The Advantage in The Greek Shipping Industry

CHAPTER 4
THE COMPETITIVE ADVANTAGE

IN THE GREEK SHIPPING
INDUSTRY
Ioannis N. Lagoudis and Ioannis Theotokas
ABSTRACT
In this chapter, authors intend to further existing literature by examining
the importance of four factors on the competitive strategies of Greek
shipping companies, namely cost, quality standards, service level and
time. The analysis is based on the Johansson, McHugh, Pendlebury, and
Wheeler (1993) model, where the combination of quality, service, cost
and time are considered to determine the value a company creates
regardless of the industry it operates in. A survey was conducted on a
sample of Greek shipping companies in order to examine and evaluate the
importance of Johansson et al.’s key metrics to the shipping industry. The
results of this survey corroborate the results of similar surveys in
international literature revealing the importance of cost for the success of
shipping companies. They also validate findings in supply chain manage-
ment literature where quality and time are considered as ‘‘qualifiers’’ and
cost and service as ‘‘winner’’ criteria. Nevertheless, differences exist when
filtering takes place in terms of company size, operating sector strategies
(i.e. operating in a single or more than one sector) and dominant
philosophy related to the application of supply chain strategies.
Maritime Transport: The Greek Paradigm

Research in Transportation Economics, Volume 21, 95–120
Copyright r 2007 by Elsevier Ltd.
All rights of reproduction in any form reserved
ISSN: 0739-8859/doi:10.1016/S0739-8859(07)21004-2
95
96 IOANNIS N. LAGOUDIS AND IOANNIS THEOTOKAS
4.1. INTRODUCTION
Greek shipping remains at the top of the world maritime league for about
the last thirty years. The industry owes its competitive advantage to the
possession of special or specialised know-how at the operations manage-
ment level with cost factors contributing most to its success. Greek shipping
companies are active in the highly competitive markets of the bulk shipping
industry, while a small percent is active in the liner market, mainly by
serving local and peripheral markets. There are also a few companies that
operate liner vessels, without providing a liner service but by chartering
these ships to liner companies. Thus, the vast majority of the companies
obtain their advantage from their ability to operate their ships competitively
in the bulk shipping markets.
Although Greek shipping companies are an interesting paradigm of
business success at the international level, various aspects of their operations
related to this success are not known. The literature review reveals a growing
body of knowledge on aspects related to the management and the strategies
of Greek shipping companies, including research on aspects of their strategic
planning (Koufopoulos, Lagoudis, & Pastra, 2005), of their family character
(Harlaftis, 1996; Theotokas, 1998), of the entrepreneurial philosophy of
Greek shipowners (Theotokas, 1998), of their investment strategies
(Thanopoulou, 1995), of the significance of the large number of small
shipping companies (Theotokas & Katarelos, 2001; Thanopoulou &
Theotokas, 2006), of the attitude of Greek shipping companies to
outsourcing (Mitroussi, 2004; Papadimitriou, Progoulaki, & Theotokas,
2005), of the crew management of these companies (Theotokas &
Progoulaki, 2004) and on the aspects of their social responsibility (Fafaliou,
Lekakou, & Theotokas, 2005). Also, there are studies that aim at proposing
a framework for the analysis of the success of Greek shipping companies
(Harlaftis, 1996; Theotokas, 1998; Harlaftis & Theotokas, 2004).
When turning to the competitive strengths of the Greek shipping
company, the emphasis of existing research is on the aspects related to
business and investment strategies. More particularly, at the business level,
the competitiveness of companies stems from their structural characteristics
and the management style of the shipowners that allow the focus on cost
control and the cost effective technical management of ships. In addition,
via their investment strategies, which are based on timing, they succeed in
accumulating profits from the sales and purchases of vessels. These are used
for expansion through new purchases or for financing losses during periods
of extended crises in the freight markets.
The Competitive Advantage in the Greek Shipping Industry 97
However, there is a shortage of studies on matters related to the efficiency

that companies attain at the operational level. Existing studies examine
shipping company operations in the traditional way not from the supply
chain management point of view; the latter, approach the issue of company
competitiveness focusing on factors which contribute to value creation but
has not been associated traditionally with Greek shipping. A most plausible
explanation is that the Greek Shipping is active in bulk transport for which
there are fewer supply chain management studies in general compared to the
liner shipping sector, which in general is more integrated in longer value
chains both in practice and in literature.
Studies in this field of research have been applied mainly in the industrial
sectors related to manufacturing such as automotive, housing, computer
and others (Holweg, Disney, Holmström, & Småros, 2005). The supply
chain management methodology has derived from the need companies have
of providing goods and services of minimum cost and maximum quality in
order to achieve maximum value both for themselves and for the end
customer. The holistic philosophy that supply chain management offers
encompasses the shipping industry since the transportation service process is
a critical link – in effect a chain in its own right – in the production and
distribution of finished goods and commodities impacting on various
characteristics of the final product. A typical example of the role of shipping
transport from the supply chain point of view is the case of value created via
the cooperation of ship operators and port terminals. A good coordination
of processes between the two players (ports and shipping companies) can
provide mutual benefits via the minimisation of vessel turnaround and
utilisation of port equipment and infrastructure (Laine & Vepsalainen, 1994).
This chapter aims at shedding light to the operation strategies of Greek
shipping companies. The theoretical framework of the Johansson, McHugh,
Pendlebury, and Wheeler’s (1993) model, who have defined value as the
result of four main factors (quality, service, cost and time), is used to analyse
the factors that contribute to the value creation at the operations level. With
the assistance of a field survey among Greek shipping companies results are
analysed and presented based on the size (large and medium) and the type of
strategy the sampled companies adopt in terms of the number of sectors –
one or more – they operate in.
The main body of the chapter begins with a review of the existing literature
in supply chain management and value creation. The discussion of the
theoretical framework of the analysis follows next along with the presentation
and analysis of the survey results. Finally, a critical discussion of the findings
is made with some concluding remarks and suggestions for future research.
4.2. A SUPPLY CHAIN MANAGEMENT APPROACH
According to Stevens (1989) a supply chain is
a system whose constituent parts include material suppliers, production facilities,

distribution services and customers linked together via the feed-forward flow of
materials and the feedback flow of information.
Christopher (1992) defines a supply chain as follows,
The network of organisations that are involved, through upstream and downstream
linkages, in the different processes and activities that produce value in the form of
products and services in the hand of the ultimate consumer.
Recognising the existence of information from the customer and materials

to the customer, which are the two main flows, together with additional
flows of cash and other resources such as people and equipment, is central
to the creation of an effective supply chain. Effective supply chain design
ensures that the linking mechanisms are at least as good as the value-added
stages in the chain. Transport is the essential and critical link among the
various players in the chain in terms of material flow.
In the 1950s and 1960s, most companies of the manufacturing sector
focused on producing massively in order to minimise their production
cost and take advantage of economies of scale (Tan, 2001). The same
philosophy was dominant in the transport sector and especially in the ocean
shipping industry where bigger vessels were built in order to reduce average
transport costs.
In the 1970s, companies began to focus on the improvement of their
internal operations and functions with the use of MRP I – materials
requirements planning (Orlicky, 1975) and its extension MRP II –
manufacturing resource planning (Wight, 1983). MRP II takes a more
holistic approach since it intends to create an integrated system with all
parts linked back to a production plan (Waters, 1996).
Since the 1980s, companies began to focus more on the market by offering
differentiated products of better quality adapted to the end customer needs.
This strategy became even more popular in the 1990s. Such strategies were
the result of the intense competition among companies which drove them
in finding alternative ways in order to attract new customers and keep the
existing ones as well. In this context, companies turned to strategies that
either promised better supply chains or better linkage of producer and
customer value chains, a trend reflected also in literature.
Two related key characteristics that appear in the literature are those of
synchronisation and integration of supply chains (Towill, 1997; Geary,
Childerhouse, & Towill, 2002). Stevens (1990) supports the idea that in
order to achieve integration in the supply chain four main stages are
essential. The first stage is the baseline as he defines it, where a company is
not integrated at all, the second is the functional integration which focuses
on the inward flow of goods, the third is the internal integration where
the company begins to focus on the customer as well and the fourth and
final stage is that of external integration where the company includes its
suppliers and customers in all its processes and becomes more customer
driven.
As seen, most of the so far mentioned studies have been mainly applied in –
or were aimed at – the manufacturing and less in the service sector. Having in
mind the supply chain management theoretical framework a number of
strategies that companies could adopt in order to improve their performance
have been created such as the lean (Womack, Jones, & Roos, 1990) and
agile paradigms (Goldman, Nagel, & Preiss, 1995), the decoupling point
postponement (Pagh & Cooper, 1998), time compression (Mason-Jones &
Towill, 1998) and information enrichment (Mason-Jones & Towill, 1997).
With regard to shipping, a number of studies adopting a supply chain
management philosophy and methodology in the analysis of the industry
have been developed by Lagoudis, Lalwani, and Naim (2004, 2006) and
Lagoudis, Lalwani, Naim, and King (2002). These studies aim at identifying
the factors that define the supply chain strategies adopted by shipping
companies depending on the sector they operate. The overall objective is
not only to point at the attributes that add value to these companies, but
also to define the supply chain these are part of. Studies in the same vein of
research have been developed by Panayides (2003) who studied the effects
that different strategies adopted by shipping companies have on their
performance and Panayides and Cullinane (2002) who identified the factors
owners pay attention to for the selection of a third-party shipping
management company.
4.2.1. The Concept of Value
In supply chain management and logistics, value has been studied based
on the idea that it is not created only through – over and above simple
production – the improvement of a product but also when the process or
processes required for the production and delivery of the final product are
optimised (Towill, 1996). So, actually value is created not only during the
production stages of a product but after the delivery of the product as well.
Anderson and Narus (1995) focused on the value that companies and
customers gain from a number of services the former provide. Their study
suggested that
After compiling a complete inventory of supplementary services, a company should
assess the value of each service and the cost of providing it
Johansson et al. (1993) defined value as the result of four parameters: service,
quality, cost and cycle time. According to Johansson et al. any company
regardless of the sector or industry it operates in, either manufacturing or
service, should focus on improving the product’s quality and service at the same
time as reducing the cycle time and cost to the customer.
The four Johansson et al. (1993) metrics are the result of the evolving rules
and norms of competition, which have moved from focusing on product
characteristics towards time-to-market strategies. This perception is not far
from this kind of studies where flexibility and responsiveness are considered to
be the key factors of success for any company in the modern and volatile
business environment (Naylor, Naim, & Berry, 1999; Anderson & Narus, 1995).
These four key metrics are applied in this study in order to identify the
key factors that add value to the Greek shipping industry and their supply
chains. The study does not only focus on the factors that are internal to
Greek shipping companies themselves but also on factors and processes
external to these companies as well. So the overall aim is to take a more
holistic approach identifying the importance not only of the factors that
depend on the companies of this industry but also on those factors and
processes that depend on external parameters.
4.3. METHODOLOGY
4.3.1. The Model
As already mentioned, the aim of this chapter is to identify the factors that add
value to shipping management companies. These factors are grouped under
four main categories – quality, service, time and cost – and the survey results
are further analysed according to company size, sector of company activity and
supply chain management philosophy. The model used is shown in Fig. 4.1.
It should be pointed out that size is determined by the number of ships
a shipping management company operates, the categorisation of sector of
Quality Appropriate and quality equipment

Availability of creative top management
Reputation and reliability
Financial stability
Size Skills and knowledge of personnel

Good relationships with customers and suppliers
Service Ability to carry odd size consignments

Professionalism in customer support
Flexibility to customer demand and market changese
Responsiveness to unforeseen problems
Willingness to negotiate with customers and suppliers
Sector Provision of good services by ports
Value
Strategy
Time Frequency of voyages
Transit time
On-time pick-up and delivery
Time for introduction of vessels and services
On-time information and delivery by supplier
Quick vessel turnaround
Supply
Cost Administration
Chain
Cost of quality assurance of service
Spares and supplies inventory
Insurance
Company restructuring
Operating costs
Fig. 4.1. The Model. Source: Based on Lagoudis et al. (2006).
activity is based on the number of sectors companies operate in and, finally,

the supply chain management philosophy status is defined according to
whether the companies are aware and adopt such strategies.
In each of the four metrics, as these have been defined by Johansson et al.
(1993), six factors have been used to measure value. The selection of the
24 factors used in this study is the result of an extensive literature review
based on Lagoudis et al. (2006). A detailed presentation of each of the four
factors along with the crystallised attributes follows.
Quality has been dealt in existing literature from a variety of points
of view as well as disciplines. Studies have focused on the quality of pro-
ducts (Houser & Claussing, 1998) or the quality of the service provided
(Teas, 1994). In this study, quality is related to shipping by focusing
on those quality factors that actually add value to shipping companies.
The factors used are (i) appropriate and quality equipment (Abshire &
Premeaux, 1991), (ii) availability of creative top management (Menon,
McGinnis, & Ackerman, 1998), (iii) reputation and reliability (Brooks, 1990;
Murphy, Daley, & Hall, 1997), (iv) financial stability (Menon et al., 1998),
(v) skills and knowledge of operating personnel (Liberatore & Miller, 1995)
and (vi) development and maintenance of good relationships with customers

and suppliers (Martin et al., 1988).
Service level is an issue that has attracted special attention as customer
satisfaction guarantees the survival and success of companies in the modern
business environment (Levy, 1997). This research focuses on the service
factors that add value to shipping management companies emphasising on
the (i) ability to carry large and/or odd-sized consignments (Stopford, 1997;
Liberatore & Miller, 1995), (ii) professionalism in customer support
(Abshire & Premeaux, 1991), (iii) flexibility to meet customer demand and
market changes (Abshire & Premeaux, 1991; Martin et al., 1988), (iv)
responsiveness to unforeseen problems (Menon et al., 1998), (v) willingness
to negotiate cost and service changes with customers and suppliers
(Liberatore & Miller, 1995; Murphy et al., 1997) and (vi) provision of
reliable and efficient services by the ports (Brooks, 1990).
Time has always been a central issue of research in management and much
of the literature in different fields has focused on it. Especially in the supply
chain management and logistics field much attention has been given on
reducing production lead times and delivery times (Mason & Towill, 1999).
In the transport industry time has always been a central issue; shipping
management companies and ports invest continuously in better and more
reliable equipment in their effort to minimise transport times (Laine &
Vepsalainen, 1994). The time-related factors used for the purpose of this
study are (i) frequency of voyages (Bagchi, Raghunathan, & Bardi, 1987;
Brooks, 1990), (ii) transit time (Martin et al., 1988), (iii) on-time pick-up
and delivery (Menon et al., 1998), (iv) time required for introduction of
additional fleet and services (Stopford, 1997), (v) on-time information
and delivery by the supplier (Martin et al., 1988) and (vi) quick vessel
turnaround (Laine & Vepsalainen, 1994).
Cost minimisation is the main goal for all companies regardless of the
industry of operation. When it comes down to profit maximisation or the
improvement of effectiveness, cost is always considered to be the factor that
plays the most important role. A number of studies have dealt with cost
issues but from the shippers’ point of view and they have been related to
carrier selection issues (Brooks, 1990; Liberatore & Miller, 1995). In this
study, the cost factors that are considered to add value to the shipping
companies are (i) administration (Hussain & Gunasekaran, 2001), (ii) cost
of quality assurance of service (Williams, van der Wiele, & Dale, 1999),
(iii) spares and supplies inventory (Liberatore & Miller, 1995), (iv) insurance
(Stopford, 1997), (v) company restructuring (Gibson, Sink, & Mundy, 1993)
and (vi) operating costs (Bagchi et al., 1987; Gibson et al., 1993).
4.3.2. Sample Response Rate
The total number of companies which constitute the sample was 150 of which
83 answered. Nevertheless from these 83 responses 9 were not completed
appropriately reducing the number of acceptable responses to 74. Table 4.1
presents the response rates in detail using the method advised by the Council
of American Survey Research Organisations (Wiseman & Billington, 1984).
To achieve the response rate illustrated in Table 4.1 a set of processes was
followed, presented in Table 4.2. A four-step approach has been followed in
many studies conducted in various areas of research. An extensive amount
Table 4.1. Response Rates.

Total number of sampling units 120
Total number of respondents 83
Total number of eligible respondents 74
Total number of non-eligible respondents 9a
Percentage of eligible firms [74/83] 89.15%
Total number of non-respondents [120 83] 37
Expected number of eligible firms in non-respondents [37 (74/83)] 33
Response rate [(74 100)/(74+33)] 69.15%

a
Three were returned totally incomplete and six were returned only with a few sections filled in.
Table 4.2. Data Generation Processes.

Step 1: Pre-Notification It included all the relevant information concerning the purpose of
Letter the study informing the respondents of the reason for being
selected. Confidentiality issues also addressed at this stage. The
letter was addressed to the contact person indicated by the
databases used and signed by the researcher on headed paper.
Step 2: Cover Letter The cover letter was addressed to the same person as the pre-
with Questionnaire notification one reminding the respondent about the purpose of
the study and emphasising the confidentiality of the research and
assuring that a copy of the results will be sent at the end of the
study. Letter written on headed paper. Apart from the cover
letter and the questionnaire a pre-paid return envelope was
included as well.
Step 3: Reminder Letter This was used as a reminder and was sent to the respondents one
week after the questionnaire. Addressed to the same contact
person and written on headed paper
Step 4: Phone-Call This final step took place a month after the reminder letter had
Reminder been sent. Telephone calls were made only to those companies
that had not responded until that point in time.
of literature has focused on the effectiveness of each of these steps and the
reasons that they should be adopted in a research methodology (Cavusgil &
Elvey-Kirk, 1998).
4.4. RESEARCH FINDINGS
4.4.1. Sample Analysis
The sample used in this study consisted of Greek shipping companies, which
had the following characteristics:
Had offices in Greece.
Operated a fleet of at least five vessels.
Were not passenger operators.
Operate either locally, regionally or globally.
The decision for selecting Greek shipping companies was based on the
fact that Greece has a long tradition in the shipping industry and controls
about one-fifth of the worlds’ dwt capacity (ISL, 2005). The reason for
following a stratified selection of the sample instead of a random one was
the fact that the aim of this study is to focus on medium-sized and large
companies. Thus only companies that own or operate a fleet of at least five
vessels have been included.
Passenger operators – such as ferry and cruise companies – have been
excluded as they refer to different markets with significantly different
characteristics compared to those involved in the transportation of
commodities or finished goods. This chapter aims at studying Greek
shipping companies operating locally, regionally or globally and dealing
with the physical movement of materials. Companies in the sample could be
categorised as middle and large size ones. Using the analysis of Petropoulos
(2003), middle size defines those shipping companies that operate fleets of
5–14 vessels and large companies those managing more than 15 vessels.
As presented in Fig. 4.2 the sample was composed of medium-sized
companies by 85 percent and 15 percent by large ones. Among the middle-
size companies almost three quarters had a single sector strategy which
means that they operated in one of the three sectors under study; dry bulk,
liquid bulk or specialised as defined by Stopford (1997). The case for the
large shipping management companies is much different since companies
were split in half on the basis of the strategies followed (active in either one
or in more than one sector).
Fig. 4.2. Sample Characteristics.
Fig. 4.3. Supply Chain Awareness Status.
Finally, in terms of supply chain awareness, as seen in Fig. 4.3, six out
of ten companies were actively pursuing such strategies being conscious
that they are part of a supply chain. The level of awareness is still at a
considerably low level when compared to other industries such as the
automotive and manufacturing in general (Naylor et al., 1999). Companies
that operate in the specialised sector are the most aware (0% non-
awareness) and those operating in the dry bulk the least, as almost one
in two companies do not adopt such strategies. This can be explained
by the fact that both specialised and liquid bulk carriers charter their ships
on a time-charter basis and have developed strong relationships with
their charterers. Thus, companies realise that their services are a part of
a supply chain, this of their clients. More importantly, to achieve emp-
loyment they accept to be vetted by the charterers at both company and ship
level. Thus, they are inclined to invest in aligning their systems to those
of other parts of the supply chain of their charterers they are themselves
a part of.
The limited awareness of the dry bulk shipping companies can be explained
by the fact that they operate in charter markets that are competitive and
rely more on the spot market for the chartering of their ships. Seen from
a transaction cost (Williamson, 1985) point of view, companies operating in
specialised and liquid bulk create permanent or long-term relationships
with their charterers, which on one hand reduces the cost and the risk of the
frequent transactions involved, and on the other hand makes them more
dependent on the supply chain of their charterers as it increases their
resources specificity. On the contrary, dry bulk shipping companies that are
more inclined to charter their ships on a spot basis are based more on the
market for their transactions, which means that they neither tie themselves
to specific transaction counterparts nor do they adjust their resources to fit
the needs of specific charterers. Besides, the complexity of operations in
the three distinct sectors differs. Both specialised and liquid cargo vessels
appear to have more complex logistic operations compared to the dry cargo
ships due to different requirements of cargoes, different regulations, ports,
etc. This complexity makes specialised and liquid cargo carriers more depe-
ndent on their suppliers’ accuracy of service. This factor further explains the
different levels of adoption of a supply chain perspective prevailing in each
sector.
4.4.2. Company Size and Value
To be able to identify the value of each factor, respondents were initially

asked to rank the factors in terms of importance and then define how well
they considered their company to perform on each of these attributes. As it
can be seen in Table 4.3 quality holds a dominant place among middle and
large-size companies as it is the highest ranked criterion. So, there is a strong
indication that quality-related factors are those that receive most of the
attention of these enterprises as it is thought that they contribute the most to
the creation of value. This is validated by the level of performance they are
perceived to achieve the respective score being the highest among all four
key factors.
Cost criteria exceed marginally service ones in terms of importance. Due
to the marginal differences observed it could be assumed that the
contribution of service and cost to the overall value is of equal importance.
Table 4.3. Value Contribution of Key Metrics Based on Size.

Quality Service Cycle Time Cost
Ranka
Total 1 (1.92) 3 (2.20) 4 (3.38) 2 (2.15)
Medium 1 (1.88) 2 (2.23) 4 (3.19) 3 (2.30)
Large 2 (1.97) 3 (2.06) 4 (3.69) 1 (1.91)
Performanceb
Total 5.89 5.78 5.10 5.58
Medium 5.82 5.80 5.18 5.66
Large 5.88 5.69 5.06 5.56
a
The scale is from 1 to 4 with 1 being the most important factor.
b
Nonetheless, for the large Greek shipping companies the cost attribute
seems to be the most important one with quality coming second. This
finding could be attributed to the maturity that big companies have achieved
at the quality level which enables them to focus more on cost-efficient
operations. An indication of the achieved maturity is the existence of
certified quality and environmental management systems according to the
Standards ISO 9001:2000 and ISO 14001. It has been found that the vast
majority of certified Greek-owned shipping companies are of large size.
Moreover, many have developed and implemented their own quality
management systems with ISO standard certification simply confirming
the implementation of their system (Theotokas & Kaza, 2006). This
means that for these companies the objective would be to deliver quality
at the minimum cost possible, since quality performance would be consi-
dered more or less standard in this context. Conversely, companies of
medium size that have not had their quality management system certified yet
are at a stage where they intend to implement quality systems to their
operations to be able to compete in the modern environment; the stage they
are at explains the high level of importance they attribute to the quality
metric.
Finally, an interesting result is the fact that time factors do not seem to be
appreciated by the shipping companies in the sample since they have been
ranked low. A reason that could considerably explain this finding is the fact
that a certain level of maturity in the attributes encapsulated in this criterion
has been reached by these companies.
Having a more in-depth look at the quality factors it can be seen that
there is a consensus among the Greek sampled companies: quality of
Table 4.4. Value Contribution of Quality Factors Based on Size.

Equipment Management Reputation Financial Personnel Customer–
Supplier
Relationships
Ranka
Total 5 (3.96) 4 (3.33) 2 (2.81) 3 (3.06) 1 (2.65) 6 (4.13)
Medium 5 (3.83) 4 (3.18) 2 (2.76) 3 (3.00) 1 (2.47) 6 (4.06)
Large 5–6 (4.19) 4 (3.38) 3 (3.13) 2 (3.03) 1 (2.94) 5–6 (4.19)
Performanceb
Total 5.10 5.47 6.08 5.94 5.58 5.67
Medium 5.20 5.52 6.20 5.95 5.75 5.68
Large 5.00 5.25 5.56 5.94 5.25 5.31
a
b
personnel is considered to be the most important factor (Table 4.4).

Reputation comes second in terms of importance for the medium-size
companies whereas financial issues seem to be more significant for the large
ones. A rather important finding is that management issues are not
considered to add much value since management procedures and structures
are characteristics that any shipping management company should have in
order to operate competitively.
The values that the Greek shipping industry, and especially bulk shipping
has used to build upon should be taken into account. Trust is the first and
most important among them. The worldwide shipping business has
developed its own culture, based on trust and reputation of its members
(Harlaftis & Theotokas, 2004). Thus, after the well-trained and motivated
personnel, reputation is considered as the next most important factor that
could create conditions of trust to the companies. While personnel is the
factor that activates equipment and management systems to create value,
reputation is the factor that attracts customers and reduces cost as it enables
networking and reduces transaction costs (Harlaftis & Theotokas, 2004).
To a certain extent reputation is a factor that stands by itself in terms of
significance. However, at the same time reputation is the result of the
remaining factors included in Table 4.4.
The ranking of management in only the fourth place can be explained by
the reduced complexity of company organisation that allows the imple-
mentation of more traditional methods to achieve coordination. This
coordination is achieved and assured by the quality of the company
personnel. The common finding in the literature that quality management

systems bring to the fore the key role of management is not applicable in the
case of the Greek shipping industry as the above results indicate.
In terms of the service attributes presented in Table 4.5, customer support
is believed to add more value to large companies while responsiveness to
unforeseen problems ranks high for the medium ones in size. Nevertheless,
due to the marginal differences in the scores of customer support and
responsiveness to problems in the case of the medium-size companies it can
be stated that the former factor emerges as the overall more important one
for the Greek shipping companies. The ability to carry odd consignments
along with the level of port services and the ability to negotiate freight
rates are low-ranked attributes with more modest performance scores
which indicate a rather low appreciation to value contribution. It is essential
at this point to stress the supply chain management focus that large-size
companies prove to have compared to the middle-size ones since they seem
to be more customer oriented ranking the customer support attribute at the
highest place.
The supply chain management philosophy that large companies follow
can also be seen in Table 4.6, where, among service attributes, the on-time
delivery factor is ranked first. The high level of performance these
management companies obtain from their operation is an additional
indication of the value contribution this factor is considered to have.
Medium-sized companies seem to care more for the time spent in port since
they are exposed more to the pressures of spot freight rate markets as
illustrated in Fig. 4.4.
Table 4.5. Value Contribution of Service Factors Based on Size.

Consignments Customer Flexibility Responsiveness Negotiations Port
Support to Problems Services
Ranka
Total 5 (4.49) 1 (2.26) 3 (2.55) 2 (2.51) 4 (3.99) 6 (4.56)
Medium 5 (4.24) 2 (2.42) 3 (2.58) 1 (2.35) 4 (4.05) 6 (4.34)
Large 6 (4.97) 1 (2.16) 3 (2.50) 2 (2.41) 4 (4.03) 5 (4.88)
Performanceb
Total 4.54 5.88 5.51 5.96 5.28 4.76
Medium 4.59 5.82 5.43 6.05 5.25 4.91
Large 4.25 5.63 5.63 5.81 5.25 4.50
a
b
Table 4.6. Value Contribution of Time-Related Factors Based on Size.

Frequency Transit On-Time Fleet Supplier Turnaround
Time Delivery Introduction Information
Ranka
Total 4 (3.31) 3 (3.14) 2 (2.72) 6 (4.69) 5 (3.63) 1 (2.60)
Medium 3 (3.22) 4 (3.31) 2 (2.77) 6 (4.53) 5 (3.73) 1 (2.31)
Large 4 (3.31) 2 (2.75) 1 (2.69) 6 (4.47) 5 (3.78) 3 (3.06)
Performanceb
Total 5.18 5.19 5.51 4.71 5.29 5.33
Medium 5.30 5.25 5.59 4.86 5.30 5.36
Large 5.44 5.06 5.56 4.88 5.25 5.25
a
b
Fig. 4.4. Charter Strategies.
Finally, among cost-related factors, operation processes and costs seem

to add most of the value to Greek shipping companies as shown in
Table 4.7. Large-size companies differ since they consider that insurance
costs seem to pay-off more than any other cost element. This result can be
explained by the fact that their ability to obtain and maintain a high level of
quality of the services they provide, along with the increased bargaining
power their fleet size provides them with, enables them to lower their
Table 4.7. Value Contribution of Cost Factors Based on Size.

Admin Service Quality Inventory Insurance Restructuring Operations
Ranka
Total 5 (3.58) 4 (3.20) 3 (3.15) 2 (3.07) 6 (4.92) 1 (2.43)
Medium 5 (3.74) 3 (3.11) 2 (3.06) 4 (3.18) 6 (4.61) 1 (2.23)
Large 3 (3.19) 5 (3.31) 4 (3.28) 1 (2.72) 6 (5.41) 2 (3.09)
Performanceb
Total 5.21 5.36 5.19 5.68 4.40 5.60
Medium 5.11 5.48 5.14 5.70 4.45 5.57
Large 5.44 5.25 5.44 5.56 4.44 5.56
a
b
insurance costs considerably. Medium-sized companies seem to achieve a

high level of performance from insurance costs but for different reasons;
these are related to the ‘‘hedging’’ role insurance plays in their case as
otherwise the cost of unforeseen problems would be beyond their financial
capabilities.
4.4.3. Sector Strategies and Value Creation
In this section, Greek shipping management companies are studied based on

the strategy they adopt in terms of the number of sectors they operate in.
Two groups of companies have been defined according to the specialisation
of their fleets; those that operate in only one sector (single) and those
that operate in more than one (diversified). As seen in Table 4.8, diversified
companies obtain more value from the attributes encapsulated in the
cost metric, whereas companies operating in a single market obtain their
competitive advantage from quality factors. These results align with the rest
of the analysis so far since single sector companies are usually medium
or small in size and those that operate in more than one sector usually
operate large fleets of more than 15 vessels. Again time factors are consi-
dered to have the least contribution to value creation by the sampled
companies.
Among quality-related factors, diversified companies consider that they
obtain value not only from their personnel, which fits well with the results
discussed in the previous section, but also from management as illustrated in
Table 4.8. Value Contribution of Key Metrics Based on Sector

Strategy.
Quality Service Cycle Time Cost
Diversified: Ranka 3 (2.30) 2 (2.17) 4 (3.50) 1 (2.02)

Single: Ranka 1 (1.72) 3 (2.24) 4 (3.30) 2 (2.22)
Diversified: Performanceb 5.78 5.61 5.00 5.48
Single: Performanceb 5.96 5.85 5.13 5.63
a
b
Table 4.9. Value Contribution of Quality Factors Based on Sector

Strategy.
Equipment Management Reputation Financial Personnel Customer–
Supplier
Relationships
Diversified: 5 (3.98) 1–2 (2.76) 3 (3.04) 4 (3.37) 1–2 (2.76) 6 (4.43)

Ranka
Single: Ranka 6 (3.95) 4 (3.65) 2 (2.69) 3 (2.86) 1 (2.61) 5 (3.94)
Diversified: 5.13 5.65 6.00 5.83 5.65 5.35
Performanceb
Single: 5.08 5.38 6.13 6.02 5.54 5.81
Performanceb
a
b
Table 4.9. The complexity of the processes, which are required to operate a
diversified fleet, makes the quality of top management a basic requirement
for their competitiveness. These companies, as already mentioned, would
normally be supply chain aware as well. Also, apart form their equipment,
both their human resources and their management systems are vetted by
prospective customers. Thus, competencies at the management level define
the ability of the companies to operate not only at a competitive cost level
but also to establish relationships with customers and suppliers. Greek
companies operating in only one sector rely – apart from personnel – more
on the reputation attribute and less on management. This reliance on
reputation is explained by the fact that the majority of these companies have
neither the amount of resources nor the advanced management systems
Table 4.10. Value Contribution of Service Factors Based on Sector

Strategy.
Consignments Customer Flexibility Responsiveness Negotiations Port
Support to Problems Services
Diversified: 6 (4.63) 1 (2.02) 3 (2.91) 2 (2.37) 4 (3.87) 5 (4.54)

Ranka
Single: Ranka 5 (4.43) 2 (2.41) 1 (2.39) 3 (2.57) 4 (4.01) 6 (4.55)
Diversified: 4.39 5.87 5.52 6.04 5.09 4.61
Performanceb
Single: 4.63 5.88 5.52 5.94 5.40 4.81
Performanceb
a
b
required to reduce the cost of the large number of transactions that their
participation in the spot market creates. Thus, they pursue the alternative of
network formation and participation to reduce transaction risks and costs.
Networks are based on trust and reputation.
The results of Table 4.10 show the tendency of large-size companies
towards supply chain management strategies; customer support processes
and functions are ranked first. Smaller in size Greek shipping companies
believe that the factor creating more value for them is flexibility. These
companies do not perceive themselves as part of a wider supply chain and
do not rely as much as the larger in size and diversified companies on
permanent relationships with charterers. Thus, they are more interested in
preserving their flexibility as they consider it crucial for the instant
adaptation to the changing needs of the bulk freight markets. Of special
interest is the fact that both single and diversified companies seem to
perform rather well in terms of customer support since they believe that
their customers are satisfied with the level of service they provide.
In terms of time-related factors there is an alignment of the importance
ranking from either single or diversified Greek shipping companies, as seen
in Table 4.11. Turnaround time is the factor that is believed to add most
value among time-related attributes with on-time pick-up and delivery
following next. The analysis of the previous section showed that large in size
Greek companies are engaged in time charter contracts and adopt supply
chain management strategies accordingly, thus on-time delivery is evidently
more important to them. The importance of turnaround time revealed here
shows also an emphasis on efficient vessel utilisation.
Table 4.11. Value Contribution of Time Factors Based on Sector

Strategy.
Frequency Transit On-Time Fleet Supplier Turnaround
Time Delivery Introduction Information
Diversified: 4 (3.46) 3 (3.09) 2 (2.85) 6 (4.48) 5 (3.72) 1 (2.67)

Ranka
Single: Ranka 4 (3.29) 3 (3.17) 2 (2.64) 6 (4.77) 5 (3.55) 1 (2.58)
Diversified: 5.04 5.00 5.39 4.52 4.96 5.04
Performanceb
Single: 5.23 5.29 5.58 4.79 5.46 5.46
Performanceb
a
b
Table 4.12. Value Contribution of Cost Factors Based on Sector

Strategy.
Admin Service Inventory Insurance Restructuring Operations
Quality
Diversified: 5 (3.54) 3 (3.20) 2 (2.80) 4 (3.43) 6 (5.48) 1 (2.46)

Ranka
Single: Ranka 5 (3.57) 3 (3.15) 4 (3.33) 2 (2.90) 6 (4.67) 1 (2.45)
Diversified: 5.04 5.00 5.26 5.17 4.17 5.30
Performanceb
Single: 5.27 5.54 5.19 5.94 4.50 5.75
Performanceb
a
b
Finally, operations appear to be the most important factor within the

cost category as illustrated in Table 4.12. A significant difference compared
to the analysis of cost in section 4.4.2 is that inventory costs are considered
of importance to diversified companies, a result which is well aligned to
those found in the supply chain management and economic literature.
High maintenance costs deriving from operating a diversified fleet is an issue
that impedes the achievement of economies of scale. Once more admi-
nistration costs and restructuring appear to be less significant since the
management structure of diversified companies enables them to function
efficiently.
4.5. CONCLUSIONS
In this chapter, the example value creation by Greek shipping companies

in shipping operations has been studied using a supply chain management
and logistics theoretical framework. The model adopted for the purposes
of this study is Johansson et al.’s (1993) four key metrics – quality, service,
time and cost – in order to define and evaluate the processes that add
value to Greek shipping management companies. The use of such a
methodology was intended to fill the existing void in literature, since most
of the studies in the shipping industry have followed an economic (either
macro or micro) or purely managerial approach. The authors explore the
factors from which shipping management companies obtain their
competitive advantage firstly through the identification of the operations
– activities, which are considered to add value and secondly through a
field research.
For the purposes of this study, the sample used was based on Greek
shipping management companies operating in bulk shipping markets: dry,
liquid and specialised. The analysis of the findings showed that there is a
differentiation in terms of the factors that add value to Greek shipping
companies when these are categorized by size, sector strategy and supply
chain awareness. Thus companies obtain a competitive advantage from
different attributes depending on the management philosophy adopted
by their owners. This philosophy is present at the strategic business
level where decisions on fleet size are taken and at the functional level
where sector differentiation and supply chain management strategies are
adopted.
The results have shown that large companies and those that adopt
diversified strategies in terms of the number of sectors they operate in,
seem to be more supply chain aware and adopt related strategies. This
supply chain management philosophy is also observed in Greek shipping
management companies that operate fleets that belong to the liquid bulk
and specialised sectors. This can be explained by the fact that the nature of
the business environment for both specialised and liquid bulk carriers has
lead them to charter their ships on a time-charter basis (Stopford, 1997).
Thus in order to compete, they have developed strong relationships with
their customers (charterers) by investing in developing their systems to the
level that could be compatible to those of the other parts of the supply
chain.
On the contrary Greek medium-sized companies – operating mainly in the
dry bulk sector – do not seem to follow supply chain strategies mainly due
to the nature of the chartering strategies they follow. This is due to the fact
that they operate in charter markets that are competitive and rely more on
the spot market for the chartering of ships (Stopford, 1997).
Another characteristic finding is that Greek large companies – as
diversified ones – give special attention to cost-related factors, a result
compatible with the suggestions of analyses of competitiveness at fleet level
as this of Thanopoulou (1998) which evaluate the competitive potential of
fleets on the basis of a strategy of cost minimisation suited to the
competitive nature of bulk markets. Medium-sized companies and those
operating in one sector seem to appreciate more the factors related to
quality with reputation standing out while Greek large shipping companies
focus more on the quality of their personnel a result which is compatible
with those obtained by studies conducted on the transport industry by
Martin et al. (1988, 1997).
As far as service-related factors are concerned, it is clear that for the
large size and diversified companies customer support is the one that adds
value. The supply chain awareness these companies have has made them
more customer oriented in contrary to the medium size and single sector
companies, which seem to obtain value from processes that are related to
efficiently overcoming unforeseen problems. The former is in accordance
to the works of Abshire and Premeaux (1991) and Martin et al. (1988)
who show that the transport industry shifts towards the need of more
stable relationships between customers and suppliers aiming at the
improvement of the service level. The works of Menon et al. (1998) and
Panayides and Cullinane (2002) provide additional evidence since efficient
and responsive solutions to problems provided by carriers strengthens
the relationship between the two parties involved in the carriage of goods
by sea.
In reference to quality, personnel seems to be the most important
attribute for the competitive operation of Greek shipping companies, which
is along similar lines with the results of Liberatore and Miller (1995)
followed next by reputation. That reputation is or is perceived to be a
critical attribute by shipping companies is corroborated by a number of
studies (Brooks, 1990; Murphy et al., 1997; Panayides & Cullinane, 2002).
Finally, time-related factors are the least appreciated ones by sampled
Greek companies in general since they are exposed to a number of external
uncontrollable factors. Among the time-related factors, those related to the
efficiency of operations are the dominant ones with turnaround and on-
time delivery ranking very high. The studies of Menon et al. (1998) and
Laine and Vepsalainen (1994) in the shipping industry have shown the
significance of these two attributes in day-to-day operations and in the

creation of long-term partnerships between shippers and transport service
providers.
Given that the vast majority of Greek-owned shipping companies are
active in the freight markets of the bulk shipping sector of shipping, the
results of this analysis should be considered as representative of companies
participating in this sector of the shipping industry. Despite the fact that
there may be differences related to cultural backgrounds, the results could
be generalised to form the basis for further study of the various aspects of
shipping operations regardless of fleet or company origin adopting a supply
chain management point of view and looking on this basis to track the
elements which render to Greek companies as competitive as their leading
position in the world fleet suggests.
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CHAPTER 4

THE COMPETITIVE ADVANTAGE

Ioannis N. Lagoudis and Ioannis Theotokas

Maritime Transport: The Greek Paradigm

However, there is a shortage of studies on matters related to the efﬁciency

4.2. A SUPPLY CHAIN MANAGEMENT APPROACH

According to Stevens (1989) a supply chain is

a system whose constituent parts include material suppliers, production facilities,

Christopher (1992) deﬁnes a supply chain as follows,

Recognising the existence of information from the customer and materials

4.2.1. The Concept of Value

4.3.1. The Model

Quality Appropriate and quality equipment

Size Skills and knowledge of personnel

Service Ability to carry odd size consignments

Fig. 4.1. The Model. Source: Based on Lagoudis et al. (2006).

activity is based on the number of sectors companies operate in and, ﬁnally,

and (vi) development and maintenance of good relationships with customers

4.3.2. Sample Response Rate

Table 4.1. Response Rates.

Response rate [(74 100)/(74+33)] 69.15%

Table 4.2. Data Generation Processes.

4.4. RESEARCH FINDINGS

4.4.1. Sample Analysis

Fig. 4.2. Sample Characteristics.

Fig. 4.3. Supply Chain Awareness Status.

4.4.2. Company Size and Value

To be able to identify the value of each factor, respondents were initially

Table 4.3. Value Contribution of Key Metrics Based on Size.

Table 4.4. Value Contribution of Quality Factors Based on Size.

personnel is considered to be the most important factor (Table 4.4).

personnel. The common ﬁnding in the literature that quality management

Table 4.5. Value Contribution of Service Factors Based on Size.

Table 4.6. Value Contribution of Time-Related Factors Based on Size.

Fig. 4.4. Charter Strategies.

Finally, among cost-related factors, operation processes and costs seem

Table 4.7. Value Contribution of Cost Factors Based on Size.

insurance costs considerably. Medium-sized companies seem to achieve a

4.4.3. Sector Strategies and Value Creation

In this section, Greek shipping management companies are studied based on

Table 4.8. Value Contribution of Key Metrics Based on Sector

Diversiﬁed: Ranka 3 (2.30) 2 (2.17) 4 (3.50) 1 (2.02)

Table 4.9. Value Contribution of Quality Factors Based on Sector

Diversiﬁed: 5 (3.98) 1–2 (2.76) 3 (3.04) 4 (3.37) 1–2 (2.76) 6 (4.43)

Table 4.10. Value Contribution of Service Factors Based on Sector

Diversiﬁed: 6 (4.63) 1 (2.02) 3 (2.91) 2 (2.37) 4 (3.87) 5 (4.54)

Table 4.11. Value Contribution of Time Factors Based on Sector

Diversiﬁed: 4 (3.46) 3 (3.09) 2 (2.85) 6 (4.48) 5 (3.72) 1 (2.67)

Table 4.12. Value Contribution of Cost Factors Based on Sector

Diversiﬁed: 5 (3.54) 3 (3.20) 2 (2.80) 4 (3.43) 6 (5.48) 1 (2.46)

Finally, operations appear to be the most important factor within the

In this chapter, the example value creation by Greek shipping companies

signiﬁcance of these two attributes in day-to-day operations and in the

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