e-Procurement in maritime

A roadmap to 2021 and beyond

A reportfor C-level and

decision makers in ship operating

companies

This report was commissioned by ShipServ and written by Tom Holmes (the editor of the IMPA magazine).

We’re extremely grateful for the contributions of CPOs and Purchasing Managers from the shipping industry. It is their expertise and opinion that forms the basis of the report and that continues to drive the industry forward.

ShipServ is the world’s leading e-Procurement platform for the marine industry. It enables shipowners and managers to reduce OPEX via automating the procurement process, supplier optimisation and analytics & benchmarking tools. See page 54 for more information.

2

Topics covered1. Maritime e-Procurement: an overview

2. e-Procurement in shipping: where are we?

3. The case for enhanced digitisation

4. Agility in the supply chain

6. What our experts said…

7. e-Procurement survey 2018 – results

5. A roadmap to 2021: how will we be buying and how will we get there?

3

Maritime e-Procurement: an overview

1

We live in a day and age where everything in our personal lives is digitised. We are growing to expect the same in our business lives. And why not? Amazon has made buying everything you want as simple as clicking a button on your smartphone. Is that feasible for the B2B market? Is it necessary?

Undoubtedly the business marketplace has a different level of attributes and requirements. Certain standards of quality have to be met and guaranteed. It’s an enormous task. But then won’t the convenience and simplicity be worth it? Won’t the cost savings justify the outlay?

Consumer market platforms are built on intuition, suggestion and availability. It’s the kind of functionality that procurement departments would bite your hand off for.

Standardised products, categorised, itemised and tallied with your inventory per vessel. Cost per unit, contract and bulk discounts readily visible alongside accurate delivery estimates. Automated contract spend taken care of. It’s the gold standard – and in truth it might not be far away.

In the last 10 years we’ve seen greater technological advances than in the previous 100. It is likely that the jobs we have now and the ones our children are training for in the next decade won’t exist. So why does this matter?

It matters because tech is a driver for change; it’s an optimiser. What we expect to do in five years time will seem archaic and perfunctory 10 years from now. Already we see how changes to the workplace demographic are changing cultures, practices and processes. If you are not fast you’re last.

4

It’s for that reason that shipping has to sit up, take notice and embrace advances in technology. Yes its challenges are unique but no it’s not exempt from the tide of change – and nor should it be. As we will see in the following pages, there are a great many pioneers working to improve the performance and sophistication of procurement. Running down 400 line items with a ruler was old school in the 90s; it should have no place in the procurement department of 2018.

The change in mindset is creeping into the industry. The first movers have taken their initial steps. Smart buying is replacing reactive buying, AI is being used to monitor voyage data and optimisation of the entire supply chain is pushing great change.

There is still a way to go however. The industry is clearly in transition – but crucially it is moving from talking to doing. The integration of systems and use of data remain sticking points; no single system has yet penetrated the shipping market in the way Amazon has the consumer; but we are edging closer.

If you are not fast you’re last

5

2

e-Procurement in Shipping: where are we?

Shipping lags behind the times. Its adoption of technology and strategic practice in procurement are well off the pace of other industries. So why does our industry drag its feet? Is it an obstinate culture that refuses to change, or is it because shipping has challenges that other industries don’t? According to key figures in marine procurement, it’s both.

Marine procurement might not be ready for enhanced digitisation according to one person we spoke to; although there are already possibilities to improve, the industry won’t take advantage of them because the ‘marine business is full of old habits and know how’ and ‘has a very sensitive sense of pride and trust in the old ways of working.’

“It’s common in my organisation to hear ‘we’ve done it this way for 30 years and it’s still fine,’” one source said. It’s a problem they blame on the culture of marine companies hiring former seamen to office roles and procurement positions, positions that they are not suited to, despite their undeniable technical knowledge. “Are marine companies hiring procurement professionals? Or are they filling the purchasing department with ex-seamen that quite often have very limited knowledge of successful and objective purchasing?”

According to many that we spoke to, the issue will resolve itself in one of two ways. Some organisations will choose to enact a change management programme, which, while challenging, can be effective in shifting attitudes to software, ways of working and to diversifying roles to meet a more modern approach. There will be resistance, but increased

6

digitisation and enhanced automation

don’t spell the end of sound technical

knowledge or experience

– they’re an adjunct to it, and that needs to be

made abundantly clear.

The other resolution relies on the tide

of culture outside the industry and the changing

demographics entering the workforce.

“There will be a change in the type of individual that comes into the

industry; already we

see shifting demographics,” said one source. “Those that have never known any different other than Amazon in their personal life will expect and demand that same type of interaction in the work place. Once the tech is there – and is ready and affordable – we will see a great change in the way we work.”

Our source added that the evolution will be driven not solely by people nor by technology but by improvements in on-board connectivity and communication. “The two key factors in this evolution are accessibility and cost; once those are in place then we will see the technology improve rapidly. It will be a slow process that depends on how the tech develops.”

The issue of connectivity is what our source believes holds shipping back, rather than an inherent lack of desire to change alone. Maritime isn’t, he says, necessarily behind other industries either.

“The connectivity just hasn’t been able to support better technology, so that’s just a case of infrastructure. In the past, you couldn’t guarantee internet access around the world. What is helping now is reliable email around the world, so at least connectivity and communication is improving. But over the last 20 years, the tech hasn’t been good enough. What’s going to drive this evolution is better communication.”

There will be a change in the type of individual that comes into the industry

7

Pain pointsTwo pain points define the current state of e-Procurement in shipping: culture and technology. Those familiar with shipping won’t be surprised to hear that a lot of resistance to change comes from people within the industry. It affects everything from innovation and process, to investment and growth. It’s a scourge on the profession.

“In principle there’s a limited appetite for sharing knowledge and experience,” says Peter Schellenberger from OSERV, “and that’s holding shipping back. That’s one of the main issues. We’re now pushing initiatives that we’ve worked hard on and are sharing them with competitors.

“During these times the market leaders should work together, make some ground and achieve standardisations. It’s not happened yet; a lot of advantages can be gained from this. A lack of leadership defines the current situation.”

Internal resistance is just as prevalent too. One source said that digitisation was not high on the organisation’s list despite a ‘clear and obvious’ need for change. Clearly if

progress is to be made a change in mindset is necessary.

“Changing mind-sets is huge,” says Andrew Oxley of SIEM Ship Management. “How do we convince people that the system can help them to if they don’t allow it to? Digitisation is fantastic if you can get everyone on board with it, and get from it what you actually need.”

Part of the solution could be to eradicate – or at least minimise – the slew of technological problems that pervade. The single biggest issue is a lack of integration between buyer and supplier systems, which in itself adds to the administrative load.

Further issues such as unverified, inaccurate and siloed data, poor or non-existent analytic tools and poor connectivity with vessels are very common; and perhaps explains why 64% of respondents told our survey they were unhappy with their e-Procurement system.

So where do we go from here? It is up to individual companies to fix legacy problems; poorly implemented systems can be optimised and those rarely updated by their provider can be replaced by newer ones – or at the very least optimised. There has to be a change in attitude from organisations as to the value of improving digitisation; our

8

Digitisation is fantastic if you can get everyone on board with it

survey showed that perceived high cost is the main reason stopping purchasers upgrading to an e-Procurement system, while time to implement is the next.

That indicates that as an industry though, we need take a collective stance.

“The industry has to adapt and shift very quickly,” one procurement manager told us. “How does that happen? We will have to achieve some kind of standardisation. There are many versions of doing things in this industry and everybody thinks they’re very smart, but we haven’t achieved anything yet compared to other industries, so some kind of association-guided standards would tremendously help the development.”

9

The lie of the land

Use of e-Procurement systems in the industry is a mixed bag. More than 50% of the experts we spoke to still used their systems mainly for transactional purposes, though all were aware of the need to evolve. Best practice therefore is patchy, though that’s not to say it isn’t innovative, especially given that respondents were working with systems of varying degrees of sophistication and functionality.

At the upper end of the functionality scale, very clear progress is being made. Peter Schellenberger of OSM, for example, reports that his organisation is using one of the most advanced systems in the industry. “At the moment we are a first mover,” he says. “We’ve also completed close to 80 supplier contracts of our most important spend categories and the supplier reaction was very positive. That enables us to operate the platform and maintain our benchmarking and professional contract management.”

Although organisations like OSM are in the minority at the moment, there are reasons for those further down the sophistication scale to be positive. In a survey ShipServ

carried out, 70% of those who used an e-Procurement system said they made greater than 20% time savings as a result; others reported the transparency, simplicity of a single system and ability to track their historical data as major benefits of their current system. Others were successfully extracting data, albeit in a piece meal fashion, to report on anything from mapped spend to supplier consolidation.

There is a clear desire to improve too. Teck Siang Sim of Berge Bulk said that his organisation was ‘constantly striving for better planning,’ while Andrew Oxley said that his company was planning to introduce mobile invoice approval. It speaks of a wider desire to evolve the whole landscape.

“The digital functionality is expected to be there,” says ShipServ’s Liam Herbert. “As a discipline in maritime, we need to better enable strategic purchasing: category managers using the data to categorise the products, to look historically at what they have been doing and make predictions for the future; there’s not just procurement data out there either – there’s data that can be used for planning and automating procurement, 6 to 12

10

procurement departments are burdened by administrative tasks

months in advance.”

“There’s a clear technological advantage to this,” agrees Peter Schellenberger. “We have to combine the knowledge streams and that will accelerate the implementation.”

At this stage it would tempting to go gung-ho into the latest tech, adding reams of functionality - but there’s a sound argument to be made for not reinventing the wheel. The thinking in the industry is, if you’re not a first mover, then making incremental improvements on what you have is the best use of your time and resource.

In an industry where procurement departments are burdened by administrative tasks, there’s little to be gained from having too much functionality and data, says Andrew Oxley. “It’s very easy to drown in data. Right now we’re saturated. It has to be closely aligned with strategy, simple and easy to use because nobody has the time to be sat around reading spread sheets; you want to be focusing on things that add proper value and save cost over time.

“That might be through aligning your procedures with what the system can do. It might be that you end up streamlining the process more as you learn to use the current platform.”

11

Clearly the industry is in transition, but it is important to remember the technology is too. One of our experts implemented a platform some years ago that connected the organisation’s suppliers to its ships. That system has adapted and evolved over time with technology, which is significant.

“We have been developing the system over a number of years. It’s in line with developments in communications; you reach a point where you cannot go further, you wait for the comms to develop and in a better way, and you begin again. It’s an on-going process; it’s not something that is static and it couldn’t ever be that way.

“The system itself should be adjusted to the way the company operates. You can have a good system but if it doesn’t suit the organisation then it will be very difficult to use it or maximise its use.”

12

13

you want to be focusing on things that add proper value and save costs over time

3

The case for enhanced digitisation

The shipping industry is starting to adapt to digitisation. Companies are evolving their approach and data is driving all of us. Every company that has a future in the industry will have digitisation on the agenda; it’s shaping current and future strategies and nobody of a significant size is preparing otherwise.

So, where are we?

On a scale where perfection is a 10, currently the marine industry is at a two.

On a scale where perfection is a 10, currently the marine industry is at a two.

14

Archaic systems that don’t integrate and cannot talk to one another prevail; they’re labour intensive and make admin assistants of intelligent and capable procurement executives.

The industry is largely fragmented too; suppliers and buyers use different systems. The lack of success thus far is not for want of investment. Consensus among purchasing professionals is that we are five to 10 years from moving the two closer to a 10.

So, what does the future look like? Increased functionality is key. Having full spend transparency, automation, and real-time inventories across the fleet are among the most common requests purchasers have. Being able to align purchasing power with real tangible data is essential too, while being able to see not only what is being bought but also the value of what you have on board the vessel is critical. The systems themselves will be simpler. Procurement departments don’t want to drown in data

and meaningless metrics – as with everything digital in our personal lives, e-Procurement systems will be intuitive, simple to use and easy to understand.

Finally, our old friend data: the engine underneath the bonnet of enhanced digitisation. It is going to drive the evolution of your department and transform the way you work, provided you use it well.

Extracting meaningful data that is legible and easily found are among the most common criteria our pool of experts demanded of their systems – few have this right now. Some complained that current systems were more concerned with fancy functionality than with the quality of reporting or measurements. Almost all said that data was hard to extract, and many said they had more data than they could reasonably use.

To that end, the volume of data you use should not be too much; you should be specific about what you want to measure, align it with your strategy and stay focused on core metrics. Such an approach moves procurement into a fact-based operation. You are no longer ‘buying half blind’ as one expert told us. Rather you are using measurement tools and real-time data to build an accurate picture of where you are and where you plan to go.

15

The need for greater transparency

If you don’t know your current position, how can you act? And if you take action, how do you know how effective it is if you can’t measure the outcomes? The need for fact-based purchasing is pushing the development of e-Procurement systems.

The next generation will have sharper measuring tools that have the ability to align with procurement strategy, offering greater transparency of spend and improved supply chain analysis.

Cost savings, efficiencies and time saving will be the most tangible wins, while being able to use data to map processes, purchases and vessel-trading patterns will provide clarity on what’s been bought and inform quicker, smarter decisions.

16

“We will have better spend analytics, spend visibility,” says Zois Dagkaris of Euronav. “This is for value creation; these are things that in other industries are common

but in shipping we are starting to embrace.”

The enhanced clarity will lead to benefits further down the supply chain too. Analysing consumption and trading

patterns allows for better forecasting, which in turn leads to volume discount and increased lead times with happier, more productive suppliers.

Current best practice in the industry supports this trend. Peter Sundell of D/S Norden says the company is using its e-Procurement system in conjunction with ShipServ to generate reports from clear and accurate data; this gives them fresh insight and enhanced performance. It’s given them the possibility to see things they couldn’t before as well.

“We are able to see the locations we are delivering to and buying in,” says Peter. “There are big opportunities to find better ways of buying with that information. For instance, we buy a lot of spares from our suppliers in Denmark.

“All of a sudden we can see the delivery in ports for those parts and use that data to negotiate agreements with suppliers in those ports, which means a better deal and savings – and time savings. It’s a big benefit because we are saving time, money and creating efficiencies.”

Another buyer reports similar benefits, adding that the enhanced information is allowing their company to act quicker and develop strategy faster.

“The quicker you act the better results you get; the more information you get and the better picture you obtain of what is happening,” they said. “This gives you a better understanding of the position you have and from that you make better decisions. What we have developed is something that allows maximum transparency between office, ship and suppliers. It really helps and gives us an idea of what we’re doing each day.”

17

Innovation through automation is essential to increasing procurement’s value and its strategic importance

18

Automation: cultivating

efficiencyInnovation through automation

is essential to increasing procurement’s value and its

strategic importance. This primarily comes through reducing

the manpower required to perform essential tasks, and freeing said

manpower to get on with valuable strategic work. So, what does this look

like?

a. Eliminating transaction-related admin The manual, email-based transaction flow between procurement departments and their suppliers is one of the biggest uses of manpower in the maritime supply chain today.

The chaotic exchange of PDFs, excel spreadsheets, and the printing, re-typing, and subsequent re-uploading of documents is a source of glaring inefficiency. When considered in the context of your entire fleet - every RFQ, every order and every quote for every vessel – the scale of the problem spirals, and the associated cost explodes.

So, what’s the solution? Increasingly, procurement departments in the shipping supply chain are automating transactions through their e-Procurement platforms. A solution like ShipServ, for example, allows purchasing departments to connect with suppliers using a single system, meaning that RFQs and orders are sent from and received by that system. The decrease in administrative tasks reduces the procurement cycle time by half and increases productivity by 30%.

19

Process automation, and the transaction efficiency that results from it, is at the core of ShipServ’s solution

It’s the biggest such platform in maritime

A single connection to ShipServ is all that is required

BEFORE: manual, unstructured, email based procurement transaction flows

AFTER: transactions go directly from, and back into, your existing procurement system. No PDFs, excels, printing out or re-typing.

200 ship operating companies are connected to ShipServ’s e-Procurement platform and do their procurement via ShipServ

20

b. Automate contracted spendAccording to Teekay’s Allan Muir, if you have contracts in place, then very little spend under that contract requires human intervention. It should all be automated as far as he is concerned.

“We have contracts in place,” says Allan. “So, whether it’s with a chandler or a spares supplier, or whether it’s a request for a widget – if it’s contracted the only decision that we make on that item is if it’s in budget – if the budget’s there and it meets the maintenance cycle it should be automated.

“There shouldn’t be any hands on that transaction. That would release manpower to focus on the serious part of the business – who we are transacting with, consolidation of vendors and category management, for example.”

c. Supplier consolidation means fewer risks and better savingsToo many suppliers and vendors put your organisation at risk. More suppliers mean more contracts, which means more time required to manage them - which is a drain on resource.

“Our platforms are connected to both contract prices and to catalogues,” says Peter Schellenberger. “So that makes the processing easy and transparent information can be shared simply with suppliers. So in terms of transparency and corporate governance we jump all these hurdles.”

Additionally, automation helps to identify spend associated with preferred suppliers and spend associated with suppliers who are not on your preferred list. This in turn helps you move certain suppliers into managed spend and allows you to leverage volume discounts with suppliers in the managed spend category.

To that end, automation can also help to facilitate integrated supplier score carding through real-time performance data, helping further with contract negotiations.

21

4

Agility in the supply chain

Automation can also add value and create efficiency further down the supply chain. For example, Andrew Oxley (SIEM Ship Management), works with a forwarder that uses e-Procurement from ShipServ. The forwarder picks up SIEM’s POs from ShipServ and receives an introduction to the supplier from SIEM; from there it establishes the date of readiness and collection.

“That saves us a big job,” Andrew says. “Eventually, the forwarder will fully integrate with us to receive our data directly because they understand we don’t have the time to chase 40 suppliers.

“In the future, the forwarder can take the onus from us to consolidate shipments from single or multiple suppliers – that comes with more complete communication. The systems and the data are a conduit to that.”

The changing role of the purchaser

The advances in technology beg an obvious question: what happens to the role of the purchaser?

Will they be automated or completely obsolete in 5 years’ time as one survey respondent told us? Opinion is divided.

In our survey, 68% of marine procurement professionals believe the profession is set for major change in the next five years, while 34% think

22

The execs will concentrate more on category management, analysis, development and strategy

Will they be automated or completely obsolete in 5 years’ time

it will totally change beyond recognition, with one commenting ‘the purchasing

officer’s job will be history in 5 years’. Liam Herbert is a little more pragmatic.

“You won’t need the team to do all the grunt work,” he says. “You will have automation, data and algorithms doing that.”

Zois Dagkaris agrees.

“The execs will concentrate more on category management, analysis, development and strategy,” he says. ‘It will be more fun for them. The new generation

won’t want to perform monotonous tasks. We’ll be

23

Viva la revolution: what are the software developers saying?The revolution in maritime e-Procurement systems is in its infancy, though the technology that’s pushing it isn’t. Evidence from other, more advanced industries indicates that the ideals sought from enhanced digitisation are not only real, but within reach.

The three areas identified by the software developers we spoke to are well known, but their applications in marine e-Procurement are less obvious. Cloud computing, blockchain and data will be familiar to all of you. In the not too distant future, they will revolutionise the way you work, and the way you use your e-Procurement system.

24

using machinery more and more with a view to liberating the people to maximise their potential.”

Naturally this will take a shift in mindset and an adaptation in skillsets over time. Esa Huotari of ESL Shipping said that ‘training, training, training’ would be the way to change mindsets, an opinion corroborated by several of the experts we interviewed, whose team were already training to be category managers. The business case is strong.

“A lot of purchases needn’t go through the RFQ process,” Liam adds. “A fully integrated supplier will know stock levels and lead times and the ships won’t have to worry about it – the order will be waiting for them. In order for that to happen there needs to be refined data and for a change in attitudes from the procurement departments. If you’re looking at this from a strategic point of view and not a reactionary point of view, it makes perfect sense.”

One buyer we spoke to, however, does not foresee a dramatic change. Purchasing they believe will be broadly the same, only far quicker. “What will change is how the tech will assist us. Instead of taking five days or three days, perhaps it will take 12 hours, or even quicker. The bottom line of procurement is always going to be cost. We are now just finding ways to change that by adding value, saving time and working on innovation. Tech allows us to do that.”

CloudCloud-based e-Procurement systems aren’t particularly new, though they are increasingly becoming the norm. e-Procurement vendors are shifting away from complex ERP-based systems to simple cloud-based systems that allow for app-driven interfaces and centralised analytics that make automation easier and more cost-effective.

Cloud-based systems also allow purchasing departments to share data directly with their supply chain because it’s stored in a single, centralised location. This means that the age-old problem of sharing data with suppliers who use differing

systems is essentially gone. They also enable safe, secure and automated two-way communications with your suppliers throughout the procurement cycle.

BlockchainBlockchain has many benefits for procurement, and for the e-Procurement systems of the future. The software developers we spoke to agreed that it would become embedded into systems that are being developed now and as such will form a critical part of the e-Procurement system’s evolution.

So why is that? By its very nature, blockchain circumvents the single biggest problem buyers and suppliers have: siloed data. The current model is broadly thus: a buyer has information and sends an RFQ through a portal; this portal connects with a supplier, collects the feedback from the supplier and passes it back to the buyer. So you have enormous redundancy.

Blockchain gets rid of that by distributing data to known members within an agreed network. Each item of data is shared and stored with the members of that network who can accept its authenticity. It is much more efficient because

25

it uses a central, shared, secure record for storing data, as opposed to non-blockchain systems that use multiple siloed databases that are difficult to share, inefficient, limited in functionality, and susceptible to unauthorized data tampering.

“The biggest bug in the procurement cycle is that information is stored in three places,” said Dimitris Theodossiou of DANAOS. “Each party wants their own information. The model in the future will look like this: the buyer will have his own information and system, the supplier will have his own system and information, and they will exchange information in such a way that everyone will work in their own system.

“Blockchain will bring a new revolution into the industry. This functionality will be built into systems. It will start to be more widespread in shipping in the near future.”

DataThe range of applications for data in maritime procurement are numerous and varied. They include identifying qualified vendors and prospects, to forecasting spend, mitigating risk

and maintaining an accurate assessment of suppliers – all aspects of the business that are tangible and quantifiable.

But, in an industry that lacks so much standardisation, it’s hard to quantify how much of an impact structured and standardised product data will have on the maritime supply chain. When considered in terms of single spend categories alone – stores for example - data is potentially the key that unlocks the door to a whole universe of untapped savings, efficiency and value.

“There is no standardised taxonomy of products in the shipping industry,” says Liam Herbert. “The way that one buyer describes a set of products may be different from another. So a lot of the tools and techniques we are using – AI, machine learning for example – are used to take a product, analyse it and say ‘I know that’s a pump, I can put that in your pump spend.’ – that’s the focus of that area of development.”

The role of organisations like ShipServ and the wider technology community is therefore to build procurement systems that solve these problems simultaneously. Data is at the base of that because, though the tech is evolving, the meta-data that underpins won’t change.

26

Data is potentially the key that unlocks the door to a whole universe of untapped savings, efficiency and value.

“We’re making progress on data categorisation and in two to three years we expect to have all the stores and consumables mapped,” Liam adds.

“Data will change the way we do e-Procurement. It’s the area people are focusing on the most and once that is refined it will change the whole supply chain. It is the biggest thing that will change the industry.”

27

Data, analytics and benchmarking: two new reports from ShipServ

28

Developing advanced data and analytics tools for decision makers in ship operating companies is a key priority for ShipServ and in 2018 two new reports will be launched.

It’s a direct response to ship operators’ issues with the structure and complexity of procurement transaction data. We are working closely with customers to develop the new tools.

Once a ship operator connects to the platform, they can benefit from ShipServ’s data tools

29

New: Spend Analytics Report It has been developed for senior purchasers. It will clean and categorise the transactions and then present the data in a series of online reports.

Buyers can see accurate spend splits by category and sub-category, by supplier, by vessel/port, and key metrics like % of spend with contracted suppliers.

The first spend category will be available in late 2018.

For more information, and more screenshots, please go to www.shipserv.com.

Above: This is a screenshot of the main dashboard of the new Spend Analytics Report, showing category spend summary.

30

Price Tracking See price trends over time

31

Category Breakdown Drill down further into each individual category

New: Spend Analytics Report Here are some more screenshots of ShipServ’s new Spend Analytics Report.

32

Spend Detail See your spend by sub-category by port and vessel

Supplier Spend See what type of categories and brands you are purchasing from each supplier

33

New: Supplier Performance ReportIt gives 24 procurement KPIs on every supplier that a buyer trades with on ShipServ, enabling them to improve performance.

Amongst the KPIs included are transaction totals, quote and win rates, response times, price and time sensitivity analysis, most commonly bought items and spend history, and analysis by vessel and by purchaser.

Unique benchmarks are included and the whole report can be printed.

34

ShipServ’s Supplier Performance Report. This and the previous page shows two screenshots from the new report. There are 24 KPIs in the online report which are displayed graphically on different tabs. This shows the KPIs for a single supplier that this buyer is trading with. This report is available for each and every supplier they trade with.

35

5

A roadmap to 2021: how will we be buying and how will we get there?

We’re on the cusp of evolution. e-Procurement systems are evolving quickly and they’re changing the way maritime procurement is done. Much of what we have discussed thus far is yet to reach fruition, and as such it’s steeped in idealism – but there’s pragmatism to it as well.

There’s a lot of slack in the maritime purchasing system at present. And while optimisation is somewhat of a dirty business buzz word, it’s highly applicable in this instance – because it’s both ideal and pragmatic to allow machines

to pick up the slack in the system, do the heavy lifting and free time and manpower to build efficiency. That’s just good business practice.

So what we are seeing with the evolution of e-Procurement systems is the optimisation of maritime procurement. We are working towards an ideal scenario using pragmatic steps. As we’ve seen, the first movers are on their way already.

So what will this ideal scenario look like? By 2021, maritime procurement will be far less transactional and far more strategic; automation will be standard practice, freeing valuable time and manpower to work on gaining competitive

36

advantage through efficiency and optimisation.

The focus will be on smarter operations and smart procurement with smart logistics, and better planning and negotiations for important items. As communications improve between systems and vessels, there will be less error and more savings.

The systems in operation will be far more useful and much more powerful too. Gaining real and tangible data from them will no longer be a problem because data will be sat in a single system as opposed to in silos across many. Information specific to your strategy and operation will be readily available and readable.

Increased functionality will be prevalent and will be a major driver for generating value and innovation. Real time data will allow for critical and accurate assessment across the supply chain and create greater awareness of opportunities to mitigate risk, optimise, consolidate and make savings.

The strategic approach will be reaching a new level of quality. Most of the experts we spoke to expected to have fewer operators in 2021, full spend visibility and to have developed vendors into partners that acted more as an extension of the company than as suppliers.

Most of the experts we spoke to expected to have fewer operators in 2021, full spend visibility and to have developed vendors into partners

37

So how do we reach the Promised Land?

Don’t reinvent the wheel….

To make strides toward enhanced digitisation, you don’t have to reinvent the wheel; for one, by the time you have, it will have been reinvented several times over anyway. Instead, using what you have, and refining your approach to make it work optimally are a sound course of action.

“We need to ask what is useful and what’s not useful,” says Andrew Oxley. “What is going to give me value? Using what you already have is an efficient way forward - you don’t have to reinvent the wheel just yet.

“As shipping takes a more digitised approach we find ourselves in a transition period where we’re establishing what is useful and what isn’t. That isn’t to say that improvement can’t and won’t be made, just that some aspects of digitisation are being used simply because that’s the trend.”

….but do embrace technological change

Moving to a fully digital, fully electronic e-procurement model which is a critical enabler for automation and

enhanced data is essential and is here to stay. Those that have moved to such a platform experience clear, ongoing, benefits.

What is less clear is whether an Amazon-style emarketplace, at scale, will develop in maritime. At present the industry is divided over whether an emarketplace will work for shipping, whether it’s viable or even necessary. Opinions range from ‘it will definitely happen’ to ‘highly unlikely.’ Our survey found that few procurement execs thought such a platform would make an impact. Our advice is not to rule it out.

“A true market place allows you to see price, stock, delivery times and to tally your inventories per vessel with such a platform,” said ShipServ’s Liam Herbert. “There’s an indication that certain sections of the industry are willing to move in that direction. It’s a few years away because we need to figure out how to bridge issues over risk and trust, among other things.”

Kerstin Hoffmann of CPO Containerschiffreederei, agrees. “An Amazon-style platform is ok, but who guarantees the quality? It’s a risk to buy items

38

from suppliers you don’t know or aren’t sure you can trust. There’s no possibility to audit and analyse these suppliers – if we can’t do that then it’s too much of a risk.”

Blockchain, meanwhile, isn’t going away. The software developers we spoke to all agreed that it had a role in the e-Procurement systems of the future. It allows companies to store and share huge amounts of information with large numbers of people in the most efficient and secure way currently possible. It also circumvents the problem of systems that won’t integrate. Make it a key consideration when you’re reviewing your e-Procurement system.

On a slightly more mundane level, it is improvements in on-board connectivity and communication that will drive a lot the evolution. “The connectivity just hasn’t been able to support better technology,” one buyer told us. “What is helping now is reliable email around the world, so at least connectivity and communication is improving. But over the last 20 years, the tech hasn’t been good enough. What’s going to drive this evolution is better communication.”

Moving to a fully digital, fully electronic e-procurement model which is a critical enabler for automation and enhanced data is essential and is here to stay.

39

Prepare now for cultural changeThe mindset across the industry has to change. Enhanced digitisation is improving other industries and other sectors; shipping can no longer resist and nor should it try. Enact a change management programme, which, while challenging, can be effective in shifting attitudes to software, ways of working and to diversifying roles to meet a more modern approach. There will be resistance, but increased digitisation and enhanced automation don’t spell the end of the sound technical knowledge or experience your people have.

Be mindful of today’s cultural waves…

Why? Because they’re a reasonable prediction of what tomorrow’s people will take for granted – and tomorrow’s people are who will be running your organisation.

Online buying is becoming the new norm for businesses outside the shipping industry - because nearly half of B2B buyers are millennials, according to a Google report. They’re young, tech-savvy and sophisticated, and unlike their older peers they demand the same simple and intuitive platforms

in work that they’re used to in their consumer lives.

In the near future, cumbersome and laborious systems won’t be tolerated and will be made obsolete by slick and agile platforms that replicate the consumer experience. Understanding this is critical not only to the growth of e-Procurement systems in general, but to the direction your organisation takes in the coming years.

Train your staff now for future rolesThe role of the procurement exec will change in most organisations. The organisation of 2021 and beyond will use them as category managers, or highly specialised execs handling critical aspects of the operation.

“We’re currently training our team with the expectation that they will be category managers by 2021,” said Zois Dagkaris. “It’s the concept of the future. We’re consolidating. If we get more and more people together that rely on that set of specialists who can be in any location, it gives us tremendous flexibility.”

40

Teck Siang Sim concurs. “At this moment each member of the team manages a category; we’re easing them into a new role to come when we are able to get more automation and get better partners in our supply chain.

“By 2021 they will have the experience to adapt to the new role. It’s necessary for the industry to head in that direction.”

CollaborateAs the industry moves towards enhanced digitisation, the need to collaborate is essential. No organisation is an island after all, especially not in the supply chain. Building and adapting for the future is a joint venture. How that looks for each organisation will vary; but it’s important to consider that to go far you have to go together.

Peter Sundell reports that D/S Norden has started to work closer with its suppliers in that respect. “Lots of suppliers are asking us what they can do for us – what they should list on their site, what sort of reports they should offer. We say that we don’t need great functionality, just the ability to access their data so that we can co-ordinate our strategy in accordance with them.”

No organisation is an island after all, especially not in the supply chain.

To go far you have to go together.

41

Providing information from the ship all the way back to the manufacturers is the e-Procurement of the future. “Ideally you would like to know how much, where and when – that’s the ideal option,” one of our experts said. “But ideally our systems would support that so that we can predict how much we have to spend and that allows suppliers to plan accordingly. It’s about planning and using data.”

Such initiatives bring the market place close to the end users, which is essential for moving from transactional to strategic models. “The suppliers can receive feedback from end users on board,” says Teck Siang Sim, “and end users on board can have a better idea of what the suppliers and market are offering and then the shore organisation can be the moderator.

“From there we can distance ourselves from a processing model to a strategic model that takes in frame agreements and volume purchases.”

On a technological level, we are beginning to see how collaboration is advancing platforms. ShipServ and OSM have worked together to develop one of the most advanced systems in the industry.

“We are a first mover here,” says Peter Schellenberger. “We are subscribing to the first OEM platform that ShipServ has created, using ShipServ functionality where the suppliers don’t have to perform another integration for another purchasing alliance.

“We are procuring here for our own vessels and also for so called consortium members on volume aggregators and also created services around outsourced procurement services where clients trust us with complete outsourcing of procurement activities and we buy in their name, but they can use our contracts via the digital platforms.”

42

43

From there we can distance ourselves from a processing model to a strategic model that takes in frame agreements and volume purchases.

6

What our experts said…

We’re extremely grateful for the contributions of CPOs and Purchasing Managers from the shipping industry. It is their expertise and opinion that forms the basis of the eBook and that continues to drive the industry forward.

Here are some sound bites from the interviews.

44

I think there will definitely be an emarketplace – it’s going to comeAllan Muir Teekay Shipping

Andrew Oxley SIEM Ship Management

Liam Herbert ShipServ

Dimitris Theodossiou DANAOS

Andrew Oxley SIEM Ship Management

“Cost will always be a motivating factor, but where you can generate innovation and value, it is a major driver for moving over to new systems.”

“The true market place does away with RFQs. With the data and the processing we have, on the transaction side we can start looking at offering better alternatives to the products you’ve selected, based on quality, different suppliers and price for example.”

“The bottom line is that ecommerce is collaboration. It is about the buyer and supplier working together to achieve the best performance to deliver goods to the vessel. The collaboration is not also just between buyer and supplier. Collaboration is the main force driving ecommerce.”

“Looking at the functionality is important. It’s all very well knowing the price over nut bolt and screw, but is that where you’re going to save your money? Probably not. Generating meaningless KPIs is not what you want to do.”

45

Peter Schellenberger OSM

Teck Siang Sim Berge Bulk

Liam Herbert ShipServ

Zois Dagkaris Euronav

“In principle there’s a limited appetite for sharing knowledge and experience – that’s holding shipping back. During these times the market leaders should work together, make some ground and achieve standardisations. It’s not happened yet; a lot of advantages can be gained from this. A lack of leadership defines the current situation.”

“We get a lot of data in. I’d like to look at the total costs of ownership for a piece of equipment; it’s not just the parts we’ve put into the equipment, it’s the break down of the man hours that have been assigned to maintain it. We have this data hidden in the various systems but it’s difficult to piece it together with what we have.”

“Part of this move to greater strategic thinking is increasing the number of purchases under contract and leveraging spend. With the age of internet, I can conceivably see that if you have contracts in place that ships could create their own orders and do their own stores procurement. That pushes a bit of responsibility onto the vessel and the crew to manage a budget.

“The landscape will change when there is better connectivity on board ships. It will essentially move from being a centralised procurement function to one that is decentralised and on the ships.”

“The new generation won’t want to perform monotonous tasks; some guys aren’t doing procurement, they’re doing admin. We’ll be using machinery more and more with a view to liberating the people to maximise their potential.”

46

Zois Dagkaris Euronav

Kerstin Hoffmann CPO Containerschiffreederei

“We are starting to take the best practice from other industries and adapt to the shipping industry’s reality – which is the most demanding reality in modern business. It’s a remote business you have to adjust according to the vessel, which sometimes you won’t know.”

“The industry is very old fashioned. One major problem is that the ships are running worldwide and the ships aren’t well connected to the internet. When widespread connectivity is on board the vessels there will be huge development. We have to invest so much on board, but it will transform the way we are able to work by shifting responsibility for some spend to the vessel and crew.”

Peter Schellenberger OSM

47

There’s a lot of reactive buying in the shipping supply chain, and not so much smart buying

Allan Muir Teekay Shipping

Jesper Bak Weller Marcas International

“We have probably realised as an industry that we are lagging far behind other industries in the implementation of eProcurement and that we can get a lot better. There is still a gap in the market that someone eventually will fill and in this game volume is king.

“There seem to be a problem in standardisation in general. Still a number of difficult and potentially expensive decisions needs to be taken in parts of our industry – not sure when this will happen but eventually it will happen, otherwise companies will lose some of their competitive edge. Those who crack the nut in this area will play a leading role in the transformation of our industry, I believe.”

Teck Siang Sim Berge Bulk

Peter Sundell D/S Norden

I think shipping is ready for change. Once the vessels are all connected with a capacity similar to what we have on land we will get tremendous possibilities to

improve the efficiency with help from IoT and other technologies.

48

“We need to be there in two years. That’s the challenge for us. We need to have a really good digitised procurement platform, with the full procurement cycle covered – all the best tech. It has to be future proof. That’s our target.”

“I think a system that integrates the inventory across vessels and tallies with purchases is possible; hopefully we will have that usable solution soon.”

Teck Siang Sim Berge Bulk

Kerstin Hoffmann CPO Containerschiffreederei

Peter Sundell D/S Norden

“Ideally we would like automation – for RFQs, greater capability to source services and detailed reporting functions. I don’t need much – we have to focus more on the quality we buy and that is best served using our own data; being able to analyse our data and forecast and analytics.”

At this moment each member of the team manages a category; we’re easing them into a new role to come when we are able to get more automation and get better partners in our supply chain.

49

“There’s still a long way to go. If you look 20 years ago the shipping industry was mainly using telex machines and radio for comms. There’s more and more coverage around the world thanks to the investments of comms companies, but it’s taken some time to reach this point. Now we are starting to benefit from the opportunities with data exchange between vessel and land in a way that was sci-fi just a few years ago.”

7

e-Procurement survey 2018 – results

ShipServ carried out a survey of maritime professionals. Thanks to all those who responded.

Here are the summary results.

50

There are a lot of purchasers not that happy with their procurement system...

18%

46%

36%

51

Perceived high cost is the main reason stopping purchasers upgrading to an e-Procurement system (35%)

70% of those with an e-Procurement system make greater than 20% time savings as a result

Even though it’s transformed other industries, if there was a marine version of Amazon, most marine purchasers (71%) don’t think it would have a sizeable impact

52

There is a great difference in views about the nature of change:

“Category buying will be essential”

“Purchasing officers will be pure administrators”

“My job will be done by a robot within 5 years”

“More educated, more trained, more strategic, more modern”

Get ready for change: 68% of marine procurement professions believe the profession is set for major change in the next 5 years

53

$300,000 to $1.2 million

If you manage 10 ships you can save between

...every year with ShipServ

How ShipServ helps shipowners and managers

54

We have worked with hundreds of purchasing departments, who have stated 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.

These problems all stem from what we call communications chaos – the problems caused by inefficient, email-based transaction flows.

Take all those emails, excels, PDFs, printing out and re-typing. And then scale that up to the real world….all your orders for all your fleet and you can see the waste, and its cost.

55

ShipServ is the market leader in operating an automated procurement solution, and is now in partnership with over 200 leading shipowners and managers.

You make a single simple connection to ShipServ

15

ShipServ How it works

56

We guarantee connections to all your suppliers

Emails, excels, PDFs and re-typing become a thing of the past

Importantly, you make this connection from your own procurement system

All your transactions are sent from, and received directly into, your current procurement system

2 4

53

57

Cut your purchasing cycle times in half

1

ShipServ The benefits

58

Typical savings from increased productivity is 30%, so you can run more vessels with the same number of people

Finally, because all the data is now digital, the quality is far better. This enables us to produce online insight, analytics and benchmarking reports for our customers

2 4

The time liberated can be spent on strategic purchasing

3

We’d love to speak with you about how we can reduce waste and save OPEX.

59

200

$3.5bn 7m

10,000

70,000

Shipowners / managers

Total trade per year

Connected suppliers

Total transactions per year

Vessels trading

ShipServ today

www.ShipServ.com

Visit our website for more information:www.shipserv.com

Or email:data@shipserv.com