Financial management
The aim of entering to any contract by a company is to make profits. However Our company responsibility doesnt end there but also in ensures that our company produces some high-quality services to our customers. This report looks at the different clauses in the contract as well as the maximum quantity to carried from each loading port base on the ships design, cost per tone of Cargo, time charter equivalent and the number of shipment required to deliver the goods. Aside from financial analysis, there are also criterias that do not make use of the numerical assessment because there are other components in the success of a delivery that has nothing to do with the numbers of any kind at all.
2. Methodology
Transport plays a crucial role in the development of any economy. This is because of the need to move capital goods, raw materials and labor from one place to the other in the course of wealth distribution. The data used in this case has been provided and excel spread sheet played an important role in calculating the necessary figures.
This report only tries to provide an outline on how we should estimate value of the contract and techniques used in estimating this value. In this report I will only depend on data provided, may increase the cost of the report to a great extent. For this reason the first important step is to find out the sources of number of tones to deliver and the number of shipment required.
3. FINDINGS
3.1 Maximum quantity of Iron From the excel appendix the maximum quantity of iron that can be carried from each port is 44,839 tones (excel appendix).
Managers also use Maximum quantity analysis to guide other decisions, many of them strategic decisions. Consider a decision about which features to add to an existing Ship. Maximum quantity analysis helps managers make this decision by estimating the expected Maximum quantity that can be carried at any given time with ships at their hands. Maximum quantity analysis also helps managers decide how much to advertise, whether to expand into new markets, and how to price the product.
Strategic decisions invariably entail risk. Maximum quantity analysis evaluates how operating income will be affected if the original predicted data are not achieved. Evaluating risk affects other strategic decisions a company might make.
3.2 Cost per tone of cargo the cost per 33.68. This figure has been calculated in excel after considering total tonnage, fuel costs and other relevant costs. This method of costing influences charges to the customer. The lower the Cost per tone of cargo relative to the price customers pays for it, the deal do we get. We should understand Cost per tone of cargo as it will help us prices that make the services attractive to customers while maximizing our operating incomes. In computing the Cost per tone of cargo for a pricing decision we must consider all relevant costs in all value. Although Cost per tone of cargo certain amount of indirect costs but these cannot be directly attributed to the unit from which it had originated. So the company devises a formula of allocating this cost to each unit based on units revenue producing capability. There is no set criterion to allocate indirect cost to different units and it varies from business to business. This allocation of indirect costs is discretionary and could create distortion in evaluating the performance of a manager. So in order to help manager accountable for results they are evaluated on the basis of operation under their direct control.
3.3 Time charter equivalent is 13,644
3.4 Number of shipment required is 21 from port Isdemir and 18 shipments from port Ponta da Madeira. This will signify the number of trips that will be made during the contract from both ports.
3.5 Charter contractual obligation will include
To accept and carry goods of any person on payment of the reasonable charges for hire, provided there is room in the ship. But he is not bound to transport such goods as he does not profess to carry or those exposing him to extraordinary risk.
To carry goods in his customary manner without unnecessary delay or deviation. If the goods face unavoidable deterioration in the course of transit, he can act as an agent of necessity in disposing of them at the available market price. But he can make this sale of necessity only where it is not possible to obtain proper instructions from the owner of the goods. The same rule applies to common carrier by sea.
To deliver the goods on the completion of the transit to the consignee within a reasonable time. Where he causes unnecessary delay, he may be liable to pay damages unless the delay is inevitable due to some unforeseen circumstances.
To deliver the goods to the right person at the right place. If a carrier delivers goods to the wrong person, he
will be liable in case he departed from the ordinary course of business practices.
We are insurer of goods accepted by us for onward journey and is liable to make good all loss or damage whether caused by his negligence or not. The rule, however, is subjected to the following exceptions
He is not liable if the loss or damage is due to an act of God
He is not liable for loss which arises from inherent defects in the goods carried.
He is not liable for loss caused directly through negligence of the consignor e.g. through defective or improper packing. The carriers duties or liabilities can be varied, limited or extinguished by introducing exempt clauses to this effect in the agreement.
Contracts of affreightment take two forms (1) charter-parties and (2) bill of lading. Therefore the people who assisted will be assisting the owner of the ship (Lorange, 2005).
A charter party is a contract whereby a ship owner agrees to place his ship or part of it at the disposal of the charter for the conveyance of goods for the duration of one or more voyages or for a definite period of time in consideration of a sum called the freight.
Charter-party by way of demise or lease in this type of contract, the charter becomes the temporary owner of the ship and becomes responsible to third parties for the acts of master and crew. While in a charter-party contract the master and the crew remain the servants of the ship owner, and the charter does not incur any liability of their acts.
Forms of charter-party
The forms of charter parties vary according to the custom of trades, but the main stipulations usually included in are the following
The name and the description of the ship owner, and the charterer and the facts of their agreement.
The position of the ship at the date of signing of the charter-party that she will be in a particular port by the stated time. The breach of this condition entitles the charterer to repudiate the contract and to claim damages.
The measurement of the ship as indicated by its registered tonnage. This is indicated by the cubic measurement of the ship and has no reference to actual weight( Lorange, 2005).
Bill of landing
A bill of landing is an important document from a legal point of view and has the following three characteristics
It is a receipt given by the carrier for the goods specified therein.
It is a document by their ship owner or on his behalf which states that certain goods have been shipped on a particular ship. It also sets out the terms on which goods have been delivered to and received by the ship.
It is a document of title to the goods themselves and the lawful holder of it can transfer the property in the goods by delivery and endorsement. This similarity between the bill of lading and a negotiable instrument leads the students to treat it as a negotiable instrument, which is not a correct conclusion because the transferee of a bill of lading takes it subject to title of the transferor. Thus, if the transferors have obtained the bill of lading through fraud or theft, the successive transferees do not obtain good title.
SHIP OWNERS LIEN
As a carrier, the ship owner has a right of lien on the goods carried for the freight and other charges. The right of exercising lien is available as long as the goods are on the ship or in the control of the master of the ship. There is no lien where the freight has been paid in advance or when freight has been agreed to be paid on or after delivery.
4. Conclusion
Contacts of affreightment determine the consideration that will be paid specific performance. This is the most critical part of any sea transport since it will be responsible for revenue generation for the company. The companys services are distinct and differentiated from other competitors also implying that the customers do not have many varieties to choose from (Lorange, 2005).
5. Recommendation
5.1. At beginning company accept the contract it will increase profitability to our company
5.2. If the company takes up the contract we should consider the cost of each tone of Cargo.
5.3. The price set price for the contract at the moment will depend sole on the performance in the market.
5.4 The price should be above the cost of production to make a profit.