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Optimal Fuel Procurement Management solution for a leading Shipping company in Europe
The largest shipping company in Europe chooses Calsoft’s Fuel Procurement Management System (FPMS), an unique and integrated procurement solution to address their complex fuel procurement needs.
Challenge
The largest shipping company in Europe was looking at replacing its existing procurement system, which was archaic and labor intensive. The flow of information was not seamless resulting in redundant data entry and inconsistency. The system lacked analytical capabilities and paper based reports proved time consuming to collate and were often inexact.
With growing worldwide operations, the company was ideally looking for a solution, which would integrate with its existing systems and automate their entire procurement process. The solution was also required to support the growing hedging and risk management practice of the company. In terms of functionality the solution should be capable of coordinating with multiple entities within the company and global suppliers. It should handle vast amounts of data, facilitatating enhanced decision making through comparison and analysis.
In addition to automating procurement they also identified the need for a proactive planning tool that would help plan bunker purchases and estimate future bunker requirements.
Solution
Based on a two-phased approach in 2004, Calsoft’s Fuel Procurement System was progressively implemented at multiple company locations across the world. In the first phase, FPMS addressed the business need of streamlining and standardizing the procurement process across global companies. In the second phase the company’s need for optimal fuel procurement was addressed by implementing Optima – a proactive procurement-planning tool.
The Fuel Procurement Management System supports client access through the Web and LAN. It was built and customized for the client by integrating Calsofts three advanced business products - MarketServer, OBIS (Online Bunkering Information System) and DeRisk.
Fuel Procurement Management System is built on the latest tools and technologies based on Microsoft .Net with a three tier architecture comprising of the client, the application server and the database server. Besides allowing effective distribution of workload as well as diverse connectivity, this architectural choice results in a solution that is robust, flexible and scalable allowing our client to migrate and upgrade easily in the future.
Phase I – Fuel Procurement Management System
By using ship operators across the globe can directly send their requests, approve them, and provide ongoing voyage and schedule updates. This connectivity across the web ensures direct participation of the operators in the fuel procurement process. The system allows the traders to aggregate requests, send RFQ and compare quotes, stem orders, send automatic email, track claims and hedge through easy user interfaces. The system maintains a port wise database of suppliers enabling real time analysis. Claims can be associated with a supplier and the entire negotiation preceding a claim settlement can be retrieved at any point in time.
On implementation, the client felt that Fuel Procurement Management System provided an integrated environment facilitating better co-ordination and process optimization. This led to improved performance as well as reduced procurement costs. Lab interface makes possible the import of lab results directly into the system to ensure efficient and transparent tracking of claims.
Fuel Procurement Management System helped the company upgrade from an Excel based environment to an integrated IT environment for Risk Management. It helped them optimize price through effective use of hedging and Arbitrage opportunities. The system supports complex calculations of formula based pricing and direct market data feed enabling increased trader productivity and better and real time management of strategies and deals.
Fuel Procurement Management System provided a central repository of trading and evaluation data – deals, corporate strategies and market prices providing consistent and up-to-date information to all traders across the organization.
Phase II – Optima
As part of the second phase Optima was implemented resulting in proactive and planned fuel procurement for the company.
Bunker traders have access to a multitude of data from various providers but have very little support in answering questions they face every morning like:
- Where should my ships bunker taking into account the market conditions, ships routes and cash flow projections?
- Should I have term contracts with suppliers in certain ports?
- Should I buy fuel using the term contracts?
Optima is a decision support tool for the traders. The tool generates a minimum cost bunkering plan based on various inputs. It also provides a what if analyses of different market price scenarios on bunker plan and fuel cost. Performance analysis of volumes and prices of procurement of spot and term contact against bunker wire prices can be done.
Benefits
The major benefits derived from deploying FPMS & Optima for the company are:
Proactive planning
- The system provides a minimum cost bunkering plan for a vessel thus avoiding last minute purchases.
- Enables Strategic advantages by using opportunities such as commingling, topping up, reducing inventory etc.
- Demand forecasting at ports.
Automation of workflow
- The system provides an integrated workflow for bunker procurement, allowing the various players (operators, bunker department, suppliers, and agents) to communicate in a timely and effective fashion.
- Simultaneous access to procurement and trading enables capturing of physical as well as paper deals using the same platform.
- Any data is entered only once into the system and flows seamlessly between departments.
- Automatic alerts from the system notifying the user of important events.
Procurement cost reduction
- The system helps bring down prices by facilitating centralized procurement, flexible multi-port requests and term contracts.
- Analysis and reporting based on procurement history.
Quality management
- The system helps capture, track and finalize claims.
- Helps import and compare lab results with standard value.
- Track ships, ports and suppliers claims history.
Performance evaluation
- Benchmarking and performance measurement of ships, suppliers, ports and traders using performance reports with graphical representation.
- Benchmarking against market prices to evaluate procurement efficiency.
- The system imports market prices from official information providers like Platts. This helps evaluate daily trades (paper and physical) and obtain real time exposure.
Risk management
- It automates the entire trading and risk management process. This ensures that traders and senior managers are in one smooth cycle of monitoring and execution in a transparent manner.
- Reduce price risk and optimize fuel oil trading through hedging and arbitrage.
- The system imports market prices from official information providers like Platts. This helps evaluate daily trades (paper and physical) and obtain real time exposure.