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1 INTRODUCTION

Ships are crucial in driving economic growth because

they are the main transportation modes to cross the sea.

Indonesia is an archipelagic country that has large

territorial coverage of waters. Two-thirds of its area is

covered by the sea. It also has approximately 17,000

small and big islands. Ships are used to deliver goods

and services domestically and internationally. They

also function as commercial transportation for the

people. Therefore, good ship operations with a support

system can generate optimal economic activities and

strengthen the maritime industry.

The high flow of shipping in Indonesia encourages

some ship owners to collaborate with Ship

Management Company (SMC) to support their

operational matters. SMC is the third-party responsible

for managing the daily operations of the ships on

behalf of the owners. Their tasks are manning,

chartering, periodic ship maintenance, and taking care

of the ship's daily administration. Those duties can

make it easier for the ship owners to manage their

operations so that they can focus more on other

operating aspects.

The ship management must be able to manage

broader scopes. The scopes have been increasingly

complex due to environmental regulations, expansion

Evaluation of Determinant Factors Influencing the

Selection of Ship Management Companies

A. Riadi & F. Mudaffa

Universitas Indonesia, West Java, Indonesia

ABSTRACT: Looking at the high flow of the shipping industry and many things related to the ship operations

that have to be done every day, several ship owners have collaborated with Ship Management Company (SMC)

to assist them in managing their ships' operations. SMC is required to be responsible for the daily operational

management of the ship on behalf of the ship owner such as crewing, technical management, administration, and

chartering. Seeing the importance of collaboration and the diversity of services provided by the SMC, it is

necessary to evaluate each determinant factor by the ship owner for the selection of an SMC to assist the ship

owner in choosing an SMC that suits their needs. It is also to improve the service prioritized by the owner to SMC.

The purpose of this research is to identify the determinant factors of SMC selection from the owner’s perspective,

evaluate the importance of each of these factors, and obtain different views between the owner and SMC in the

selection of ship management. The Fuzzy Analytical Hierarchy Process (Fuzzy AHP) method is used for

evaluating weight based on the opinions of the owners and SMC who are experts in their fields. Then, the different

perspectives between the owner dan SMC were obtained from the processing result. The results show that owners

placed their top priority on factors that they can get the most from SMC, such as human resource factors and

services. Meanwhile, SMC placed its priority on cost and its services factors that described the things they must

manage well and optimization provided to owners.

http://www.transnav.eu

the International Journal

on Marine Navigation

and Safety of Sea Transportation

Volume 16

Number 4

December 2022

DOI: 10.12716/1001.16.04.12

712

of authority over coastal waters, and the development

of offshore resources (Frankel, 1982). There are other

settings based on specific regulations that must be

complied with. They come from the ISM Code, ISPS

provisions, flag state regulations, ship management

growth, and maritime laws through IMO, making SMC

must adjust their services. Service quality is a key factor

to consider before choosing an SMC. Some owners only

require the SMC to handle technical management for

their ships. Some only need crew recruitment or

insurance services. Based on this situation, it is

necessary to identify the determinants of SMC

selection from the ship owners’ perspective.

Ship owners can achieve effective market

segmentation, reduce operational costs, improve

operational performance, and meet customer needs

through the SMC to manage their non-core business

matters (Panayides, 2003; Panayides & Gray, 1997,

1999). Some previous studies showed that ship owners

choose the SMC that can support the best performance

and profits. It is also based on the capabilities of the

company's managers, directors, and accuracy in

predicting demands for the ships they manage

(Goulielmos et al., 2011; Pollalis, 2009). According to

some considerations and views, it is important to

evaluate the weighting of each factor contained in the

SMC. Service evaluation is needed to assess the

potential factors that can be developed and improved

for the company's sustainability. On the other hand,

the owners can express their opinions regarding the

services provided, so that SMC can provide the best

services as expected by the ship owners.

Good cooperation between the ship owners and the

SMC can be realized by harmonizing and unifying the

views of each party. This aims to determine and

evaluate the services that influence the values of

success. The research findings can help the SMC for

improving the quality of its services on the

determinants from the owners' perspective in selecting

the best SMC. The results can also evaluate the

weighting of the determinant values and find out the

differences in views between the owners and SMC.

Therefore, the owners can get the best services as

expected, and SMC can carry out sustainable

cooperation.

Previous findings examined the SMC and its

development, as well as determining factors in

selecting a Ship Management Companies using

various methods. The methods include evaluating

SMC success factors using fuzzy logic (Jeon et al., 2016)

and determinants of SMC selection for tramp shipping

companies (Lin et al., 2019). Previous research also

studies the roles of SMC in the shipping industry's

business activities (Bistrivci’c et al., 2011; King &

Mitroussi, 2003; Mitroussi, 2013) and the scaling

method for the priority hierarchical structure (T. L.

Saaty, 1977). On the other hand, this research is related

to the latest ones, namely those related to the analysis

and evaluation of the determinants of an SMC using a

combination of 2 methods, namely fuzzy logic concept

and Analytical Hierarchy Process (AHP) decision

support method with PT SISM, one of SMC in

Indonesia as the object. Besides, this research aims to

study SMC in more detail in Indonesia.

The evaluation variables in the Shipping

Management Industry are intangible and

heterogeneous (Jeon et al., 2016). Some factors cannot

be measured, such as knowledge, information, and

service capabilities. They are included in the

determinants discussed in this research. Therefore, this

research uses the Fuzzy Analytical Hierarchy Process

(Fuzzy AHP) method. It is a combination of the AHP

method and the fuzzy set used to evaluate measurable

and non-measurable factors and makes it easier to

weigh each factor in this research.

2 DATA COLLECTION AND METHODOLOGY

2.1 Data Collection

The data consist of the primary data. They are collected

using questionnaires distributed to PT SISM as the

SMC, and customers from PT SISM as the ship owners.

The data are collected using questionnaire instruments

that are easily and commonly distributed to the

respondents to obtain the primary data. This

questionnaire facilitates answering paired questions

and getting the value preference of a measure. The

questions are based on the arrangement of each

criterion and sub-criteria. The results show that seven

respondents can represent the company's internal and

external clients in terms of the ship owners and PT

SISM related to the SMC.

Respondents' data are assessed using a Likert scale

to measure a person's opinions, perceptions, and

attitudes. The scale also shows the level of agreement

with a series of questions. In this research, the Likert

scale data are changed into numbers that follow the

concept of fuzzy logic with lower, middle, and upper

limits (l, m, u) as shown in table 1 below.

Table 1. Likert scale (concept of fuzzy logic), (Source:

(Puspitasari, 2009))

________________________________________________

Saaty Fuzzy Definition of Linguistic Variable

Scale Number

(l, m, u)

________________________________________________

1 (1,1,1) Two elements have the same importance

3 (1,3,5) One element is slightly more important

than the other

5 (3,5,7) One element is more important than the

other

7 (5,7,9) One element is more important than the

other

9 (7,9,11) One element is more important than

another

2,4,6,8 (1,2,4), One element with a similar value to

(2,4,6), another

(4,6,8)

and

(6,8,10)

________________________________________________

2.2 Determination of Criteria and Sub-criteria of

Determinant Factors

Criteria and sub-criteria of the determining factors are

prepared to fix the questions for the respondents.

Determination of the factors for the questionnaire is

done using literature reviews from previous

journals/research related to the general description,

objectives, and functions of the SMC. There is also a

consideration of the 2009 BIMCO Standard Ship

Management Agreement as a reference for the

agreement between the ship owner and SMC (BIMCO

713

et al., 2009). The obtained criteria and sub-criteria are

written in Table 2.

Table 2. Determinants of Criteria and Sub-criteria

________________________________________________

No. Criteria Sub-criteria

________________________________________________

1. Cost Efficient management of ship operating

costs

Ship management fees

Commission days

Transparency of the use of funds

2. Human Ability to recruit skilled workers

resources Experience in the ship management

industry

Professional and knowledgeable workforce

3. Services Good quality management service

potential

Quick responses to the owners

Coordination of ship verification reports

Sensitivity to IT systems

Responsiveness towards the owners’

policies

4. Business Building sustainable collaboration

Development Company reputation

SMC Fleet Size

________________________________________________

2.3 Method

Fuzzy AHP is a ranking method for making a decision

(multi-criteria decision making). Fuzzy AHP can cover

the shortcomings of AHP related to problems in each

criterion which tend to be subjective and many (Elveny

& Syah, 2014). Meanwhile, the logic of fuzzy concepts

can help in making measurements related to subjective

human judgments in language or linguistics.

The AHP method was introduced by Prof. Thomas

Lorie Saaty (R. W. Saaty, 1987). It is a model for

supporting decision-making by looking for rankings or

priority sequences from various alternatives for

solving problems. Some basic foundations in solving

problems using AHP include hierarchical models,

considerations or judgments, synthesizing priorities,

and logical consistency. Besides, there are basic axioms,

including reciprocity, uniformity, interdependence,

and hope (T. L. Saaty, 1977). Pairwise comparisons

with all hierarchical elements aim to determine the

priority arrangement of elements. A scale with an

interval of 1 to 9 is needed to test the overall priority

against changes in the comparisons.

The concept of fuzzy logic ("vague”) was developed

by Professor Lotfi Zadeh. It is a development of the

previous theory related to the crips or firm set. In the

crips set, there are only two possibilities for

membership; being a member or not, or something like

"black or white" (Goguen, 1973). Meanwhile, the fuzzy

set members have a fuzzy value between false and true

or such as "gray" (fuzziness) displayed in a curve to

show the mapping of fuzzy number points to set the

degree of membership (Equation 1). It has an interval

from 0 to 1. This research uses triangular fuzzy

numbers (TFN) arranged based on linguistic sets to

obtain the degree of membership in the Fuzzy AHP

method. Significant levels in AHP are converted into a

set of TFN scales represented by a triangle that has

three parameters, namely a, b, and c (with a < b < c)

expressed through a triangle (x; a, b, c). The image

mapping of triangular fuzzy numbers is described in

Figure 1.

( )

( ) ( )

1 2 3 1 2

3 3 2 2 3

/ ,

µA



    









− −  





− −  







Figure 1. Image mapping of triangular fuzzy numbers,

(Source: (Goguen, 1973))

TFN can describe the subjectivity in pairwise

comparisons and the degree of certainty of the

obscurity. Therefore, the linguistic variables can be

used by decision-makers to represent the data

fuzziness if there is a discontinuity with the TFN.

The data are processed using the fuzzy AHP

method supported by spreadsheet application. The

stages start with forming a fuzzy pairwise comparison

matrix (Equation 2).

12 1

21 2















(2)

where:

aij = [lij,mij,uij]

∀ij = 1,2,…,n

lij is the lower limit value, mij is the ideal value, and uij

is the upper limit value.

The consistency of fuzzy pairwise comparison

matrix must be tested. Since the matrix is inverse, only

the lowest and highest triangular element values are

tested. A comparison matrix is consistent if it meets the

following conditions.

( ) ( )

Max Min

k ik jk k ik jk

l l u u

(3)

for all i,j,k = 1, 2, 3, …, n

Next step is the calculation of fuzzy weighting. The

fuzzy weighting assessment is calculated using the

geometric mean of the column vector. The fuzzy

weighting assessment of

can be calculated as

follows:

( )

i i N

W Z Z Z Z

−

=   

(4)

( )

i i i iN

Z a a a=  

(5)

714

where:

aij : column i, row j of matrix, i, j = 1, 2, ..., n;

Zi : the mean value of the column vector of fuzzy

numbers, i = 1, 2, ..., n;

Wi : weighting of indicators i

⊗ : multiplication of fuzzy numbers

⊕ : additional fuzzy numbers

The next step is the calculation using the center area

method. The defuzzification can be calculated to assess

the fuzzy weight (DFij) (Tzeng & Teng, 1993):

( ) ( )

ij ij ij ij

u l m l



− + −



(6)

where:

uij : upper value of TFN in column i row j

mij : middle value of TFN in column i row j

lij : the lower value of TFN in column i row j

The next step is the weighting normalization

process (Ni). It is calculated as follows:



(7)

where:

DFij : defuzzification value in column i row j

∑Fij : total defuzzification value in column i row j

3 RESULTS AND DISCUSSION

3.1 Results

The fuzzy AHP method starts with creating a pairwise

comparison matrix such as the formula (2). The next

steps are fuzzy weighting, defuzzification, and

normalization carried out sequentially by referring to

the formula (3), (4), (5), (6), and (7). It can be seen in the

order of factors from those with the highest priority

level. The data obtained through the questionnaires

filled out by the ship owners and SMC are processed.

The final results of the weighting for each criterion and

sub-criteria are in line with the previous descriptions

related to the perception of the ship owners and SMC.

Based on the weighting for each criterion, there are

some differences in perception between the two

parties. They are related to the factors of interest in

choosing an SMC, as can be seen in Figure 2. The figure

shows the difference in the order of priority between

the owners and the SMC. The owners feel that superior

human resources owned by an SMC are the most

important because in the business services industry,

human resource advantages the power offered that the

customers focus more. On the other hand, SMC

believes that cost is a good factor because it is related

to the amount of money for each ship in daily

operations.

Figure 3 shows the weighting for cost sub-criteria.

From the figure, it seems that both owners and SMC

have the same view. The priority is efficient cost

management of ship operations. It is due to the amount

of nominal money that must be managed by SMC and

issued by the owners for one voyage for each ship.

They also agree on commission days based on the

ability to operate within one year. It aims to minimize

breakdown time and maximize benefits.

Figure 4 shows the weighting for human resource

sub-criteria. The figure shows that according to the

owners, the SMC must have a professional and

knowledgeable workforce. Expert workforces can also

determine the quality of management services (Dickie,

2014). SMC thinks experience in the ship management

industry is good. Long experience means more

problems can be solved by internal workers. The

owners want to get the best provided by the human

resources of an SMC.

Figure 2. Result of Main Criteria Comparison

Figure 3. Comparison Results of Cost Sub-Criteria

Figure 4. Comparison Results of Human Resources Sub-

Criteria

Figure 5 shows the weighting for services sub-

criteria. SMC agrees that quick response to the owners

is a top priority. Establishing communication between

two parties is good, especially for deciding certain

conditions. Quick responses and coordination of ship

verification reports are the two most important factors

in terms of service. It means that the communication

and coordination provided to the owners must be

considered deeply based on the SMC perspective.

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Figure 5. Comparison Results of Services Sub-Criteria

Figure 6 shows the weighting for business sub-

criteria. According to the ship owners, building

sustainable cooperation is the best factor because the

ship operations must be based on their ages. The SMC

must have sustainable characteristics so that the

owners do not need to change the SMC until there is a

ship demolition. A company's reputation becomes the

second priority for SMC because companies usually

raise better chances to promote themselves to the

clients. Besides expanding their market shares, better

companies' reputations can also make clients sure to

establish cooperation. According to the owners, this

factor is not so important because it is external or does

not directly intersect with them.

Figure 6. Comparison Results of Business Sub-Criteria

3.2 Discussion

The research findings show that the ship owners place

their top priority on something they can feel directly,

such as human resources (HR). It is because the HR

provided by SMC can directly affect the quality of their

services. Previous study indicated the three most

influential factors; operational cost, the ability to

recruit human resources, and good management

quality as the first rank (Jeon et al., 2016). There are

similarities between these two findings. The ship

owners consider human resources and management

services as the most crucial matters. However, the

previous study proves the owners place their most

important priority on managing ship costs. The owners

prioritize the best things they can get in selecting an

SMC.

Meanwhile, the SMC prioritizes the cost and

services. This illustrates that an SMC focuses more on

good cost management, considering that cost reduction

is good for efficiency. Quality service also becomes a

selling point of ship management to the owners. That

is why because the service is one thing that the SMC

emphasizes. If SMC follows the ship owners’ view by

prioritizing and developing workforces, there will be a

good and sustainable collaboration in the future.

However, money must also be prioritized in future

strategic steps.

4 CONCLUSION

This research aims to identify and evaluate the

determinants in the selection of a ship management

company. The ship owners can consider and select an

SMC appropriately. The findings can also assist the

SMC in improving the quality of its services. Therefore,

the owners can get the best service as expected, and the

SMC can carry out sustainable cooperation. The

research generates a priority order of the factors in the

selection of an SMC by the owners. The results show

that the owners are more concerned with the factors

that can directly influence or support maximum and

optimal achievement. They do not care about external

matters. Human resources and services belong to the

top priorities. The owners focus more on human

resources in choosing an SMC. Meanwhile, the SMC

does not describe the same thing but highlights another

factor (cost). It mistakenly thinks that the owners only

focus on management and its financing. Therefore,

there is a difference of opinion between the two parties,

where the owners concern more about the factors that

they can get the best from an SMC, while the SMC

thinks more deeply about something they must

manage well and the optimization they can provide.

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