Global shipping markets are booming. A combination of market drivers and geopolitics is pushing the maritime industry to the limits of its operational capacity.

Disruptions to trade routes, ship diversions, increased security risks and port congestion mean the focus remains on efficiency, even as earnings remain strong in the short term.

The strain on global supply chains is leading to a familiar problem for shipping companies: Are the spare parts they need for safe transport in the right place at the right time?

Indeed, with markets as tight as these, the question of inventory availability that allows vessels to operate is more important than ever. A weak market may mean that operators can take their time with repairs or modernizations; tight markets mean the opposite. Moreover, in this active buying and selling market, inventory adjustments for vessels leaving or joining the fleet can lead to shortages or oversupply.

The issue of inventory management has long been a headache for crews trying to keep the ship sailing, and it is now coming into management focus as operators try to keep costs under control and maximize utilization.

Despite various initiatives to streamline the upfront purchasing of spare parts, feedback from studies conducted for ABS suggests that parts can still remain in supplier warehouses or on board vessels for months or even years due to a lack of transparency.

Finally, online procurement generally does not offer a lifecycle solution after you click “buy now.” Like any online marketplace, it’s about lower front-end prices and shipping the goods to your chosen destination.

What is initially considered valuable inventory can quickly become obsolete or damaged inventory, destroying value and creating waste that can be complex to manage. Estimates suggest inventory levels can range from $0.5 million to $1.5 million per vessel, and even higher depending on fleet complexity and procurement practices. Multiply that figure by a medium-sized fleet and the numbers increase very quickly.

Improper inventory management poses significant operating cost risks and can tie up working capital, with implications that go beyond operational inefficiency. Even in strong markets, the cost of capital is an issue for owners seeking to capitalize on market opportunities.

So why is spare parts inventory still a problem in a digitalizing, globally networked shipping industry? In addition to black swan effects, supply chain consultant Peter Schellenberger cites a lack of management focus on the issue and the challenge of implementation as reasons why the problem persists.

A smart and user-friendly Planned Maintenance System (PMS) that helps crews maintain good data standards should be a given, but Schellenberger believes that system evaluation and implementation decisions do not always receive the priority they deserve.

He notes that a similar issue comes up in discussions with customers about new PMS systems: what should happen to existing vessel inventory databases?

Schellenberger estimates that 70 to 80% of common data sets do not reflect reality or are not structured correctly. In most cases, however, companies decide to simply transfer all data available in the legacy systems to the new PMS to shorten decision-making time.

Whether for a new or existing system, the processes around inventory control rely on good data to deliver the expected returns. In a recent case study conducted by ABS Wavesight, an operator with a fleet of over 40 vessels was able to save over $3 million per year by optimizing their spare parts program by first focusing on rebalancing their inventory.

Fundamental issues related to data structure and hierarchy, as well as cross-referencing between vessels, were resolved, enabling analysis and insights to be generated that were previously impossible or unreliable.
Continuous training and dedicated specialists maintain data quality and process controls, achieving the level of inventory transparency that many desire but do not yet have the time and resources to achieve.

By putting their inventory management process on a solid and sustainable footing, shipping companies can implement “just-in-time inventory” to achieve just-in-time deliveries. Focusing on the millions of items of inventory sitting idle on board a fleet of vessels or in a warehouse can create value for shipping companies – and have a positive impact on fleet operations.

By linking maintenance and inventory management across the enterprise, efficiencies can be achieved that not only lead to savings, but also put assets and people in the best position to take advantage of commercial opportunities.

ABS Wavesight Nautical Systems™
Nautical Systems is a comprehensive fleet management platform from ABS Wavesight that has provided vessel owners and operators with unparalleled operational and compliance support for over 30 years. For more information and a demo of Nautical Systems’ maintenance and purchasing capabilities, visit abswavesight.com/nautical-systems.