Outsourcing Shipping Management
Outsourcing is a process by which an organization takes the services of an external party to perform some of its operations or functions. Outsourcing is also done by shipping firms all over the Globe (Outsource Freight, 2012). Ship owners generally outsource their operations and management functions to the external parties against for a particular period of time and against a specific sum of money (Lorange, 2009). Outsourcing of the shipping management enables the ship owners to focus on their core competencies and hand over the strategic decision making and policies to the outsourcing parties (AB Crewing, 2012).
Ship owners select the outsourcing parties by analyzing the different aspects of their operations and business environment (Outsource Freight, 2012). There is a full fledge selection criteria which helps the ship owners throughout the outsourcing party selection process (National Freight Management, 2012). The process starts with analyzing the business environment of the shipping firm and the outsourcing party so as to evaluate the different environmental forces that may impact the outsourcing process (Logistic Cluster, 2012). The business model, methodology, and track record of the outsourcing party must match the shipping firm's business strategies (Taylor, 2012).
This paper gives a comprehensive description of the key selection criteria which ship owners use while outsourcing their shipping management to external parties. The second part of the paper gives an explanation to why shipping management should be separated from the ship ownership. All the discussion has been made in the light of recent research studies and reliable internet sources from the relevant field.
Importance of Outsourcing
Outsourcing is any function, process, or task that can be performed by an organization itself but assigned to some external party against a particular sum of money (Hitt, Ireland, & Hoskisson, 2009). Outsourcing has become a common practice among business organizations all over the world (Lorange, 2009). Companies generally outsource some of their operations to some external parties working in regions or geographical boundaries other than their home country. However, outsourcing can also be performed by those external parties in the same country where the company operates (AB Crewing, 2012).
Outsourcing is sometimes referred to as off-shoring which includes contracting some functions, services, or jobs to outsourcing companies in other countries. Outsourcing brings a number of benefits for an organization; the biggest of all is the saving of time and expenses. Business organizations believe that outsourcing give them an opportunity to focus on their biggest strengths and core competencies and outsource the less important projects (Lorange, 2009).
Outsourcing decision in Shipping Management
Shipping firms have also engaged themselves in outsourcing practices since the evolution of Globalization and internationalization of businesses. They are more engaged in outsourcing their logistic services, supply chains, and materials to external parties. Moreover, vessel management is also outsourced by a large number of shipping firms around the Globe. Outsourcing is not an easy process; it requires a careful analysis of all the important factors of the business environment that may directly or indirectly affect the ship owner's business operations and profitability (Lin, Wen, & Ting, 2012).
The success of outsourcing in any type of business solely depends upon the assessment of all the key factors before taking the decision to outsource a particular type of service or job (Hitt, Ireland, & Hoskisson, 2009). Outsourcing may benefit the ship owners in a variety of ways. For example, it enables them to save their costs that are incurred on multiple shipping operations and focus on the most profitable and important operations (Lorange, 2009). It also enables them to keep their full attention towards bringing improvements in the core strengths, overcoming their weaknesses, and availing the potential opportunities by using the core strengths. Keeping in view these major benefits, ship owners can outsource their shipping operations or shipping management to outside parties so that they can only focus on specific aspects of their business (Zaeri, Sadeghi, Naderi, Kalanaki, Fasihy, Shorshani, & Poyan, 2011).
The Key Selection Criteria in Outsourcing Shipping Management
Outsourcing the shipping management involves a careful analysis of the internal environment of the shipping firm itself as well as the current market standing of the vendor or outsourcing firm. A shipping firm can take the outsourcing decision in three different ways:
The complete shipping business operations and the Management functions are outsourced to the third party
Only shipping business operations are outsourced but the Management remains with the owner of the business, i.e. The shipping firm
The Shipping Management...
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