft/effective-automated-systems-engineering/ease-project-management-
software/ (accessed on 30th May 2012).
4-262 Critical path analysis or critical path method is the system of tracking your
project by setting the time of all the key tasks which cannot be moved without
prolonging the overall length of the project. The critical path method has some
drawbacks (Figure 13).

Figure 13
4-263 As can be seen from Figure 13 Microsoft produce a useful software package called
“Project”. There is a fair amount of automation with this software. For example you
could enter the length of the task in weeks and the dates will be calculated by the
software. The user can choose between working a five-day week or a seven-day
week. The weekends can also be set at overtime rates if required.
4-264 Once the duration of the tasks have been entered into the software then the
sequencing of events can be set. This is done by simply placing the number of
the preceding task against each task. A view of this can be seen in the final

column of the table shown in in Figure 13. The software automatically calculates
the Gantt chart from the information entered in the table. The critical path is
calculated and shown in a different colour.
4-265 None of the information is cast in stone and dates and times can be changed
easily. This enables “what if” scenarios to be explored and the effect on the
critical path can be seen immediately.
4-266 It can also be seen from Figure 13 that individual people can be assigned to the
different tasks. The employment cost can be allocated to the different people and
thus the cost of the project can be calculated.
The Gantt Chart
The critical path
Precedence diagrams
4-267 The precedence diagram shows the sequencing of operations or tasks in the
process. The events can be shown visually so that the most productive method
of sequencing the events can be determined. They do not necessarily give an
exact plan view of the total operation but enough to see, at a glance, where the
bottlenecks are.
4-268 Prior to using these charts it is important to understand work content analysis.
This can be done by use of method charts that define individual task procedures
so that previously established work data can be applied to create realistic work
“man hours” required for each element of the project.
4-269 This is particularly necessary for items on a critical . It is also advisable wherever
possible to look at alternative methodology in order that a choice of strategies
can be used should plan “A” fail to achieve the desired results.
4-270 It is important to ensure that everyone understands that the project is not over
until the final objectives have been reached. This might include producing a
report for a customer or for the internal managers of the organisation (see
Figure 14).
Figure 14

5. MANAGE PHYSICAL RESOURCES
LEARNING OUTCOMES
• Describe the way that information is collected to enable the

management of physical resources
• Outline the need for planning stock level
• Evaluate the need for skilled and semi-skilled labour
4-271 The management of physical resources will require a person with more personal
traits than just technical knowledge. In most cases a manager of physical
resources will also have to manage people as well. This means that the person
specification required for the talk will need to include communication skills,
organisational skills, team-building knowledge and leadership qualities.
4-272 If the manager is to secure the financial backing from the senior commercial
managers then the manager of resources must also be able to understand
where his/her department fits into the business planning for the organisation.
4-273 The machinery critical to the company’s operation should be identified and risk
assessments drawn up to ensure that any malfunction of that machinery has
little or no impact on the business.
4-274 Any organisation operating its business by using resources should work around
the following two ideals:
1. Physical resources deteriorate and need action and or replacement parts

to keep them operating at their design specification.
2. Human beings make mistakes, they are not infallible and managers should
put in place systems and procedures that take this fact into account.
4-275 With the modern use of electronic systems planning for the two factors stated
above become much easier than has been possible in the past.
4-276 Therefore the very heart of any system has to be the requirement for physical
resources to carry out their function to their design specification when they are
required to do so over their design period.

Module 4 Manage Physical Resources
4-277 All the monitoring and control systems to ensure that this criteria is met should
also incorporate a checking system which allows for the fact that humans are in
the loop.
4-278 So where do we start? The initial starting point is for what function are the
resources required to carry out? If we consider a ship then the primary reason
for most ships is to return a profit for the owner.
4-279 Therefore, the primary function of the manager responsible for this physical
resource is to give the owner a return on his/her investment. Having said that the
ROI will come at a cost. The vessel must be operated safely and comply with
international regulations. Any unforeseen eventualities such as collision or heavy
weather damage, must be considered and included in the planning process.
4-280 For the vessel to perform to its design specification it will have to be operated to
the manufacturer’ s guidelines. Therefore any operating guidance or maintenance
system should be set up according to these guidelines.
4-281 If the vessel is new and no previous performance data exists then the team
responsible will have to check that the machinery is performing at its design
specification. Performance data can then be recorded and the equipment
monitored against this criteria.
5.1 COLLECTING THE INFORMATION
4-282 If this task has not been completed as part of the purchase agreement then it
will have to be carried out by the owner’s representatives. The technical detail
related to machinery items should be clearly provided in associated drawings
and maintenance manuals which should also be provided in electronic form. In
a new installation, these will be current and should specify:
• fluid and lubricant type;
• filter specifications;
• operating pressures and temperatures including details of any safety

devices fitted such as fail-safe pressure retaining and pressure relief
valves; and
• any safety procedures.
4-283 In the case of deck machinery, passenger lifts, elevating access and loading
ramps on ro-ro vessels will be fitted with fail-safe devices, which may require
periodic testing.

Manage Physical Resources Module 4
Figure 15
4-284 Some of the systems which at first appear relatively simple may also have
underlying complexities which will need to be clearly identified and may also be
related to safety and security. Some of these are:
• lighting;
• lifts;
• air conditioning and ventilation;
• sprinkler systems;
• sewage systems and other environmental protection equipment;
• self-tensioning devices.
4-285 Details of electrical splitting, distribution and isolation devices, circuit loading
and diagrams have to be specified and recorded accurately. It is important that
the detail is updated immediately following any modifications to the system
(Figure 15). This will ensure that the recording system is holding current data
and, therefore, the maintenance personnel and management information will
also be working with the latest information.

Components in the Control Room Might Need to be Upgraded
5.2 MANAGING PLANNED MAINTENANCE SYSTEMS
4-286 Designing maintenance and renewal systems specifically for the operation
within a given environment provides real-time data to facilitate an early response
to changes in operational patterns. This allows management to explore
alternative cost/benefit strategies, which provide the most desirable availability
levels compatible with acceptable safety and operational levels.
4-287 This early warning system is achieved by monitoring the data stream at various
critical points to provide key performance indicators. The business should also
provide similar performance data from its operational functions. This allows the
maintenance function to respond to any demand that threatens the critical
availability requirement for any important equipment.
4-288 Complex IT driven systems require a relatively extended gestation period before
maximum benefits are realised. The length of this period is proportional to the
enthusiasm and understanding of the staff operating the component parts of the
system.
4-289 Management must take the lead in learning and using analytical methods, to
evaluate and compare performance data at the earliest opportunity. They must
employ a disciplined approach to periodic performance reviews, if the business
advantage of the availability of continuous real-time data is not to be lost or
seriously diminished.

4-290 The stability and future trends of each type of activity on-board should be
qualified by the collection of continuous data by the operating management,
which will then indicate utilisation trends when analysed further up the
management chain.
Maintenance Intervals can be Updated with Information from Actual Components
4-291 In the past the data collected by the watchkeepers has been analysed by the
Chief Engineer and any corrective action indicated through standing orders or
changes to maintenance schedules. In a modern setting this process may have
to be completed in a different way depending upon the level of expertise
on-board. It may well be cost effective to subcontract this work out to a third
party or the original engine manufacturer.
4-292 The viability and direction of any evolutionary changes in the business
requirement should be considered when planning maintenance staff levels and
skills. It will also be a factor when arranging contract maintenance cover and
when determining the total value and lengths of contracts.
4-293 Once the system has been running for the initial period, it may be apparent that
these indicators need to be modified to fit any changes in actual operating
patterns.
4-294 The most recent software systems will cover a wide range of control and
planning functions and should produce all the required maintenance and
functional documentation.
4-295 At a minimum, these should be:
• weekly work schedules and staffing levels;
• detailed work specifications and equipment requirements;
• work orders, including the time allowed for a job (known as a work ticket); or
• materials requisition documents.

4-296 For contractors, the system should provide similarly detailed work orders and
also have provision for the input of daily progress reports on each task, with the
proportion of the target time expended. It should then be able to report any
additional work arising together with the full reasons. The progress report data
will be provided by the contractor and entered into the system daily.
4-297 The weekly work schedule will be formulated from the longer term planned
maintenance scheduling together with the input from any work arising such as
breakdowns and accidental damage repair. The system will be required to report
on the maintenance schedule status, e.g. critical, priority 2 etc and any individual
item that has a critical float.
4-298 It will also report on the availability of labour, the immediate requirement and any
critically imminent shortfall requirement as well as the projected staffing
requirements for any future planned work load.
4-299 The system will have to be able to receive any requests from operational
managers for additional modifications to the maintenance requirements within
their section.
4-300 The materials and any spares required for all operations will need to be
monitored. Systems should monitor the spares required for all operations and all
the logged consumables and spares required for the maintenance plan taking
into account the historic lead time for each item, or any revised lead time that
the procurement officer may require. It must also report on stock levels in relation
to user requirement for future work planned and generate the appropriate orders.
The system will also have to take into account the vessel’s voyage pattern,
change in pattern and the difference between different vessels in the fleet.
4-301 The systems should be generating and recording data on all aspects of the
planned and preventative maintenance system. Not only will it keep an accurate
record of the frequency at which work is carried out on a particular asset, it will
also record if this was planned or unplanned and will be able to report on
achievement of availability targets.
4-302 Because we have recorded both work and materials actually expended the
system will also compare actual expenditure to budgeted expenditure up to that
point in the maintenance cycle so providing budgetary control for each asset.
Another very useful addition to a computerised system is the link to surveys and
statutory inspections. This is particularly useful when matching these inspections
in with the normal planned maintenance cycle.
5.3 PROVIDING AND MANAGING MAINTENANCE RESOURCES
4-303 Once the assets are in place and operated for a while the capital cost and
estimated life of individual components will start to become known. It is now the
task of management to quantify and cost the maintenance resources that will be
required. This maintenance cost will then be used to fully evaluate the overhead
costs of the vessel to the overall business.

4-304 These resources could be placed into four different categories:
1. Consumables
2. Equipment
3. Staff cost
4. Capital expenditure.
4-305 The consumables could be divided again into sub-categories such as:
• Lubricants
• Operating fluids
• Surface coatings
• Cleaning materials.
4-306 Although these resources will not account for a major part of the budget, the
costs involved will be significant. There are also technical, safety and hygiene
issues to be addressed and finally waste disposal must be handled effectively
and safely.
4-307 Lubricants can encompass a wide range of different types and grades; some of
these will be relatively expensive. Although equipment manufacturers will specify
a lubricant type, this can only be regarded as a definitive guide during the early
life of the equipment as research and development will usually lead to the
original lubricants becoming obsolete.
4-308 Considerable economies of scale and subsequent reduction in the stockholding

can be realised by standardising the type and grade of lubricant where this is
technically possible. However, it is recommended that this is only done following
consultation with the equipment manufacturers.
4-309 In order to establish stockholdings and re-order points, it will be necessary to

extract the user requirements from the various maintenance specifications
because this information will form part of the work preparation schedule supplied
with each work order. It will also require a referencing marker, which will be used
for stock choices and forward stock planning.
4-310 Because consumables may not be dedicated to any particular item it will be
advantageous to produce a spares register or inventory. The Chief Engineer will
then be able to make best use of consumables that are common to more than
one item. Each commodity should be given a unique reference, which when
combined with a user quantity, will allow the computer to produce a complete
annual user schedule for each commodity.
4-311 The cost-effectiveness of this action will be justified in the larger bulk purchasing
power due to the larger use of a smaller number of different items. Further to this
it might, for example, be advantageous to fit a larger oil filter within a system

because the larger item is a common stock item rather than the more expensive
smaller item.
4-312 If minimum stockholding levels are set to cover any unscheduled events, then
additional consumables can be purchased on a just-in-time basis to satisfy the
scheduled maintenance requirement. This would then satisfy the accountancy
need to minimise the holding of stock, which has an adverse affect on the cash
flow.
4-313 How this identification marker is dealt with will be a matter of preference from
system to system and on whether the system is manual or computerised. It is
suggested, however, that the marker is dedicated to this purpose and it would
be wise to use a letter that is not used for any other purpose. For the illustration
used here, X will be used.
4-314 In a single-function situation the number of items will be small in which case the
prefix and a running number will be sufficient. In a larger diverse undertaking,
where there is a need to maximise economies of scale and commonality of
components, then it will be preferable to use a second letter to designate each
type of consumable. In modern computerised systems that full name of the items
might be used or indicators inside the computer program might not appear on
the front screen.
4-315 Examples of this could be:
XL = Lubricants
XF = Operating Fluids
XD = Disposable Components
XC = Surface Coatings
4-316 Therefore, the lubricants reference list might be as follows:
XL1 Diesel engine lubricating oil (litre units)
XL2 Vehicle gearbox oil (litre units)
XL3 Machinery gear box oil (litre units)
XL4 General purpose (low melting) grease (kg units)
XL5 No stain hinge and door lock lubricating oil (spray can units)
XL6 Molybdenum oil additive (litre units)
XL7 Molybdenum anti-scuff paste (kg units)
XL8 Water resistant anti-scuffing paste (kg units)
XL9 Copper slip (kg units)

4-317 In addition to the type of lubricant required for a particular maintenance

procedure, it will also be necessary to indicate the quantity required. With liquid
lubricants it may be acceptable to just show the quantity in litres. However, this
will not be the case for commodities that are supplied in set containers such as
grease in cans or oil in pressurised spray cans as shown in XL5 above.
4-318 This procedure can be applied to the other categories of consumable items with
the exception of small disposable components, although there is scope for
rationalisation and designing commonality into the equipment we order in the
future.
4-319 If there has been no management policy in this area in the past, then we may
be faced with an extreme variation in component specification. The best practical
solution to this will be to enter a detailed description of the variations within the
system rather than additional indexing. When the new policy on reducing the
variation of consumables, due to the multiple use of a single product, starts to
have an effect, then the different detailed descriptions can gradually be
removed.
4-320 This action will have the additional benefit of listing these detailed descriptions in
the store inventory and by applying a dedicated marker to each item to identify
the component. This marker can be attached to the maintenance procedure
specification rather than listing components as part of that specification. Therefore,
10 litres of Shell, high detergent oil for diesel engines becomes XL 1/10.
4-321 Capital spares which are items of considerable cost and retain a value even after
use, might be refurbished for future use, or they might be exchanged for
reconditioned or new items from the manufacturer and this could be after a
surcharge.
4-322 Examples of this could be:
• diesel engines;
• gearboxes;
• differential units;
• hydraulic rams and pumps;
• electric motors; or
• air conditioning units and heat exchangers.
4-323 A proportion of capital spares will have a common application in various facilities
but others will have a single dedicated application. The great advantage to the
port is where the stock levels can be reduced due to the operation of a
commonality of parts policy.

Examples of Spares That may be Opdered
5.4 SKILLED AND UNSKILLED MAINTENANCE STAFF
4-324 The complexity and scope of maintenance management within a company can
be complicated by the charter service and conditions.
4-325 In some organisations, the responsibility for loading and unloading movements,
of passengers, vehicles and unaccompanied freight is in the hands of the ship
operator or specialist stevedore company operating within the port.

4-326 This increases in complexity for many vessel functions, particularly security and
the maintenance of standards related to safety.
4-327 Many of these standards are set out in accordance with the requirements of the
flag state and the classification societies and reflected in the ISM system
on-board and in the office ashore.
4-328 However, it will be the responsibility of the company management team to

ensure that the minimum standards are met for equipment design and
maintenance, cleanliness and the disposal of waste, safe operation of equipment,
minimum qualifications and the staff development required, as well as the proper
disciplined behaviour of staff.
4-329 As it will be necessary to ensure that all persons operating on the vessel are
aware of the regulations, applying to them and that it is a legal and contractual
obligation of companies operating on the ship to comply, some formal
documentation will need to be completed by the contractors to provide evidence
that the vessel has completed its part in providing the information to those
contractors.
4-330 Inevitably, these regulations and working practices will need to be policed and
some of this responsibility will fall on the ship’s officers who will be required to
set minimum standards to ensure that vessel operations are not continually
disrupted by other outside operator’s shortcomings. For example, if outside
contractors are trying to bring sub-standard equipment onto the vessel, it should
be explained that this practice is not acceptable.
4-331 Staffing any multi-functional maintenance operation in a business environment

requires detailed and complex analysis even when it is in a far less hostile
environment than that found in most port operations.
4-332 The need to find staff that can perform well in adverse conditions and to ensure
their safety and welfare at all times can be a daunting prospect for any
management. Some of the criteria that needs to be considered are:
• skills;
• physical ability;
• personal fitness and eyesight;
• a willingness to work shift work and in adverse weather conditions using

all the protective equipment that has been supplied; and
• the ability to work as part of a team.
4-333 Operational functions will also have a bearing on how and when maintenance
and repair work is carried out, particularly to the degree of urgency associated
with interconnecting passenger services and the port’s capacity to hold freight
containers and vehicles within its jurisdiction. These will all be factors that must
be considered, together with the financial implications for the basic response

that needs to be provided and the cost that can be justified in providing this
service.
4-334 Another aspect of the assessment must be the volume and type of work to be
carried out over a representative period, together with the degree of local
knowledge and skills required. The priority rating of the operational functions
should also be assessed.
4-335 A prime example would be electrical work, where local knowledge of the main
distribution points and the areas they service, coupled with detailed experience
of machinery control equipment, would make the provision of reliable prompt
cover in this skill a top priority. There may also be a high level of continuous
safety checks throughout, for example a cruise liner, which may well be enough
work to justify full-time staff dedicated to this area.
4-336 Another key area would be the machinery associated with safe docking and
ro-ro access to ships. The loss of a link span due to an hydraulic failure would
cause major disruption, therefore, access to “on call” fitters with skills in the
repair of hydraulic systems and to the correct spare equipment is vital to ensure
the prevention of any disruption in service. As there are five berths to service in
our example, together with extensive hydraulic systems on freight handling
vehicles, this would be another area that would justify the use of full-time staff.
4-337 For a new vessel, on a new voyage plan it may be necessary to build up different
suppliers, chandlers, bunkering stations etc. Consequently, the data will need to
be obtained from equipment manufacturers and possibly other vessels in the
same fleet working a similar operation. If detailed work data can be obtained
from these different sources then the information can be used to build up the
information about the work processes. This is known as analytical estimating.
Further data can then be obtained by carrying out selective maintenance
operations specifically to analyse the work involved.
4-338 This data could be regarded as robust. However, where outside contractors have
been extensively involved it will be more difficult to establish real-time values and
staffing levels as there may be a vested interest on the part of the contractor in
concealing these details.
4-339 Having identified all the maintenance and inspection procedures that need to be
carried out over a complete maintenance cycle and after determining priority
factors, evaluating the work content and identifying the skill level required can
then be accomplished. The workload can now also be analysed to indicate the
staff requirements for each skill group.
4-340 By using targeted staff development and retraining personnel to produce multi-
skill groups in appropriate areas would create a more flexible and manageable
situation overall. The staff can be used where the requirement arises and the
overall numbers can be reduced while keeping existing staff fully employed.
4-341 In a new undertaking, the provision of maintenance personnel will be part of

early personnel planning, personal preference and preconceived ideas should
be disregarded.

4-342 The decisions made should be based on the overall benefit to the business
where specialist skills and accredited certificates are required as with, for
example, passenger lifts and/or gas installations, it may be difficult to justify
direct labour for these specialised areas of work. However it might be cost
effective to have engineering staff obtain certificates of competency for some
areas rather than fly contractors out to join a ship.
5.5 THE SKILLS AUDIT
4-343 Thomson & Mabey (1994) suggest that the information needed for a staffing
resource audit is information about the staff’s:
• relevant training and development already undertaken or in progress;
• occupational experience;
• associated skills and abilities; and
• physical suitability and fitness.
4-344 The skills audit should not, however, be an isolated function of management but
a tool, which would be at the heart of human resource planning or, as Hendry
(1995) suggests, the skill supply strategy. Hendry goes on to say that the skill
supply strategy consists of two things:
1. Understanding and monitoring the existing and emerging knowledge and

skill base of the organisation, in broad terms.
2. Specific initiatives to remedy “skill gaps”.
4-345 If the suggestions from the two parties are combined, then a structure for a skills
strategy starts to emerge. Thomson & Mabey point to the criteria that could be
used and Hendry indicates that the process should be ongoing. Initiatives then
to remedy the skill gaps might possibly be, additional staff or the development
of current staff. The process must be followed up with a check or “feedback” link
to keep it supportive of the changing needs of the organisation.
4-346 Drucker (1990) states that a given organisation cannot reasonably expect to
recruit and hold staff that is significantly better than the general labour available.
Therefore, no organisation can do better than the people it has. It is the effective
management and resultant performance from the staff that determines the
effectiveness of the organisation. This makes a powerful argument when
stressing the need for staff development and accurately matching that
development to the requirement to carry out the strategic plan. However when
working in the global market with the best will in the world the standards of
training and expertise will vary from one administration to the next.
5.6 PURPOSE AND VISION
4-347 With the skill matched to the tasks, within the confines of current knowledge,
then the team must be persuaded to work effectively. It is necessary for the

leader to ensure that the team feels part of the decision-making process.
Therefore, it is necessary to agree as a team the tasks that are to be undertaken.
Agree the timescale and agree the process for measuring progress of
performance.
4-348 Each member of the team must be allowed to progress his or her part of the plan
to the best of their ability with minimum interference all the time they are making
a valuable contribution. Members of the team must then continue to ask
questions about their interaction with other team members. Questions such as:
• Working to our common goal, how do I help or obstruct your progress?
4-349 Each member should also ask of the others:
• This is what you are doing to obstruct my progress, how can we change
procedures to make life easier?
4-350 According to Drucker (1990), the individuals that go through this process every
six months will find that a lot of problems disappear. The company pay people to
do a job who have also been chosen because they have the skill to do that job
then they must be allowed to complete that job. The company, managing director
or team leader must give people the tools to complete the job that is required or
the information they need. It is also important to remove the things that trip them
up, obstruct them or slow them down. The most important thing for the leaders
is not to guess what these things are but to go and find out by discussion and
observation. Shore-based management could ask the ships’ staff to work in the
office for a short period of time to get a better understanding of the management
processes that are in place there.
5.7 OPEN COMMUNICATION
4-351 It is very important within an organisation that members of the organisation keep
each other informed about what is going on and how they themselves are
performing. This open communication then leads to trust upon which all
organisations are built. This is another key element in building a successful
team.
4-352 Another key reason for open communication is the resolution of conflict within
the team. Conflict is an inevitable part of working together especially when highly
qualified people are being asked to work on complex systems and tasks.
4-353 One of the things that I try to insist on is that people are polite to each other
because I maintain that politeness oils the wheels of successful resolution of
conflict. If people are abusive toward each other then they stop communicating
and can even start doing things to put obstacles in each other’s way. If this
happens then neither member is working for the good of the team.
4-354 It is not good to try and prevent disagreement, on the contrary, if disagreements
are discussed than the arguments for and against decisions or strategy are out
in the open. The leader’s job is to show that all opinion has been considered and
that final strategy has been formed from the input and to have the persuasive
power to win the day, thus resolving conflict.

4-355 In the end, it might be necessary to meet with the two parties and resolve the
issue by trying to first find “common ground” and then encouraging each side to
compromise or split the difference.
4-356 Therefore, to build the kind of team you want there are a few key elements to
consider that are crucial:
• creating trust amongst team members;
• allowing differences;
• recognising individual strengths, styles and skills;
• keeping lines of communication flexible;
• being tolerant and allowing mistakes; and
• encouraging brainstorming sessions and off-the-cuff ideas.
4-357 There are very good reasons to include these elements when building your
team. They strengthen the whole team while developing the individual, steering
away from blame and creating a climate of loyalty and support. People will feel
able to voice their opinions and ideas without fear of criticism or humiliation. You
will have a stronger, more versatile and productive team if you carry out these
simple activities.
4-358 It is most important to recognise that a team is a collection of related but

disparate individuals. They may have common goals and purpose, but each
team member will see things differently because no two people see the world in
exactly the same way. Team members do not always have to agree. However,
they do need to negotiate and accommodate all the different views and ways of
working that people have.
4-359 Good team-building means creating a whole, which is greater than the sum of
its various parts, while still maintaining the integrity of each individual.
4-360 Management must formulate a clear plan showing the new skill requirements
indicated by the system together with a realistic time for implementing the new
system. Armed with the evidence of clear reasons for change all the staff should
be consulted and given adequate opportunities to state their opinions. There
may be existing work problems which they would like addressed for example.
4-361 Comprehensive training in operating the new system will be required with
sensible incentives for when the training is complete and personnel can
demonstrate a clear understanding and ability to operate the system.
4-362 Introduction of new or replacement computer systems, for example, can be

strongly opposed, especially by people who are not IT literate. However, as a
better understanding of the benefits of the new system develops, most staff will
embrace change especially as they see that the new system is just a tool to be
used for processing the same information as before only in a different and
hopefully more efficient way.

4-363 Computerised maintenance systems should contribute appropriate information

to the main vessel management information system. This will, if done carefully,
show cost savings and efficiency gains in areas other than with the manual
workforce. For example hand-held computers could hold the information
traditionally collected manually. The person carrying out a maintenance task
could record the spares used and the time taken straight into the computer,
which would remove the need to type up a record.
4-364 The latest generation of hand-held computers could have touch screens
arranged so that yes/no boxes can be marked and, therefore, the maintenance
staff have very little typing to do.
4-365 Maintenance managers must always keep a completely open mind and clearly
identify with the team. Everyone should feel able to express their opinion on
work related issues, providing that when they do it is done with due respect for
those in overall charge of running the system.
4-366 As a manager, your main function is to encourage and enable personnel at the
work point to do their jobs more easily and efficiently.
4-367 If you have identified a clear advantage to the business by using contractors,
then the reasons must be stated. The existing workforce will only be required as
long as the port remains profitable in its overall operation and continues to meet
its customer’s needs.
4-368 The introduction of new technology such as Condition-based Monitoring/

Maintenance (CBM) systems will need to be understood by the ship’s staff if its
benefits are to be realised. It is very important that the correct staff development
systems are put in place.
4-369 The modern vessel will need to be managed from cradle to grave and the total
lifetime cost of the vessel will need to be managed as well. Therefore the
manager in charge of this area will need to take a strategic approach to the
vessel’s management.

6. PURCHASING STRATEGY
LEARNING OUTCOMES
• State at least five steps in the total life-cycle cost of owning a ship
• Explain the system of just-in-time purchasing
• Describe two systems of e-purchasing
• Outline the difference between total cost of purchase and the

purchase price.
6.1 INTRODUCTION
4-370 The maritime industry is now discussing more and more the total life-cycle cost
of running a vessel rather than the short-term approach that has been adopted
over the past few years.
4-371 This way of thinking not only covers the purchase of the vessel but also stretches
to the stores, spare gear, fuel and maintenance.
4-372 This gives the management an opportunity to make a real difference to the
life-cycle cost of operating and maintaining the vessel.
4-373 The technical managers should be continually evaluating the procedures and
modifying practices in the light of experience and the collection of real time
operational data as described in Chapter 5.
4-374 If the projected plan is to spend £100,000 in an accounting period and £7,000
can be saved via changes in procedures or by upgrading equipment then that is
£7,000 that goes straight on the bottom line, which means that the technical staff
are making a positive contribution to the profitability of the company.
4-375 Each company will have a different approach to purchasing due to the differences
in the nature or structure of their business. Some organisations and staff will be
able to choose their suppliers from the open market, while others are restricted
by lists of “Preferred Suppliers”, meaning that they can only approach those
suppliers approved by the parent organisation, regardless of the location of those
suppliers and the costs associated with dealing with such suppliers. It may be that
individuals can make a case for using different suppliers from the “approved” list.
4-376 Therefore formulating a Purchasing Strategy comes about from experience,

training and building up knowledge of the suppliers. If good basic management
techniques are then applied then the relationship will progress.

Module 4 Purchasing Strategy
4-377 In the maritime sector, the purchasing strategy will cover the procurement of
not only materials and products, but also services from repair contractors and
shipyards. It will cover not only the purchase of the equipment but also the
shipment of the equipment to where the ship is going to be at any one
point.
4-378 If the staff have the freedom and in order to satisfy the conditions of the vessel
life-cycle, those responsible for purchasing materials or services must be able to
use a strategy capable of addressing every need to the finest degree while
guaranteeing value for money at every stage of the life-cycle process.
4-379 The vessel life-cycle may be seen to comprise the following elements:
– Specification
– Design
– Construction
– Launch
– Fitting-out
– Handover to owner
– Operation
– Withdrawal
– Scrap.
4-380 The introduction of containerisation has fuelled the globalisation of businesses

throughout the world. It may well be cost effective to obtain parts, and stores
from 5,000 miles away as it is from close by.
6.2 JUST-IN-TIME (JIT)
4-381 The introduction of JIT purchasing has changed the focus of the purchasing
process from the product to production capacity. The JIT principle is that demand
drives the production level so that the products are ready just as they are
required for use. The main aim is to ensure that production is as close as
possible to a continuous process from the receipt of raw materials or components
to the shipment of finished goods. If this system can be used it could be of help
as it reduces the amount of stock that is held but the decisions on how this is
done will have to be taken company-wide.
4-382 This system will be difficult for the marine manager to operate unless the vessel
is on a regular run carrying a similar cargo with each run because for the JIT
purchasing system to work well in a production environment, such as in the
maritime sector, demand must be relatively stable with a commitment over a
term long enough to cover specific investments.

Purchasing Strategy Module 4
4-383 Suppliers must be able to anticipate the demands of the customer, especially by
forecasting demand, often by close communication with the customer to exactly
establish the customer’s needs throughout the project, thus enabling them to
correctly plan their own capacity. Otherwise, the JIT principle will push inventory
requirements back on to the supplier, thus incurring costs that will influence the
cost bid for the supply transaction.
4-384 The manager responsible for the purchasing of equipment for their fleet will have
two major challenges:
• The first is how do you trust the people that you are purchasing from.
• The second is how do you know that you are getting the best value for
money.
4-385 The face of purchasing has been changed by e-procurement but the manager
purchasing equipment for his/her company still has to decide if they should
purchase OEM parts or the usually less expensive alternative of using a supplier
offering pattern parts.
4-386 The OEM component’s price may reflect research and development costs and
take into account a discounted purchase price of the machinery. But the
attraction of pattern parts is always going to be considered when there is an
increased pressure on costs.
4-387 The reality is that there are some very good manufacturers of pattern parts
and the R&D and high quality products are not always the preserve of the
OEM. In fact some OEMs prefer contracting out spares manufacture and repair
to third parties. Where this happens, the third party is subjected to the OEM’s
quality control procedure before being allowed to say it is “approved” in its
advertising.
4-388 But how does a buyer know if a supplier really is approved by the original
manufacturer?
4-389 The answer may seem obvious: call the manufacturer and ask. This is not as
simple as it sounds due to the overwhelming number of suppliers that are
growing in maturity and professionalism in a global market. A buyer’s remit is
becoming more difficult due to the variety of choice available brought about by
the use of the Internet and e-commerce.
4-390 ShipServ helps marine and offshore buyers to find the best suppliers easily,
trade efficiently and build trusted relationships.
4-391 ShipServ’s products and services bring buyers and suppliers together online, in
print, on ship and in person. They offer a large online trading platform, the most
used supplier search engine, a leading ordering guide and the first online ad
network.
4-392 TradeNet easily integrates with all the major purchasing systems in the marine
industry including any custom systems thanks to the Marine Trading Mark-up

Language (MTML) standard; the average TradeNet customer is fully integrated

in days, not weeks or months. If more integration is required, ShipServ’s
integration team make sure there’s no disruption to your purchasing processes.
If you have no purchasing system, you can still benefit from TradeNet because
of:
• ShipLink…the shipboard software that lets ships’ personnel browse

catalogues, create requisitions, manage delivery status and develop
reusable templates. Requisitions are transmitted to shore personnel via
TradeNet for fast approval and action.
• Web Buyer…a web-based tool that allows buyers to review requisitions,

manage RFQs, solicit bids, award and place orders – all without any
software to buy or maintain.
4-393 ShipServ Pages is the search engine for operational ship supplies. It works just
like Google except, since it specialises in ship supplies, it only delivers relevant
results to busy buyers. Pages is a time-saver, making it easy to find new suppliers
in any port in the world.
4-394 The service offers a range of listings and advertising options. Customers can
start with a Basic listing and then move up to a range of high-value, low-cost
options, which are:
• Basic Listing
• Premium Listing
• Catalogue Upload
• Banner Advertising.
6.2.1 Basic Listing
4-395 Is a fast and comprehensive online directory – the choice for 12,000 maritime
purchasers per week. The service allows you to:
• Appear in relevant search results (not prioritised)
• Provide full company details
• Listing in 1 Primary Supply Category
• Listing in up to 3 other categories
• List up to 3 brands carried
• List 1 location
• List 1 port served

6.2.2 Premium Listing
4-396 A Premium listed supplier is ranked higher than a Basic listed and also the
Premium Listings can link themselves to more categories, brands and ports.
This means that your listing is related to a far wider range of search keywords.
4-397 Premium Listings are specially highlighted in the search results page to make
sure that prospective customers see your name first. And if you buy a Category
Banner your Premium Listing will be placed number one in your target category,
country or port. Premium Listing offers:
• Priority placement in search results
• Unlimited number of contact details
• Full business summary (4,000 characters)
• Company logo
• Link to your website
• Up to 10 product sheets or brochures
• Up to 5 Primary Supply Categories
• Unlimited listing in other supply categories
• List up to 20 ports of presence (physical locations)
• List up to 60 ports served
• Optional catalogue upload availability (added €495)
6.2.3 Catalogue Upload
4-398 Once you have a Premium Listing, you can make your entire anglicise searchable
on Pages.
4-399 It’s easy to get started: just place your order and a member of the Catalog Team
will contact you to start the simple process.
6.2.4 Banner Advertising on Pages
4-400 For companies that want to build their brand further flexible range of banner
advertising opportunities is provided.
4-401 There are no casual browsers on Pages. This means you get your company in
front of real buyers looking to buy real products – maximising your sales and
marketing spend.
4-402 Customers can choose from three options depending on their marketing
goals:

General Banner Ad
4-403 These appear on the right-hand side of all search results and supplier profile
pages. Ads are displayed when no Targeted Ads (see below) are available. This
could be a cost effective way to get started with advertising.
Targeted Banner Ad
4-404 A Targeted Ad truly customises the chance to focus your marketing spend on
your target audience because the ad can target specific categories, countries or
even ports (e.g. compressors from Germany). This means that the customer’s
advertisement appears against the specific searches relating to their choice.
4-405 Targeted banners also combine with Premium Listings, letting a specified
Premium Listing gain the number one spot in search results for category, country
or port combinations. You can place any Premium Listing at the top of the search
results – giving you the flexibility to, if appropriate, choose authorised agents,
local branches or regional representatives.
Home Page Banner Ad
4-406 These are displayed on the Pages Home Page for maximum visibility and
impact. Viewed by all buyers who perform a search, which is currently over
70,000 maritime purchasers every month.
4-407 Depending upon the company policy and the decisions of the individual the
responsible person might like to use the IMPA Stores Guide instead of
ShipServ.
6.3 IMPA STORES GUIDE
4-408 Since it was first published under the IMPA banner in 1993 we have worked
alongside partners, Fuji Trading to create a world-leading reference guide and
this website is a platform for discussion, development and continual enhancement
of the six-digit data and the guide.
4-409 Over more recent years IMPA has played a major role in the development of
e-commerce trading standards and we are delighted that following much work
the Marine Stores Guide data is now available for use within ship managing/
operating companies and suppliers. A large part of their website is dedicated to
explaining how this is working and how you can use the six-digit code within your
IT systems.
4-410 The IMPA Marine Stores Guide (MSG) provides a universal coding system to
facilitate communication between ships’ crew, their owner/manager offices and
their marine suppliers.
4-411 The value of this coding system has been acknowledged for many years as a
way to overcome language barriers and to ensure accurate specification of
marine stores.

4-412 Companies wanting to use the IMPA MSG Data Service in their procurement
need to have a data licence agreement, which is issued either by the IMPA office
in the UK or via a number of resellers around the world.
4-413 This straightforward agreement is available in two ways:
• one for suppliers;
• one for shipowners/operators,
and it sets out the revised licence terms and fees.
4-414 Full details are in a new document – “An Introduction to the IMPA Marine Stores
Guide Data Service” – that can be downloaded from the new Marine Stores
Guide website www.marinestoresguide.com (accessed on 30th May 2012).
4-415 A copy of the agreement is included in the document and can be used to apply
for a licence.
4-416 The data is available in a number of different formats for ease of integration with
procurement systems – for instance, it can be used as a Microsoft Excel file or
as a CSV data file.
4-417 Once companies have purchased the MSG data, they will be issued with a serial
number so they can download the data quickly and easily from the Marine
Stores Guide website and import it into their IT systems. Six-monthly updates
will be issued in the same way.
6.4 PLANNING AND FORECASTING
4-418 There are just a few closing things to note about managing the procurement of
supplies and stores for your vessels.
4-419 Obviously operating in a global market you will have to keep on top of global
issues and look far outside of the UK for drivers that will influence your business
price fluctuations and international currency fluctuations will be influenced less
by domestic issues in the UK and more by how the UK interacts with the rest of
the world and issues that are taking place there.
4-420 You will need to develop forecasting techniques to anticipate the demand for a
particular item such as setting up RSS feeds to your desktop or taking out
subscriptions to relevant newsletters or websites.
4-421 Don’t assume that your forecasting will be accurate. There are many occasions
where forecasting does not anticipate sudden fluctuations or unforeseen
circumstances, and for this there is the need for contingency planning.
4-422 Therefore contingency planning must take into account the following:
• Unavailability of supplies
• Cost fluctuations

• Delays in delivery of materials
• Sudden exit of suppliers from the market
• Quality issues
• Unforeseen changes in specifications.
4-423 There is always the need to monitor the original planning schedules and to take
account of any changes. Where changes can be anticipated, then it is easier to
analyse and correct any deviations from the original schedules.
4-424 This is analysed and calculated by taking into account any surplus which
deviates from the norm. This same method can be used in the principle of
Statistical Process Control (SPC), where a set of parameters around the
mathematical mean average are calculated, and the resulting data for the
process is monitored against these parameters. Any substantial deviation is
identified, and the process is adjusted accordingly. This method equates to a
certain extent with the Six Sigma approach, with regard to the eradication of any
problems as quickly as possible with the purpose of the reduction in the faults or
errors in a production or supply process.
4-425 The total cost of a product takes into account all costs associated with the
purchase of an item or service. It includes all aspects of the costs related to the
procurement, production and supply of a product or service from the supplier to
the customer.
4-426 The purchase price of an item relates to the cost of that item in relation to the
total cost for the finished product. However, the purchase price itself can include
several items. These are:
– Materials cost
– Labour costs
– Overheads
– Administrative costs
– Profit
– Cost of shipment (transport)
– Insurance (especially international).
4-427 When a manager is responsible for the procurement of goods or services

she/he will have to ensure that when testing for “value for money” all the costs
are included in the comparison. She/he must remember that this is a COST
comparison and not a PRICE comparison.

7. ORGANISE AND OVERSEE THE
MANAGEMENT OF CONTRACTORS
LEARNING OUTCOMES
• State at least three reasons for using contractors
• Outline four pieces of auditable evidence that could be included in

a ship’s SMS system
• Explain the reasons why contractors must be supervised by ships’

staff when working on a ship
7.1 WHEN TO USE CONTRACTORS
4-428 Modern ships are highly complicated, working to a very tight schedule and
operated with the minimum of direct labour as possible under the international
regulations. Therefore even the most efficiently run vessels will require the
service of repair contractors. Contract expertise and labour could be an option
where:
• there is not sufficient volume of work in a particular skill to allow economic

employment of direct staff;
• a particular skill or expertise is not immediately required to safeguard the

continuous operation of the vessel;
• there is a symbiotic arrangement with another organisation that provides

a continuous service to the benefit of both parties;
• specialist skills and equipment are now readily available; and/or
• service is required by the original equipment manufacturer.
4-429 A number of important qualifying conditions must be in place wherever contracts

are issued for work to be carried out on a company’s vessel.
4-430 These conditions are that contractors:
• must prove that they have a valid safety policy and show evidence that it
is actually being operated;

Module 4 Organise and Oversee the Management of Contractors
• must prove that they have the correct expertise, qualified and certificated
staff to carry out the designated work;
• have sufficient capacity to complete the work within the agreed time and
to the agreed standard; and
• are financially sound and will be able to absorb any start-up costs and
finance the work within any agreed payment scheme.
4-431 All managers and ship’s officers within the company must remember that the
responsibility to ensure that work is carried out safely and satisfactorily still rests
with them. This responsibility cannot be delegated or transferred.
4-432 However as we can imagine, this is no easy task for the officers and crew of a
modern vessel engaged in international trade for the following reasons:
• the vessel might need the service of a contractor in a port where it has
never been before;
• quality assurance and safety standards are not the same in every
country;
• increases in the security of ships means that not all contractors will be
allowed on-board;
• the “emergency” use of contractors in one port could have a knock-on

effect for the ship when it arrives in the next port; and
• language problems could be a problem, especially with new contractors.
7.2 CONTRACTORS AND THE SHIP’S SAFETY MANAGEMENT SYSTEM
4-433 The manager looking after the vessels should ensure that everyone on-board
has a clear procedure to follow when allowing any contractor on-board. Table 1
would be seen as the minimum required by an SMS auditor.
Table 1
Requirement of Contractor Type of Evidence That Could Be

Produced
Training contractors in the content of the Records of training and sample

vessel’s safety management system. responses from contractors.
Is there evidence of all contractors This may be part of the initial
being familiarised with the vessel/unit’s induction process, and should
emergency procedures and include personal reference
requirements documents
(Continued)

Organise and Oversee the Management of Contractors Module 4
Requirement of Contractor Type of Evidence That Could Be

Produced
Are contractors encouraged to be Look for evidence of participation

involved in the vessel/unit’s safety or documented input to the
management processes, such as agendas. If positively excluded
safety meetings? from input, make comment as an
Observation
Are the contractors appropriately Is there evidence that contractor
qualified for their operations and the staff have appropriate training and
equipment placed on-board the “rules of engagement” for their
vessel/unit plant and equipment?
Are procedures in place to verify the Evidence of inspection reports

adequacy of contractor’s equipment
before first use?
Have any additional hazards Log of observations and any

associated with contractor’s operations records of discussions about
and equipment been identified and risk contractor’s operations
assessed and appropriate control
measures put in place?
Are contractors aware that they must There should be a clear

comply with shipboard accident/incident understanding that accidents and
reporting and investigation processes? incidents amongst the contractor
crew must be reported.
Do contractors supply appropriate Ascertain range of equipment

PPE? provided; suitability for jobs
expected; and equipment retire/
renewal processes
4-434 The shore-based manager would also need to ensure that this procedure is
being carried out. There have been some high profile accidents in recent years,
where blame could be laid to rest on the shipowner’s management and ship’s
staff because procedures had not been followed correctly.
4-435 It must be remembered also that procedures and local laws will change as the
vessel travels from place to place.
4-436 For example, IMO do not give specific guidance for the maintenance and
inspection of passenger lifts. They state that the lifts must be maintained in
accordance with the requirements of the classification society that is accepted
by the registry of the vessel.

Module 4 Organise and Oversee the Management of Contractors
4-437 In the UK passenger lifts would have to be inspected, by a competent person,

every six months and the Chief Engineer is not necessarily regarded as a
competent person. However under the Danish authority the inspection is due
every 12 months and the Chief Engineer is regarded as a competent person.
4-438 So the question for the company here is simple, the responsible person will have
to form a close relationship with both the flag administration and the classification
society to ensure that they are within the regulations.
4-439 This might well become complicated if the company’s vessels are registered with
different classification societies or the vessels are under different flags.
4-440 It is worth remembering that where people have a responsibility for the
management of services and they can’t complete a task with the resources
available, then it is often the case that they will use a method or service that they
know will work.
4-441 This means that the manager in charge of a ship or series of ships will use
companies, contractors, individuals or services that they know or trust.
4-442 It is important to build up this trust with companies or people that you know will
deliver for your business. Unknown people or organisations might cost
considerably extra if they don’t complete a good task and damage your business
and/or reputation.
4-443 It might cost legal fees to get compensation and that is only if the company or
person can pay compensation. All in all it is far better to build a relationship with
known providers.
4-444 This does not mean that you should become complacent and just accept their
charges or service without checking out the competition. If they are a good
supplier and value you as a customer then they will want to keep you happy and
informed about their business.
4-445 If a supplier is more expensive than others in a similar business then you must
evaluate why they are charging a premium. They may well be supplying a quality
service and giving added value. If they are then they should be happy to discuss
this “added value” with you.
4-446 The level of service that you want may well determine where you look for this
service and where you actually purchase the service.
4-447 One area of growth in the industry at the moment is with the maintenance and
repair of electronic systems on-board. Now that the old style radio officer is no
longer employed and the new style electro-tech officer has still to become
excepted this specialised area of work will need to be serviced.
4-448 So where would you look for a contractor to carry out repairs on your vessels?
Well northern Europe and America would be a place to start and this may be
workable if your vessel is trading close by, but if not then you might have to look
elsewhere. If the cost of flying contractors around is expensive then you might

Organise and Oversee the Management of Contractors Module 4
look for another company based in say Singapore or you might even train up your
own staff to use as a riding gang depending upon the level of activity necessary.
4-449 One issue that is becoming more complicated, especially in the highly
industrialised nations, is that of employment law. In some cases contractors
could be seen as employees and this point must be considered carefully.
7.3 CONTRACTORS AND HEALTH AND SAFETY
4-450 However the most serious area to concentrate a lot of effort on is Health and
Safety. Increasingly this is an area where the ship’s crew will be in the front line
in the event of an accident. As the advice from the UK’s Health and Safety
Executive (HSE) says the work between client and contractor will be governed
by civil law but health and safety responsibilities are defined by criminal law and
as such cannot be changed by a civil contract.
4-451 Relating to a ship this area of management is so difficult because this issue is
the subject of the law of the land where the ship is situated but the ship is also
subject to the law of the place of registry which complicates matter more.
4-452 It must be remembered that both the client and the contractor have a duty to
ensure that people are safe when they come on-board to work on a ship.
4-453 All the routine repair tasks and proposed repair tasks should be risk assessed
and any precautions identified should be put in place before the work is
completed.
4-454 This is particularly true where entry into an enclosed space is required.
4-455 In any client/contractor relationship, there must be co-operation and co-ordination

between all the parties involved, to ensure the health and safety of everyone
on-board. Anyone that may be affected by the work to be carried out should be
informed of the work. The ship’s staff should set up discussion and communication
arrangements with all parties which could include regular meetings or briefings,
e-mail contact and/or the sharing of mobile phone numbers. This is particularly
important where the work is not straightforward or where more than one
contractor or sub-contractor is being employed.
4-456 Ensure that you have an agreement in writing.

8. ESTABLISH AND IMPLEMENT
SYSTEMS FOR THE MANAGEMENT
OF VESSEL SUPPLIES
LEARNING OUTCOMES
• Outline the concept of total life-cycle of vessel costing
• Describe how to profile their budget
• Explain how cash flow management might affect their working

practices
8.1 PLANNING A COMPANY-WIDE VESSEL SUPPLY SYSTEM
4-457 The management of vessel supplies will of course be linked to an individual

ship’s planned maintenance systems but it will also be influenced by several
other factors some internal to the company and others external.
4-458 Voyage planning for example will determine the spending pattern of the manager
in charge of a particular vessel. This is probably the most obvious factor to
influence but there are others as the modern thinking is now the management
of total life-cycle costs.
4-459 Module 8 will be dealing with this subject in more detail and linking it into the
overall financial accounting of the company.
4-460 It is important to understand that the physical management of the vessel will cost
money to ensure that it is performing to its design specification throughout its
operational life.
4-461 However it is also the responsibility of all managers to constantly look for ways
to improve the cost effectiveness of their operation. It is also the responsibility of
technical staff to constantly look for new technology that will, if implemented,
correctly, save the company money.
4-462 The total cost of vessel management can contribute to the bottom line. Managers
should be looking at the cost of the vessel over its total life-cycle and planning
for ways to reduce the cost of the vessel over that period.
4-463 As we have already seen earlier in the course engine manufacturers are
increasing the time between overhauls for the main propulsion plant. This has
the effect of reducing costs and therefore contributing to the owner’s bottom
line.

Establish and Implement Systems for the Management of Vessel Supplies Module 4
4-464 Germanischer Lloyd (GL) are one classification society that have just announced
another cost saving initiative by extending the time between dry docking. This
means that the shipowner can now dry dock his/her vessel at any time up to a
maximum of 7½ years instead of the usual 5 years maximum.
4-465 This extension however comes at a cost and it is up to the manager in charge
of the physical resource to work out the best cost effective route to take.
8.2 BUDGETS
8.2.1 Controlling Budgets
4-466 The setting and use of budgets is part of the strategic planning process carried
out by the management of the company. This involves setting objectives for the
business before any figures can be added and a budget set.
4-467 Module 1 sets out some basic guidelines for strategic planning and marketing
from the company’s perspective. This will involve the operational business
managers of the company in the planning for, and the setting of, both long and
short-term objectives to meet the business plan.
4-468 This is not a process that should be undertaken at the last minute and the process
will always take longer than you think or longer than the time that has been
allowed. Time and time again business managers have been asked for information
and meaningful figures at the last minute, or there are business managers not
taking time to plan budgets, hoping that the issue will go away for another year.
4-469 Budgets are a necessary part of keeping track of the business and a very
important tool for all managers. The information, whether good or bad, means
that more accurate “informed” decisions can be made, therefore, all managers
should be ready for the budgeting process when it comes around.
4-470 From the business planning will come the financial planning in the form of the
annual budget that is required to meet the strategic plan for that year. Certain
assumptions will need to be added to the plan and the company will require the
ship’s superintendent to contribute to the process.
4-471 This will involve the superintendent making assumptions about the amount and
sequencing of work that has to be done for the forthcoming budget year. The
superintendent must obtain clear information from the senior managers about
any constraints or differences for the coming year. It is not good to put together
a budget that you consider to be realistic only to have it returned with figures that
are totally different from the ones that you constructed, and then to find that the
budget’s total allocation was different from the year before.
4-472 It will be very important to look at last year’s budget and the assumptions for this
year to compare them with the actual outturn for the previous year. This will
enable the superintendent to evaluate his or her forecasting techniques and
systems.

Module 4 Establish and Implement Systems for the Management of Vessel Supplies
4-473 Historical data is always useful, however the budget must be set before the year
end, which means that the most recent data is not available. It will still be
necessary to check last year’s conclusion when it does become available and
also to check that there has been no additional problems between the time that
the budget was set and the time that it is to be used.
4-474 It is important to remember that there is a natural tendency for managers to

procure the best resources that they can, to enable them to meet their objectives.
Senior managers must realise that if the resource allocation is tight, then there
is an increased risk of the managers not meeting their objectives, due to the
inability to overcome small unforeseen events.
8.2.2 Profiling Budgets
4-475 The expenditure of a department or a cost centre will not normally be equal over
the 12-month period. Therefore, it will not be appropriate just to divide the annual
budget equally by 12 to arrive at the monthly allocation.
4-476 An illustration of this might be the company’s ships on a regular operation between
Canada/USA and northern Europe. If the round trip is eight weeks it will be
recognised that the ship’s superintendent will have a high expenditure every other
month. This is because it will be more expensive to send all the spares, stores etc
across the Atlantic. The expenditure will need to be timed to enable the stores,
spare gear or bunkers to be delivered to the most appropriate port on the run.
4-477 If the centre of the company’s administration is in the USA, this will be a port in
Canada/USA and if the costs are less in Europe, the preferred port will be on
that side of the Atlantic. Therefore, the expenditure will be at the end of each
round trip.
4-478 The hit on the ship superintendent’s budget will be before the ship arrives
because, as we have discussed the hit on the accounts and the budget is when
the order is placed and not when the exchange of money takes place. The orders
will need to be placed before the ship arrives in the allotted port to overcome the
time lag involved.
4-479 This means that the superintendent needs to work closely with the finance
department to ensure that his or her profile is correct for the business that the
superintendent is responsible for.
8.2.3 Reporting Budgets
4-480 Another area where the superintendent can help the company budget controller
is with the published monthly budget reports. These reports must be
understandable by the people that are managing the business and, therefore,
they will not need the detail of the financial accounts. If the reports turn out to be
overly complicated, then it is up to the superintendent to point this out and work
with the budget controller to produce reports that are useful and understandable
to the superintendent.

4-481 The superintendent will need be able to check the accuracy of the individual
transactions that have been posted to his or her budget and will, therefore, need
to know the exact amounts together with the supplier’s name.
4-482 Some accounts departments produce reports containing information such as

the company’s purchase ledger code instead of the actual name of the supplier.
This will not be helpful to the superintendent because even with a separate
listing matching the code to the name, considerable time will be lost by the
manager when checking their budgets.
4-483 The budget will also need to be checked against the actual expenditure and this
is where the budget reports might link in with a full set of management accounts.
The reason for this is that the management accounts includes income and
expenditure for a given cost centre. The management accounts would also show
variance against budget as well as showing profitability. A more detailed
explanation of management accounts appears later in this section.
4-484 Budget reports that indicate a variance will have to be explained by the budget-
holder and the reasons discussed with the relevant senior managers. There are
many reasons for variances, some of which are:
• items not included in the original budget;
• items included in the budget but set at a different price or volume;
• allocated expenditure that is now not required;
• expenditure intended for one month that will now not be spent until some
time in the future;
• expenditure that has been allocated to a budget without the budget
holder’s permission either deliberately by someone else or because of a
misposting;
• an administrative hold up to the orders; and
• accounting problems with accruals or pre-payments.
4-485 It will always be the case that unforeseen events will occur. Machinery
breakdowns and errors leading to damage cannot be predicted exactly but they
should still be planned for and, therefore, contingency plans should be built into
the budget.
8.3 THE THEORY OF COSTING
4-486 It is necessary for an organisation to monitor the full cost of providing a service
or manufacturing a product. Some of these costs are easily attributable to a
particular service or component but others are not so easy to deal with. The
different costs are described below.
8.3.1 Direct Costs

4-487 These are the costs incurred as a direct response to providing the activity of the
business. If, for example, a transportation company operated a road haulage

service as well as a shipping service, the cost of diesel to run the vehicles will be
a direct cost to that side of the business, while the cost of fuel oil for the ships will
be a direct cost to the shipping side of the business. The message to understand
with direct costs is that if the activity does not exist, neither does the cost. A major
direct cost of operating a ship, for example, is the cost of the crew.
4-488 These direct costs might also be a variable cost. For example, if the ship’s
activity increases, due to extra voyages and more trade, the overall cost of the
fuel will also rise. However, the cost of the crew will be a fixed cost because the
cost is constant, independent of the earning capacity at any given time.
8.3.2 Indirect Costs
4-489 These are costs not identified as being attached to any one activity but are used
for the benefit of all activities within a cost centre.
8.3.3 Fixed Costs
4-490 These are costs that stay at a constant level and do not vary with the level of
activity. The best example of this being the crew cost as we have mentioned.
Another would be the cost of the food for the crew. These are fixed costs and are
independent of the amount of cargo.
8.3.4 Overheads
4-491 There are areas within the organisation that are used by each of the different
income-generating activities. For example, the cost of the finance department,
the marketing department and the costs associated with the office space will all
need to be shared as fairly as possible.
4-492 Therefore, for example, the cost of the finance department should not be
allocated to any one part of the business because it serves each part, and if we
are to ascertain the true cost of each part of the business, then each part must
also carry its fair share of this and every other overhead.
4-493 The biggest headache is how to allocate the overheads fairly. Let us consider,
as an illustration, the costs associated with operating a business from a building.
Any income-generating activity that is carried out inside the rooms will have
direct costs attached. However, the cost of the rent and rates will be charged to
the building as a whole. This cost must be passed on to the income-generating
activity in such a way that reflects the true cost to that activity. The way to
allocate this cost at first seems easy. If we measure the floor space the cost per
square metre can be calculated by dividing the total cost by the floor space.
Each income-generating activity can then be allocated a cost depending upon
the size of room that the activity requires. However, this would leave a shortfall
because not all areas are income-generating areas: corridors, toilets, storage
rooms and general offices are not all spaces that generate income directly.
4-494 So even this simple exercise has to become more sophisticated. The allocation
of overheads is not an exact science and will be subject to certain assumptions,
for example the cost of the accounting system could be allocated by the number

of transactions made by any one department or cost centre. Departments may

feel that they have been allocated overheads unfairly for certain areas but other
areas will be more favourable.
8.3.5 Depreciation
4-495 The equipment, buildings and grounds that are owned by a company are
collectively known as the company’s assets. A company is allowed to record a
value for its assets in its accounting system.
4-496 However, it can be seen that, although a company might pay the full cash price
for an item, the full amount should not be recorded in the accounts for the one
period because the company will still have some value at the end of the
accounting period. Therefore, some value should be shown in the accounts.
4-497 Let us say, for example, that the company purchases some computer equipment
that cost £3,000. The company must obviously pay for the equipment, which will
reduce the bank balance by £3,000. However, computer equipment is regarded
as having a life of three years, therefore, after the first year the company will
have two-thirds of the value still in its possession.
4-498 The £1,000 charge made against the profit is known as “depreciation” and
£2,000, that is still the value of the asset, is then held in a balance sheet
account.
4-499 The prices for products are initially set to cover all the production costs as well
as the overheads and indirect costs. This will, after adding a suitable profit
margin, naturally determine the selling price. It must also be recognised that the
selling price is also determined by the market that the product is being sold into.
For example, a basic small compact car will be sold to a different type of
customer than will a luxury limousine.
4-500 With this in mind the company may take the decision to sell the product below
its full cost price. Therefore, as long as the selling price covers the direct costs,
the surplus will be contributing toward the overheads of the overall business. This
method of costing is called marginal costing, and is very useful especially if the
organisation has spare capacity or is regarding a product as a loss leader.
8.3.6 Cash Flow Effect on Budget
4-501 Cash flow is exactly as the name implies. It is the recording of the cash coming
into and going out of the business. This is also known as the liquid assets of the
business. A company that has the ability to generate cash to meet its liabilities
will be said to have good liquid assets.
4-502 The management of cash flow is an important part of the accounting service
within an organisation. The timing of when the cash will come into the business
and when it is required to pay the bills is the central part of the management of
cash flow.

4-503 Companies that have been trading well and profitably have found themselves in
difficulty due to cash-flow problems. If you cannot pay your suppliers because
you are waiting to be paid yourself then problems occur and your reputation will
suffer. The accounts department will put a lot of effort into collecting monies that
are due from the sale of goods or services. They will also use legitimate
techniques to hold up payment of suppliers for as long as possible. These two
actions will contribute toward a positive “cash flow”. However it may cause
operational problems such as suppliers that will not supply goods because they
have not been paid on time in the past.

TUTOR-MARKED ASSIGNMENT
You have been asked by the Managing Director of your company to prepare an
initial feasibility study into alternative arrangements for a new Bulk Carrier.
The vessel will be deployed initially on a fixed charter between Australia and
China carrying different types of bulk cargoes.
Your brief is to suggest with reasons the following specification:
• Size of vessel
• Type of discharging system
• Power plant, propeller type and thrusters
• Auxiliary machinery
• Hull arrangement such as bow arrangement, rudders and hull shape
• Class and flag
• Manning level and qualification structure.
Where appropriate you should indicate where there might be an alternative

solution, e.g. slow-speed two-stroke direct drive diesel engine or four-stroke
diesel electric solution.
Suggestions for initial research are:
http://www.dnv.com/press_area/press_releases/2011/ecoreastepchangein
vlocdesign.asp
http://www.classnk.or.jp/hp/publications/Publications_image/bulk_carrier_
pamphlet.pdf (Free login set-up required)
http://www.mandieselturbo.com/files/news/filesof15529/DF_2011-2.pdf (All
accessed on 1st June 2012)

Module 4 Tutor-Marked Assignment
For candidates taking the Diploma option, a Tutor-Marked Assignment must be

completed for each core module. There is a minimum pass mark for each
assignment and candidates will be expected to reach this minimum standard.
Collectively, the assignments represent a possible one-third of the candidate’s
final mark.
On the cover page of your assignment, could you please

include the following information:
Your Name
Course Name – Ship Management
Course Code – FLP2233
To speed the processing of assignments, please return your typed assignment

by post, fax or email directly to the TMA Administrator:
Post: Mrs Parmjit Gill

TMA Administrator
The School of Maritime Operations and Logistics
North West Kent College
Lower Higham Road
Gravesend
Kent
DA12 2JJ
United Kingdom
Tel: +44 (0)1322 629692
Fax: +44 (0)1322 629667
Email: mol@nwkcollege.ac.uk
Remember to keep a copy of your completed assignment in case of loss in the

post. Please also state if you would like confirmation of receipt of your
assignment. If so, you must include your email address, as confirmation by post
or fax is not possible.
Emailing assignments will only be accepted if they are sent as attachments to

the email message.
You should attempt to complete each assignment within four weeks of receipt of
the module.
In order to be able to sit the exam, at least 50% of the assignments must be
submitted three months before the exam and 100% of assignments must be
submitted one month prior to the exam.
Please see your Course Handbook for full details.

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DIPLOMA IN

Ensure Vessels Are Procured, Maintained,

1. MANAGE THE ACQUISITION OF VESSELS . . . . . . . . . . . . . . . . . . . . . . . . 4

1.1 Initial Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2. MANAGE THE DISPOSAL OF VESSELS . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2.1 Green Passport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3. DEVELOP AND IMPLEMENT VESSEL MAINTENANCE PLANS . . . . . . . 21

3.1 Introduction to Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

4.1 The Project Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-1

5. MANAGE PHYSICAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

5.1 Collecting the Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

7. ORGANISE AND OVERSEE THE MANAGEMENT

7.1 When to Use Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

8. ESTABLISH AND IMPLEMENT SYSTEMS FOR

8.1 Planning a Company-wide Vessel Supply System . . . . . . . . . . . . . . . . . . . . 75

4-2 Diploma in Ship Management 2012 / 2013 (FLP2233)

8.3 The Theory of Costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

© Copyright IIR Limited 2012. All rights reserved.

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-3

By the end of this chapter the student will be able to:

• Outline the basic steps in the acquisition of a vessel

• State at least five people or organisations that should be included

• Describe at least two alternatives to the purchase of a new

1.1 INITIAL PLANNING

4-4 Diploma in Ship Management 2012 / 2013 (FLP2233)

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-5

4-6 Diploma in Ship Management 2012 / 2013 (FLP2233)

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-7

1.2 CONSULTATION PROCESS

4-8 Diploma in Ship Management 2012 / 2013 (FLP2233)

1.3 PREPARING A TENDER

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-9

4-10 Diploma in Ship Management 2012 / 2013 (FLP2233)

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-11

By the end of this chapter the students will be able to:

• State at least three different alternatives to selling a ship for scrap

• Explain two reasons for IMO needing to regulate ship recycling

• Outline the concept of the “Green Passport”

4-12 Diploma in Ship Management 2012 / 2013 (FLP2233)

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-13

4-14 Diploma in Ship Management 2012 / 2013 (FLP2233)

4-068 Marine Environment Protection Committee of IMO (MEPC) agreed to refer

• The impossibility of containing pollutants on a tidal beach because where

• The impossibility of rapidly bringing emergency response units, including

• The incompatibility of conducting hazardous waste management (as ships

Diploma in Ship Management 2012 / 2013 (FLP2233) 4-15

• fuel, lubricants, and coolants;

4-16 Diploma in Ship Management 2012 / 2013 (FLP2233)

• floatable materials (e.g., plastics, Styrofoam insulation);

• materials possibly containing PCBs such as wiring insulation;

• harmful aquatic organisms in ballast water; and, currently (on older

• asbestos used as insulation material and in accommodation panelling.

• electrical equipment (e.g., transformers, batteries, accumulators);

• storage facilities for production and other chemicals;

• tanks, diesel tanks including bulk storage tanks;

• stored solvents, and other chemical stocks;

• electrical cabling installed before 1975 (plastic covering may contain

• fire extinguishing and fire fighting equipment;

• piping, valves and fittings;

• pumps and compressors;

• engines and generators;

• hydraulic systems; and