Recommendation to improve business efficiency of shipping agency service at VOSAL

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MINISTRY OF TRANSPORTATION

MINISTRY OF EDUCATION & TRAINING

VIETNAM MARITIME UNIVERSITY

STUDENT NAME: NGUYỄN TUẤN HIỆP

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DISSERTATION
GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATIONS TO IMPROVE BUSINESS EFFICIENCY

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OF SHIPPNG AGENCY SERVICE AT VOSAL

HAI PHONG – 2015

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MINISTRY OF TRANSPORTATION

MINISTRY OF EDUCATION & TRAINING

VIETNAM MARITIME UNIVERSITY

STUDENT NAME: NGUYỄEN TUẤAN HIỆEP

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CLASS: GMA02

DISSERTATION
GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATION TO IMPROVE BUSINESS EFFICIENCY

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OF SHIPPING AGENCY SERVICE AT VOSAL
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Supervisor ::

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Hoàng Bảo Trung

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Division :BasicEconomics
Faculty :EconomicsDivision:

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Global & Maritime Affairs

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Faculty:

International School of Education

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HAI PHONG – 2015

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Recommendation to improve business efficiency of shipping agency service at VOSAL

PREFACE

Thanks to the economic development, a large number of companies have

been found and participated in such a competitive market. The companies,
therefore, need appropriate policies in operation to develop and make profit. It is a
fact that different strategies and flexible business methods are what to evaluate the
strength of a company. The more uniqueness a company owns, the more successes
it achieves.
Business result is one of the key factors to consider whether it is a good
company or not. It expresses the efficient of a company in production including
productivity, capital management and recovering/developing capability. That is why
business results are required an exact and objective data collection and analysis in
order to establish plans for later periods.
I declare that this report is my own unaided work. It has not been
submitted before.
If violated, I am solely responsible for and bear the punishments of the
Institution and University.

Student Name and Signature

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Nguyễn Tuấn Hiệp

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Recommendation to improve business efficiency of shipping agency service at VOSAL

ACKNOWLEDGEMENT

Firstly, I would like to express my sincere gratitude to my advisor MSc.
Hoàng Bảo Trung for the continuous support of my study and related research, for
his patience, motivation, and immense knowledge. His guidance helped me in all
the time of research and writing of this thesis. I could not have imagined having a
better advisor and mentor for my study...

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Recommendation to improve business efficiency of shipping agency service at VOSAL
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CONTENTS
Preface............................................................................................................................................. i
Acknowledgement......................................................................................................................... ii
Contents ........................................................................................................................................iii

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List Abbreviations ........................................................................................................................ v
List of Tables ................................................................................................................................ vi
List of Firgures ............................................................................................................................. vi

INTRODUCTION......................................................................................................................... 1
1. Necessity ................................................................................................................................ 1
2. Research object...................................................................................................................... 1
3. Research scope ...................................................................................................................... 1
4. Research findings .................................................................................................................. 2
5. Report structure ..................................................................................................................... 2
CHAPTER 1: LITERATURE REVIEW ..................................................................................... 3
1.1 Theoretical basis about shipping agency service .............................................................. 3
1.1.1 Definition of shipping agency service ....................................................................... 3
1.1.2 Roles of shipping agency service in maritime sector................................................. 4
1.1.3 Features of shipping agency service ........................................................................... 4
1.1.4 Functions of a shipping agent ...................................................................................... 5
1.1.5 Criteria of a shipping agent ......................................................................................... 7
1.2 Business efficiency of shipping agency service .............................................................. 98
1.2.1 Definition of business efficiency............................................................................... 98
1.2.2 Indicators of business efficiency ............................................................................. 109
1.2.3 Factors affect business efficiency of shipping agency service ............................1211
CHAPTER 2: EVALUATING BUSINESS EFFICIENCY OF SHIPPING AGENCY
SERVICE AT VOSAL FROM 2011 TO 2014 ..................................................................... 1412
2.1 General introduction about VOSCO ............................................................................ 1412
2.1.1 Establishment and development process ..............................................................1412
2.1.2 Functions................................................................................................................. 1412
2.1.3 Subsidiaries of VOSCO .........................................................................................1513
2.2 Introduction about VOSAL ..........................................................................................1513
2.2.1 General information ...............................................................................................1513
2.2.2 Business fields ........................................................................................................ 1513
2.2.3 Organization ........................................................................................................... 1614
2.2.4 Facility .................................................................................................................... 1815
2.2.5 Personnel................................................................................................................. 1816
2.3 Shipping agency service at VOSAL ............................................................................ 1816

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2.3.1 Legal basis of shipping agency service at VOSAL.............................................. 1816
2.3.2 Level of shipping agent staffs at VOSAL.............................................................1816
2.3.3 Procedure of shipping agency service at VOSAL................................................ 1917
2.4 Evaluating business results of shipping agency service at VOSAL ..........................2220
2.5 Evaluating business efficiency of shipping agency service at VOSAL .................... 2826
2.5.1 Gross profit coefficient ..........................................................................................2826
2.5.2 Profitability ratio .................................................................................................... 2826
2.5.3 Efficiency of cost ................................................................................................... 2927
2.6 Evaluating shipping agency service at VOSAL ..........................................................3028
2.6.1 Strengths ................................................................................................................. 3028
2.6.2 Weaknesses............................................................................................................. 3129
2.6.3 Opportunities .......................................................................................................... 3129
2.6.4 Threats..................................................................................................................... 3230
CHAPTER 3: RECOMMENDATION TO IMPROVE BUSINESS EFFICIENCY OF
SHIPPING AGENCY SERVICE AT VOSAL ..................................................................... 3432
3.1 Development strategies of Vietnam maritime sector .................................................. 3432
3.2 Recommendations to improve business efficiency of shipping agency service at
VOSAL ................................................................................................................................3634
3.2.1 Recommendations to increase revenue ................................................................. 3634
3.2.2 Recommendations to minimize cost ..................................................................... 4240

3.2.3 Recommendations to improve recruitment and training activities ..................... 4340
3.2.4 Improve facilities and high technology application ............................................. 4543
CONCLUSION ....................................................................................................................... 4644
REFERENCE ..........................................................................................................................4745
APPENDICES .........................................................................................................................4846
INTRODUCTION ......................................................................................................................... 1
1. Necessity................................................................................................................................ 1
2. Research object .................................................................................................................... 1
3. Research scope ..................................................................................................................... 1
4. Research findings ................................................................................................................ 1
5. Report structure .................................................................................................................. 2
CHAPTER 1:LITERATURE REVIEW .................................................................................... 3
1.1 Theoretical basis about shipping agentagency service ................................................ 3
1.1.1 Shipping agent agency service definition ............................................................... 3
1.1.2 Roles of shipping agency service in maritime sector ............................................ 4
1.1.3 Features of a shipping agent ..................................................................................... 4
1.1.4 Types of shipping agency service................................................ 5chuyển lên 1.1.3
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1.1.5 Functions of a shipping agent ................................................................................... 5
1.1.6 Criteria of a shipping agent ....................................................................................... 7
1.2 Business efficiency of a shipping agent .......................................................................... 8
1.2.1 Definition of business efficiency .............................................................................. 8

1.2.2 Indicators of business efficiency .............................................................................. 9
1.2.3 Factors affect to business efficiency of a shipping agent.................................... 11
CHAPTER 2: EVALUATING BUSINESS EFFICIENCY OF SHIPPING AGENCY SERVICE
AT VOSAL FROM 2011 TO 2014........................................................................................... 13
2.1 General introduction about VOSCO ........................................................................ 13
2.1.1 Establishment and development process ............................................................. 13
2.1.2 Functions ................................................................................................................... 13
2.1.3 Subsidiaries of VOSCO ............................................................................................. 13
2.2 VOSCO Agency and Logistics One Member LTD Company (VOSAL) ............... 14
2.2.1 General information ................................................................................................. 14
2.2.2 Business fields .......................................................................................................... 14
2.2.3 Organization .............................................................................................................. 15
2.2.4 Facility ........................................................................................................................ 16
2.2.5 Personnel ................................................................................................................... 17
2.3 Shipping agency service at VOSAL ............................................................................. 17
2.3.1 Legal basis of shipping agency service at VOSAL ................................................ 17
2.3.2 Level of shipping agent staffs at VOSAL ................................................................ 17
2.3.3 Procedure of shipping agency service at VOSAL ................................................. 18
2.4 Business results of shipping agency service at VOSAL............................................. 21
2.5 Business efficiency of shipping agency service at VOSAL ....................................... 27
2.5.1 Gross profit coefficient ............................................................................................ 27
2.5.2 Profitability ratio ...................................................................................................... 27
2.5.3 Efficiency of cost ....................................................................................................... 28
2.6 Evaluatebusiness efficiency of shipping agency service at VOSAL ........................ 29
2.6.1 Strengths .................................................................................................................... 29
2.6.2 Weaknesses ............................................................................................................... 30
2.6.3 Opportunities ............................................................................................................ 30
2.6.4 Threats ....................................................................................................................... 31
CHAPTER 3: SOLUTIONS TO IMPROVE BUSINESS EFFICIENCY OF SHIPPING
AGENCY SERVICE AT VOSAL ................................................................................................. 33

3.1 Developing strategies of Vietnam maritime sector .................................................... 33
3.2 Solutions to improve business efficiency of shipping agency service at VOSAL .. 35
3.2.1 Solutions to increase the revenue .......................................................................... 35
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3.2.2 Solutions to minimize cost ...................................................................................... 41
3.2.3 Improve recruitment and training activities........................................................ 41
3.2.4 Improve facilities and high technology application ............................................ 44
CONCLUSION ............................................................................................................................. 45
REFERENCES ............................................................................................................................. 46
APPENDICES .............................................................................................................................. 47

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LIST OF ABBREVIATIONS
VOSCO: Vietnam Ocean Shipping Joint Stock Company
VOSAL: VOSCO Agency and Logistics LTD Company
LTD: Limited
VINALINES: Vietnam National Shipping Lines
UNCTAD: United Nations conference on Trade and Development
ISO: International Standard Organization
VND: Vietnam dong
Dept: Department

F/I: Free in
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F/O: Free out
L/I: Liner in
L/O: Liner out
D/O: Delivery Order

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NOR: Notice of readiness

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SOF: Statement of Facts
B/L: Bill of Lading
GT: Gross tone
ETA: Estimated time of arrival
WTO: World Trade Organization
TPP: Trans-Pacific Partnership

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LIST OF TABLES
TABLE 1: LEVEL OF SHIPPING AGENT STAFFS AT VOSAL ........................ 181617
TABLE 2: BUSINESS RESULTS OF VOSAL SHIPPING AGENCY SERVICE242223
TABLE 3: GROSS TONE OF CARGO PERFORMED BY VOSAL SHIPPING
AGENCY SERVICE ......................................................................................................... 272526
TABLE 4: GROSS PROFIT COEFFICIENT OF VOSAL SHIPPING AGENCY
SERVICE ............................................................................................................................ 282627
TABLE 5: PROFITABILITY OF VOSAL SHIPPING AGENCY SERVICE ............... 292728
TABLE 6: BUSINESS EFFICIENCY OF VOSAL SHIPPING AGENCY SERVICE.. 292728
TABLE 7: CRITERIA TO RECRUIT A SHIPPING AGENT STAFF AT VOSAL...... 434142

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LIST OF FIGURES

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FIGURE 1: VOSAL ORGANIZATION STRUCTURE ............................................ 161415
FIGURE 2: PROCEDURE OF VOSAL SHIPPING AGENCY SERVICE ........... 191718
FIGURE 3: VOSAL REVENUE STRUCTURE IN FOUR YEARS (2011-2014)232021

FIGURE 4: GROSS TONE OF CARGO PERFORMED BY VOSAL SHIPPING
AGENCY SERVICE ......................................................................................................... 272526

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INTRODUCTION

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1. Necessity
In the context of economic integration, the shipping sector plays an
important role in providing a strong supply chain, contributing to general cargo
transportation. In which, shipping agency service is considered indispensable for the
connection between transport and port/vessel operation. Nowadays, it is obvious
that agency service observed significant changes, both in quantity and quality. Not
only state-owned but also private and joint venture companies are taking part in this
field. At the first place, it encourages the development of agency service to satisfy
the high demand of current transportation; on the other hand, a strict competition is
actually inevitable.
VOSAL, – a subsidiary of VOSCO, is one of the leading company in
shipping agency service of Vietnam. Moreover, VOSAL agency service is also
considered animportantvital activity, contributing to the general business results of
the corporation therefore, business efficiency of shipping agency service in VOSAL
is such a major concern. That is why I decide to follow the topic

“RecommendationSuggestions to improve the business efficiency of shipping
agency service at VOSCO”.VOSALosal”.

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2. Research object
In this dissertation, the core target is to evaluate business efficiency of
VOSAL shipping agency service through business results in a period of four years
(2011-2014) and indicate relateding factors contributing to the business efficiency.
Based on this, suggestions wouldill be proposed to enhance the business
efficiencyoperation of VOSAL shipping agency servicet.

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3. Research scope
This topiciswas researched at VOSAL, – No. 215 Lach Tray Street, Dang
Giang Precinct, Ngo Quyen District, Hai Phong City. All the Materialsdata in this
study were collected from the Finance & Aaccounting, Administration and Shipping
Agency ServiceDdepartment of VOSAL Haiphong. The studywasis carried out
from 10 September until 14 November with the 2011-2014 statistics.

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4. Research findings

During the dissertation, statistics and materials wereare collected from
VOSAL financial report meanwhile internet and books are the origins of data. TAll
these sources are shown in referencesappendix. Moreover, it can be concluded that
despite the fluctuations during the analyzed period, business efficiencyresults of
VOSAL shipping agency servicet followed an upward trend from the beginning
until the end in this period.

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5. Report structure
This dissertationreport is divided into three chapters:
Chapter I: Literature review Theoretical basis about business efficiency of a
shipping agent
Chapter II: Evaluating business efficiency of shipping agency service at VOSAL
from 2011 to 2014The business result of VOSAL shipping agent
Chapter III: RecommendationSolutions to improve the business efficiency of
shipping agency service at VOSALs results of VOSAL shipping agent

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CHAPTER 1:LITERATURE REVIEW

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1.1 Theoretical basis about shipping agency servicet

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1.1.1 Definition of sShipping agency servicet definition

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According to Article 158, Section 1, Chapter VIII, Vietnam Maritime Code
promulgated on June,14th, 2005 and has become effective since November, 1st,
2006 “ Shipping agency is a service whereby the shipping agent provides, in the
name of the shipowner or operator of the vessel, services in connection with
vessel’s operation at the port, including the arrangement of formalities for the
seagoing vessel to enter and depart the port; conclusion of contracts of carriage,
marine insurance contracts, contracts for handling, charter parties, and crew
employment contracts; issuance of bills of lading or similar carriage documents,
furnishment of supplies, fuel and food for the seagoing vessel, submission of sea
protests, communication with the shipowner or operator of the vessel; provision of
services related to crew; receipt and payment of all amounts related to the vessel’s
operation; and settlement of disputes over contracts of carriage or maritime
accidents, and other services related to seagoing vessels”. This definition is partly
revealed the concept of a shipping agent. In which,Aa shipping agent is fully
recognized as an agent in maritime sector with: the authorizer is the shipowner, the
person authorized is the shipping agent – the representative to perform the shipping
agency service, the third parties who are supported by the shipping agent in legal
co-operationly connectingwithto the shipowner in shipping activities. However, the
authorizer is not only the shipowner but the charterer, operator or shipper. They
may ownhave the same nationality with the shipping agent or not. To some extent, a

shipping agent who is legally found as a state-owned company, a joint stock
company or a private company.
According to Article 159, Section 1, Chapter VIII (2006) “a shipping agent is
a person authorized to act as a representative to perform within the scope of
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authority designated by the authorizer shipping agency services at the
seaport”.”“The shipping agency may, after obtaining the consent of the shipowner
or operator of the vessel, perform shipping agency services for the shipper, the
charterer and other persons having contractual relations with the shipowner or the
operator of the vessel”.

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1.1.2 RThe roles of shipping agency service in maritime sector
It must be conceded that the shipping agency service plays an important role
in maritime sector. This business witnessed a growth day by day thanks to the
development of maritime sector in recent years. ConcurrentlyConversely, each
shipping agency servicet exerts a positive impact to the maritimeshipping sector in
the world.
- Each shipping agent contributes to the efficiency of foreign trade by supporting
the shipowner in optimizing the shipping process and maximizing the profits. As
known, shipping is a process of many steps related to receipts, cargoes, staffs and

other involved parties. Thanks totheo the shipping agent, the cargoes are transported
smoothly, on time and safely and the co-operations between shipper, shipowner,
Port Authority and other parties are strictly legal.
- Thanks to the role ofthe shipping agents, the task of shipowner would be
minimizedreduced, just concentrating to the vessel management. The specialization,
therefore, may increase the business efficiency.
- Performing on-spot service, a shipping agent may facilitate survey of government
and supports authorities in managing import-export business and supervising
foreign trade. Based on data surveyed, appropriate strategies are proposed to
enhance the maritime sector such as fleet upgrading, port construction and
employment education.

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1.1.3 Features of a shipping agency servicet
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In the maritime sector, the shipping agency service is different from other
industries because of low demand in capital, assets or personal quantity. However,
this job strictly requires the high level of education level, knowledge and the
majority of experience. Here are some features of the shipping agency service:
- Running a shipping agent does not demand huge capital (in comparison with port
or vessel operation), high technology and a large number of staff. Because of the
high profit achieved, many countries prohibit the operation of foreign companies in
this business. Nevertheless, the main partners of the shipping agents are foreign

companies or shipowners soo the maritime security needs to be highly
appreciatedfeatured. In recent years, the shipping agency business has been
increasingly popular in many port cities, which creates a potential and competitive
market.
- A shipping agent is required to strictly follow contracts or legal orders of
authorizers. In addition, the diligence and cleverness are indispensable to a shipping
agency staff in performing services.
1.1.4 Types of shipping agency service

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- Shipping agents are divided into two types:

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+- Main agent (AAgent level 1): the person who is authorized by the authorizer
(shipowner, operator or charterer) in the form of a shipping agency contract or an
appointment to perform service for ships, cargoes, crews of seagoing vessels.
+- Sub agent (AAgent level 2): the person who is authorized by the main agent to
perform the shipping agency service.
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1.1.45 Functions of a shipping agentt
Nowadays, almost shipping agents perform service of transportation of
import/export goods and transit goods in Vietnam territory, advisory for domestic
and foreign companies about shipping, tally and import/export. Therefore, functions
of a shipping agents include:
- Carrying out procedures with competent state agencies for arrival and departure of
vessels under the law.

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- Arranging towing vessels, pilots and berth, area for anchorage to load/discharge
cargoes and passenger transportation.
- Performing services relating to cargo: cargoes loading/discharge, tally and
lighterage; cargoes collection and division; cargoes test, supervision and scale;
cargoes transporting to the warehouse; cargoes preservation; damaged packaging
repair and packing; implementing damaged, lost cargoes indemnity.
- Signing contracts relating to shipping, vessel rent, loading/discharge, tally
procedures, rent, cargoes delivery, cabin storage, cargoes insurance.
- Carrying out customs procedures relating to vessel and loading/discharge
procedures.
- Collecting and paying charges, indemnity, loading/discharge tips and other fees.
- Ship brokerage (rent and purchase): ship supplies at port; ship repair and checking;
cabin checking for loading/discharge process; cargo hold antiseptic and
cleaning;food, beverage, material, petroleum, and equipment supplies for crews;
ticket selling for passengers, implementing procedures for passengers and
importing/exporting cargoes.
- Services for crews: carrying out procedures for landing (visiting, healing);
carrying out procedures to repatriation, title replacing and crew dispatch; sending
letter, telegram, parcel, gift to crews.
- Supporting maritime rescue for vessel and .
- cCarrying out procedures for maritime disputes.
-Supporting trade between ship and port and shipper when anchoring.
- Representing for the shipowner to trade with shipper, authority and port to settle

issues.
- Completing door to door contracts relating to the multimodal transportation.
- Authorized to do import/export business with the agreement of Vietnam shipping
agent manager.

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- Cooperating with domestic and foreign companies in transportation, tallying,
warehousing and ship rent.
-Doing other tasks on agreement with the authorizers.
Nowadays, the shipping agents tend to expanddiversify their services, for
instance, whenthey carrying out all the procedures for the shipowners from arrival
to departure. Not only being a shipping agent, they also perform as a cargo’s agent,
ship rent’s agent, ship purchase’s agent.
Authorized by the shipowner, the shipping agent also is responsiblehas
responsibility for of solving legal issuesoffor the shipowner and follows all
demands of them. In addition, an agent is required to announcenotifyto the
shipowner all the worke work progress tothe shipowner and calculate related
expenditures.
In a nutshell, the development of a shipping agent needscessarilyto
corresponds with the whole shipping sector. Thanks to the development of
information technology, the shipping agency service is significantly contributing to
the foreign trade. Not demanding a large amount of capital, the shipping agency
service is having advantage of developing more and more in the future.
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1.1.56The Ccriteria of a shipping agent
1.1.56.1 Decree 30/2014/NĐ-CP of the Government: On conditions for sea
shipping and sea shipping support service business
Article 10: Conditions for sea shipping agency service business
1.. Organizations, individuals providing sea shipping agency service in Vietnam will have to
establish enterprises in accordance with legal provisions.
2. Having registered the business of sea shipping agency service.
3. Enterprises must have professional cadres conducting provision of sea shipping agency service
and legal affairs for enterprises.
4. Persons who are appointed to hold positions in charge of sea shipping agency field must have at
least 02 (two) years of experience in sea shipping agency operation.
5. Staff of sea shipping agencies must be Vietnamese citizens, having their bachelor degrees in one
of maritime, foreign trade, commercial or economic specialties.
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6. Persons who are appointed to hold positions in charge of legal affairs in enterprises must have
bachelor degrees in law specialty and must have working experience at least 02 (two) years in legal
field.

Article 11: Conditions for upholding business activities of sea shipping
agency service
1. Having insurance contracts for professional liability of sea shipping agency service or equivalent
financial guarantees.
2. Having a shipping agency contract for each specific shipment or in a specific time limit.

Article 12: Conditions in term of capital for foreign organizations,
individuals providing sea shipping agency service
1. Foreign organizations, individuals are entitled to establish joint venture enterprises to provide
sea shipping agency service, in which the percentage of capital contribution of foreign investors
must not exceed 49% of the charter capital of joint venture enterprises.
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1.1.56.2 United Nations conference on Trade and Development (UNCTAD):
According to UNCTAD, the minimum standards for a shipping agent:
- Have obtained the necessary experience in the profession by working for at least
three years in a responsible capacity with a qualified shipping agent
- Be a good standing and be able to demonstrate his good reputation and
competence. For example by positive vetting and signified approval of at least two
agents of good repute who are also in his business and his geographical area of
activity
- Have passed such profession examination(s) as required by the relevant national
authorities/ professional associations. The scope and details of such examination(s)
shall be determined by the said authorities/ professional associations
- In case of a corporate entity, employ such persons professionally qualified as
above to ensure the proper performance of the entity’s functions as an agent.
1.1.56.3

International Standard Organization (ISO 9002)

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ISO 9002 promulgated regulations in servicescing, including shipping
agency service. A shipping agent accredited for the quality standard ISO 9002 must
demonstrate to own a good automatic quality assessment system in operation and
management. This system is required to satisfy governmental and international
regulations and fully recognized by quality control standards committee. This
committee periodically periodically inspectssupervises the proceduresquality
systemcarried outundertakingbyof company staffs and evaluates in detail. In
addition,nd extend the recognition for the satisfying company. Moreover,
appropriate ideas are recommended to enhance the quality system of the company.
Therefore, it is evident thatIthe standard is established by the company itself, not
any external organizations. In conclusion, ISO 9002 is considered a vital assessment
whether that company is good or not and customers may rely on it to select the
cooperator. a guarantee for customers about a credible company to cooperate.
1.2 BThe business efficiency of a shipping agency servicet

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1.2.1 Definition of business efficiency

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In a business context, the business efficiency is defined as the reflection of
the level and capability of using available resources to achieve the highest output
from the lowest input when running a business operation. Therefore, the business
efficiency of shipping agency service is to take full advantage of the human
resources and facilities to gain the highest business efficiency from the lowest
expenses.
In general, the business efficiency can be illustrated as the ratio between the
input to run a business operation and the output gained from the business. The

output to input ratio increases when the efficiency is improved.
The business efficiency is measured as the relative efficiency with the
following equation:
The absolute efficiencyreflects efficiency of each business method in each
period of each company:
H=K-C
Comment [A1]:

Where: H: business efficiency

Comment [l2]:

K: results achieved
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C: input cost
The relative efficiencyreflects the level of using producing factors of a
company:
H=

K
C

Input cost: Operational expenditure (OPEX), capital expenditure (CAPEX),

headcount (including headcount of partners)
Results achieved: Revenue, customer numbers/distribution of each segment,
quality, growth, customer satisfaction
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1.2.2 Indicators of business efficiency
1.2.2.1 Definitions relating to business performance
- Revenue is the total amount a company receives for the sale of its output (good,
product, service) to the customer. Revenue is also called sales or turnover. The total
revenue may be originated from:
+ Sales revenue;
+ Financial activities: money from equity contribution, lending rate, interest of
deposits, trading security;
+ Other income: infrequent activities such as asset liquidation.
- Cost is considered the market value of the inputs a company uses in production.
Cost is what a business must pay to take results (product, service) and depicted as
the loss of money in raw material, equipment and facility use. The cost in business
includes:
+ Cost of production is the expense a business spend to create product or service.
+ Cost of sales is related to the product or service consumption, including warranty
cost.
+ Cost of business management includes cost for the managing system of a business
and costs relating to the business activity.
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Recommendation to improve business efficiency of shipping agency service at VOSAL

- Profitis gained when the amount of revenue exceeds that of cost, expense and
taxes in business activity. The profit is calculated:
Profit = Total Revenue – Total Expenses


+ Gross profit is the disparity between the total revenues or sales of products

or services and the direct cost in producing or selling products or services in a

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company. Gross profit is also referred as gross income or gross margin.


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+ Net profit(profit after tax)is a company’s total income after subtracting the

total expenses from total revenue, showing the earnings of a company in a period of

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time (after minus sales cost, business management cost or tax).
1.2.2.2 Indicators of business efficiency
- Gross profit coefficient is an indicator which reflects the relationship between the
pre-tax profit achieved and total revenue in a period of time. It is calculated:
Gross profit coefficient =

𝑝𝑟𝑒 −𝑡𝑎𝑥 𝑝𝑟𝑜𝑓𝑖𝑡
𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

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𝑥 100 (%)

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- Ratio ofnetprofit tonetrevenue (profitability ratio) is an indicator which reflects
the relationship between the net profit achieved and netnet revenue in a period of
time. It is calculated:
𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

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𝑛𝑒𝑡 𝑛𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

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𝑥 100(%)

Ratio or profit to revenue illustrates with each VND of revenue, how much
VND or profit is created. If the current figure is higher than that of previous time, it
means the company gains high productivity and cost-saving, which means high
business efficiency.
- Ratio of profit to cost is an indicator which reflects the relationship between the
net profit achieved and total cost a company spends in a period of time. It is
calculated:
𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡

𝑥 100(%)

Ratio of profit to cost illustrates with each VND of cost, how much VND of
profit is obtained. If the current figure is higher than that of previous time, it means
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Ratio of profit to net revenue =

Ratio of profit to cost =

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Recommendation to improve business efficiency of shipping agency service at VOSAL

the company achieves high profit with the low cost, meaning high business
efficiency.
- Ratio of revenue to cost is an indicator which reflects the relationship between the
total cost spent and the netnet revenue a company gains in a period of time. It is
calculated:
Ratio of revenue to cost =

𝑛𝑒𝑡 𝑛𝑒𝑡 𝑟𝑒𝑣𝑒𝑛𝑢𝑒
𝑡𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡

𝑥 100(%)

Ratio of revenue to cost reflects with each VND of revenue, how much VND
in cost is spent. If the current figure is higher than that of previous time, it means
the company achieves the cost-saving in business activity, illustrating the business
efficiency.
1.2.3 Factors impacting toaffectthe to business efficiency of a shipping agency
servicet
1.2.3.1 Internal factors
The internal factors are factors inside the company/enterprise and are born
when performing service. They, which are controllable, include human resources,
financial management, science-technology, service process, management style of
leaders. In which, human resources is the most important factor because the other
ones are actually originated from people’ activities. In addition, other factors such
as financial management, technology, service process, marketing and management
also play important roles because they directly influence to the profit of a company.

To some extent, these factors affect strategies such as competition, market growth,
and service process and management style of leaders. Facility is the fundamental
factor to evaluate the efficiency of the service and it seems that the more money a
company spends upgrading facility, the more efficient the business can achieve.
1.2.3.2 External factors
Thanks to the globalization and integration, shipping companies have many
chances to achieve success but also face numerous threats. In general, each
company is impacted by the factors from macroeconomic and micromaritime
transportation factors. MThe macroeconomic factors outside a company includeare
economy,

culture, politics, law, technology development.

MicroMaritime

transportation factors attached with activities of athe company are competitors,
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Recommendation to improve business efficiency of shipping agency service at VOSAL

maritime national and international law. Competition is an important factor which
directly affects to the success of a company meanwhile a company would make
developing strategies to satisfy the law promulgated.

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Recommendation to improve business efficiency of shipping agency service at VOSAL

CHAPTER 2: EVALUATING BUSINESS EFFICIENCY
OF SHIPPING AGENCY SERVICE AT VOSAL FROM
2011 TO 2014

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2.1 General introduction about VOSCO

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2.1.1 Establishment and development process

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Vietnam Ocean Shipping Joint Stock Company (VOSCO), whose former
name was Vietnam Ocean Shipping Company, was established on 1st July 1970. At
that time, the main business fields of the company were shipping business, ship
brokerage, shipping agent, import-export activities, and furnishment of supplies.
In 1993, The Vietnam Ocean Shipping Company was re-established and

operated according to Decision 29-TTg adopted on January 26th 1993 by the Prime
Minister. At that time, the company entity was state-owned and managed by
Vietnam National Shipping Lines (VINALINES).
In 2007, under the Decision 1367 QĐ/BGTVT on June 26th 2006 adopted by
the Minister of Ministry of Transport, state-owned companies of VINALINES
conversed into a joint stock company. The official name of the company is Vietnam
Ocean Shipping Joint Stock Company (VOSCO).
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2.1.2 Functionss
Since founding in 1970, VOSCO has continuously developed and improve
its fleet. Currently, VOSCO owns a fleet of modern ships including general cargo,
bulk carriers, tankers and container vessels.
Shipping is the core business of the company. Aside from being shipowners,
ship managers and ship operators, VOSCO is engaged in the chartering, sale &
purchase and related services through subsided companies/branch office such as
agency, freight forwarding & logistic; ship repair service; supplying lube oil and
store; supply seafarers... as well as shipping co-operation & joint ventures (VOSCO,
n.d.). VOSCO fleet is operated in the wide range of area in the world, especially
South East Asia, North East Asia, West Africa, Australia, and South America.

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