One of our good supply partners was today off the market by $30pmt for a prompt enquiry. In the old market this would have elicited various comments centred around 'have you been drinking?' 'do you not love us anymore?'. In todays market it is simply tight logistics, various product blends and differing hedging strategies.
The question then is, as an owner what is the strategy?
The logical strategy is to have as much open credit directly with suppliers as possible so the whole market is covered. There has been a lot written recently about the use of hybrid broker/traders and the benefits of covering the whole market as a hybrid. This is of course highly debatable.
Transparency and best price come from covering all the market as direct as possible. If you have a proactive broker they will open the necessary credit at a fixed broking fee. They will also provide a benchmarking service and a comprehensive and open audit trail.
The current market spread means unless you as a buyer find the supplier long on product/logistics and keen to sell, someone else will. The benefit and the inevitable margin will be taken by others.
How do you find the supplier long on product?
You can use a tool like NSI's www.2020planning.com and a team of brokers with the necessary market intel at their finger tips.
Am I at risk dealing with traders?
I have also seen recent articles about the risks of dealing with traders and comparisons made with the OW situation.
This risk can easily be managed by checking credit reports, company accounts, discussing in detail the trading model, identifying where the risks are and then discussing open and transparent margins.
We all know of traders with certain compliance, legal and credit issues but these can be avoided if you are in the market regularly and ears are kept to the ground. How we work is the broker controls the enquiry and works the supply side. When needed the use of a 'conservative trader' for a fixed transparent margin is beneficial for the owner, supplier and the trader. It is a good solution when the owner is tramping and cannot access direct credit in a port they do not call in often. The trader gives a value and receives a value. That value is controlled by the broker and communicated to the owner in a transparent way with a fully documented audit trail..
How do I benchmark effectively?
How are the reporting companies providing accurate pricing? In the absence of reliable benchmarking reports it is very useful to benchmark your performance against your peers. This can easily be done through the use of a bunker buying platform, such as ClearLynx which we use as our operating system. They can provide reporting and market intelligence for the owner and let you know if you are performing below or above your peers through anonymised data. We are also benchmarking our performance and driving our numbers through the use of technology. Any 'outliers' in price are picked up and analysed each week.
The platform has the additional benefits of being able to monitor claims ratios and market trends. It gives us a comprehensive basis to analyse and manage the team and our resources.
If your partners are still pushing credit as their USP they are 12 months too late and way behind the curve. The key factors now are audit trail, benchmarking, compliance and above all real transparency.