Inatech Interview: Better Bunker Buying Practices Can Save 2-5% Per Year

Monday July 14, 2014

Over the last six years the shipping industry has endured what some are calling its worst ever sustained downturn, during which bunker costs for some operators have been as much as 60 percent of their operational costs.

Reducing bunker spending is therefore a top priority, and while there are a dazzling number of new technologies and design features available to do just that, marine software and IT services company Inatech says that by simply adopting better bunker buying practices operators can save 2 to 5 percent on their bunker costs without the need to modify their vessels.

Ship & Bunker recently spoke to Inatech's Head of Marine, Capt. Alok RC Sharma, to get a better understanding of how their system allows buyers to make better buying decisions.

Consumption, Procurement

"If you want to save money on fuel, there are two real areas in which that can be done. The first is to reduce consumption, the second is in procurement - you understand and use technology to buy fuel at the right point in the market," explained Sharma.

"Sophisticated buyers that can use their systems can get better deals."

Inatech's base platform aimed at improving the bunker buying process is ShipTech, which allows a shipping company to plan its bunkering and conduct negotiations on its bunker buying between different suppliers.

The system also tracks suppliers' performance and ranks them on up to eight key performance indicators (KPIs) such as bunker quality, quantity, and cost.

"Cost is not just the final price, you also want to know where suppliers started their bidding," noted Sharma.

"Was it two suppliers that both ended up offering $600 [per metric tonne (pmt)] but one started at $630 and the other at $610?"

"With the bid / offer system inside ShipTech, the buyer not only gets a good understanding on who the best suppliers are, but who the best people are to deal with."

Data for the system comes from a number of connected sources, rather than being manually entered.

For example the quality data comes directly from lab test reports, while the quantity parameter brings in the information from the supplier's bunker delivery note (BDN).

The technology can then look at the parameters across all suppliers and take the differences, such as variations in fuel quality, and equate them into a dollar value.

"The system also tracks the time to raise a dispute. This helps buyers to not miss the deadline in the event a claim needs to be made," said Sharma.

Optimized Buying

"Imagine you're a bunker buyer. You need to answer two questions: Where do I bunker? How much shall I bunker? The ShipTech system answers those questions with an automated planning system called Optimizer," said Sharma.

"Optimizer looks at about 80 parameters, including vessel capacities, fuel use, what ports the ships are calling at, etc, and on the supply side factors such as supplier availability, port times, port restrictions and so on.

"Based on that it then suggests to you a bunker buying plan over what we call the 'planning horizon', typically about a three week period to tie in with supplier price indications."

That plan, explained Sharma, tells the operator the best place to buy fuel, and how much they should buy.

After a plan is accepted, if things change later in the voyage such as bunker price spikes or ship call changes, the optimizer can suggest a new plan if the savings to be made from a change are greater than an amount specified by the operator.

"We are not taking the decision away from the buyer, from the human beings. This is the start point," stressed Sharma.

"We're automating the planning but there's no one size fits all approach. A containership might want a three week planning horizon, a tramp operator maybe two weeks. Also what is a significant saving? The size of ship and average cost of a port call will influence what saving needs to be made to change a plan."

The ShipTech system also helps with the inventory management of fuel, making sure operators buy the right amount of the right type of fuel.

"If you've got a ship doing, say, Brazil to Côte d'Ivoire, if they have 500 tonnes of low sulfur fuel sat there in a tank, that's cash locked up," said Sharma.

Low Hanging Fruit

Inatech say their claim of 2 to 5 percent bunker savings comes from real world data based against a company's own historical buying performance, and there are 600 vessels currently getting their bunkers through the ShipTech system.

"It's low hanging fruit. It doesn't need sensors or vessel modifications, And because there's typically only five to ten people involved in the buying process, our results are much more rapid and apparent than something that's done on a vessel," said Sharma.

The implementation cycle for the system is about two months, with people ready to use the system after a week of training.

Sharma says the return on investment of the system is typically 6-9 months, and the savings come from better planning, accurate market information, inventory management of fuel, and reducing quantity and quality claims.

"This isn't about getting the latest iPhone. This is about using IT to solve a problem," he said.

"You could complain about bunker prices. They are high, but they are high for everyone. So buying better can give you a commercial advantage."