Quality in Project Management BJMP 5043

Name: Nyanapriyaa Mageswaran Metric Number: 818934

Eurasia International: Total Quality Management in the Shipping Industry

1. With the changes taking place in the shipping industry, what were the ship-owners'
motivations for outsourcing vessel and crew management to third-party ship
manager?

Ship-management companies provide ship-owners the alternative of sorting out shipping

operations apart from asset managements, sales and marketing aspects of their business. This
allows the owners the privilege of focusing on revenue-generating in their business (such as
marketing cargo space).

There were a quite a number of high-profile shipping accidents in the 1980’s, climaxing in
the highly publicised 1989 Exxon Valdez tragedy. Thus, ship operators found themselves in
public interest and they had to guard their industry against alleged scarcities. Third-party ship
managers were blamed for apparently ignoring standards and supplying inadequately trained
crews.

Besides that, safety and environmental standards also garnered attention as the industry
emphasised the need for greater environmental awareness. In addition to these issues, there
were also increasing amount of regulation was being enacted on shipping industry by national
governments and international bodies. Ship managers were operating in a climate of
increasing complexity. Since early 1990s, ship managers had to encounter increasing
regulatory burden as international trade bodies and regional regulators introduced multiple
rules and security measures. Consequently, they had to hire highly skilled support, training
and supervisory staff. Accordingly,ship managers also confronted persistent pressure to
sustain or even diminish management fees in the lows of shipping cycles.

In means of cost-cutting, ship managers were often accused for a professed decline in
shipping standards. Therefore, an informal association of leading ship managers founded the
International Ship Managers’ Association (ISMA) in 1991 to pursue a quality superlative for
the industry. The ISMA code of ship management was issued in 1998, stipulating audit-based
compliance as a condition for membership. ISMA was a driving force to enforce voluntary
standards and to induce proactive role in influencing the evolution of shipping industry and to
continue the group’s quest of the highest standards in ship management.

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2. How was Eurasia able to differentiate itself from the competition?

Eurasia choose Hong Kong as its headquarters as it has one of the busiest container ports in
the world and it also had all five basic criteria that is crucial as the choice of location: a
sophisticated telecommunications infrastructure, an extensive air transportation system, an
advanced banking infrastructure, a low tax regime and a productive workforce.

Eurasia had established regional headquarters in Hong Kong, Bombay and Hamburg, and a
number of regional offices, extending its coverage to offer year-round, worldwide services.
Initially it had started with a fleet of just a few ships in the 1980s, and Eurasia had expanded
to a total of 90 ships by 2004. Eurasia established itself as an Asian company with global
operations. By 2004, Eurasia was offering a suite of services that encircled the entire life-
cycle of a ship from construction to demolition. Fifty-six per cent of its managed fleet
belonged to Asian owners (approximately 80% Japanese) and a growing European element
was prominient within the remaining component.
As a manager of its customers’ assets, Eurasia offered services in three categories: ship-
management services (the biggest category), marine consultancy services and shipping
services:

Ship Management: Technical Ship Management, Crew Management, Commercial Ship

Management
Marine Consultancy: New building and Design Consultancy, Quality Assurance
Consultancy, Risk Management Consultancy
Shipping Services: Port Agency, Procurement and Logistics, Sea Chef Maritime Catering

Unlike some of Eurasia’s competitors that embarked on niche marketing strategies, claiming
distinctive competencies in managing certain classes of vessel or as technical, financial
management, risk management or liability experts, Eurasia’s service offerings were not
product-centric. Through Eurasia’s marketing strategy, a client could pick and choose among
the numerous services and a service package that would be assembled accordingly. To fulfil
customer necessities, Eurasia offered devoted seafarers fit for any size or type of tanker, bulk
carrier or container ship. It also arrayed advanced database-management and computerised
information systems that gave users access to opportune and precise information.

Eurasia’s strategy was not geared towards size. As a member of the Schulte group of
companies, it could trigger economies of scale by pooling resources with the four other
management groups under the parent company. Eurasia could offer both cost competitiveness
and product differentiation as advantages over its rivals. “Being the Best, Not Necessarily the
Biggest” is Eurasia’s objective which is not to strive for momentous growth in a given
market, but to provide the highest-quality service while satisfying customers, shareholders
and staff. Eurasia is able to manage expense items such as training, human resources
administration and insurance through a common pool. Eight thousand diversely experienced
seafarers of various nationalities were available to take on contract assignments through the
Schulte Group’s eight international manning and training centres. Eurasia thus bolted
pressures to acquire or merge with other companies to remain cost-competitive. By staying
relatively small within the structure of the Schulte Group, the Company was able to offer far
more tailored services and to uphold a somewhat exclusive business model compared with
the competition.

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Quality in Project Management BJMP 5043

3. What is Total Quality Management (TQM), and why was it an appropriate

organisational change mechanism for Eurasia?

TQM is a system of organisational management based on a framework of continuous

improvement. Therefore, it had both cultural and technical dimensions, and emphasises
proactive leadership and firm commitment on the part of management.

The TQM approach could be viewed in terms of four components:

 A definition of quality in terms of the customer’s requirements

 A work system that included planning, budgeting, reward-recognition and other
systems to consistently produce quality
 A meaningful way to monitor and measure the results of the system

By means of restricted resources, the challenge of ship management was to placate and
poise the expectations of shareholders (who wanted greater dividends), customers (who
demanded personalised service at low prices) and staff (who wanted job security, better
compensation and good working conditions).
Mr Bajpaee saw Total Quality Management (TQM) as a useful model that could place his
organisation in a favourable condition.

With the re-engineering of business processes and establishment of best-in-class

benchmarks, TQM was formally implemented at Eurasia in 1995. Within the Company’s
organizational context, Mr Bajpaee realised that TQM is an approach that could
competently convert Eurasia’s fundamental assets such as its people, processes and
technology into deliverable outputs.

The ship manager’s challenge was first and foremost to have the right people, at the right
place and at the right time to operate the vessels under its management. In Mr Bajpaee’s
opinion, it was obligatory to start by conceding that relentless improvement of the crew was
vital to success. Conversely, there were two principal challenges: one was to attract the best
people, and the other was to train them into leadership positions. With competing shore
based jobs offering stable work hours and established career paths, Eurasia bid to create
more genial conditions for shipboard staff such as by allowing up to five family members to
accompany certain seafarers during their shipboard employment. Eurasia recruited seafarers
internationally and assembled multinational crews. At Eurasia’s helm, Mr Bajpaee saw the
need to grow beyond an Asian base and to construct the group’s business accordingly. He
advanced a five-year plan to magnify Eurasia’s customer base and cultivate operations to
cover the three major world regions: Asia Pacific; Europe and the Americas, and the
Middle-East and Africa.

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Quality in Project Management BJMP 5043

4. How was management's commitment crucial to the success of Eurasia's TQM

effort?

A ship manager had to maintain the necessary HR focus while controlling the ship’s cost
structure, staying in tune with customer requirements and anticipating the competition. To
warrant that the vessels under its management were operated safely and optimally, Eurasia
instituted a management structure comprised of self-check, cross-check and external-check
components, equivalent to the company’s shipboard, fleet management and support teams.
The self-check component was conducted by teams on board Eurasia’s vessels.

The cross-check component was steered by Eurasia’s shore-based fleet management

professionals who monitored and reviewed shipboard performance against established
policies and guidelines. The external check component was piloted by teams of cross-
functional support staff who represented as referees in undertaking challenging situations.

When any defects or deficiencies were acknowledged, they would be examined by a

“reliability team” to conclude whether the root cause was due to failure on the part of the
crew, a failure in the system, a failure of equipment or some combination of the three. The
appropriate remedy would then be prescribed; if the cause of failure was people-related, then
the situation was further analysed to regulate whether the issue involved crew members’
skills, knowledge or attitudes. If required, a training module would be established to address
the specific problem. If the failure was due to equipment malfunction, then adjustments were
made to the maintenance regimen. If it was deemed a failure of the system, then the relevant
policies and procedures were modified. Fleet-wide circulars were sent out regularly to
disseminate any lessons learned.

Total employee training at Eurasia was the highest level in 2002, while in the same year;
employee turnover was at its lowest level ever. So that the management could measure
performance at all functional levels, Eurasia dedicated noteworthy means to perpetuate
performance measurement systems. In concocting a charter for performance measurement,
Eurasia’s senior management prearranged individual business targets around a leadership
model comprised of four core values: customer value, human value, shareholder value and
leadership/intellectual value.

Key Performance Indicators (KPIs) were enforced for which parallel objectives and
responsibilities were identified. All sea-based and shore-based groups within the Company
had performance targets at the business unit, team and individual levels. This dimension
framework permitted senior management to discern how all parameters were working on a
virtually real-time basis. To complement this information, key data from external market and
financial information providers were collected and analysed recurrently. Innumerable forms
of analysis were engaged, including financial analysis, root cause analysis, trend analysis and
regression analysis; the findings and results were conveyed to the pertinent parties for
auxiliary action.

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