Individual Case Development on E-procurement on Board Merchant Ships

Executive Summary

The case would highlight the e-Procurement procedures in the Shipping Industry where I have been working since 1996. Having experienced the transition from conventional industry methods to the latest e-Procurement technology I would be presenting the in-depth analysis of same.

Presently on board Ships we use custom made software tools such as SHIPSERV for ordering Ship Stores and Spares. The IMPA (International Marine Purchasing Association) and ISSA (International Ship Suppliers and Services Association) provide the standard coding of all stores for use in the Marine Industry.

With the state of the art Inmarsat Broadband Communication Systems on Ships from almost any part of the Ocean and in any weather conditions we upload our requisitions to the head office server and after approval the stores/spares are arranged either at the next port or while transiting or even by Helicopters depending on the urgency.

Organization and industry background

Anglo-Eastern has been working with ship Owners and their clients for over 40 years, driven by their passion for shipping industry. They are committed and engaged in all areas of ship management, crew management and technical services for all types and sizes of ships. They currently hold over 600 Ocean going ships under their management. Anglo-Eastern operates all around the world, with head offices in Mumbai & Hong Kong and over 25 office locations in Asia-Pacific, Europe and the Americas. Each Ship on an average will have a monthly budget of USD 1,65,000 (Around 11.2 Million INR) out of which USD 50,000 (INR 34 Lakhs) would be allocated monthly for items such as Provisions, Stores and Spare Parts.

Now we are looking at a monthly expense of 34 lakhs X 600 Ships trying to procure the necessary stores to run the ships. In order to streamline the entire process from requisition made on ship to final delivery on board, Anglo Eastern has partnered with ShipServ to initiated e-Procurement system on board their entire fleet.

On board Ships Requisitions are prepared on the ShipServ Module by various department heads and Captain after review transmits to the head office using Satellite link. Immediate acknowledgement is received and further follow-up is done by the Ship Superintendent at the office end.

ShipServ was founded in 1999, ShipServ is the world’s largest procurement platform for the marine industry including Oil and Gas Offshore Sectors with current annual value of trade being USD 3.5 bn from over 200 buying companies, managing 9,000 Ships and trading with over 68,000 suppliers in over 100 countries around the world.

The ShipServ proposition is simple. It helps marine buyers to find the best suppliers easily, trade efficiently and build trusted relationships. Buyers speed up their purchasing process and save money. Suppliers serve their customers better and find new customers and markets.

Setting the stage

Traditionally, it’s been a transactional function not regarded as a value centre for the business. Many of its processes are administrative like managing purchase orders, reconciling invoices and tracking payments. Primitive versions of predictive analytics that used unstructured data are replaced with advanced versions that are used to forecast spend and benchmark performance. The shift in mindset is obvious.

Prior implementation of e-Procurement system onboard ships purchasing departments claim that cycle times are too slow, procurement costs are too high, processes are plagued by errors and a lack of reliable data means that it’s hard to make strategic decisions.

Model to Promote Use and Application of Onboard Data

Ship Data Center Co., Ltd. offers consolidated management of vessel operation data and establishes a system to supply data, aiming to promote use and application of data. Its objectives are to contribute to international shipping and maritime industries, and create new businesses by enhancing the IT foundation of the maritime clusters through promotion of data use and application.

Case description

As marine procurement takes a more strategic approach, the role of technology is becoming increasingly prevalent. Data is at the heart of that. But, with so much data being produced, it is hard to gain insight, and to find solutions from it, without knowing where to look or having the requisite skillsets.

Many Shipping giants have already launched onboard data transmission and accumulation for its operated vessels in cooperation with Ship Data Center Co. Ltd, Tokyo, which is a wholly owned subsidiary of Nippon Kaiji Kyokai (ClassNK).

Anglo Eastern has worked steadily to create an environment that allows the collection of big data from onboard its operated vessels, and sharing the information between ship and shore in real time using marine broadband service. Based on the analysis of onboard big data, Anglo-Eastern also aims to build a comprehensive vessel operation support network, which will improve operating safety, reduce vessels' environmental impact, make vessel operation more economical, enhance ship management, and promote high-quality training and education for seafarers.

Anglo-Eastern will transport onboard big data acquired from its operated vessels to Ship Data Center, where it will be accumulated or the benefit of the entire maritime cluster. They believe supporting this effort will promote innovation throughout the entire maritime cluster, including producers of ship supplies, shipyards, ship's classes, societies, universities and research institutes.

With the goal of becoming the world leader in safe operation, the entire Anglo-Eastern Group, on land and sea, is united to proactively develop and introduce technologies that will contribute to safe, reliable operation and build and maintain the trust of valuable customers. In addition, as the world's leading shipping company, Anglo-Eastern takes a proactive stance in efforts to promote the continued growth of the maritime industry.

What changed?

e-Procurement ship management software helps ship-owners and managers reduce their OPEX by:

• Digitizing their procurement process – removing emailed PDFs, excels and re-typing and replacing all that that chaos with a single link between them and ShipServ.
• ShipServ makes sure we connect with 100% of their suppliers. The end result is that buyers see all their procurement transactions come in and out, electronically, of their existing procurement system.
• This typically improves procurement productivity by 30%.
• Improved data
• Access to a number of spend benchmarking tools to identify where savings can be made
• Supplier performance reporting to improve the outputs of your conversations with key suppliers

Automate the Procurement Process

• Change manual process to electronic and efficient
• Retain your existing procurement system
• Improve productivity typically by 30%
• Analyze and benchmark your spend – exclusive tools
• Over 200 buyers operating close to 10,000 ships trade using ShipServ today
• All suppliers can trade for FREE on ShipServ.
• This ensures that buyers get the ability to automate their entire procurement supply chain and is one of reasons why over 200 ship-owners and managers have chosen to implement e-procurement onboard their ships
• Maximize brand exposure
• Manage and control brand
• Improve quoting efficiency

Problem statement

There’s an issue with the quality of data in maritime organizations – a big issue. Data is generated continuously, but because it’s poorly structured or poorly managed it’s inaccurate, incomplete or laden with errors. Duplicate information appears across systems or has no relation to its associated fields on the software system. In other words, it’s dirty data.

The problem is rife throughout the industry and common in the procurement profession. Critical information - industry benchmarking, supplier performance or costs analysis for example – can be hard to find. Gaining insight from the data - from which value is derived - is time consuming and laborious. The problem impacts strategy. Because there is no standard way to name products in the maritime supply chain, it is hard to identify what to buy or who with. Categories become fragmented, transactional spend high and spend under contract patchy.

In fact, it’s indicative of a trend. In a recent survey, one respondent told ShipServ that they didn’t have the data to produce meaningful reports. That was further corroborated by the 78% that said they would like to increase their expenditure under contract but were prevented from doing so by dirty data.

If that weren’t damning enough, a further 69% of respondents said that they would like to consolidate their expenditure with fewer suppliers than they currently use, but in most cases (60%) were unable to report savings achieved across all spend areas because of inadequate data and reporting tools.

The survey results backed the comments - 72% of respondents couldn’t monitor what they spent. This lack of visibility extended to the categories, brands, product types and suppliers they were using.

The same 72% said that they were unable to quickly identify where they were delivering orders, what equipment they had bought, or what brands and products each office or vessel had bought.

Shipping is a traditional industry - and tradition makes change difficult. It’s worth remembering that less than 30 years ago, ships used telex machines to send requisitions ashore. Switching from a transactional approach to one that is data-driven and strategic will be met with resistance.

Strategy for change

Vast data is generated by every organization. Having data hasn’t been the issue for companies, the problem has been looking at the future of the procurement profession will draw heavily on the insight gained from data it in such a way for it to be useful. Outside the marine industry, the new wave of analytical tools is allowing procurement departments to see their data in a meaningful way. Companies can combine insights from data and unstructured information to respond to customer and market demand more quickly and efficiently.

To date, the adoption of strategic procurement models in the maritime industry is poor. Some see the value in harnessing data, but the vast majority still needs convincing of its efficacy. The issue is predominantly cultural. In an industry dominated by tradition, change is difficult, especially if it requires new ways of working. It is therefore incumbent on those that can see the need and worth of data to prove its value to the organization and make a case for investment in data-centric procurement models.

History shows us that in times of change, those that don’t adapt are left behind. The future of the procurement profession will draw heavily on the insight gained from data and harnessed by technology that much is obvious. Decisions will be more informed, process will be automated and savings wrought. Procurement will be more efficient, intelligent and dynamic. Data will be at the heart of that.

Role of Internet and Information Communication Technology

Implementation

Software CD ROMs were sent onboard with a Computer Based Training Programme for immediate familiarization. Ashore new joining officers were given Inhouse training prior joining the ships. Presently Anglo Eastern Maritime Training Centre conducts a 8 Hrs Certificate course on e-Procurement tool.

Outcomes

Reliable data is the cornerstone of modern procurement. Clear information informs more comprehensive strategy and drives business performance through informed decision-making.

Specifically, it is the data organised by spend analytics tools that are a catalyst for elite performance. Those using such platforms report savings of between 5% and 20% a year after engaging the software, gaining competitive advantage from the

improved process, enhanced supplier performance and consolidating spend.

It is essential for a procurement professional to reliably track spend, though few maritime purchasers can do so accurately because they don’t have the data or the systems to support that information. Spend analytics is a remedy to that, demonstrating where money is spent, on what and with whom.

What went right? The Benefits

• Procurement time savings of up to 30%
• Replaces manual processes and inefficient multiple formats (paper, emails, phone, fax)
• Eliminates re-typing
• Improves order accuracy, fewer data errors
• Increased productivity – more ships per purchaser or time freed up for more value added tasks
• Drives the competitive advantage
• Online report, which can also be printed, showing performance – supplier by supplier
• Use data as inputs to supplier review process
• Used internally on Ships to show compliance with procedures and performance against targets during Audits and Port State Inspections
• All data can be viewed online and printed into a single report
• Metrics available at vessel and purchasing manager level
• ShipServ claims that Ship Managers can save upto 1.2 million USD per year for a fleet of every 10 Ships.

What was the response from Industry?

• It identified what data procurement departments should be looking for and how to better make sense of it.
• Demonstrated how we should use data to gain a competitive advantage and why some data sets are more important than others.
• Identified when in the procurement cycle certain data sets are most beneficial.
• Demonstrated how to use modern tools and metrics to harness data to drive value, cost saving and innovation in the supply chain.

Lesson Learned & Concluding Comments

Way of procurement has changed due to necessity. In a highly competitive market, a strategic approach is an advantage and knowledge is an asset. To deliver consistent and sustainable value, both are essential. Data-driven technology is the key that unlocks the potential in your strategy and gets the best of out of your intelligence and expertise.