Procurement

by Jie Ying Koh, April May Tangalin and Mikkel Kjaergaard

Dear Colleagues at Sea,

In the January MTTO Newsletter, we wrote about the impact of COVID-19 on the overall freight rates, and how we saw the freight rate increased significantly over the course of the year. In 2021, while we expect the freight rate to gradually reduce, it is unlikely for the rates to reach the same level pre pandemic. As such, for the month of March, we are over budget by 34% year to date. While the overbudget did not come as a surprise, your colleagues in Supply Chain are working on mitigating this and we will require your assistance to optimize our freight expenses.

How can you help in optimizing our freight expense?

Approximately 45% of our spend in freight and warehousing expense is due to shipping cost to the vessel. In year 2020, on average, each vessel received around 9 airfreight shipment and 3.3 tonnes of spares by air. It is our goal to reduce this for 2021 as that will not only reduce our overall freight cost, it will also reduce our carbon footprint.

In 2020, our carbon footprint for our shipment accounts to 1000 tonnes which is equivalent to 40,000 trees. In order to optimize our freight budget, it is paramount that we focus on forward planning of our stores and consumables. Below are some ‘best practices’ in planning for our stores and consumables:

1. Where possible, you should raise quarterly stores for consumables that can be purchased locally at key ports where Maersk Tankers have a contract with the local ship chandlers. Example of key ports would be

Singapore, ARA, Fujairah, Houston, Algeciras to name a few. In order to allow the supply chain buyer to have sufficient time to process the orders, it is recommended that you raise the requisition at least 5 business days in advance.

2. Spares requisitions for planned maintenance are recommended to be created 6 months in advance to have sufficient time for the order to be sent together with the consolidated stores from the warehouse.

3. Last minute requirement typically will result in higher freight cost as these may have to be sent directly from the supplier’s site to the vessel. In order to minimize such requirement, we suggest that you review any upcoming planned jobs or items nearing expiry date in order to raise these requisitions well in advance. It is also recommended that you highlight these requisitions to your buyer either through email or during the VPR calls. This will allow the buyer sufficient time to plan the delivery of these spares.

4. While last mile barge charges only accounts for 10% of the total freight budget, it is also important that we optimize this cost by avoiding last minute delivery of spares consumables that will require an additional barge. It is expected of the agent to ensure that the full list of shipments and ship chandlers deliveries are delivered in one barge (where possible), however, we will depend on you to manage the agent’s performance and to alert us of any situation where the agent is not optimizing the last mile delivery properly. We understand that for certain vessel trade, it is difficult to plan the port of delivery in advance due to short notice of port call. However, we believe that together we can work out a solution for you through close collaboration and communication between the buyer, tech superintendent, vessel crew and operator. The Supply Chain Vessel Report will be a good tool for you to get visibility of the status of your orders as well as the performance of your vessel from a supply chain standpoint.

Our combined efforts to improve and optimize the way we do our logistics will definitely align the business towards our purpose of innovation & supporting efforts toward a more sustainable planet.

Procurement Fundamentals

Greener Logistics & warehousing