Non fixed day shipping schedule in tan cang shipping afects to customers satisfaction

Thesis uses 4 groups of factors affect to customers satisfaction to conduct an interview on regular customers, the result show that many customer unsatisfied with TCS’s shipping schedule

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Hai My Duong

(NON FIXED-DAY SHIPPING SCHEDULE IN TAN CANG SHIPPING AFFECTS TO

CUSTOMERS SATISFACTION)

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2018Hai My Duong - January, 2018

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-Hai My Duong

(NON FIXED-DAY SHIPPING SCHEDULE IN TAN CANG SHIPPING AFFECTS TO

CUSTOMERS SATISFACTION)

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Trần Hà Minh Quân

Ho Chi Minh City – Year 2018

Table of Content

Executive Summary 5

Background information 5

.Methodology 6

Problem Identification 7

Situation Analysis 7

Symptoms 9

Central problem 12

Initial cause-effected map. 16

Potential root cause 17

Cause-effected map 21

Problem solving 22

In short time: Providing a weekly fixed-day shipping schedule 22

In long time: Establishing the research and develop shipping schedule team 24

Action plan 25

Supported information 26

References 27

Appendix 01: Interviewees Information 28

Interview 1: Customers using TCS’s reefer service 28

Interview 2: Vice Director of TCS’s Customers 28

Appendix 02: Interview guides 29

Interview Guide 01: Customers using referred container service 29

Interview Guide 02: Regular customers 29

Appendix 4: Frequency of TCS’s shipping schedule 42

Appendix 5: Estimated output/ month for 40RH of TCS’s dry container customers 45

3

Professional terminology and abbreviation:

4 TEU The production of liner shipping and slot on vessel

7 Closing Time The time which vessel will stop loading container to

prepare for departing

8 Freight Price for transporting container by vessel

9 Plugging Fee Fee charge for plugging electronic of reefer container

on terminal, on vessel

Hai My Duong - January, 2018

4

Executive Summary

This thesis aims to identifiy the reason why TCS new reefer service could not attract customers Basing on in-dept interview in TCS’s current customers, market information and report from marketing department, thesis find out there are 3 potential problems:

- Low customer satisfaction of regular customers

- Competitors are stronger than TCS show on 2 issues:

- Marketing strategy to attract new customers does not implement

Using theories and analysis, identified central problem is: low customer satisfaction of regularcustomers To giving exactly problem solving, the thesis draws cause-effected map to find outroot cause

Thesis uses 4 groups of factors affect to customers satisfaction to conduct an interview on regular customers, the result show that many customer unsatisfied with TCS’s shipping schedule, to change un-fixed day shipping schedule, the broad director should change their intension that having fixed-day shipping schedule is more important than full fill each trip

Background information

Tan Cang Shipping Joint Stock Company (or Tan Cang Shipping – TCS) is a transport service company, was established in 2013 under the decision of the Board of Director of Sai Gon New Port Corporation The beginning mission of Tan Cang Shipping is developing the transport services of Sai Gon New Port Corporation while their vision is "Leading in quality of service, customer oriented; Advanced management, professional and high quality in human resources; Military discipline, corporate culture, community responsibility " After almost 4 years of

operation, Tan Cang Shipping now works on three areas like Sea Transport Services, Logistics and Shipping Agent Despite its short time of operation, they work quite well, complete all the missions and develop Tan Cang Shipping becomes a prestige brand, having a strong position in the shipping industry in Vietnam nowadays

With the criterion "Coming to Saigon New Port, coming to one of the top quality services", Tan Cang Shipping always tries to provide their customers best quality shipping service To the Sea Transport Service, Tan Cang Shipping provides customers with domestic transport services by sea line including main routes: Ho Chi Minh - Da Nang - Hai Phong and opposite or Ho Chi Minh - Hai Phong and opposite To Logistics, they provides a full range of professional logistics services such as freight forwarding, customs clearance services, warehousing services, And to

Shipping Agent, we now are acting as an agent for vessels to import and export in domestic ports

as well as international port in Vietnam In addition, we are ready to provide ancillary services such as customs clearance, fresh water supply, fuel, crewmembers supplying and other support services when the customer needs

Besides developing shipping service, Tan Cang Shipping also focus on hiring and training their employees With the core value: "Satisfaction, Trust and Long-term commitment of our

customers", all the employees of Tan Cang Shipping are always enthusiastic, hardworking, having responsibility with work and more experience to solve customers’ requirements quickly inall situations happened during transportation Moreover, Tan Cang Shipping usually has the policies of supporting and consultation so that they can make their customers feel satisfaction when they choosing their service and want to build a long-term stable cooperation

The organizational structure of Tan Cang Shipping consists of 5 departments:

.

This thesis was developed and supported by both primary and secondary data with particular following methods and resources:

Business reports: TCS's business performance report for dry service and reefer service in

2017 checked in order to analyze how TCS achieve the target revenue as well as how each trip follows the golden structure The report on reefer container’s revenue in 2017 be classified by customer’s name and trip

Interview: From the results of data analysis in business report, classify the customer

using TCS services into 3 focus-groups, build an interview guide and in-depth interview for each group and TCS’s Vice Director

Market Research: Online research in Viet Nam shipping line market as well as interview

TCS’s customers to understand refer container market size

Theory: Customer satisfaction and Service Quality in liner shipping industry.

Problem Identification

Situation Analysis

The domestic shipping market has 2 types of good: dry container and reefer container Dry container included: 20GP (20feet) and 40HQ (40 feet) Reefer container in domestics market onlyhas 45RH

In liner shipping industry, the quality of good the vessel carried is calculated by TEU Each vessel has limited TEU to carried, all good have to be packaged in to container and

1x40HQ=1x45RH=2x20GP=2TEUS

The domestic shipping is the core business of TCS TCS operates 4 vessels with 4 routes South- North and opposite a week Domestic shipping industry in Viet Nam has 7 liners: Hai An, TCS, Vinafco, Vietsun, Germadept, Bien Dong, GLS…TCS and Hai An are 2 liners have more vessels and routes than the others

From the beginning, TCS only transported dry container base on the relationship of broad

director in the market to attract customers After 4 years, TCS gain their trust and loyal, and the Broad of Director realized that reefer container market is a potential field to develop TCS has launched Reefer container’s service with 2 objectives:

Diversified TCS’s service: Most TCS customers are freight forwarders who have goods in both dry and reefer container TCS want to provide full of choice to customer who already has used TCS’s service in dry container filed

Opportunity Costs: Receiving a reefer container is economically more cost-effective than a dry container of the same size Specifically, the empty dry containers are owned by TCS and incur costs repair, cleaning, stock in yard… while empty reefer containers are owned by the customer (domestic liner does not own empty reefer containers), so that customers will pay all of these fees Regarding the freight, 1 reefer container cost 10 million VND while the dry one is 7 millionVND We can calculate the opportunity profit of transport a reefer container, TCS will gain 3 million VND from difference freight while 40HQ and 40RH are covered similar slot (2 TUES), TCS will not pay the clean (200.000 VND) and storage fee (100.000 VND/ day) because 40RH are customer’s owner

In order proceed reefer service, TCS's leaders were based on the actual situation of TCS

customers, TCS infrastructure conditions and freight rates to calculate a golden structure for eachship to ensure the feasibility and maximize profit in the beginning

At present, there are 20 customers using TCS’s dry service have reefer container need to

transport (see Appendix 05, Source: Marketing Department Report, December, 2016) TCS expects to attract 20-30% of these qualities

About the facilities of TCS, 4 vessels of TCS have different capactity, Tan Cang Foundation (TCFD) – 370 TEUS, Tan Cang Victory (TCVR) – 325 TEUS, Tan Cang Pioneer (TCPN) – 395TEUS and Tan Cang Glory (TCGR) – 425 TEUS and different freight of 20GP (3 million VND), 40HQ (7 million VND), 40RH (10 million VND)

TCS calculated the effective structure to ensure the feasibility, maritime safety and maximize profit called “golden structure”

Table 2: Golden Structure of TCS’vessels

Chart 1: Revenue and target revenues by vessel in the beginning of 2017

For detailed analysis, for 20GP and 40HQ dry container, it is easy to see that dry sales nearly achieve the expected level, especially some trips are more remarkable

Chart 2: Revenue and target revenues by Dry container in the beginning of 2017

For revenue of reefer container, the output was completely below expected and unstable on each

ship So that, the operation of reefer service is lower expected

Chart 3: Revenue and target revenues by Reefer container in the beginning of 2017

Attracting dry’s customers is not effective:

Only 15/20 dry’s customers used TCS’reefer service and 2 of them have signed the fixed-slot

contract with TCS, become key account in TCS’s reefer field

Table 3: TCS’reefer customer

name

Number of 40RH in 7 month

(79 routes)

Quantity in 7 month/ total quantity

Excepting key accounts, the quanlity of other customers are not stable.

Chart 4: Volume of 40RH from Jan-2017 to July-2017

Now, reefer container transportation plays an important role in domestics shipping industry

because:

About freight, receiving a reefer container is economically more cost-effective than a dry

container of the same size Specifically, the empty dry containers are owned by TCS and incur

costs repair, cleaning, stock in yard… while empty reefer containers are owned by the customer

(domestic liner does not own empty reefer containers), so that customers will pay all of these

fees Regarding the freight, 1 reefer container cost 10 million VND while the dry one is 7 million

VND We can calculate the opportunity profit of transport a reefer container, TCS will gain 3 million VND from difference freight while 40HQ and 40RH are covered similar slot (2 TUES), TCS will not pay the clean (200.000 VND) and storage fee (100.000 VND/ day) because 40RH are customer’s owner.

The freight of dry container transportation has decreased from 11 milliom VND in 2015 to 7 million VND in 2017 while the price of oil has increased each year while the freight of reefer container range from 11-10 million and remain stable

The reefer container stranportation market is potential with the increasing in demand of exportingfruit and sea food abroad in recent year, especially to China Forwarder also chooses shipping as

a popular logistics solution because of low price when comparing with trucking in road

Basing on these informations, 3/7 liners have provided reefer transportation service to diversified their service and gain more profit from this potential sector

TCS has joined reefer market in 2017, after Hai An, Bien Dong, Gemadept, but the first business result is not as expected, the thesis identified the symptom is customers are not satisfied with TCS’s reefer service

Central problem

Based on business metrics analysis, customers can be categorized into three groups (Table 1):

- Key account group is the group of customers who have fixed-slot on TCS’s vessel Only 2customers sign the contract with fixed slot on each trip and given more slots on TCS thanother liners So that they have gained more promotion from TCS’s policies of contracted- customers such as lower freight, free electronic fee, receive their container in the peak season…

- Regular customer group: 5 customes move from dry filed who have more than 1% of total quantity in 7 months, and they book in more than 3 consecutive trips, but they did not sign the contract with fixed slot so that they have not gain more promotion fromTCS’s policies We called them are Regular customers, who are potential to become key accounts

- New customer group: include 8 other customers who only used 1-2 times and never comeback They used TCS’s reefer service when they has emergency reefer containerwant to transport immediately and TCS’s shipping schedule is suitable The not reachable customers: TTO and Nhat Phuong, TCS has not database of them

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Table 4: 3 groups of reefer customers

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Different from key account, the regular customer group is still not gave more slot on TCS while their ability is more than They used TCS’s service to maintain relationship in the high season, they also have current partner and do not intend to switch to TCS’s service as their main choice The regular customers are not satisfied with TCS service included: policies, freight, supporting when un-expected situation occurred… While being ask “do you intend to increase slot in the future”, they were said that their current regular shipping line is quite well, thus no plan to switch

to TCS because TCS’s service have not competitive advantages and they do not satisfied with TCS’s service.

In the high season, the new customers group just come by themselves to use TCS’s service when they have emergency good to transport and TCS’s shipping schedule is available, they did not gain any support or promotion and they never reuse TCS’reefer service On the other hand, thereare still 2 more well-known customers in the market that have not used TCS’s reefer service (Table 4) It clearly shows that TCS could not reach potential customers

In general, both regular customer group and new customer group have choices in other

competitive liners who joined the market long time ago and they could not see competitive advantaged in TCS’s service

In particular, regular customers were not appreciated in service quality of TCS and the new customers were not received any support or policies to promote their volume, they only know TCS’s new service through market informations rather than the marketing activities of TCS.Basing on the interview result, there are 3 potential problems of the symptom:

- Low customer satisfaction of regular customers

- Competitors are stronger than TCS show on 2 issues:

• TCS joined reefer transportation service lately

• TCS has not competitive advantage compering with other liners

- Marketing strategy to attract new customers does not implement

According to these analysises, TCS should focus on low customer satisfaction of regular

customers because:

- Current regular customers have large and stable volume with transportation contract with the reputed companies For example, Hai Dang Phat Logistics have about 100-150 40RHneed to be transported a month but only give 5% of this to TCS, Vinaline Logistics HP has sign the contract with Merino ice-cream to transport 80 40RH from Ho Chi Minh to Hai Phong a month… They have not given more their quantity to TCS but they want to remain relationship with TCS to diversified their service offerd to their customers by booking every route with 2-3 TEUS

- All regular customers have used TCS’s dry service, so that, TCS have all of database, information, relationship with manager and leader, it is easily to build the cooperation inthe long time

- Regular customers are more potential to be key account than new customer group or reachable potential customers if TCS can meet their needs and create competitive

non-advantage compared with other competitors

Basing on interview result, regular customers are not satisfied with TCS’s service and could not see competitive advantage in TCS when comparing with other liners who join reefer domestic shipping long time age To gain the loyalty of them, TCS must meet at least 1 element or all of them.

About the competitors factor, TCS joined market lately, so that, TCS must create competitive advantage comparing to other liners to attract customers

In general, Korler and Armstrong (1) stated that “a shipping firm can satisfy customers by

offering low-cost or differentiated services”, but domestics liner could not dump freight, so that according to Dadfar and Brege (2) “liner should differentiated services, one way to differentiate a firm’s services is by offering high-quality service” Midoro (3) said “the only way to gain

competitive advantage is providing high level of customer satisfaction.”

In domestics shipping market in Viet Nam, the best way to increase competitive advantage is increasing customer satisfaction or offering high-quality service

About attracting new customers, another thesis will solve this problem

So that, my thesis chooses low customer satisfaction of regular customers is the central problem

Hai My Duong - January, 2018

Initial cause-effected

problem:

Low customersatisfaction ofregular customers

TCS has notcompetitive advantage compering with other liners

Marketing strategy to attract new customers doesnot implement

TCS joined domestic shipping market lately

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Potential root cause:

About the service quality in liner shipping, according to Kum Fai Yuen and Vinh V Thai’s research called “Service quality and customer satisfaction in liner shipping” accepted 29 March

2015 by School of Civil & Environmental Engineering, Nanyang Technological University, Singapore, customer’ satisfaction in liner shipping can be classified into 4 groups:

Responsiveness, Speed, Value, Reliability.(4)

Reliability: consisting of core and non-core attributes which reflect the overall consistency in

providing customer service, error-free documentation, on-time pick up and transportation

Included:

• Consistency of customer service

• Error-free documentation

• On-time pick-up and delivery of cargo

Speed: related to the core activities of shipping service Included:

• Transit time of transportation service

• Frequency of transportation service

• Accuracy of cargo tracking systems

• Idle time of shipments and availability of empty containers contribute to the speed of ashipment

Responsiveness: this factor relates to the supporting elements of liner shipping service Included:

• Speed of claims

• Effective of sale team

• Promptness of customer service

• Exhibition of socially responsible behavior

• Involvement in green shipping practices

• Availability of large selection of service offerings

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Hai My Duong - January, 2018

Value: involving maintaining the cost advantage of shippers by being sensitive to the pricing of

shipping service and shipper’s total logistics cost In addition, cost can be reduced by maintainingthe condition of ships equipment, and enhancing the safety and security of shipment “Value” can

be evaluated by 5 elements:

• The pricing of shipping service

• Total logistics cost

• Condition of ships equipment

• Safety and security of shipment

From the study, Kum Fai Yuen and Vinh V Thai found that Reliability and Speed are the main predictors of customer satisfaction, the result indicated that liner prioritize time-related and responsive service Following after is Responsiveness consist of supporting indicators which assess customer’s perception and experiences before and after using service Finally, Value determined the competitive freight and fee

Basing on these concepts and result, conducting an interview of regular customers and finding out which are the potential root causes

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According to the interview result, regular customers of TCS have trouble in many indicators: Consistency of customer service, On-time pick-up and delivery of cargo, Transit time of

transportation service, Frequency of transportation service… But the highlight is Frequency of transportation service, the indicators strongly affected to customer’s decision

About the factor: “Frequency of transportation service”: TCS has 4 vessels and run about 3 trips/week, but the schedule is not fixed (Table 2) For example, in the 2nd week of 2017, 3 vessels run

on Monday, Saturday and Sunday, but the next week, schedule is Wednesday and Sunday

Although TCS updates shipping schedule on website day by day, the schedule is arranged in onemonth and any revised will be noticed, but according to customers it is difficult to manage the packing plan so that they could not give a fixed number of reefer container on each trip

Customers trend to compare TCS with Hai An, the direct competitor of TCS, Hai An has fixed shipping schedule with 1 trip on Tuesday and 2 trips on Sunday

Frequency of transportation service is reflected by shipping schedule TCS have not had weekly fixed-day service, shipping schedule is floating, this non-fixed day service lead to consequences:

- Customers could not actively set up packing schedule in the long time while all of theirtransportation contract be signed long time

- Liner could not book a fixed schedule berths in port, TCS also book while vessel have exactly time of discharge But, port will priotitize arrange berths for liner who has fixed- schedule, TCS’s vessel often anchored offshore from 6-12 hours, in the peak season may

be 24 hours Ship anchored offshore will be lead to delay in both ports, affected to

prestige of company, schedule of other ships if the time discharge or arrived is duplicated

- Delay also incurred the per day ship cost The per day ship cost is the expense companyhas to pay whenever vessel run or not, according to vessel management department’s calculator, 1 vessel 1 day cost 79.014.442 VND (Table 2)

Hai My Duong - January, 2018

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Table 2: The per day ship cost

So that, the root cause of central problem is: un-fixed day shipping schedule of TCS

Basing on these theories, data and analysis, drawing the cause-effective map to see the root cause

of central problem

Frequency of transportation servicePotential root cause:

Non-fixed-day shipping scheduleSpeed

Transit time of transportation service

Consistency of customer serviceReliability

Low customer satisfaction of regular customers

On-time pick-up and delivery of cargo

Value Total logistics cost because of delaying

Responsiveness

21 Hai My Duong - January, 2018

Cause-effected map:

Problem solving:

According to vessel management department, the input data to make a shipping schedule includesmany elements have been divided into 4 groups:

• The port’s elements: Berths, navigator… these elements could be activitily arranged with

a fixed shipping schedule

• The ship’s elements: speed, maintenance, repair, registry… These elements vary

depending on the ship and have specific schedule, especially unexpected incident or damaged could change shipping’s schedule, so that, shipper need to have a back up time

to keep on-time schedule

• The natural elements: tide, storm, monsoon…

• The intention of broad director: from the beginning, the broad director have given

requirement for all of department is full fill almost 70% vessel’s loading to cover cost Basing on this direction, shipping schedule have been delay to wait to full fill vessel, sometimes 12 hours or 24 hours, especially, in the low season, one ship may be delayeduntil 48 hours

The process create shipping schedule to meet the requirement of company: Vessel management department provides shipping schedule for 1 month, marketing department publics the schedule and receives booking, after calculating the expected TEU on each trip, if the quantity is below therequirement, marketing will survey customers if the schedule delay, will they increase the volumeand offer vessel management changed departure day or change to another vessel smaller than the old to easily full fill The depature date will be closed four days before the first schedule pulic Sothat, TCS’s shipping schedule could not fix

The requirement of broad director full fill 70% vessel to maximize profit of this trip is reasonable but it is affect to other trip and change all shipping schedule in company

Notteboom, T E (5) stated that:

“Container shipping lines have developed or at least aim to develop liner services networks characterized by low operating cost, high frenquencies, fast transit time and both tight and reliable voyage schedules.”

TCS’s unfixed-day service leads to delay, unreliable service, long transit time… and affect to TCS’s service quality

All of these factors, we could not impact on natural factors, vessel’s condition is ensure by

periodically maintenance by Viet Nam Register of Ship

The port’s factor can be active arrangement if we can provide a fixed-schedule of discharge and loading

The factor directly affect to shipping schedule is the intension of director about the full fill each trip We should focus on changing the intension of them about the important of fixed-day service rather than full fill each trip

In short time: Providing a weekly fixed-day shipping schedule

1 Demonstrating to Broad of Director the necessary of weekly fixed-day service Now

aday, floating shipping schedule of TCS has these problems:

• The number of routes in one year are lower their ability because of delay and waiting forfull fill Furthermore, delay lead to the per day ship cost

• Reservation at the pork will be difficult because port will prioritize shipping lines with fixed schedules

Hai My Duong - January, 2018

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• TCS’s TEU is not stable in each trip because shipping schedule is dense or sparse.

Chart: Revenue of TCS of 3 months in the beginning of 2017

Advantage of weekly fixed-day shipping schedule:

As

the view of liner : Notteboom, T E (5) stated that:

Carrier will try to have at least a weekly service In doing so, they make a trade-off between frequency and volume on the lines: smaller unit capacities allow more frequency and as such meet shipper’s demand for lower transit times, while larger units will allow operators to benefit from economies of vessel size.

Calderwood, J A (7) described “They sign the contract with owner of good and will use

integrated transportation to save time and money While the owner of good does not inquire and

is not informed as to what type of transportation entity it is dealing with”

They only pay a transportation’s packet for door-to-door service, so that, every delay in shipping schedule will lead to delay in other stages, incur adding cost and these cost be the loss of freight forwarder A weekly fixed-day service will be the best choice for freight forwarder to sale to their customers, arrange packing’s schedule, set up delivery time… and win the trust of customers

Easily in arranging shipping schedule: By fixing the schedule, providing a long-term schedule

for 1 year is feasible, so it's easy to persuade customers to have a long-term contract that becomesthe TCS's key account

A weekly fixed-day shipping schedule is now the competitive advantaged in domestics lines:

Three year ago, in 2015, when TCS entered the domestic lines, there are 10 liners with 23 vessel (average of 250 TEUS/ vessel), 10 routes/ week (The weekly report of Domestic Liner

Association) To encourage customers to use TCS’s service, the Broad Director of TCS given lower freight but no dumping based on provision of Domestic Liner Association, delay shipping schedule to collect more goods, built shipping schedule base on current need of familiar

customers… to gain their satisfaction

But now aday, there are only 7 liners: BiỂN ĐÔNG, GEMADEPT, GLS, HẢI AN, VIETSUN, VINAFCO and TAN CANG but they own 25 vessels with larger capacity (average of 400 TEUS/