Expecting the unexpected
INSIGHTS - 23/07/2020
Procurement is vital to keeping the Wallem fleet operational. We talked to Kennis Lee, Head of Procurement at Wallem, to find out what magic happens behind the scenes and how preparedness and quick-thinking often saves the day
How is procurement organised at Wallem?
Procurement for all Wallem vessels is handled by SeaSafe, a separate business entity which is a part of the Wallem Group.
In fact, we also provide services to non-Wallem shipowners. Operations are managed from our headquarters in Hong Kong, but we depend on the support of our teams of experienced local purchasers in key global locations dotted around the globe including Singapore, the Philippines and Cyprus. They work closely with customers and each other to ensure that supplies reach ships in the Wallem fleet and other shipping companies whenever and wherever they are needed. We take full advantage of the latest systems to provide an end-to-end and wholly transparent service and, because of our size, we can leverage of significant economies of scale.
Who decides what supplies are required?
Wallem has a well-defined process for generating and acting on requests for spares, stores and other consumables. First seafarers must verify locally held inventory before raising any request. Requisitions are then approved by a technical superintendent for the purposes of cost control and monitoring efficiency.
For machinery spare parts, request for quotes are sent to the original manufacturer, a licensee, or other authorized dealers registered in the procurement database. Mindful of long-term reliability/to minimize downtime further down the line, the default selection criteria is for ‘genuine’ items, and vendors must make a mandatory declaration stating country of origin when submitting quotes. In certain circumstances, for example, if the vessel in question is due to be scrapped in the near future, this requirement may be waived in agreement with the vessel owner.
What processes kick into action once an order comes?
After a purchase order (PO) has been issued, the vessel’s designated purchaser will work with the technical superintendent in drawing up an initial plan covering all the likely logistics. The purchaser will investigate further and prepare a detailed breakdown of the transport and delivery arrangements for approval and the vessel will be issued with a full schedule itemizing supplies and services it is expecting to receive.
The purchaser will then stay in close touch with the supplier to monitor order readiness but also keeping track of the vessel’s itinerary and liaising with logistic companies and port agents in order to navigate any terminal restriction that could affect the delivery timeline.
We have various internal procedures and tools at our disposal to track orders and raise alerts if a delay occurs or is probable. The vessel’s superintendent and original purchaser are kept up to date every step of the way.
The “Procure to Pay” process relies on tight collaboration between ship and shore staff at every stage. We both have an important role to play to ensure goods are safely delivered on board the vessel.
What unexpected hiccups can happen?
SeaSafe knows it has to expect the unexpected as vessels are continuously on the move. While containerships have fixed voyage schedules, most vessels managed by Wallem operate to a less predictable tramp service and typically we are only notified of a vessel’s confirmed ETA a few days before it docks. In the worst-case scenario, a vessel might change port when the supplies and services have already been arranged per the original schedule.
Another issue with major knock-on effects is an unexpected change in the readiness of the order. We are currently dealing with a case where we had arranged a service engineer to attend a vessel in Pusan, South Korea to overhaul its engine. With less than ten days before the vessel’s scheduled arrival, the vendor informed us that parts needed for the job had been delayed and would not reach the port in time. Our team immediately leapt into action sourcing the parts from an alternative vendor who could get them delivered to the vessel at very short notice, so that the work could proceed as planned.
What items are most difficult to deliver?
Arranging the delivery of items classified as dangerous goods is always a challenge. Some specialist spare parts in this category can only be obtained from a single location where our managed vessels seldom, or never, visit. Such parts are expensive to deliver and often must go through additional custom procedures, so there is no room for error when planning the necessary logistics with local agent, forwarder, and vendor.
Spare parts needed for urgent repairs are another special case because we are working against the clock. We recently dealt with one case in Puerto Barrios, Guatemala, where the required parts and engineer were arriving from different locations. Matters were further complicated because there were no direct flights to the area. Nevertheless, we managed to get both the parts and the service engineer where they needed to be for the repairs to go ahead.
What was your most memorable requisition?
I don’t think I will ever forget the effort and adrenalin rush that went into sourcing 20,000 surgical masks and coverall sets for Wallem personnel shortly after the Covid-19 outbreak started in Wuhan. Availability and prices were changing by the minute – we felt more like stock market traders.
It quickly became clear that fulfilling the order from a single vendor in a single location was not feasible, so it was all hands on deck as the team approached suppliers around the globe. Decisions had to made on the spot, as we knew supplies would be snapped up by someone else if we didn’t act immediately.
How has Covid-19 impacted procurement?
The Covid-19 pandemic has sent shockwaves through the global supply chain. For a start, it originated in China – the factory of the world, so it had an immediate domino effect on manufacturers across elsewhere reliant on Chinese suppliers, including those producing engines and other ship equipment. Before long, factories and businesses outside China came to a standstill as local lockdowns were imposed.
From a logistics perspective, airfreight was hit particularly hard. There was a dramatic reduction in capacity, which caused costs to rocket. The capacity shortfall also means shipments going through transit hubs are at risk of missing connections. In nearly all countries, medical equipment and supplies take priority on whatever capacity is available. It has made the tight scheduling of shipments that was possible before the pandemic next to impossible.
The availability and price of consumables has also been badly affected as our regular suppliers simply don’t have men on the ground. As a result, lead times for deliveries have lengthened from two working days to ten.
What permanent changes will Covid-19 bring about?
Like many other businesses, we will need to think strategically about the whole supply chain and the way we manage warehouse inventory rather than concentrating solely on the efficiency of individual transactions for each ship.
What will procurement look like in five years?
Digitalisation looks set to be a game-changer. Reliable data and common standards for sharing it will transform the way we do procurement, in the same way it will drive the evolution of functions elsewhere in the Wallem Group.
Wallem’s decision to use BASSnet as a unified solution across the business for managing vessels maintenance, safety, operations will provide us with maximum transparency on real-time inventories across the fleet. Tangible data will strengthen our purchasing power greatly as tangible data will enable us to plan ahead by analyzing consumption and lifting pattern, which in turn leads to volume discount and/or better negotiate agreement with suppliers.
Looking further ahead, if we can properly harness algorithms, machine learning, and such like, procurement will stop being treated as a “cost”, instead, be regarded as an opportunity for adding value. The manpower currently employed for performing administrative tasks could be reduced and diverted to get on with valuable strategic work that benefits the company’s profitability and sustainability.
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