Supply: chains of command

In the current economic climate, the importance of driving cost out of any business cannot be underestimated. The cruise industry has long been on a quest to improve efficiency and increase margins by pushing down costs, and the supply chain has been a prime focus.

Optimising the supply chain is about finding the most effective and efficient ways to interact with vendors, and many cruise lines have turned to IT in order to achieve this. Supply chain systems can help to improve visibility across the whole value chain, giving a clear picture of costs and highlighting areas in which improvements might be made.

"The goal is to always find cost-saving opportunities without affecting a brand and its offerings," says Jafar Al-Shibibi, deputy director of purchasing at Holland America Line. "Synergies are a fundamental part of an operation’s savings, especially when managing two distinct brands. As an example, working with one vendor who can deal with the distinct products and needs of both brands is always advantageous when it comes to cost and service.

Holland America Line, and now Seabourn, achieve competitive pricing and quality in their purchasing processes by participating in global bids through Carnival Global Sourcing. An added benefit is that consolidating information from different parts of the supply chain can greatly assist in controlling and managing the process.

"Accessibility of information to and from the ships can lead to a more proactive approach in detecting and solving potential problems in the supply chain," says Al-Shibibi. "And we should not forget the importance of having experienced and knowledgeable staff that can anticipate problems and work together with both the ships and the vendors."

A clear view of suppliers

There are many systems on the market that have been adapted to suit the cruise industry’s needs and they are widespread among cruise line operators. All rely on the principle of providing more transparent pricing information to purchasing teams.

"Supply chain efficiency is a priority for top management," says Richard Paulsen, director of purchasing at Crystal Cruises. "We bought ShipServ, through which we send out requests for quotes and vendors post prices. Through it we can find more vendors for our food and beverage needs, and we have much more information and a clearer view of our suppliers."

Crystal signed up to e-marketplace, ShipServ’s TradeNet platform, at the end of 2011 in an agreement under which the Crystal Symphony and the Crystal Serenity use SpecTec’s Amos maintenance and purchasing system. Many other lines, including Seabourn, HAL, Princess, NCL and Oceania are already part of the ShipServ community.

"Various IT platforms give us the right tools in regard to online communication with all our partners," says Al-Shibibi. "It enables us to link a variety of systems to each other, which increases accuracy and consistency of information. At HAL, we currently use MXP, which has the great advantage of combining many different modules and tasks within one application. This provides us with a more consistent tool with which to exchange information from different areas of the supply chain."

MXP combines modules for itinerary planning, vendor contacts, tour and shore excursions, menu-engineering and procurement. In addition, it links to various other applications and systems such as Oracle Financials and the HAL website. The procurement module features an e-commerce portal that lets a cruise operator send and share purchase documents with vendors online, which results in a virtually paperless workflow.

"MXP holds information from all different areas of the supply chain and much of this information is visible for the ships," explains Al-Shibibi. "For example, a provision master or executive chef onboard can track the status of their orders as they are processed in the Seattle office. In the Seattle office, management can also view information about the flow of goods on the ship.

"They can, for example, view a ship’s food costs in real time or run up-to-date consumption reporting. MXP also offers the ships and the office a variety of tools to manage inventory on the ship."

Beyond cost savings

The effectiveness of supply chain systems is relatively easy to measure. While they deliver a better flow of information and a clearer perspective on the different stages of the value chain, their true worth is measured in simple numbers. If cost savings accrue, then they are doing their job.

"The cost savings can be considerable," says Al-Shibibi. "Just the fact that information is more visible and accurate creates many cost-saving opportunities within the supply chain. Problems can be detected and prevented before it is too late. Fully automating processes such as product contracting and vendor payment creates many cost savings and efficiencies.

"Consistency and predictability of information are certainly big advantages," he continues. "This goes for HAL as well as the vendors. Having transparency and availability of up-to-date information throughout the organisation is another advantage. This data enables us to ensure we get the right product at the right price and at the right time."

The human touch

Yet relying purely on IT to get the best deal may not be the best solution for every vendor relationship. There are both technical and human issues to be considered. "Multiple systems may not necessarily be advantageous if they are all using different operational platforms. As long as systems are able to communicate with each other and decipher the information needed then that would be advantageous," believes Al-Shibibi.

According to Crystal’s Paulsen, the importance of personal interaction should not be understated.

He believes that mutually beneficial relationships cannot always be conducted purely through the purchasing systems on offer, no matter how effective they are at improving information flows. Any system relies on data that is entered by people at the cruise line and the vendor, so the personal element is still important.

"The more technology you put in, the more you find that it is a double-edged sword," he remarks. "It is easier for us, but it makes more work for the vendor to populate the system. You may get more from a phone call. Sometimes vendors take less care when they are populating a system with quotes than when you contact them personally – so, using a system is quicker, but you don’t always get the best deal. Putting in a system means shifting more work to vendors."

Paulsen speaks from experience, having seen over the years how people use technology to interact across the supply chain. For him, IT is important, but it should by no means replace personal interaction.

"With our previous system, we found that we relied a lot on the vendors to provide information and it was a nightmare to get them to populate the system," he explains. "Everyone who puts in a system thinks it will be easy, but it is not always; supply chain efficiency is not all about the technology. When we introduce a new vendor we visit them and explain what we expect. We need quality and we can’t afford mistakes, so we have a close partnership with our suppliers. That is the way to achieve supply chain efficiency."

Systems vendors are certainly eager to understand the needs of target markets such as the cruise industry, and will no doubt continue to refine their solutions to improve information flows and ease of use. But a system only facilitates a relationship, while personal interaction nurtures it.

The cruise industry is, at heart, about people, so to find efficiency in the supply chain it must balance the personal with the technical.