Automation in marine procurement

THE STATE OF

AUTOMATION IN MARINE PROCUREMENT 2 CASE STUDIES AND INTERVIEWS WITH SENIOR PROCUREMENT PROFESSIONALS

For Purchasing Leaders FOUNDED IN 1999

AUTOMATION IN MARINE PROCUREMENT 2 case studies and interviews with senior procurement professionals Written by Tom Holmes, editor of the IMPA magazine We would like to express our thanks to the contributors to this article and especially to Sim Teck Siang from Berge Bulk and Lars Andersson from Maersk.

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Contents 1. Introduction: Automation in Marine Procurement 2. Case Study: Berge Bulk 3. Case Study: Maersk

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Introduction Automation in the maritime supply chain Automation is better than most tech available on the market.

Why is that? Its implementation is simple and its results are immediate. It reduces errors, waste and complexity overnight. And because it is a mature tech, automation is a very safe investment.

Despite the obvious benefits, it is not standard practice in the industry. For those who do not yet automate processes, that should be a concern. Automation is not a passing trend.

History shows us that today’s advanced is tomorrow’s basic.

As such, standards are changing and the bar is being set higher each year.

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We spoke to two organisations for this eBook, each of which has used automation in a different way. Each has achieved similar results. If that demonstrates anything, it is that automation offers advantages to all, wherever you are on your digital journey.

But don’t take our word for it. The case studies in this publication show how companies use automation in the real world. They offer insight and show the many benefits automation brings beyond efficiency and simplicity.

Despite the obvious benefits, it isn’t standard practice in the industry. For those who don’t yet automate processes, that should be a concern

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Adapting to new ways of working – incremental improvements Automation is used to speed up the procurement process by allowing machines (or IT systems or platforms) to carry out routine and laborious tasks – POs, RFQs and invoices for example – freeing executives to spend time on business-critical tasks.

Given its maturity and the relative success of those who have adopted it, the question for the rest of the industry is not should we adopt it, but how should we adopt it? Automation technology lays the foundation for other technologies to thrive and – as we shall see – in turn benefits from sitting in a suite alongside analytics programmes.

Procurement’s new directive, therefore, is to embrace this technology, to define a clear strategy for implementation and to develop the function’s capability into something altogether more sophisticated. An opportunity is presenting itself to raise the bar, to set new standards and to be a centre for business growth.

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First, the foundations have to be laid, the new norms adopted. Data and automation are essential to today’s procurement departments. Without them, it will be extremely difficult to compete in the future – a future in which automation too will have evolved.

Today’s RPA enabled automation programmes – which replicate human activity – are fast becoming the norm. They are also the forerunner of cognitive intelligence that is able to learn human attributes and automate them as with natural language processing or providing insights. The Hackett Group estimates that future adoption growth rates for such technology will exceed 240% over the next three years. Time is of the essence.

The companies we have spoken to for this eBook are by no means early adopters, yet they have demonstrated clear and tangible benefits from automation. They, like many others, have active tech programmes, the constituent parts of which are reviewed and refined regularly.

While automation is neither a magic bullet nor a goal in itself, it is an enabler and a means to a crucial end. That end is improved operational efficiency and empowered teams that execute longterm strategy, both of which will define the success of future procurement teams.

Without automation, there can be no real hope of relief from the administrative burden; neither can there be any realistic hope of advancing professional standards.

The companies we have spoken to for this eBook are by no means early adopters – yet they have demonstrated clear and tangible benefits from automation

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Where ShipServ comes in ShipServ helps procurement teams improve their performance and make the most of the investment in their current procurement system.

It does this through increased efficiency and productivity, providing data and benchmarks for better decision making, removing many of the daily manual, repetitive tasks, and enhancing cyber security.

Regardless of which procurement system you currently use, adding ShipServ to it will enable the following benefits: Efficiency improvement of 30% or more is typically achieved 100% coverage of your suppliers, guaranteed

Enhanced procurement cyber security Easy plug-in to all maritime software systems We are the only platform equally committed to both buyers and suppliers Trusted by more ship operators than any other. Today, over 260 leading ship owners and managers and their 10,000 vessels put their procurement through ShipServ.

For more information on these benefits, please go to page 19.

Supplier performance reporting Leading benchmarks Excellent supplier response rates and speed

FOUNDED IN 1999

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How does it work?

Much of the inefficiency in maritime procurement results from the “communications chaos” caused by manual emailbased transaction flows between you and your suppliers.

Think about all those emails, spreadsheets, PDFs, printing out and retyping, and scale that to your entire operation - all the RFQs, quotes, and orders - for all your fleet. You can see the inefficiency and its cost.

With ShipServ added onto your existing procurement system, these problems go away. All those manual transactions become a thing of the past, and you just work within your existing purchasing system.

Here’s how it works. ShipServ is already connected to tens of thousands of suppliers, so to automate your company’s procurement you just make a single, simple connection to ShipServ. Importantly, you make this connection from your current purchasing system. The result is that your transactions go directly from, and come directly back into, your purchasing system.

No emails, no printing out, no re-typing, no comparing different formats.

The end result of this automation is a significant improvement in procurement efficiency – typically an improvement of 30%. This enables you to grow your fleet with the same number of people, and spend some of that time on strategic procurement.

How does it work for your suppliers?

All your suppliers will be connected electronically to the ShipServ platform too. As we offer all suppliers free connection (unlike some other platforms), this means we provide procurement teams with 100% coverage of their suppliers.

Another significant benefit of having all your suppliers electronically connected is that you benefit from excellent supplier response rates and speeds.

In fact, a full 25% of ShipServ’s trade is from suppliers who have (and pay for) our ultimate supplier solution: a full integration into the supplier’s ERP, leading to the best response speeds.

So procurement platforms like ShipServ have changed the way organisations work for the better – including Berge Bulk.

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Case Study: Berge Bulk

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Efficient & effective “We have been enjoying this type of automation for a while,” says Berge Bulk’s Sim Teck Siang. “It’s definitely necessary for the purchasing departments because with the volumes we deal with today, it’s just not efficient to handle the data entry manually.

“Going down line items is indicative of where procurement was even a few years ago. And of course, there’s value outside of the speed and efficiency of processes. What we are doing now has doubled the efficiency of each purchaser since it was introduced; now that they don’t have to handle the data manually. It is not something we can live without – automation is necessary.”

Sim says that for his organisation and for the wider industry, current applications are the tip of the iceberg as far as automation is concerned. Given the intricacies of the entire procurement process, he believes that predictive analytics and automation will combine to supercharge the value that automation delivers.

“If you look at the purchasing process, there are still areas where automation can take place. It may be before the requirements start, on the forecasting side of things. How can requirements be forecast, so that we aren’t caught in a position where we have to react quickly and stretch resources unnecessarily?

“Automation can also be used more effectively in the RFQ process. Currently, most organisations are guided by a purchaser’s hunch, or their experience. We are working closely as a team to identify key items, to have a strategy around the companies we approach.

“In that scenario, data would be used to translate certain items or for certain requirements, and the enquiry could be made automatically. There’s real value in that because the strategy becomes more robust and much more complete because automation facilitates accuracy.”

It’s definitely necessary for the purchasing departments 11

Raising standards The knock-on effect of automation is widely spoken about. The reduced administrative burden allows procurement teams to focus on more engaging work that aligns with the strategy. The result is a team of empowered execs who deliver added value along the entire procurement process.

At Berge Bulk, this is being realised. The team is in the process of being up-skilled from purely transactional clerks to category managers. It is an incremental process according to Sim Teck Siang but one that has been enabled solely by automation.

“Right now our purchasers are in a hybrid role. So they are able to benefit from the efficiencies that ShipServ offers, and they now have extra time to work on their category and to think about plans and strategy more than they would have previously.”

Naturally this had led to improved relationships with suppliers and better strategic performance for the department. Since the team has been able to dedicate more time to SRM, more one-toone meetings with suppliers have taken place, which has gone a long way to creating new value.

“That is further enhanced by the reports we have from ShipServ. We’ve been able to have more meetings and been able to show suppliers how they have 12

performed. By showing them where they’ve excelled and where they can improve, we’ve improved their performance and our relationship. It’s mutually beneficial.”

According to Sim, it is having a positive effect on the type of entry-level professional the company looks to recruit. A new dynamism is required - someone who is tech-savvy, analytically astute and who possesses the soft skills to engage with stakeholders. In turn what that individual expects is also changing.

The reduced administrative burden allows procurement teams to focus on more engaging work that aligns with the strategy

“Someone that joins the organisation at entry-level is going to look for advancement after a year or two. They’ll want more challenging work and more progress, so you definitely have to build in the efficiency in order to actually be able to raise the individual’s level.

“In the process of doing it’s also important that the decisions we make are supported by data. We can analyse supplier performance and spend at a granular level, which is indicative of how well the individual is managing their area of work – are they using the right people, are the suppliers they’re using responsive enough, have they dealt with those problems effectively? We are able to spot someone that appears to be pretty strong but is not performing too well – i.e. not adhering to spend under contract

By showing suppliers where they’ve excelled and where they can improve, we’ve improved their performance and our relationship. It’s mutually beneficial

or frame agreements with the supplier.

“We now want someone that can interface with stakeholders, and balance their understanding of data with an awareness of business needs. It’s also about painting a picture of the objective – so being able to visualise data and present it is becoming more and more necessary. As for now, we have to consider the skills in the organisation and where the organisation is – in the future we may well be looking for very specific, highly specialised individuals and maybe in time that evolves too.”

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Case Study: Maersk

Breaking new ground Maersk is well known for innovation, so it comes as no surprise that its approach to automation is well-refined and efficient.

The company uses frame agreements and has built a preferred supplier base over time, working on the ambition that if they have selected a vendor then there should be zero touch processing.

We connect our catalogue solution to ShipServ, and process 97% of our transactions through that – we engage with almost 1,000 of our suppliers through their platform

“We’ve had a couple of solutions that really are key for us to remove the manual effort,” says Procurement Automation Manager Lars Andersson. “We have a catalogue solution that keeps our supplier base updated. We connect that to ShipServ, and process 97% of our transactions through that – we engage with almost 1,000 of our suppliers through their platform.”

The approach means that Maersk is able to define how it should buy in certain categories and in certain ports.

The long history of data from suppliers is part of a four-pronged approach to procurement that includes catalogue prices, connected vendors and purchase history that form part of a buying rule book. When added to their algorithms and RPAs it raises

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procurement to a sophisticated level.

“Basically we are really transforming the buyer role here in procurement,” says Lars. “Instead of touching every order, we ask the buyers to give input when there is something missing. So certain rule-based processes can give us most of the input, but then, right now, we ask the buyers for the missing pieces.”

The algorithm-supported approach went live in March 2019 and has supported vendor selection and optimised results from RFQ responses. Lars says that it has changed the way procurement works because they do not have to touch every aspect of the procurement process. Instead the teams are working on what he describes as ‘impactful’ work that optimises the supply chain further.

“This will enable us to remove our efforts when it comes to the operations, particularly when we already have vendors selected through a frame agreement and then move on to more valueadding tasks.”

Optimising Embedding this kind of tech in the company means that Maersk is able to work closely with the operations team, with superintendents and captains and with the engineers on the vessels. Greater operational efficiency – aided in part by data and 16

by automation – means that resource is well-directed. It is a virtuous circle, according to Lars.

“Automation produces more data than manual processing, so, if you have an automated flow you can basically push much more data into every requisition or article. We have much more data to work with, which of course enables us, if we have the right tools, like algorithms, to make better decisions.

“The improved data helps us in Procurement to tailor our contracts in a better way so they can be used by the business.

This in turn drives more usage of our contracts and more automation, which in turn brings even more data. And that’s how we really, really improve the way we work with these categories.”

Lars says that, in the future, Maersk is more likely to use suppliers who are digitally connected because that allows them to analyse data and thus improve their algorithms. That kind of purchasing, he believes, is far better because it

Basically we are really transforming the buyer role here in procurement

relies on facts to make decisions, rather than hunches.

“It’s just facts. So the vendors that are most competitive and most efficient and effective and with the best price will be the ones we can identify through digital connections.”

The future of automation Automation is inevitably moving beyond taking care of administrative processes. It will likely reach its full potential when other technologies are embedded and optimised in the procurement process. Automation, alongside the IOT, spend analytics, predictive analytics and blockchain, for example, will produce a much more powerful tool, and one that generates value beyond administrative efficiency.

“What is very interesting now,” says procurement Consultant and Data Analyst Ivo Arts, “is the volume of technical analysis that’s being done. A lot of data from engines, from all kinds of different systems on board, is being processed, and is being analysed, and used to optimise a vessel’s performance.

“Based on those data, you could also see when a certain component is under-performing and is probably going to require maintenance. That type of data and analytics is taking off more, you can at a certain point integrate more with purchasing and procurement, and therefore with automated processes.”

Lars Andersson of Maersk agrees. In December 2016, the company began teaching robots how to use the company’s procurement system. The robots have been trained to execute a number of basic tasks – sending RFQs, creating orders, picking vendors and sending consignments – using simple RPA-based rules that are easy to replicate. The plan now is to increase the robots’ capabilities.

“We realised that in very complex situations, the RPA-based robot was not able to address the situation properly, and it got a bit lost,” says Lars Andersson. “Our solution was to introduce three algorithms to help them deal with more complex tasks. Although still rule-based, we have a separate work stream working on a reinforcement learning model that will then predict the actions that the humans take whenever we ask them for input.

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“By having a lot of catalogue prices and a rich purchase history, we have so much data. If we leverage that in the right way, it’s definitely going to be robots talking to robots or cognitive solutions making decisions.”

The benefit for people is that they get to work on adding real tangible value to the organisation, which Lars does. Technology is after all supposed to enable the workforce to concentrate on the more fun things, although he believes this is a challenge too.

“Procurement now has to reinvent its value-add in the organisation. Our role for sure is that we work with a vendor base and that might be to negotiate rates or capacity, or when we get deeper integrated with the vendor base, to work on innovative new technology, for instance. So that’s really a core value if you talk about this business area.”

The role may change in another significant sense too. Maersk has recently given the position of Virtual Workforce Manager (VWM) to one of its operational buyers in what is a first for the organisation. The VWM’s role is to make sure the robots and their algorithms are doing what they are supposed to, tweaking things as it goes. It requires a reasonable level of procurement knowledge and of technical knowhow, which is an altogether different proposition for the workforce. Is it a sign of how automation will change the industry? Perhaps.

“Category management will be much more accurate,” says Lars.

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“We are able to pinpoint in each category what we are able to do, place restrictions and give freedoms where appropriate. It allows us to be flexible in our approach and get maximum value.

“I definitely see this trend of selective automation growing, even though we are talking about multiple ports, globally. I think that the future winners are suppliers who are digitally connected, because they’ll be the one’s that are just more professional and better equipped to support us.

“But I must reiterate, that I don’t think we would have been able to do this if we didn’t have our vendors connected digitally and it’s something that’s growing across all industries and I think that’s a very, very important foundation that all companies need to prioritise, simply because you can unlock a lot of value by having that connection.”

But I must reiterate, that I don’t think we would have been able to do this if we didn’t have our vendors connected digitally

WAYS TO IMPROVE YOUR TEAM’S PROCUREMENT PERFORMANCE

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Efficiency improvement of 30% is typical

100% coverage of your suppliers, guaranteed

In the last 20 years, we have implemented the platform into hundreds of procurement teams’ operations, so this is not an empty claim.

What is the point of moving to an e-Procurement platform if you need to retain inefficient, manual processes for many of your suppliers?

Sounds crazy? Well it happens because some e-Procurement platforms have a pricing model where suppliers are forced to pay to quote, and refuse to be part of the platform.

This does not happen with the ShipServ platform because we have always offered a free trading tool available to all suppliers, regardless of trading frequency or value.

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Excellent supplier response rates and speeds

Unique reports and benchmarks

Enhanced cyber security and data protection

We offer suppliers the choice of advanced quoting solutions which enable suppliers to quote back efficiently and quickly.

We give procurement teams a host of online KPIs and benchmarks so that you can monitor the trading performance of each of your suppliers and make the most of your supplier meetings.

As your procurement transactions go directly from your procurement system via ShipServ, the number of emails, and potentially harmful attachments, you receive from suppliers is vastly reduced.

We give similar reports to both buyers and their suppliers so they benefit from improved dialogue.

Also, unlike some of the other platforms and portal solutions currently on the market, all ShipServ interfaces are fully secured.

In fact, a full 25% of our trade is from suppliers who have our ultimate supplier solution: a full integration into the supplier’s ERP. These solutions benefit the suppliers, but also our buyers.

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ShipServ is ISO 27001 certified (Information Security Management standard).

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Avoids hidden issues with portals

Easy plug-in to all marine software systems

Trusted by more ship operators than any other

Apart from the security risks covered in the previous point, there is another reason to be cautious of portals.

Our expert team has successfully completed hundreds of implementations into ship operators’ marine software systems or procurement systems.

We run by far the largest platform in marine. Currently 260 shipowners and managers, and their 10,000 vessels, are connected and run their procurement through ShipServ.

There is additional work and time involved for suppliers in using individual portals. Inevitably these costs are passed on to buyers in the form of increased prices (although often invisibly to the buyer).

We list 21 marine software companies on our website as partners. With many of these we have already built “adapters� so implementation is super quick.

On the supplier side, over the last 20 years we have built up the largest supplier coverage in marine with over 73,000 connected suppliers.

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What other purchasing professionals say about ShipServ “ShipServ has greatly reduced our purchasing administration workload, freeing up at least 30% of our time.

“ShipServ’s reporting tools are very useful. The Supplier Performance Report is especially effective for managing key suppliers.”

“ShipServ plays a crucial role in the automation of the procurement process. Using ShipServ has enabled our purchasing team to significantly reduce the time spent doing administration. This has allowed us to spend more time on providing better support for our ships and to focus on other strategic activities.

Nick Christian-Edwards, Purchasing Manager

“We are looking forward to using the improved reporting in the Supplier Performance Report which ensures that supplier information is readily accessible for Management reviews.”

John Samonas & Sons Ltd Anna Szyszko-Thompson, Purchasing Manager SMT Shipping

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“Vroon first integrated our procurement system with ShipServ many years ago.

“It now forms a vital part of our purchasing process enabling transaction efficiency and the centralising and coordinating of crucial information exchange with our suppliers.”

Lynnda Pekel, Head of Procurement Vroon B.V.

“By using ShipServ TradeNet, we have eliminated the manual retyping of work and our team of six purchasers can spend a lot more time on strategic sourcing of suppliers through ShipServ Pages. ShipServ also gives us an automatic KPI dashboard which helps in our negotiation with key suppliers”.

Roar Misje, Head of Procurement Grieg Shipping

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We’d love to help If you are a shipowner, manager or operator and you would like to find out more about how ShipServ can help you, or if you want to see a demo, please get in touch.

Please email me directly at: marketing@shipserv.com I will then make sure you are contacted by the right person.

Thank you David Hardy | Chief Marketing Officer, ShipServ

To find out more, visit our website: www.shipserv.com or follow us on: Twitter and LinkedIn You can also download our eBooks from the website

FOUNDED IN 1999