Why it took so long to convince shipping that digital trading works…

IT and Communications, Marine Insurance, News, P and I Clubs — By on June 13, 2014 at 7:55 PM
Paul Østergaard

Paul Østergaard

Why it took so long to convince shipping that digital trading works – Paul Østergaard of ShipServ speaks of the turning point and the exciting future,  By James Brewer

A few minutes is a long time in the electronic world, so one can imagine the patience and commitment that Paul Østergaard has had to exercise since founding a company in 2000 with the vision of using the internet to change the economics of the global shipping industry.

Mr  Østergaard seemed to be sailing against the wind in seeking to convince an industry with many conservative traits to change its way of trading supplies of goods.

He persisted with the mission, as chief executive of the privately-held organisation he established, ShipServ, and his tenacity has paid off, for it now describes itself as the world’s leading maritime e-marketplace. In his 14 years at the helm, Mr  Østergaard has seen many rival businesses come and go, defeated by the disappointing speed of adoption of digital trading by the maritime sector.

At last there is traction and action. ShipServ today connects buyers including shipowners, managers, shipyards and oil rig operators with more than 50, 000 suppliers based in 100 countries. The trade is in spares, stores and other items vital to keep ships provisioned.

The proud statistic is that in 2013, ShipServ facilitated $2.3bn of annual trade between that huge number of suppliers and 200 companies managing more than 8, 000 vessels.

Mr Østergaard was in buoyant mood as he met clients and contacts at Posidonia 2014 in Athens. In an interview, he admitted that almost every e-commerce endeavour in the business space has taken much longer to get a grip than its backers expected, but said that the reason had become clear.

B2B businesses had in the late 1990s expected to make rapid progress rather like the big success stories of ebay and Amazon – but on sites like those it was the customers who were both the decision makers and the users. Within a company, making the switch to doing things electronically was a longer process: such moves had to be referred for approval by senior management, and that needed a change of culture.

Now members of a generation that had grown up with computers as part of their environment were assuming positions of responsibility in their companies and they saw digital trading as natural. “Young people are living their whole lives technologically enabled, ” said MrØstergaard, and “we see growth accelerating. This year to date [early June 2014], we have seen as many ships come onto our platform as did in all of 2013. So we are very excited about the take-off.”

Just how much some of the early entrants into the field misjudged the industry mood is indicated by the fact that ShipServ faced 70 competitors in 2000. “By 2005 we had 15 competitors, ” said Mr Østergaard, “and now we really do not have any competitors that can offer the information services we do, with the ability to search the scale of resources we have.”

He said: “We have signed up more than 8, 000 ships which is a very big chunk of the shipping market, representing about 200 of the most sophisticated owners.” ShipServ has more than 15 containership owners and operators trading, delivering close to a 50% share of vessels in the liner sector. These include AP Møller-Maersk, CMA CGM, Mediterranean Shipping Company, Seaspan Corporation, NYK Line, CSAV Group, K Line, MISC, Matson, Crowley Lines Reederei and Claus-Peter Offen.

Among new customers is container operator Reederei NSB, based in Buxtehude near Hamburg, and which is involved in ship management, supervision of newbuildings, retrofittings and crewing. The German company, which has a fleet of 71 vessels, is connected to ShipServ through its ShipNet ERP maritime software.

In May 2014,  ShipServ added to its roster integrated ship management company Thome Ship Management. Thome is responsible for the technical management of more than 200 vessels including dry bulkers, tankers and offshore units.

In other sectors, ShipServ has 43% of LNG vessels and 31% of cruise vessels using its platform.

“Our data is our biggest asset. We have 4, 000 person-years of purchasing experience that are built into our system, ” said Mr Østergaard.

As the roll call increases, so does trust in the system, for users are aware that comparable shipowners, including many major names, are sourcing their supplies through the same platform, and suppliers recognise that the business flow is beginning to approach a grand total of $3bn.

All this is gratifying to Mr Østergaard who before founding ShipServ was director of strategy for Oracle Online, part of iconic software company Oracle, and began his career at J Lauritzen A/S.

ShipServ’s two largest external shareholders are Thomas Miller and Wellington Venture Capital.  As a private company it does not disclose financial information including profit and loss figures, but with trading volume growing on average by around 15% per annum over the last five years with similar growth expected in 2014,   and revenue earned from both suppliers and ship owners and managers, this appears to be a good indicator of the company’s financial health.

ShipServ membership has become for the suppliers a badge of trust and of brand recognition, at a time when they are keen to raise their visibility in what for many of them amounts to a distressed market. It brings a focus, too. “You can promote yourself not to random buyers, but to buyers who are specifically looking for your products, ” said Mr Østergaard.

As to the future, with growth at a brisk clip ShipServ has set itself a target of winning enough operators to reach the 100, 000 ships level.

The company is launching benchmarking services giving information about price levels that buyers can use to gauge how to handle their own purchases. There will be indices that tell clients about average [excluding fuel, labour, and insurance) operating costs, for instance relating to the supply of catering provisions to cruiseships. Some of the data will be made available to the public.

ShipServ will offer specific advice to individual suppliers, such as analysis as to why sales of particular lines are falling. “We had a supplier who had seen their sales drop and they had no way of knowing whether that was part of a market trend, or specifically related to them. We were able to tell them that shipowners in general were spending less in that market on the kind of products they offered.”

ShipServ, which works with existing ship management software, has said that users report up to 10% savings on operational spend by using tools such as ShipServ Match – an automated supplier recommendation service – and a 30% reduction in the procurement department workload. Joanna Dziegielewska, senior technical officer of Green Management ASA, has said that the Shipserv Match service allows her company to identify local suppliers in unfamiliar ports, and reduce freight costs. Vessels under Green Management – the ship management arm of Green Reefers Group – trade on the spot market and often visit ports where the purchasing team lack a preferred list of suppliers. It is said to have made savings of up to $1, 500 on some items, such as hard-to-find parts.

At this year’s international maritime exhibitions, ShipServ is showcasing among other services its new Lost RFQ feature, which helps save time for suppliers in quoting and in chasing lost requests for quotations.

Tags:

Leave a Reply

IMPORTANT! To be able to proceed, you need to solve the following simple math (so we know that you are a human) :-)

What is 5 + 13 ?
Please leave these two fields as-is:

Trackbacks

Leave a Trackback