Jesper Larsen considers the value ship owners put on procurement departments, and how technology can revolutionise the way we do business in the shipping supply chain…
Ship owner attitudes to the value and practice of procurement still vary widely. Even in a market where pressure on rates is in some cases extreme – or perhaps because of it – some still regard the process as a cost rather than a value.
Some continue to apply traditional methods to the procurement process, while others see the potential for transformational technology, using it as a central business strategy based on increased execution and better efficiency.
However, something very specific to shipping has survived the transformation and will continue to play a key role: relationships.
“Some ship owners will do this one way, some owners another,” says Jesper Larsen of specialist tanker owner, Ultraship.
“I worked for a long time for an owner who outsourced their procurement and that worked for them. For my part, I believe that it is very important to retain a good personal relationship with your suppliers. Moving procurement to a call centre is the opposite of that.”
In general, though, he says procurement professionals are focused on taking relationships to a better level, even though business interaction has become increasingly digital. And it’s not just time that can be saved; Larsen believes the relationship can also be improved if the interaction is improved. “You have less time and you need more interaction with suppliers which is a contradiction in some ways.” A decade ago buyers were afraid to get into a close dialogue with suppliers on technology integration because they feared they would not be able to switch easily if they committed too far. Larsen says being linked to suppliers digitally is “part of the game now”.
“We have more reason to get into a closer dialogue and having a neutral platform for that exchange helps a lot. ShipServ lets us access all potential suppliers all the time. When you need prices quickly ShipServ is a simple way to ask for quotations and get recommendations.”
Ultraship has integrated its in-house software system to ShipServ to manage the procurement cycle long and short term uses it to manage supplier relationships and work with long-term preferred suppliers with whom it has framework price agreements for certain products. Once again, flexibility is key. But what about the more traditional ‘ship owner’ mindset – are buyers like him more interested in price or quality?
Larsen says he has always tried to move towards a value-based relationship. “Slowly procurement people are acknowledging that good relations are worth as much as good prices. If you have a vessel lying idle waiting for spare parts and you don’t have a good relationship with the supplier, then you are really paying.” Valued suppliers will do whatever they can to help and that is what delivers real value, he says. E-auctions that press suppliers very hard might be a short-term cost saver but they can’t deliver value in the long term.
“When you are in tramp shipping like we are, your vessel might easily come into areas where you can’t use your preferred supplier. With ShipServ, you can find an alternative that is good quality at good prices.” Ultraship is streamlining processes in other ways too, through a link between ShipServ, its own Sertica purchasing system and Eye-Share, enabling supplier invoices to be processed electronically.
Invoices are sent to Eye-Share and loaded via Sertica onto ShipServ. If the amount on the invoice matches the purchase order, the invoice is paid automatically with no further approval, giving Ultraship the advantage of a paperless, more time-efficient invoicing process. “It’s a major step and it means that our POs have to be thoroughly approved but it also means we can have decisions on requests for quotation made onboard and sent to the owner who can issue the PO electronically into ShipServ, compare it to the invoice and pay it,” he explains. Better for operations and procurement staff to optimise their processes than have to spend additional time checking and approving invoices, he says.
And there are other efficiencies in the pipeline too. The next change on the horizon is the greater use of data and analytics in the purchasing process, something Larsen thinks can help to replace an owner’s gut feel with more evidence-based decision-making.
“That is next for us and something we are looking at with a lot of interest. ShipServ allows us to compare prices and performance, and data is very important in the process. Again, it’s part of deepening the supplier relationship. Having access to better data that supports your position would be a huge advantage.” Jesper Larsen was speaking at the ShipServ Smart Procurement event in Rotterdam.