February 9, 2022
Supply and procurement of ship stores and provisions are still stuck in analog… The time to modernize is now.
The world relies on the shipping industry to transport billions of dollars’ worth of innovative, high-tech products and other critical supplies every day. Indeed, some 60% of all global goods are shipped by container. It is therefore paradoxical that some shipping processes have not kept pace with the digital transformation that has changed so many other industries over the last few decades. On the one hand, the world’s first attempt to autonomously navigate and birth a containership was recently completed. On the other, supply and procurement of ship stores and provisions are still largely stuck in analog order procedures.
Now, however, the connectivity issues that have slowed shipping’s digital transformation are much less critical than before. Broadband satellite connections are available at reasonable prices, and vessels across the seven seas have access to the internet 24/7. At the same time, pandemic-related supply chain issues have pushed sea freight rates to record highs and caused serious congestion and delays at ports and terminals all over the world.
With time in port so precious and digital connectivity so widespread, this is our golden moment to bring maritime procurement up to date.
Procurement is a challenge for every business. Mitigating the risks related to quality, cost, and delivery is an issue in any vendor-supplier relationship. Lack of transparency, poor or inaccurate data, and inefficient, labor-intensive processes are other common problems.
Many land-based businesses have long ago adopted digital solutions to overcome these challenges, but maritime procurement has lagged behind. The consequences of this slow adaptation are twofold.
For one thing, it causes inefficiency. As we pointed out in our blog, Why shipping’s 8% share of OPEX is its 100% headache, maritime purchasers spend 50% of their time sourcing stores and provisions – and generate 30% of all purchase orders – only to buy what represents 8% of a vessel’s overall OPEX.
For another, opaque purchasing processes based on poor data too often go wrong. Deliveries don’t match ship crew needs and expectations, and there is no time to fix errors before setting sail again: berthing plans are made months in advance and time in port is increasingly short.
Going with the “tried and true” may feel less chancy, particularly if you’re trying to get provisions to a vessel with a very short turnaround time in port. When there is a genuine risk of order errors, late deliveries, and a very unhappy crew, it’s natural to go with what seems safe.
However, procurement managers must also consider the opportunity costs of sticking with outmoded processes that might in fact be less safe than other options. For many in maritime procurement, the ongoing use of traditional catalogues is the default alternative, and the opportunity costs of this option are simply not considered. The cost of inaction is probably one of the most difficult to identify. This should change.
When connectivity at sea was spotty, analog procurement processes were the best anyone could do. Now, that digitalization is sweeping through the shipping industry, it’s time for purchasing to catch up.
By changing how crews procure stores and provisions, shipping companies can reduce risk and add efficiency. The digitalization of maritime procurement reduces OPEX and SG&A expenses. It also makes it easier to change orders on the fly and keep crews secure, satisfied, and productive.
Source 2 Sea helps both vendors and customers modernize procurement processes. Check out our two-minute introductory video to learn more.