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Digital Transformation

Bringing Order to Inventory Chaos

“Competition is not the enemy, cost is!” – Tony Fernandez (Founder, Air Asia)

Shipping has a logistics problem.  Any marine engineer has been there.  Urgently needing a spare part but unable to readily locate it. Turnover just occurred, and stores happened weeks prior by another team.  The company is demanding you get underway, while frantically searching for critical spares. 

The industry is suffering from lagging digital adoption, inaccurate data, and no standardization across day-to-day operations.  Just as the intermodal shipping container standardized global trade in the 1960s, digital maturity and harmonized vessel inventory management can reinvigorate the struggling maritime community.  On a per vessel per annum basis, our results show that data inaccuracy (which leads to inaccurate decisions and waste in the supply chain) accounts for >10% of an organization’s wasted time and >10% of operational expenses (OPEX).

SparesCNX Maritime Industry Friction

As it were, the shipping industry has continually experienced shrinking margins. COVID has placed an even tighter squeeze around global logistics, whereby the unit of measurement for success or failure is shrinking.  If COVID’s effect on the supply chain wasn’t worrisome enough, we have now witnessed the vulnerability that canals and shipping lanes impose.  For those who may have been stranded on the wrong side of the Suez for critical parts, a butterfly effect of delays sent ripples across the oceans.

To survive, owner/operators must see the world anew and identify sustainable cost-saving measures.  As a team of mariners, engineers, scientists, and supply chain experts, SparesCNX is familiar with the pain points within the industry.  We have identified common impedances to success and now offer a laser-focused, best-in-class solution to address three main challenges in the shipping industry: data accuracy with spare parts, variant operations, and digital adoption.

Data Accuracy

Onboard data accuracy for spare part inventory is critical for any vessel, and inaccuracy can be a force multiplier of erroneous assumptions spread across an entire fleet. Eighty percent (80%) of shipping companies have inventory inaccuracy. There is an estimated $8B in excess spares, with $4B wasted annually due to inefficiencies related to squandered time searching for parts, purchasing items already onboard, last-minute urgent ordering (which typically costs 3 times than for non-urgent orders), along with the expenditure of carrying excess spares.  Across the 50,000 + vessel global fleet, each with unique standard operating procedures (SOPs), suppliers, and systems, an estimated 30+ million man-hours are wasted per year handling spares. 

 

John Slattery, General Manager, SparesCNX offers, “The shipping industry suffers from a lack of accurate data of spare parts and storage consumption.  Our [SparesCNX] solution gives shipping companies precision clarity on the location of spare parts, inventory levels, and consumption patterns across the fleet.  Companies can then better manage cash and activities.”

Variant Operations

Those that have sailed know that each vessel has massive variation, let alone entire classes.  Vessels often act similar to Individual fiefdoms or city-states, resistant to top-down directives.  Each crew’s senior officers tend to operate in their own ways.  Amplified by understaffing (through decades of cost savings initiatives) and a lack of focus on operational excellence of day-to-day activities, the industry is ripe for reformation. 

Shortcomings in tool standardization and automation have equated to low data quality with subdued visibility of spare part profiles.  The antidote, harmonized internet of things (IoT) solutions with hardware and software designed from the perspective of the front-line mariners. This is where the data is collected.

Digital Adoption

“The world’s greatest problems are also the world’s greatest opportunities.” – Dr. Peter Diamandis (Author, The Future is Faster Than You Think)

A question that often arises is why the maritime industry is slower to digitally transform when compared to other transportation industries?  Although there are several factors involved, the answer is boiled down to a few main points. Shipping is far less visible, operating beyond the horizon by a dwindling number of experienced mariners.  Compared to the everyday person now taking an Uber – which uses transportation management systems (TMS) prolific with mobile devices – shipping’s highlighted importance is perhaps overlooked by the disproportionate amount of software engineers who are addressing the likes of self-driving cars.  There also exists a widening gap, culture clash, and troubled communications between traditional maritime executives and the younger tech industry.  Talent acquisition is a problem for most legacy industries.  Further, the explosion in fleet size growth over the past decade has reduced margins, and subsequently budgets, for owner/operators to invest in optimization.

However, with the convergence of technologies such as artificial intelligence (AI), IoT, machine learning, computer vision, and significant data innovations, along with associated skillsets now permeating outside of Silicon Valley, the logistics industry is primed for transformation.  According to Transparency Market Research Report, digital transformation spending in the worldwide logistics market is anticipating to reach US$ 94,972.3 Million by 2026, at a 10.7% CAGR during the forecast period (2018 – 2026). 

Logistics companies willing to invest in digital transformation that increases efficiency, optimization, speed, and timing of services will witness a surge in customer satisfaction, loyalty, and revenue.  Major airlines such as Lufthansa and Emirates have already adopted a standardized electronic Air Waybill (e-AWB) which follows cargo from shipper to delivery.  This espoused tech hugely improves efficiencies in tracking, data processing, transparency, and security, while reducing costs and delays.

Vessel Inventory Management

Spare parts are the low-hanging fruit for fleet optimization. Automated inventory management and tracking solution for spare parts improve the procurement process by reducing costs for buyers and suppliers through seamless integration with existing enterprise resource planning (ERP) systems. The main thrust is to improve inventory data accuracy and sharing between shipping buyers, spare parts suppliers, and onboard engineers using these parts.

 

How SparesCNX Works –

The definition of insanity is repeating the same process and expecting different results.  The first step in fixing a problem is recognizing it.  For those familiar with Safety Management Systems (SMS), per International Standards Organization (ISO), an organization cannot manage what they do not measure.  To begin, SparesCNX conducts two distinct phases, installation, and transformation. 

During a port call, the installation of a microserver and RFID devices are connected.  Afterwards, a granular audit of the onboard spare parts inventory is performed by SparesCNX Transformation Engineers to identify and tag parts with RFID and labels. The onboard team overhaul’s the vessel’s existing inventory management system with a granular headcount of spares and then organizing the footprint according to the vessel’s class, which will then be harmonized across an entire fleet.  Inventory shrinkage is immediately addressed during the implementation phase, with clients typically realizing immediate increases in the bottom line by finding more resources than they knew they had.

PROPELLER Portal –

SparesCNX ties together different user-friendly technologies such as PROPELLER portals for ship, shore, and suppliers.  Derek Tang, Head of Engineering at SparesCNX helps explain how their system provides, “Proprietary data analytics, RFID, lifecycle tracking, cloud deployment, and smart contracts that provide end-to-end transparency, and predictive forecasting across the spare parts supply chain.”

PROPELLER Ship is the proprietary ERP agnostic software ran on an intrinsically safe tablet with integrated RFID/QR scanners and computer vision/machine learning-enabled cameras that automatically synchronize with any PMS or ERP system. Understanding that most locations onboard a vessel are not networked, PROPELLER works on- or offline.  To achieve accurate lifecycle tracking, upon transformation, each spare part, and every onboard location is assigned a unique RFID tag.  An intuitive search function allows you to search partial names and/or manufacturers, then will help physically guide you through visual and audible aids (such as beeping the closer you get to the item).  The intelligent system will then recommend the optimal spare to consume, based on a “first-in, first-out” approach.

To further enhance visibility and accurate parts profiles for the fleet, checking out parts are linked to work orders for planned and unplanned maintenance. Once purchase orders from onshore procurement teams are created, onboard engineers can immediately access them.  The Goods Delivered (GD) process is sped up by confirming all pre-tagged items from the supplier that were ordered, have arrived.  To stow, the engineer scans the location/shelf and then scans the item(s) being placed there.

Automated Stock Reconciliation –

The dreaded process which historically consumed weeks can now be performed in a matter of hours.  An engineer is assigned equipment groups to inventory, which the tablet automatically recognizes and groups the relevant parts, then directs personnel to their storage location.  Waiving the tablet over bins or parts quickly pings RFID tags and instantly provides an accurate count.  The process can be performed simultaneously by multiple engineers, with results aggregated across the equipment hierarchy, in real-time.  Progress is tracked via color-coded bars, and once complete, a detailed historical report is accessible within the app, as well as online and in the cloud for shore personnel, such as superintended and fleet directors. 

Digitized User Manuals and Identification of Spares –

Another common pain-point identified is hardcopy user manuals (often required by Class to maintain) and printed labels of spares.  For ease of reference, manuals are now digitally accessible on the tablet.  By scanning the physical label or product, equipment specs and vital details are displayed. The platform tracks spares and critical parts throughout the supply chain.  Reports and alerts are raised digitally and help to immediately clarify the part location and stock levels, with real-time warnings and indicators for when parts are running low.

Engineers will be able to raise requisitions, manage work orders, and receive recommendations for optimal onboard stock levels via cloud-based AI.

Support –

ERP systems are typically designed with head office requirements and not with front-line considerations.  Blunt instruments once onboard.  However, SparesCNX started the design from the bottom and closes the synaptic gap from the computer terminal to the actual storage through a portable and user-friendly interface.  Those responsible for new tech know that an obvious constraint to critical adoption levels will reside down at the onboard engineer level.  With new technology rollouts, effective education and support are required. The PROPELLER tablet provides interactive user guidance that explains every element and workflow action.  If a user is still unclear, they can screenshot, upload, and receive shoreside clarification in near-real-time.

Bottom Line

Dollar- & time-value, balance-sheet, shelf-life, operational readiness, lead time for parts replacements, footprint, emissions, and sourcing decisions are everyday spare part concerns for owner/operators.  The data coming off the ship provides the raw material for management to build the company’s financial profile and projections based on the accuracy of the data inputted. By improving data accuracy through digital adoption and reduced variant operations, fleetwide standardization can be achieved. 

SparesCNX’s lean implementation process brings visibility fast to its adopters.  For those shippers ready to become digital transformation leaders, not only driven by legacy methods and legal compliance, a world of vast efficiencies and profitability awaits.  A new era of global logistics has arrived.

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