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Procurement is an essential component of any business, but more so in the maritime industry. An unorganized or poorly managed procurement process could lead to various inefficiencies and unnecessary delays, leading to the shipping company's tens of thousands of dollars. To operate effectively, and to ensure SLA’s are met, there is minimum wastage and customer experience is catered to, shipping companies in the marine industry have several suppliers, vendors, and partners with whom they work closely to purchase goods and services, which have to be managed aptly by the procurement process.
Effective procurement processes save costs, aid compliance, ensure you work with reputable suppliers, and eliminate delays and mistakes. More recently, procurement is also a way to help shipping companies attain non-financial goals such as sustainability, reduce their environmental footprint and burnish their green credentials.
Procurement is an overarching term for a set of steps that an organization performs to acquire goods and services that are essential to its operations. Procurement and purchasing are different even though people use the terms interchangeably but they are significantly different. To procure goods, organizations will identify the internal need, evaluate suitable vendors, negotiate terms, approve an internal purchase requisition, submit a purchase order, receive an invoice and pay it, take delivery of the goods & services and, finally, maintain records for audit purposes.
Procurement is, hence, an umbrella term that includes several internal processes – part of the so-called Procure to Pay (or Purchase to Pay) cycle.
Procurement management for companies in the marine industry is crucial because of the volume of transactions a majority of these shipping companies handle. Most large shipping companies often have a centralized procurement function with their own employees and standard operating procedures which they have to follow.
There are various steps that the shipping company follows in the traditional procurement process:
Figure 1- Traditional procurement process in a shipping company
There are several challenges in the traditional procurement process. It's highly manual and therefore is prone to several inefficiencies. Usually, the entire procurement process could take anywhere between 3-4 weeks to complete, primarily as a result of back-and-forth Email communication. Additionally, the procurement quotations, invoices, and other important records are stored in Emails or on spreadsheets. Finally, this centralized procurement department works in a silo and often the tools lack integration to core ERP systems like SAP, accounting, etc.
This approach, therefore, is fragmented and highly inefficient. This makes it difficult for the procurement team to address the following challenges:
Digitalization has crept in almost all functions of the business and the procurement process should be no different. The digitalized procurement process is very different from the traditional one and reduces any manual intervention unless absolutely required, eliminating any inefficiencies that come with it.
There are various advantages to the digitalized procurement process for the maritime industry. Firstly the procurement process is now automated and decentralized and can take anywhere between a couple of hours to a couple of days, depending upon the request. Data records are stored in a central repository and the access to structured data allows the executive management to make educated decisions in real-time. Finally, the integration with core systems like ERP and accounting ensures that data exchange is possible and it leads to the formation of a robust digital ecosystem that becomes the backbone of your organization in years to come.
Figure 2- Streamlined procurement process in a shipping company
A recent Deloitte survey found that the level and speed of digitalization across procurement functions are abysmally low. Only about 18% of procurement leaders have a digital procurement strategy supported by a complete business case.
By streamlining the organization's internal procurement processes, business leaders can ensure that they do not just reduce costs significantly, but also reduce the cycle time and improve efficiency. There are a number of following advantages that automation and integration bring to the procurement process in the maritime industry:
Procurement is now a strategic function with a wide-ranging business impact. A well-designed and effective set of digital procurement processes is a critical business need. There’s might be no need to rely on spreadsheets for purchase requisitions, purchase orders, and invoices anymore. In fact, using these techniques is highly inefficient, slows you down, and exposes your business to unnecessary risks. A digital procurement strategy starts with the foundation of transactional process automation which opens the door to deploying high-impact technologies like ML and AI.
By using Steer Platform’s No-Code MRO Suite, you would have pre-built templates which you are able to customize the procurement process using a simple drag-and-drop interface. Additionally, you would be able to build other support applications which would complement the suite of existing modules. Couple this with process automation and integration allows streamlining repetitive activities and the ability to connect easily with third-party applications via built-in recipes or direct integration.
Connect with one of our customer success team here for a demo to gain a deeper understanding of how Steer’s No-Code MRO Suite would be ideal for your procurement requirements and take your first steps towards building a digitally connected business.
Sid Wadehra is a seasoned and a result-oriented professional with varied experience spanning geographies from leading multinationals to fast growing start-ups. His industry experience is well-complimented with business education from a global business school. Sid's expertise include digital transformation, corporate strategy, and innovation management.