UCAM/CIQ/203 Quality Management Approaches on Mediterranean Shipping Company Assessment 1A Answer

Q1: 

Company background:

In 1970, Mediterranean Shipping Company (MSC) a Swiss-Italian international company was established by Gianluigi Aponte in Naples as an operator of a tramp with a single second-hand ship carrying containers. The company then expanded its operations with the continuing by second-hand ships and by 1977 the company expanded its services Indian Ocean, Africa, and northern Europe, and by 1980 the company operated ships in Australia and North America. Currently, the company has 471 vessels for containers and considered the second-largest shipping company in terms of container capacity (Msc, 2020).  The company has it’s headquartered in Geneva, Switzerland, and around seventy thousand employees worldwide with 480 offices in one hundred and fifty-three countries. 

Principles of Operation:

A global leading shipping company like MSC the business environment is complex and the management needs to apply various operation principles to ensure the total quality management and which helps to achieve the business goals of MSC. These principles are very important to the company’s perspective. These operation principles are discussed below with justification why it is important for the company:

1. Reality: The operation management needs to be focused on the entire problem instead of just relying on the techniques (Business Tech, 2017). There is no tool developed that provides all solution to every issue that arises in the company.  In a global shipping company like MSC, various problems arise related to legal, business strategies, shipping operations, business strategies, workforce issues, etc. All these problems need to attended and analyzed separately and find a specific solution as well. If the solutions cannot be found on an immediate basis than the management needs to find ways to deal with it. So it is a very important principle for MSC shipping.
2. Organization: In MSC or any other shipping company being organized is the fundamental key principle (Grant et al. 2017). The business process and shipping process and all other organization processes in MSC are interconnected. All of these elements of processes need to be consistent and predictable so the operation of MSC can achieve a profitable outcome. The organized process helps to prevent disruptions so the company operations can be run smoothly.
3. Fundamentals: The management of MSC must know the way to comply with the fundamentals of shipping operations because it is important for the company’s success. It is important to ensure that the shipping operations like port handling (both loadings in berthing and unloading in destination), Berthing and sea voyage, container pickup and delivery by the truck which summarize in two different operations like port to port service and door to door service are properly handled (Grant et al. 2017). Also, the management has the fundamental basic knowledge about other ship management operations which are purchasing, crewing, technical management, marine insurance and claims, ISM, and ISO 9002 (commercial). The management has to ensure the accuracy of the above shipping operations, data, BOM, and other basic tasks of business operations related to shipping to achieve the results the company expects.
4. Accountability: The management of MSC is responsible to set regulations, policies also they are responsible for assigning responsibilities to their subordinates according to their efficiency and capability also set objectives and goals for the employees. Also, the management’s is to check regularly if these objectives are achieved regularly (Business Tech, 2017).
5. Humility: There are various operations in shipping which needs types of machinery to operate and those are very costly and also ship management and servicing is a costly process as well. Also for each process in the company trial and error is proved to be very costly so management of MSC needs to understand they have limitations. With that, the company can save money and time which are going to assist them in their operations in the long run. 
6. Variance: In every management, process variance needs to be encouraged. IN MSC variance is an important principle for operation and needs to manage properly.  Because it can be a creative source for the operational process (Grant et al. 2017).  
7. Quality Control: Quality control is essential for MSC and without proper quality control the customers, clients, and partners can be satisfied properly with the service MSC is providing. 
8. Knowing the competitors: There are various shipping companies is in the market that also provided quality services.  MSC needs to understand the competitor’s customer base services they provide, practices, and other forms of competitive advantage they have so the company can maintain and advance its position in the global scenario.   

Operation Strategy of MSC:

Operational strategies described as the methods that companies utilize to achieve objectives. By developing strategies for operation, organizations can test and apply efficient and effective systems for work processes, staff, and utilizing resources (Richards-Gustafson, 2019). Companies which are Service-oriented use basic strategies for the operation to integrate short-term and long-term decisions for business and create a team of effective management. For MSC the company’s operational strategy must be aligned with the corporate strategies. The corporate strategy of MSC is to align its strategy with universal values and principles in anti-corruption, labour environment, and human rights. Their corporate strategy based on sustainability with a strong commitment to their employees, communities, and the environment. The company’s operational strategy is discussed below with the alignment with their corporate strategies:

Continuous development of new service offerings: Every company needs to develop new products and services to offer in the market to remain in the competition and gain a competitive edge (Richards-Gustafson, 2019). For MSC the company develops various service offerings like online container booking, tracking shipment through their websites are very effective,  Also the service needs to be improved and it should be more environmentally friendly like using hydronic grabs for container unloading, etc.

Core competency development: It considered a resource and strength of the company. The core competency of MSC allows them to get optimal business locations, staffs with well trained and expertise in finance and marketing aspects. With an efficient core competency, the company can develop good service, building strong bonds with stakeholders, and achieve customer satisfaction (Ferdows, 2018).

Competitive priorities development: The MSC competitive priorities that MSC develops based on the cost of operations, service quality, prompt delivery of best services, service flexibility regarding customization, and variety. MSC provides the best and flexible services with a varied range to their customers which are environmentally friendly as well. It gives them a competitive edge. The service they provide has a fair cost with the aim to satisfy the need of the customers.

Customer-driven strategies: MSC’s strategic approaches are customer-driven and they aim to meet the needs of the target market’s customer. The company’s strategies are designed to monitor the trends of the market and prevent potential threats along with to take advantage of new opportunities (Ferdows, 2018). However, their strategies should be more also flexible to adapt to changes. 

Operational management converts inputs (capital, labour, information goods, buildings, land, and equipment) into outputs (services and products) that delivers value addition to customers. The figure captures the process. The so-called "change system" is the key to determining how well MSC produces services that achieve the requirements of the customer (The input/output transformation model, 2016).

Transformation, Input and output process

(Source: Author)

The company facing challenges in terms of competition, increased labour cost, changing global transportation regulations along with inspection regulations from external sources. The current data shows that increased labour cost in the global scenario is a huge issue also the current economic changes pose a potential issue for MSC as well.  The export, import decreases drastically which impacts the company’s business and the current economic scenario is very volatile which also considered as a challenge for the company.  

Q2:

Review of MSC operation strategy:

In the present scenario, continuous new service development is important. Without it, the company can lose its competitive edge in the market (Visvikis et al., 2017). MSC’s strategy is to provide flexible, variety, and prompt service to its customers. The service provided by MSC enables customers to view the cargo’s carbon footprint. The customers can also see containers in live-version via an arrival monitoring service which is designed as airport style. However, MSC needs to provide more eco-friendly services through their cargos by using eco-friendly energy. The company should aim for zero carbon footprint through its operation. 

MSC has a strong supply chain but compared to other global companies it is very limited. To gain cost savings and supply chain advantage the company should aim to expand the supply chain and more focused on outbound and inbound logistics (Barry, 2019). The services include push value-added services, supply chain quality inspection, enforce and establish policy for vendor compliance, multi DC strategies to reduce cost, etc. 

Labour cost increased is also a challenge for MSC.  However, the company develops a reporting system for the employees and training and development program which enables them to get productive and efficient labour.  However, the company should develop career path planning for employees which can help to reduce labour cost turnover and new employee hiring costs. Also, MSC should implement an incentive system to increase employee output. Also, the company should develop a talent management system to retain good employees to develop the managers as well as retain them in the company (Tang and Gekara, 2018).

With the changing time, MSC faces new challenges regarding the process. The company needs to improve and update its process. MSC's current strategic direction is not enough for that. The company should be more focused on continuous improvement of teams and objectives, increase the capacity of current employees and managers, better application for material handling also to reduce cost workflow improvement is necessary.

The external and internal influences for strategic direction:

Various factors influence the strategic direction of a company. It is also applicable for MSC as well. The factors which influence such decision are discussed below:

Internal factors:

Decision making is key to strategic preparation. In hierarchical organizations, traditionally top management do the decision-making, so the process called as “top-down” (Funk, 2015). However, this is a time-consuming process that encourages employees to take part in the strategic structure. Leaders are generally portrayed as independent and non-biased towards action and faithful in mobilizing and planning the resources needed to use the business opportunity. However, rational decisions in terms of planning for long-term and analysis are equally important: in fact, organizations like MSC need professional managers and leaders.

The resources available to an organization have a significant impact on the type of strategy which includes strategic content and uncertain or planned strategy. The goal of a strategist, according to project attorneys, is to compare the company's resources (effectively it’s weaknesses and strengths) with the threats along with opportunities facing the environment (Funk, 2015). Big companies like MSC are planning more than smaller companies because resources availability is more in these companies, which allows them for data collection and seek for alternative strategies.

Life-cycle strategies of an organization can determine how well they done the planning or development. As companies become larger and more complex, programs and strategies are needed to motivate guide and integrate managers. Strategy becomes a highly, systematic, analytical, collaborative, and practical process. Often, crisis management approaches involve changes and in structures strategies, and company leaders are aware of the importance of the project.

Strategy shapes and impacts the internal dynamics of the organization, including organizational strength, culture, training, and politics (Shalender and Yadav, 2019). Corporate values are a great management tool because they inspire the company along with creating competitiveness. Additionally, learning from relationships with, suppliers, customers, family, peers, regulators, and bankers provides a systematic decision.

External factors:

Proponents of the project see the environment of external aspects as the fundamental outcome of the strategy: the role of the strategist in responding to changes in the environment of social-economic, political also technological. In a nutshell, companies applied PESTLE to cover the macro environment of business.

External partners, such as customers, suppliers, government agencies, and, trade unions influence decision-making related to strategy (Shalender and Yadav, 2019). As companies like MSC rely on the sales environment source and fairness of their services, these external groups have the power to influence managers' decisions.

Q3:

Supply Chain Management Strategies:

Supply Chain Management (SCM) is the move from supplier to the supplier of products and services. SCM means service, product, and information flow between supply chain positions and services or products to maximize profit. The purpose of the SCM is to increase total value. The value chain supply is tied to profitability. Here, profit is the difference between the total revenue from the entire supply chain and the customer (Khan and Yu, 2019). Supply chain strategies and design include: Determining supply chain operations and structure at each stage of the supply chain, selecting the capabilities of a facility and location, sourcing services or products, sourcing information, and transport routes from them. Supply chain design decisions are expensive in the long run so the company management must, therefore, take into account the uncertainty of the market.

While the supply chain industry has not been challenged by the biggest financial crisis since the Great Depression, the introduction of advanced analytics and smart devices has helped the industry gain a rapidly growing customer base in business. These market changes mean that the supply chain will be affected forever. Company leaders have done everything they can to fit in. They prioritized projects that would reduce logistics and freight costs. This has enabled experts to avoid short-term things and to focus on the demand-driven view on long-term aspects of the business operating model. Companies that are ready to emerge when responding to new normal conditions are as follows: a tough omnipotent market, low labour pool, and analytical operating statistics. Effective strategies and a well-defined plan have helped supply chain professionals to reduce the full pressure of future market changes.

Strategy 1: Follow planning on demand-based and business execution models based on on-demand structure and real-time demand statistics. Proper tools of contingency planning and analysis ensure a fully focused and effective response to risks such as going out of business, political chaos, and natural disasters affecting services provided by shipping companies like MSC. MSC can adjust advertising and pricing strategies, achieve rapid service growth, increase growth in revenue, or increase margins for high-demand services like eco-friendly cargos, a variety range of container services with optimum market supply.

Vision is key to taking advantage of opportunities and reducing challenging events so that shipping companies like MSC can survive. With the developed and advent technology of the cloud supply chain, MSC can have the ability to see their service and storage positions in real-time - from the store shelf to the supplier or client’s storage house. Businesses can achieve this with cloud technology.

Strategy 2:  Aligning business goals with the supply chain by integrating business planning along with operations and sales planning. The business risk of companies has increased significantly over the years. From Brexit to the wage wars, leaders face market uncertainty. This is why shipping companies need to align their strategic operations planning and sales plans with their strategic forecasting and budgeting efforts. The goal is to develop a plan that includes macro priorities of business and risk management tasks to continually update changing market conditions.

MSC has to ensure that final processes are maintained with a detailed, up-to-date operating accountability and accountability for budgets created in income budgets. At the same time, the strategy aligns the financial goals with the action plan. Truly integrated business planning with cloud technology is possible - combining sales and action planning processes with corporate business planning and strategic business goals to help MSC in achieving better demand and supply balance. It provides real-time visibility into all key aspects of the risk, supply-demand, production, efficiency and success of the company's expanded supply chain.

Strategy 3: Inclusion of sustainability in operations of the supply chain. Environmental and Social sustainability is one of the key priorities of the present companies, which combines profitability and growth (Liu et al., 2018). It was only last year that the business round table issued Corporation Purpose Statement, noting that sustainability supposed to be a fundamental priority for companies along with profit generation for shareholders also.

Focusing on sustainability is a new practice for supply chain, many of which have a broad impact on environmental health in areas of pollution, industrial waste and carbon emissions. MSC should employ the following strategies to improve its supply chain:

1. MSC supply-chain should generate long-term goals to improve the fundamental sustainability aspects, such as carbon footprint reduction, renewable energy use, etc.
2. The truck lines optimization and supply chain responsible for reducing fuel consumption can enable MSC to adopt new technologies to improve carbon emissions (Liu et al., 2018).
3. MSC can switch to a shared data model to provide real-time statistics to improve and stabilize supply chains.

Q4:

Quality management approaches and tools:

Quality management is seen as the overseeing process of the various activities and processes within the company ensuring that the delivery of services as well as products. This helps the company to achieve and maintain the required standards. The quality management’s goal is to ensure that all company partners work as a team for improvement of the company's processes, services, products and culture, resulting in customer satisfaction and long-term success (Ladewski and Al-Bayati, 2019). The Quality Management Policy describes how quality is maintained in company operations. This includes specific policies, procedures, methods, standards and applicable responsibilities. The quality management process defines various responsibilities to achieve the level of quality required during the project. There are three components to quality improvement practices: people-oriented development, product or service development, and process improvement. 

Company’s value addition:

An effective program of quality management draws the path to processes of high-quality and outputs. These generate improved customer satisfaction and better profits. It promotes the team culture at all working levels of the Quality Management Organization and thereby improving productivity. Human resources are identified as the main institutional asset (Corporate Finance Institute, 2020). With less processing time, the cost and the cost of failure will decrease. This enables the company to achieve better consistency in the operations involved in the production of services and products. It improves processes efficiency, prevents unnecessary wastage along with the time usage improvement and optimizes the use of other resources. This makes it easier for businesses to train and develop new employees, which helps companies to aggressive growth management. This allows businesses to effectively market their businesses and exploit new markets. This allows the business to continually improve its products, processes and systems. This helps in customer satisfaction improvement.

Various tools and implementation:

Many techniques and tools of quality management are used. These include Zero Defect Program, Kaizen, Quality Circle, Six Sigma, Toyota Systems, Taguchi Methods, Bronze Engineering, OQRM, PPR, Bottom-Up and Top-down Approach, ISO (Kowalik and Klimecka-Tatar, 2018).

The Kanban system implementation in Toyota is a model example of quality management. Developed by Taichi Ohno, Kanban is a system of inventory control that creates visibility for buyers and suppliers to help control the growth of additional listings at any given time. Toyota implied this idea in Just-in-Time (JIT) system, which enables raw material orders direct processing from suppliers with schedules of production  (Corporate Finance Institute, 2020).

MSC should implement ISO techniques (for offline) to achieve MSC’s commitment to comply with international standards and ethical practices along with their aim of continuous improvement of social processes and existing environmental practices. MSC currently complied with the highest standards for container carrier operation, bulk and car carriers in fleet categories along with security and safety and management system. MSC implemented various green and eco-friendly approaches in the customer service system along with employee operations (for online) with the usage of eco-friendly devices which minimise the carbon emission accordingly (ISO Certifications | MSC, 2020). Also, their green energy campaign prevents unnecessary paper usage and most their operation based on cloud systems allows them to achieve then green initiative. 

Q5:

 Artificial Intelligence is defined as any software program that can engage in human activities. It involves the depiction of human intelligence in computer programs, and the activities revolve around the evaluation, solution or planning of a particular problem. These software programs do not require human intervention to solve the problem. This is one of the main reasons for the technological growth of companies around the world. Managing customer needs in this digitally driven market is a boom (F.R, 2019). Businesses need to look at large amounts of data to gain valuable and operational statistics that guide good decision-making processes. 

Ship lines carry large quantities of cargo every day. This includes petroleum products and large containers along with other items. Shipping is a very reliable industry. Many companies need to be contacted for delivery. Once the shipment is available in the shipping carrier, it passes through several agencies, changing hands and eventually delivering.

Business applications:

Most functions of the shipping process generate large amounts of data. This data contains the description of parameters such as shipping time, cost and export and import size (Saeid et al., 2020). Besides, the ship's other data like the correct route, ship's inventory and fuel consumption for cargo play an important role in the decision-making. There are many applications and opportunities for data analytics in the shipping industry. Easy access to the above data analytics and data provides new statistics. Valuable statistics help shipping companies improve asset utilization and reduce cost and time. Data analytics can help businesses improve their ranking, testing and travel operations.

AI and automation play an important role in the shipping industry, and businesses have great success with machine-human interaction and logistics collaboration with AI. Shipping lines of retail take advantage of AI and applied in logistics and offer faster delivery as a competitive option, as it has begun to cut costs that allow for faster delivery (F.R, 2019).  This is reinforced by the fact that retailers use similar technology to deliver products across the ocean to their Continental distribution centres. AI enables us to make more accurate estimates of arrival times, trends and risks of shipping lanes and ports. The use of AI is a natural by-product of shipping, which allows companies like MSC to deliver data from locations with valuable statistics. The use of analytics allows users to better understand the challenges that allow business processes to transform data to meet future needs and deliver value to customers. AI helps improve container terminal operations and reduce exceptional case management, and automates the maintenance and supply chain upgrades of terminals, ships, and warehouses (Saeid et al., 2020). All these can be applied in MSC scenario to improve their business operations. 

Risks involved:

As a global shipping company, MSC needs shared data for decision making but most of the data generated are poor in quality. Also, the analytical insights of such data lack accurate and solid information. In connection of AI has generated fear of job replacement in the industry. It is considered as a potential issue. Also, the implementation of Ai and business digitalization is a time-consuming and costly process also various companies lack the strategy to mitigate the risk involved in the process (Mikavica et al., 2015).

Recommendations for MSC:

Various companies implemented AI and it proves beneficial to them. The following recommendation for MSC is described:

AI can help to reduce fuel consumptions. It helps the company to cut costs through it. Like the partnership between Stena line and Hitachi Europe Ltd. and implement AI intending to reduce the cargos fuel consumption which currently a successful tool to reduce environmental impact.

MSC can use AI to improve its operations in the shipping network. Like OOCL team up with Microsoft research division who build a hybrid infrastructure of the cloud with auto-scaling and auto-switching (Mikavica et al., 2015). By implanting AI MSC can access big data related to ocean shipping which helps to generate analytical data of maritime affairs and economics which is currently used by Mitsui OSK Lines.