Background
The world’s largest port operators wanted to reduce procurement spend and administrative complexity across a num-ber of ports geographically close to each other. Each of the ports is connected to road and rail terminals and handles predominantly containerised freight - although at least one also has a significant volume of bulk, specialised and passenger traffic.
The ports deal with the largest container ships through roll-on roll-off to bulk and specialised coastal feeder vessels. Harbour management co-ordinates the entire process from stevedoring and unloading through security to crane plant maintenance. Using unionised labour to run both automated and semi-automated loading and unloading systems, the challenge in a highly-competitive European market is to reduce continually the time taken to turn ships around and hence minimise the so-called cost per movement.
Task
T.A. Cook was chosen especially because of its procurement knowledge as well as experience of working with existing internal improvement teams. The internal team had been chosen from a number of departments and had begun its work but required some external objectivity and assistance in meeting its goals. The T.A. Cook Consultants were to provide best practice procurement knowledge as well as manage the deliverables and pass on sustainable tools and techniques to the internal team.
Approach
The team (re)started by mapping the ideal procurement process from start to finish and comparing best practice, outcomes and work content with that perceived or known to be followed internally. In a simultaneous exercise, the business spends, procurement-related and procurement influencing roles were plotted by department such that it was possible to determine the critical areas for improvement. These areas were then investigated in more detail and specific improvements highlighted in a detailed project implementation plan.
Main Findings / Solution
The findings relating to procurement were that:
• Numerous spending authorisation levels appropriately set, but insufficient awareness of true procurement processes and expectations
• Procurement mostly engaged in administration with significant data reentry
• Lead-times of critical equipment not comprehensively updated
• Opportunities for consolidation of smaller and low-risk goods and services.
Notably the most critical issues were not concerned (as had been suggested) with poor procurement administration, rather with the perceived demand for plant, goods and services not matching the true requirement. Specifically, issues included:
• Significant proportion of the assets not utilised to acceptable levels
• Insufficient must-have/nice-to-have analysis at specification stage
• Asset downtime frequently influenced by non-availability of parts
• Excessively onerous tender demands for low and medium risk contracts resulting in out-of-date or inappropriate contracts and hence excessive costs
• Some contracts and spend aligned to asset performance either not completely understood, or consistently measured
• Some service contracts not actively managed or linked to appropriate service level agreements (SLA’s)
• Maintenance effort and hence spend not aligned to operations requirements
• Capex decision-making process well controlled, but driven by poor operational data and hence faulty assumptions
• Whole life costing not fully applied, especially to foreign-sourced spares
• Energy purchased mostly on the spot market without sufficient attention paid to longer-term trends and needs
Immediate benefits
The team determined that improved understanding of asset performance and expectations would yield significant cost reductions and also better operational utilisation. The short-term implementation plan therefore focused on establishing better day-to-day control of plant and equipment planning. This included installation of asset utilisation measure with new a maintenance policy and 10% reduction of hourly-paid third-party operators.
In addition to these organisational improvements, the team also identified a number of specific short-term actions:
• Identification of interim roles and responsibilities for procurement processes
• Classification and adoption of clear low, med and high risk tender rules facilitating greater competition and immediate 7.5% savings
• Identification of significant capex reduction and two year advancement of plans
• Forward energy contracts set up with like-for-like 15% saving
Longer term recommendations
In the long run procurement savings could indeed be achieved with a slicker administration and cross-port interaction. Importantly, it was felt that identifying areas of excellence within each of the ports would retain specialist skills and knowledge, spread workload and avoid any undesired “us and them” effect. The key factor remained, though, the need to establish procurement clarity at the early stage of engineering and technical specification. The team created a plan to ensure:
• Realignment of procurement roles and responsibilities
• Cross-port consolidation programme
• Consistent must-have/nice-to-have analysis at specification stage
• Installation of consolidation and price optimisation processes
• Upgrade of plan/actual maintenance cost analysis mechanism to whole life
For more information contact:
Rupert Clark
Marketing Manager
Direct: +44 (0) 1183 260 229
Mobile: +44 (0) 7792 926 696
r.clark@tacook.com |
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