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  • "ShipServ is a vital tool for us as a leading European ship chandler and we need to be highly visible in the ports we serve as it is used by all the leading shipping companies."

    George Saris, President
    Atlas Ship Chandlers

  • "We started to use TradeNet just to save time and stop manual typing of orders, but now we get other substantial benefits including vital benchmark data on suppliers’ response times that help us in all our negotiations."

    Knut Ove Thuland Hansen, Purchasing Manager

  • "Time is the biggest saving through ShipServ. We have detailed data that tells us that the amount of time we spend per vessel each week has dropped from 9.2 hours to 7.9 hours."

    Richard O'Malley, Purchasing Supervisor
    Crowley Maritime

  • "Encouraging our suppliers to adopt the e-commerce platform has been well worth the effort. We have reaped significant cost savings from streamlining our purchasing processes."

    Charles Ong, Purchasing Manager
    Keppel Shipyard

  • "Since joining ShipServ in 2012, we have gained 7 new clients in 18 months. It has helped our company be seen in the international shipping market as both ShipServ Pages and TradeNet are used by many different shipping companies and it also speeds up the process between buyer and supplier."

    Valeria Assandri,Machinery & Replacement Parts S.r.l

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13 August 2008

ShipServ Primer: An Interview with Paul Ostergaard, May 2008

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{Reproduced, with permission, from an interview with Marine Electronics & Communications Magazine, Apr/May 2008}

Freeing up information is key to efficient parts procurement

As far back as the 1990s, people understood that e-commerce had potential to eliminate the friction that traditionally existed between buyers and sellers, thus allowing market forces to work more efficiently. But transforming a concept
into a proven reality took longer than perhaps many originally anticipated.

According to ShipServ’s founder and current chief executive officer, Paul Ostergaard, one of the key obstacles was the existence of legacy procurement systems. While the latter were more advanced than traditional faxed orders between buyer and seller, they were not sophisticated enough to take advantage of everything the Internet had to offer.

“In those early days, I thought we could launch a fully web-based service, akin to eBay, for ship supplies,” he says, “but it rapidly became clear that starting from a clean slate was not a feasible option. Indeed, the global nature of the maritime industry meant that most companies already had some appreciation of the value of technology and had in-house systems to meet their specific trading requirements. They were not going to suddenly scrap those systems and start doing business directly via the Internet because some newcomer told them to do so.”

To be successful, the nascent company came to the conclusion that a way of integrating all these systems was necessary, or at the very least, making sure they could ‘talk the same language’. “Fortunately, only around 10 dominant e-procurement systems existed at that time, so there was a reasonable chance of persuading all those players to agree on one common language. Of course, it was to their advantage as well as their users,” notes Mr Ostergaard.

From here, ShipServ ploughed its efforts into creating the common standard known today as MTML or Marine Trading Mark-up Language. “What we did was to take an old EDI standard and transform it into a modern XMLbased standard – the glue of web-based data transfer. We then lobbied software providers and the International Marine Purchasing Association (IMPA) to adopt MTML as the electronic lingua franca for describing marine equipment transactions. It was crucial step in removing a major obstacle to the future growth of e-commerce, both for us and, in many respects, our competitors, too.”

It is because of MTML that users are not restricted to accessing the ShipServ platform only from their web-browser. Buyers can continue using their existing e-procurement system, but when they press the ‘send’ button, instead of a fax or e-mail going out, the information is encoded into MTML for transmission over the Internet back to ShipServ’s servers. Buyers new to e-commerce, however, can use either the browser-based interface or a lightweight hybrid application that is installed and operates on the client’s computer, but essentially acts only as an interface, with all functionality dependent on a network connection to the server being available. Mr Ostergaard notes: “Provided the data reaches us in one way or another, the type of interface is not that important.” He adds that today around 80 per cent of ships trading on ShipServ TradeNet do so via MTML compatible in-house applications.

Nevertheless, this ratio could change dramatically as smaller owners and new regional markets open up to the idea of e-commerce. ShipServ estimates that of the 80,000 vessels afloat today (a figure that includes those operating on inland waterways), only 15,000 or so are managed by companies that have invested heavily in standardised software systems. Most of the remaining 65,000 are operated by very small concerns. “In the past, these companies could never dream of having enterprise level software because the cost of developing or licensing it was so high. Today, however, thanks to the Internet, gaining access to best-of-class software systems is simply a matter of going online.”

Furthermore, as the Internet becomes more and more accepted and trusted, people have fewer inhibitions about working online even when financial transactions are involved. Japan is one country that ShipServ says is now showing a strong interest in web-based trading. “There are some countries that are always slower than others to latch on to certain technologies. In Russia, for example, they jumped straight from telex to e-mail, skipping fax machines on the way. The signs are that Japan could be another example – leapfrogging from brown manilla envelopes straight to the Internet.”

On the supplier side, the dynamics are different but the set-up is conceptually the same. Many suppliers are reluctant to invest in e-commerce unless it works with their own systems. But at the same time, they need to jump on board as more and more clients want to place orders electronically, and often via TradeNet.

Again, ShipServ offers suppliers a three-tier solution. The simplest is the fully web-based service, which provides core functionalities such as an ability to respond to requests for quotes. Once volumes start to increase, however, a hybrid client speeds up the handling and processing of orders; and once a supplier hits 500 orders annually, ShipServ recommends upgrading to the pay-for service, which can integrate with a range of ERP systems, including SAP or Oracle.

Nonetheless, on both sides of the market, ShipServ tries to remain agnostic about how individual buyers or sellers interact with TradeNet. “We represent the hub where everybody meets and trades, so it is not in our interest to tell users what systems they should run. The crucial thing is that they can access the hub and exchange information.”

Similar agnosticism was required when devising the business model for TradeNet, in the sense of not allowing any buyers or sellers to have a controlling stake in the company. “This was a big decision in the early days as it went against the prevailing school of thought for building an electronic marketplace. The thinking was that creating a consortium of buyers (or sellers) would provide a quick way of reaching that difficult to obtain critical mass. While this model has worked in some industries, we believed in the long term it was not suited to the needs of the maritime market.”

Having weathered the bursting of the dot. com bubble, ShipServ TradeNet continued to grow steadily and, says Mr Ostergaard, reached the critical mass turning point in 2006. “We had around 2,000 ships and 4,000 suppliers who between them traded US$400 million worth of products. More importantly, we had that mass in each of the key segments of the supplier base, for example, lubes, coatings and even Japanese trade-houses.”

These numbers have since increased to 3,500 ships and 6,000 suppliers, and to a combined trading value of more than US$700 million. Looking to the future, Mr Ostergaard predicts that this growth trend will accelerate. In autumn last year the company welcomed its first shipyard member – Orient Shipyard in South Korea – to TradeNet. Orient, one of Korea’s shipbuilding newcomers, has two yards, in Busan and Gwangyang, and aims to build bulk carriers and LNG carriers.

“TradeNet allows shipyards like Orient to source suppliers and then streamline the supply chain. Standardising information exchange with buyers means the order cycle time is shortened and parts arrive in less time. Since timing is critical, this is a very attractive proposition for shipyards.

“The reality is that the majority of information flow that takes place in commerce is between two companies, and that is where the real inefficiencies are. We never really had the technology to standardise the flow of information between ourselves and all trading partners. This is a much greater challenge; for example, within the four walls of a company, the chief executive officer might issue an edict: ‘we are now all going to use MTML’ or something similar, but a typical shipping company deals with over 1,500 suppliers. Who is going to tell them what standard to use and implement it? However, many technologies on the web lend themselves to just this sort of problem and its solution.

“In essence, ShipServ is working to extend the principles of ERP to the whole supply chain. Having broken down the walls between internal departments, the challenge today is to break down the walls that surround the company itself.”

Until recently, the focus was exclusively on automating orders, but the company is now looking at the activities that surround each transaction. Product delivery, for example, is one area where there is considerable scope for improved efficiency, and ShipServ has evolved a solution that brings the freight forwarder into the loop. Mr Ostergaard explains: “We knew what was being bought and where it was going, so why not send that information directly to the logistics provider rather than print it out and fax it. It was a natural extension.”

A further opportunity is contract management. “In big organisations, there is a lot of money that could be saved but which is not because the buyer is not fully aware of what is written in the contract or that these contracts are not updated in a timely fashion. Part numbers, descriptions or prices can all change, but in many cases there is disconnection between the procurement system and contract compliance.” ShipServ has since developed a solution – already used by one leading shipowner – that helps synchronise this information flow.

Another area of innovation is the company’s directory service for suppliers, called ShipServ Pages, which was recently revamped to enable member suppliers to market themselves more effectively. In the new version, they can upload their entire product catalogue rather than being limited to a short company description, contact details and a list of product categories.

“We know that all the information is out there – what we are trying to do is release this. For example, a supplier may have, say, three cylinder liners sitting in his warehouse. Hopefully, he will have remembered to put this into his inventory system. From there we need that data to reach the outside world and be available to his customers.”

On top of this, ShipServ is making use of its some seven years’ worth of trading history to provide more accurate search results. “We know what suppliers have actually supplied, which does not always match what they say they supply. So the results that a shipowner receives from a search are ranked according to how much a supplier has supplied that
product in the past.”

In fact, together with its sleek, simplistic front-end interface, ShipServ’s policy of aggregating and indexing as much information related to the ship equipment as possible bears a striking resemblance to that other major web directory – Google.

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