Optimising spare part procurement

Optimising spare part procurement
A screenshot from ShipParts.com.

We spoke with Roy Yap, chief growth officer at ShipParts.com, to find out how the online procurement platform for marine equipment is helping the industry to eliminate the inefficiencies of spare parts purchase and delivery. 

The problem with spare part procurement today

Operating and running a safe, compliant, and cost-efficient vessel requires each part or component of a ship to be running at optimum performance. When a part of a ship fails or comes to the end of its lifetime, a repair or replacement should be obtained as soon as possible to avoid additional expenditure.

However, the shipping industry remains conservative in its approach to spare parts management. As a result, long logistical times, long procurement times, and slow or even mis-deliveries can result in machine downtimes leading to inefficient and expensive vessel operations.

Roy Yap, chief growth officer at ShipParts.com.

Users looking to purchase a new part often struggle with identifying the quality of a product at a cost appropriate for them, and if they find the right part at a good price, the cost of getting it to their preferred location could be high.

There is the option for vessels to carry some spare parts onboard, but this reduces cargo carrying capacity and the likelihood of the part’s degradation is increased. Furthermore, predicting which spare parts will be required is not always straightforward.

Traditionally, spare part procurement would happen manually. An owner or operator would initially enquire about a part via email, and this would be followed by some back and forth as negotiation takes place and there is comparison with suppliers. This manual process to procure a ship part could take seven to 10 days, which is both inefficient and costly.

However, the lack of efficiency in procuring spare parts means that there is plenty of room to optimise. This is the opinion of Roy Yap, chief growth officer at ShipParts.com who believes that these inefficiencies can be removed by both digitalising and automating the entire supply chain.

Optimising spare part procurement

ShipParts.com is an e-Procurement platform for the marine industry, helping to digitalise the marine procurement process so that the inefficient manual method of securing spare parts can be eliminated.

ShipParts.com connects suppliers with buyers, offering spare parts, equipment and maritime services to help both parties sell and obtain parts needed onboard ships. According to Mr Yap, it “automates procurement and increases transparency.”

ShipParts.com works by first digitalising the procurement process, then adding Artificial Intelligence (AI) to match the best product at the best price for the buyer. This reduces the need for a manual enquiry to be made.

ShipParts.com automates the sourcing process, so one enquiry is automatically mail shot to a number of suppliers that fit the profile for a particular item. Digitalisation enables the enquiry for the item to be automatically forwarded to the relative suppliers.

Following this, ShipParts.com’s AI bots compare the various quotations that are received.  The AI bots will compare and automatically flag up the best quotation before recommending it to the supplier. “Because of the automation and intelligence, this digitalised process takes about 2 days on average and you are guaranteed to get a reply within 48 hours,” Mr Yap told us.

One challenge many owners, operators and managers face today is the fragmentation of the maritime industry. Many companies are developing solutions separately and parts of the industry particularly susceptible to fragmentation are often slower to take advantage of digital opportunities. ShipParts.com aims to overcome this and to aggregate items to increase volume. According to Mr Yap, procurement is about volume. “The more you buy, the better the unit prices.

“ShipParts.com helps to aggregate in the background by assisting with reducing the cost of spare parts procurement. If shipowners are all buying from us, then there will be an aggregation in the background, which is a natural process of digitalisation,” Mr Yap explained.

He went on to say that ShipParts.com ensures there is a stringent process to ensure that legitimate and valid spare parts are being viewed and purchased by customers. “First, we determine that a company is a legitimate business, which involves reviewing the business certificate and premise or factory. Following this and at the buyer’s request, we can carry out item verification, which involves our large teams in major marine equipment manufacturing countries, including China, Korea, Japan and many other of our international supplier locations.  We visit and assess the quality of the parts and confirm that they meet the specification. Countries that we cannot visit, we work with several classification societies, including Bureau Veritas, the International Register of Shipping (IRS) and the China Classification Society (CCS). With these, we provide third party verification services for critical parts.” While these critical spare parts tend to be more expensive, Mr Yap confirmed that the driver for this verification process is criticality, rather than price.

A commitment-free solution

Unlike other e-Procurement platforms that are often based on a membership model, ShipParts.com is a transaction-based model. There is no membership or subscription required to use the services offered; it is an open platform that is free to join, meaning there is no additional cost to shipowners or operators and they simply pay for the part they are purchasing.

Mr Yap confirmed that ShipParts.com gets its revenue from taking a commission on transaction, which is variable depending on value and volume. “If there is a successful trade then there is a commission which is payable by the buyer and we take a small cut from this,” he explained.

As of May 2020, ShipParts.com had 1,953 buyers, 2,000 demands, 18,102 sellers, and 4,223 quotations.

3D printing and e-Procurement

Recently, ShipParts.com announced that it would be moving into the 3D printing realm. In March 2020, ShipParts.com signed a research collaboration agreement with Singapore’s Nanyang Polytechnic (NYP), and the American Bureau of Shipping (ABS) to prove standards for the certification of metallic components produced by NYP’s Additive Manufacturing Innovation Centre (AMIC) for maritime application.

ShipParts.com’s role, following completion of the SGD$350,000 project, will be to help optimise the entire supply chain by providing 3D printed parts to end users on their platform.

3D printing is particularly valuable in optimising the entire supply chain when used in collaboration with e-Procurement. According to Mr Yap, it enables both faster buying and more cost-effective delivery.  Once a spare part is ordered, it still needs to be delivered and this requires careful examination of the logistics chain, as well as the Capex. He explained that while 3D printing optimises the cost, the logistical costs and challenges of shipping the item to where it is needed in time could cost more than the part itself. This is where 3D printing comes into play. “3D printing enables distributed manufacturing. You could send the data to a local 3D printing factory, which can then be sent to the ship from there, instead of shipping the spare part. So, while the item could be slightly more expensive, the overall costs balances out when you factor in logistical cost and time.”

While ShipParts.com doesn’t carry out 3D printing itself, it facilitates the transfer of data to the 3D printing factory. The buyer, usually a shipowner, licenses per print of the file from ShipParts.com and uses it either for their own 3D printing or they can use a 3D printing factory closest to the ship’s next port of call. This allows the end user to pick up the spare part around two to three days, depending on complexity and size of the part, after the data has been sent by ShipParts.com to the 3D printing factory.

Mr Yap believes that for owners and operators to reap the benefits that platforms such as ShipParts.com offer, they will need to identify when and how to automate and use AI to save time and money, but he believes this is starting to take off.  “It is obvious that procurement processes have started digitalising, and we are seeing greater engagement in e-Procurement. The number of transactions is increasing every day and the take up is getting better,” he confirmed.

COVID-19

Mr Yap said that due to COVID-19, the firm has seen an acceleration in digitalisation. “The digital model has proven resilient and allowed e-Procurement to continue despite lockdowns. Digitalisation has been proven as a cornerstone of business continuity and we are glad to support our customers with digital services and solutions.”