Adapting Your Inventory Management in a Disrupted Supply Chain Environment

At its peak in May 2023, there were 2,318 monthly transits in Suez Canal, but global disruptions such as the Red Sea crisis saw a decline to 1,338 monthly transits in January 2024, a stark 42% decline. This means delays and increased costs due to rerouting, mainly through Cape of Good Hope, an unnecessary 14,000 nautical miles longer.

Rick Ackermann, Head of Procurement at BW LPG, shares about how BW LPG is working at proactively improving their inventory management to minimise the effects of unprecedented global disruptions. It’s time to rethink your traditional models if you’re looking to mitigate supply chain disruptions, control costs, and reduce your carbon footprint.

With 35 years of experience in procurement across industries such as shipping and aerospace, he explores hot topics such as the need to maintain critical parts across different ports in a dynamic industry to maintain fleet operations, BW LPG’s plans to increase data analysis to create maximum visibility from vessel to vessel, and fostering sales and operations collaboration through shared goals to optimise an effective inventory management.

As Head of Procurement at BW LPG, what unique challenges and opportunities do you encounter in managing inventory for a global shipping company, especially in light of recent disruptions to supply chains?

In order to tackle the constant disruptions in the supply chain, increasing costs, and CO2 impact of flying spare parts across the world, we have been investigating possibilities to have inventory management tools on board as well as in the warehouses of our freight forwarder.

Simple solutions such as creating visibility in our Planned Maintenance System from vessel to vessel, including stock in the warehouse, is part of the new set up. Next to this we are in the process of setting up MIN/ MAX stock levels based on consumption, which would ensure availability in the different ports that we frequent, as auto replenishment is part of the management of these stock levels. This will take the - sometimes long - lead times from suppliers out of the equation.

It’s an effective method that has been applied in many businesses, although new to shipping, as we usually directly allocate stock and costs to the vessel instead of purchasing for the warehouse.

BW Balder STS with Epic St Martin

How does BW LPG approach inventory management differently compared to other industries, given the dynamic nature of maritime logistics and the need to maintain critical spare parts and supplies across a fleet of vessels?

The hard part of inventory management for a company such as BW LPG is that we do not have standard sailing routes. We pick up cargo wherever available and even then, the discharging port can change overnight. This puts an enormous strain on the supply chain and logistics in general.

This is one reason why spare parts are flown across the world in a lot of cases. Our newly developed inventory management set up should tackle a lot of these challenges as we would be able to analyse the requirements and maintain stock in the major ports, thus minimize the logistical movements and rush orders.

We are still developing this set up and have been facing many challenges along the way, as this way of working, however standard in other industries, is quite disruptive in shipping.

With sustainability becoming a focal point for many organizations, how does BW LPG integrate environmental considerations into its inventory management strategies, particularly concerning the procurement of eco-friendly materials and supplies?

At BW LPG, we started our ESG journey several years ago with the development of our Sustainability report and the creation of our Supplier Code of Conduct. This Code of Conduct is part of all of our Agreements and Purchase Orders.

We also have an active approach regarding the reduction of plastics on board. Single use plastics, such as water bottles, are purchased at a bare minimum for emergencies. In all other cases, we have introduced re-usable water bottles. We have signed the IMPA pledge to stand our commitment as well.

We also have KPIs in place with a number of suppliers, where they have to show how they actively reduce the use of plastic in their packaging, such as using more eco-friendly materials. As an industry, we are still in the phase of exploring opportunities, but I clearly notice a greater sense of awareness throughout, which gives me hope that we will actually get there.

BW Leo at Panama Canal

Could you elaborate on the role of data analytics in your inventory management strategy? How does BW LPG leverage data to make informed decisions about stock allocation, procurement, and optimizing inventory levels?

At present, we’re in the process of developing an inventory management system together with our freight forwarder. Currently in shipping, there is no sophisticated inventory management available with dynamic stock levels and stock maintenance on board.

We are developing a system that included RFID tagging of spare parts, which would enable our crew on board to easily update our PMS and optimize our stock levels in the warehouse at the same time. The system would also create maximum visibility from vessel to vessel, as well as visibility on spare parts in the warehouse.

Stocking up on spare parts in various warehouses on our sailing routes would tremendously reduce transport costs and increase availability of parts.

Collaboration across departments is crucial for effective inventory management. How can procurement teams work more closely with other functions such as sales and operations to optimize inventory levels?

First off, we try to collaborate as much as possible within the different business units in BW LPG, accumulating as much volume as possible to create better and more robust contracts. This creates better opportunities and optimised inventory management on the supplier side.

Secondly, within the company itself we have a close cooperation with our technical department and operations, where we try to optimize planning and timing of our voyages. This allows us to align with the timing of spare parts in the warehouses we use in the different ports.

Thirdly, the cooperation with our technical department for drydocking enables us to combine transports for the different vessels to have less transports and more volume. Most importantly, to use sea freight instead of airfreight, thus lowering the costs and impact on the environment.

BW Gemini at Enterprise Terminal

You are speaking at this year’s ProcureCon Asia event. Can you share what the audience can expect to hear from you and what excites you about this event?

I like that I can connect with my peers and discuss issues that interest and occupies us all. It is a good time to align and find out in which way others tackle the same issues your procurement department is dealing with.

The speaker panel that I will be a part of will address different ways of communicating with your suppliers. How to categorize your suppliers in such a way that you can actually create robust relationships with your partners that strengthen your company’s position, by being pro-active, innovative and look for integrated and cost-effective solutions. We will also discuss in which way tools and platforms can help you do this. The importance of such relationships cannot be underestimated, especially when we are talking about strategic partnerships, moving away from the classic supplier- buyer relationship.

When you are willing to go the extra mile for your client, providing a unique service, Price is seldom the main topic of conversation. The right TCO and creating added value is.

Hear from Rick Ackermann at ProcureCon Asia, Equarius Hotel, Sentosa, on 10th July 2024, 11:20 AM "Keynote Panel: How do you cultivate effective supplier relationships to ensure seamless business operations?" Find out more here!