Micro-Managed Outsourced Operations

“Anyone who after this could think of becoming a shipowner, can console themselves with the fact that it is easier than becoming a nuclear scientist. Perhaps it is easier than running a kiosk as well. Money is necessary to have, but not so much. Knowing something about financing is important, probably the most important. After a crash course in financing, one could try with a mix of ordinary mortgage debt, convertible loan, and shares at a premium, then the need for own money soon disappears. Finding a ship to buy is the easiest thing, they are traded daily. Shipbrokers will get the boat, they will keep calling you with offers. You will be invited to dinner over and over again. Ship inspectors inspect the ship to check that it is in proper condition based on the price and description (just don't choose the same ones who inspected the Latsis fleet for John Fredriksen back in 1996.) Then, one can outsource all operations to one of the many companies that specialize in this. V. Ships, Wallem, and Thome are three that are all good enough for Fredriksen. They take care of everything; they provide crew – (V. Ships alone has access to 22,000 sailors), they train them, pay them and replace them. They procure supplies, fuel, handle all formalities in ports, they have technical inspections and maintenance, they keep accounts and make reports. Whatever problem one can imagine; these companies deliver the solution. If financing turns out to be a tough nut to crack, V. Ships offers this too. Everything from writing prospectuses, making presentations, securing documentation, to meeting banks, investors, and others with money. Shipbrokers get the shipping company cargoes – unless you want V. Ships to handle that too – they will work hard for you, they are on commission, and a new shipowner without an established connection is valuable. Expect many dinners there too. As a shipowner, you get a picture to hang on the wall, that is probably as close to the ship as you will ever come. If you want to be a modern shipowner, it would be completely wrong to go on board. That is just for romantics.”

“If one does not feel like a real shipowner after this, then it is worth considering Frontline's situation. As much as possible, Frontline aims to avoid owning ships; they have leased them at a fixed price for the remainder of the ship's lifespan. All operations are outsourced, but to many different management companies so that Frontline can compare them against each other. They closely monitor all subcontractors and have a scoring system to rate them. There are 36 employees in the Frontline organization, including accounting in Bermuda, far fewer than one employee per ship operated. They have technical expertise, people who can handle chartering, they compile the accounts for all the ships and are good at financing. But what is really the core competence of the world's largest tanker shipping company? The core is undoubtedly John Fredriksen. No one disputes his vast knowledge of shipping; he is said to know every supertanker that floats. He has worked his way up from the telex machine, and no one can match his knowledge. Perhaps even more important, however, are his personal qualities. He has an apparent contempt for risk, which means that the gains are even greater when things go right. Where others choose to secure a bit, Fredriksen goes full throttle. Historically, it has not been the operation of ships that has yielded the greatest profits, it has been buying and selling. He does not fall in love with the steel giants; sentimentality has no place. Everything can be sold and bought as long as the price seems right. It requires no large organization, just one man's instinct. Fredriksen has shown this so many times that it is no coincidence.”