Analysing TQM in the shipping industry

Eurasia International is a wholly owned subsidiary which operate as a competitive third party ship manager. It provides suite of services that covers end-to-end solution for the shipping industry. The key factors for shipping industry success are high quality , cost efficiency and personalised service. The Ship management company should be managing cost more efficiently than the owner of ship.

The key issue highlighted by the case report confronting Eurasia International is to maintain the necessary HR focus while controlling the ship’s cost structure, staying in tune with customer requirements and anticipating the competition. The Strategic Issue identified for the firm is to sustain creating value for shareholders, customers and human resources in the rapidly evolving shipping industry. Therefore a recommendation and implementation plan is generated to confront the strategic issue after carrying out an in-depth analysis and evaluation of alternatives against certain criteria of leveraging key strengths, mitigating/overcoming key impediments and exploiting key opportunities.

PROBLEM STATEMENT

1. Maintaining HR Focus:

According to the emerging trend the constant improvement of the crew was essential to success: the two challenges faced in this regard are attracting the best people and training them. Based on past analysis high training days leads to low employee turnover rate:

The recommendation should incorporate this key factor, and should further lead to a low turnover rate.

2. Image Enhancement:

In the past the third party ship managers received a lot of blame for allegedly bringing down standards and providing inadequately trained crew, Also safety and quality is a key points recognised across industry to measure the efficiency of company. The increasing amount of regulations, by national and international bodies, imposes a lot of restrictions and can indeed hamper reputation of company if the conditions are not met.

3. Cost reduction:

While the cost efficiency is a major criterion for selecting a ship manager, there is a very small portion of ships that are managed by third party managers (Approx 10%), therefore the size of market is very small and with the growing number of third party ship manager companies the competition is increasing for the small pie. Recently the ship owners could operate vessels internally at very low cost by using different flag states and alternative crew arrangements.

The recommendation should better equip the company to fight this challenge and sustain itself in high competition state.

4. In sync with Future:

The ship owners in high cost countries are currently facing shrinking domestic labour forces and rising costs., high attrition rates within the industry and occasional union problems. Also in the coming decades, high global reshuffling is anticipated all this means continuing pressure for ship managers to adapt and be better trained for future.

ANALYSIS

Demings :

1. Create a consistency of purpose toward improvement of product and service with the aim to become competitive, stay in business and provide jobs

2. Adopt a new philosophy: We are in a new economic age

3. Cease dependence on mass inspections to improve quality

5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease cost

6. Institute training on the job.

7. Improve leadership

9. Break down barriers between departments

13. Institute a vigorous program of education and self improvement

14. Put everybody in the company to work to accomplish the transformation

Initiatives :

Cost effective solutions by outsourcing functions to low cost areas

Establishing practices based on the latest know-how and technology

Offering a suite of services that spanned the entire life-cycle of a ship from construction to demolition

Develop a five year plan to expand Eurasia’s customer base to position itself as a Asian company with global operations

To meet customer requirements , it’s able to offer dedicated seafarers qualified for any size or type of tanker , bulk carrier or container ship

Deployed advanced database-management and computerised information systems that gave users access to timely and accurate information

Generate economies of scale by pooling resources with the four other management groups under the parent company

Offer cost competitiness and product differentiation as advantages over its rivals

By staying relatively small within the parent company , it could offer more personalised services and unique business model

Ability to balance the expectations of key constituencies and continuously add value through best practices

Adopt Total Quality Management (TQM) as a model to manage the organization

Create more congenial conditions for shipboard staffs by allowing up to five family members to accompany during shipboard employment

Recruit seafarers internationally and assembled multinational crews

To operate safely and optimally, I’s instituted a management structure comprised of self-check , cross check and external-check components

Fleet-wide circulars were sent out regularly to dissiminate any lesson learned

Provide the foundation for continuous improvement throughout the organization

Devising a framework for performance measurement

Ishikawa :

Training

Continuous Improvement

Statistical quality control

SWOT Analysis

Strength:

1. Prime location of headquarters

2. Offers suite of services (end to end solution)

3. Dedicated seafarers for varying types or sizes of ships

4. Timely and accurate information: advanced database-management and computerized information systems.

5. Economies of scale without merger: part of Schulte Group of Companies.

6. Cost competitiveness and Product Differentiation

7. Provides more congenial conditions for shipboard staff

8. Operations spread over several countries.

Weakness:

1. Fortunes depend on greater trends in world trade.

2. Services are not product centric.

3. Unable to attract the best and the brightest people.

4. No benchmarking with industry’s best.

Opportunities:

1. Labour problems in high cost countries.

2.Growing importance of ISMA: can prove to be platform for

Threats:

1. Limited & small marketplace: Minor increases in the size of world fleet and only 5000 (10%) ships are managed by third parties.

2. Complex and evolving regulations by maritime administrations.

3. Global reshuffling of industry players.

4. Moving towards automation contrary to Bajpaee’s anticipation.

5. Fundamental image problem for third party management.

6. Ship owners can operate their vessels internally at very low costs.

SOLUTION

Quality Solution

After analysis of high yield by successful implementation of TQM; it can be concluded that with implementation of quality guidelines the key resources for Eurasia can be transformed into deliverable output. Following are the alternatives for implementing quality policy in future:

Status Quo: Continue with the existing TQM policy, with no further quality initiatives.

Status Quo with benchmarking: Implementing the TQM policy and also benchmarking against some other industry or past year performance to evaluate progress.

TQM with Six Sigma: New quality certification can be applied for, to take the quality initiative into next generation by implementing Six Sigma quality measures.

Operations Solution:

The problems currently faced by ship-owners related to reducing cost and labour uncertainty, can be rectified by change in operations strategy. Following are the alternatives:

Status Quo: continue with the existing operations and office locations.

Shifting Operation Base: Shifting base operations to ports in developing nations, also moving back hand operations.

Automation: Move towards automation by developing unmanned ships.

Recommendation:

First, after the successful implementation of TQM, Eurasia is now ready for the implementation of six-sigma as a complementary model to achieve higher levels of deliverables. Six-sigma is an effective tool in cutting excess costs. Therefore it be able to enhance the cost competitive advantage to the firm as compared to the other alternative and thereby being more cost efficient than the ship owners. One of the key strength that can be leveraged most effectively, by implementation of six-sigma, is the highly trained workforce and low turnover ratio. Six-sigma can be very effectively be utilized to market the key success factor of professionalism and thereby attracting more customers from the same pie, hence mitigating the impediment of limited market. However, implementation of six-sigma is relatively more expensive than the other alternatives, especially in high cost countries. But it is definitely in sync with future trends in the field of quality management.

Second recommendation of shifting operations is recommended. The other alternatives against which shifting base operations proved to be most viable are status quo and moving towards automation. Considering the size of the firm and risks involved in allocating significant resources and expenses to automation, shifting base operations to ports in developing nations can prove to be the optimal solution for the cost competitiveness. This cost competitive edge against the ship owners internal operations addresses effectively one of the key success factors. Leveraging the key strength of highly trained workforce can successfully streamline the shifting of operations. So shifting the Eurasia’s base operations to these countries is totally in lines with future expectations and it would also reduce cost incurred.

Implementation:

Six-sigma implementation can be quite hectic and demanding in the beginning, as it requires significant amount of management time and resources. Timeline: 12-16 Months

Shifting base operations to ports in developing nations is a tedious process and requires to be carried out in orderly steps to mitigate risks. Timeline: 33 – 43 Months

Major Issues or Obstacles:

Major issues in this process are the following:

Timeline and Complexity for Implementation: Six Sigma is a relatively complex process and requires a lot of time for implementation. It would take a lot of dedication and seriousness on behalf of staff to achieve this.

Relocation reluctance: with the relocation of jobs and base there can be very high reluctance among the existing staff to relocate and the company can witness very high attrition rate due to this decision, which can lead to new team hiring and added cost.

Challenges :

Greater environmental awareness

Increase amount of regulations by national governments and international bodies

To attract the best people

To train people into leadership positions

To retain the talented crews

Voluntary culture of self-regulation