When we last spoke to Mark Haslett, it was January 2013. The shipping industry was coming off the back of another turbulent year, cash was king and owners were thinking of short-term survival. At the time Wallem’s Director for Procurement was “adapting for quick wins” and operating under a directive to “only spend on essentials.” Pure cost was very much on the agenda. Fast-forward 30 months and the picture looks a little rosier (except in the bulk market!).
The number of ships managed out of Hong Kong and China has continued to grow, meaning that companies like Wallem and their procurement departments are under a different kind of pressure. Their strategies have had to adapt according to the market, though value is still very much on the agenda.
In the purchasing department at Wallem there is a great emphasis on supplier relations and systems. With fewer experienced buyers in the market, the department relies more on administrators than those with an extensive knowledge or products around the world.
“It’s a challenging period,” says Mark. “You can’t create experience overnight; it’s not there in the quantity required, so we have changed the way we work.”
“We are also taking a horizontal approach to purchasing. Rather than the purchaser handling every aspect of the purchase for a group of ships we are looking at various aspects of the process to see if they could be done cheaper in different regions? “We think that has some mileage in it; we are actually trialling that. Some of the buyers are responsible for functions, rather than for the entire ship requirements.”
The change in strategy has seen a change to supplier relations too.
The company now has greater control over the suppliers it is using. Suppliers are selected from a central pool, and each is assessed monthly on a range of criteria such as time taken to quote, accuracy of quotations submitted, compliance with quoted delivery time and specification of ordered items.
“This helps us to understand if suppliers are providing the service that we require and how they are comparing with their peers,” Mark says. “We are focusing on delivering value to the suppliers that we do use, using far fewer suppliers and bringing them value that we can leverage for reduced prices or increased service levels – hopefully both. So that’s been very much our focus.” Wallem is extracting greater value from its suppliers too. As all good SRM strategists will tell you, true value in the supply chain is gained through collaboration, and with that in mind Wallem is working closely with its suppliers to leverage their expertise and experience.
“We have 50 to 60 superintendents who have experience of 300 ships; but when you talk to the suppliers they have experience of 10,000 or 20,000 ships. They have seen all the problems,” Mark says. “So rather than us thinking we are the experts, we are spending time talking to the real experts, and seeing how they think we can do things better. It’s getting the suppliers to see how we can work smarter.”
Waste not, want not
Wallem currently manages vessels for around 70 ship owners. Because each has its own demands, each owner is managed individually. Wallem is able to do that because it has flexible working relations with its suppliers; in so doing it concurrently reduces the waste in its supply chain. The approach isn’t without its challenges though. “What we need to do at all times is supply things that are fit for purpose; what is fit for purpose for one ship is not fit for purpose for another,” Mark says.
“We want to have good quality products on board each ship, but if the owner is going to scrap the ship in six months time we only need to supply a product that will last him until the ship hits the beach; to supply a product, an engine part for example, that will last 15 years is unnecessary and not economical.” Mark concedes that reducing waste in the supply chain isn’t easy. It is an “ongoing battle” and one who’s biggest challenge is cultural. He is making progress, but it is slow. “My biggest struggle at the moment is getting the Asian suppliers to share their expertise with us. They are used to being told what to do; they will act and quote as you ask them to, even if they know they could do it cheaper or better.
“It is an ongoing battle. I recently tore up a supplier’s contract and asked them to tell me what contract I should have with the least amount of waste in it. The new contract had six percent savings because it was dynamically modelled on the actual supply patterns we have and not on a generic model. It was well worth us doing.” ‘Fundamentally, what we are trying to do is to get suppliers to give us the service that Wallem requires which may not be the same as the suppliers’ standard offering. “In other words suppliers are now meeting Wallem’s needs, not the other way around and in turn Wallem is able to offer our clients deals that are good for them”