Three Reasons Why We Need to Embrace Technology in Bunkering Now

by Danny Soos, CEO and founder, OilFront
Monday September 25, 2017

Streamlining bunker procurement through use of technology is not a new idea - many companies tried and ultimately failed in the early 2000's. Today, almost two decades later, there are another group of companies looking to change the way the market buys bunkers through the use of clever technology. What has changed since then? Can technology really improve the way the market buys bunkers, and if it can, why is the time to do that now?

1. Improved buyer and seller experience

Over the last two decades technology has driven higher and higher quality consumer experiences in our everyday life. We are starting to see this translate into the workplace. We are now used to carrying smartphones and have come to expect that the information we need is at our fingertips.

You probably wouldn't book a flight without checking all of the other options through a price comparison site. You might save $100. But shipping companies frequently stem bunkers without knowing there is a better option available. We recently worked with a client who was able to save $20 / MT by calling bunkers only with minimum deviation. In total they saved ~$30,000 on a single bunker delivery by shopping the market. In bunkers, the truth is that there is no good way to know what you don't know today. My personal view is that by using technology we can get smarter about where and when to bunker to great effect.

Today if you order a $15 pizza online you will get more information about its delivery than you will if you order a $1.5 Million bunker stem. I'd argue it's about time the bunker market catches up - real time updates, clear audit trail, documents in one place, benchmarking and reporting. All of this is unmanageable when relying on email and excel to hold your operations together.

2. Increased complexity driven by IMO 2020

In the lead up to 2020 the bunker market will go through the biggest shake-up in memory. It is already a full time job to keep on top of who supplies what, where, and at what price. The mental map people use to navigate the market today is going to change drastically. Bunker planning is going to become a lot more complex with an array of new fuels and compatibility issues. Technology is going to be crucial in helping bunker buyers make informed decisions and demonstrate compliance in the new world.

Bunker prices are also expected to rise in 2020, which means that credit will again become a much more important part of doing business. FinTech companies have already changed the way finance teams evaluate credit risk and has opened up new credit lines for many individuals and companies who would have struggled in the past.

It is not a zero sum game, as FinTech has shown in Financial Services, there is a tremendous amount of extra value that can be created by taking a data-driven approach to how we plan, operate and finance the bunker trade. 

3. Smart Bunker Strategies already providing a relative competitive advantage

Today shipping companies are overloaded with information, but they can't make use of all the data available when planning. Technology will be used to get smarter about which ports to bunker in, when to enter the market and which suppliers to work with. I'll write more about this in another article.

Relative bunker pricing is much more important than absolute. In many ways it doesn't matter if bunker prices double as a shipping company as long as all your competition also pay the higher prices and freight rates go up too. Some smart shipping companies are already enjoying a 2-3% saving on total bunker costs, by using technology to take a holistic approach to bunker procurement. One study showed a yearly saving of $25 Million across a fleet of 269 vessels. With bunkers typically representing 60%+ of a vessel's operating cost a good bunker strategy can make a big difference in today's highly competitive environment. 

It is my belief that most shipping companies will be better off working with an applied technology company than trying to develop solutions in house. This will afford them access to the latest technology, require no IT investment and allow them to benefit from data and purchasing economies of scale. It is also a win for bunker suppliers and traders who can better optimise their physical operations and credit lines.