Bunkering issues: Irene Notias spells it out…

Associations, Bunkering, Communication, Ship Supplies — By on April 9, 2016 at 12:48 PM
Irene Notias

Irene Notias

Respect and Honor in business is our business, By Irene Notias*

The words honour, trust, integrity, teamwork, respect, gentleman’s agreement refer to qualities increasingly missing in today’s bunker business, but nevertheless everyone claims to adhere to them.

Customers look for reliable suppliers while suppliers look for financially stable customers. Brokers connect the two and act in the best interests of both parties. Yet they seem to be underestimated and occasionally “used” or “overlooked” without anyone really acknowledging the ethical commitments towards a reliable broker.  Maybe we need brokers’ contracts?

Bunker brokers serve a distinct purpose in the bunker purchasing chain.  They connect end users to the bunker supply chain, fuel traders and physical suppliers, and they must  be alert, aware, totally informed, transparent and remain independent, at all times.  In order to do this well they must work diligently and effectively, aiming for long term relationships.  This takes time, energy, and financial resources.

A reputable bunker broker is all of the above and will have years of documented experience of effective work for portfolio of a reputable client.  In addition,  a broker must have established long-term relationships with all members of the industry, sustaining a pristine reputation for credibility and know-how of the bunker industry dynamics.  In order to achieve this and hence provide these assistances to the rest of the industry, it is imperative that their diligent work is not interrupted and the relationships not trespassed.

Of course, credit information is available from business analysts’ reports which are easily purchased, but the actual experience of a broker with a long-term successful client relationship is undeniably the best referral, and it is free.

This year, we have seen growing incidents of bypassing and misuse of brokers’ services, upsetting this balance of trust.  As world trade slows and demand decreases,  competition has reached crazy levels. So much so that some would risk their integrity to save or gain a buck.

It is understandable that some owners often allow suppliers to come directly to them because they think that by bypassing the broker they save on commissions.  From experience, such thinking is misguided.  As previously mentioned the broker is instrumental in shielding an owner from many unknowns, and offers relatively free support from the beginning to the completion of the bunker inquiry process, besides his or herwhole network, which without it the buyer would have not known who to contact and whom he was contacting (reputation wise).

In an article in the magazine Dockwalk (for Captains and Crew) “Why use a Bunker Broker?” Dec. 23, 2009, its author,  Bransom Bean, states: “But there are times when do-it-yourself is not the best idea. Buying bunkers is perhaps one of them, especially if you happen to be in an unfamiliar port or up against a tight schedule.”

A bunker broker service can also assist suppliers and traders for the same obvious reasons: it helps clients. Mainly,  by screening potential customers and providing information on payment performance based on actual experience with a credit worthy customer.  Bunker brokers are filters for the suppliers and traders, weeding out the trouble-makers or losers.  In 15 years, this bunker broker has provided ample reliable credit information to the bunker sales sector about several esteemed Greek and New York ship owners and companies. On our word, we have in cases, been able to secure credit for owners who have been ate paying with delays due to interruptions in their cash flow from weak freight market and/or non-performing charterers. In today’s difficult times, a broker is an important voice on behalf of an owner.

Brokers monitor payments for both supplier and clients to ensure smoother payment performances. They are like the chorus in a Greek tragedy, reminding every one of the rules and dynamics. Besides offering port info, price indications and port comparisons, they do all the follow-up and after-sales including claims handling.

While an owner may silently participate or pro-actively seek to cut out the broker, the savings are minimal and lost in so many other ways.

The owner may have saved 50 cents on a bunker stem, but may have overpaid for the stem itself.

Speaking with a ship owner on whether they would bypass a broker who showed them a cargo that came from a shipper that was known to them, their response was enlightening.  The owner said, no. And, he went on to explain that it is in many cases better to have a person in the middle, because it allows for better negotiations on the freight and it also is valuable in the event of a dispute. Why could this not be the case in bunkers?

Nevertheless, it is becoming more and more prevalent today to find owners and suppliers bypassing the bunker broker.

There are different types of bypassing.  The “white” kind where the customer wants/must cut costs by cutting out middlemen.

Then there is the “orange” kind which is when salespeople are instructed to “go direct” thus bypass the middleman who introduced the client or where sales people take it on themselves to do it “accidentally.”

This is a frustrating event.  Recently even major fuel companies do this. They reached out to the customer they already had via their own authorised broker and bypassed their own colleague point blank, hurting the brokers’ business and the major oil companies’ reputations for ethical conduct.

The “red” kind of bypassing which is the premise of this article is when all the homework and legwork has been done by the brokers without remuneration and the oOwner then turns and gives the business to someone else.

Like the jungle, it’s survival of the fittest.  But, this, in the end, is defeating to the owner.
There is a reason why an owner went to a particular broker to get the legwork done in the first place.  The broker’s contacts, reputation, and abilities to procure the best results.

Did the owner think of the consequences of his behaviour?

It is frustrating to the broker, demotivating to its staff … and damaging to the broker’s reputation.

At first, this may be of no concern to the owner, but in the end, the broker’s reputation is what has helped the owner get the service and best price in the first instance.

Maybe a broker should not make the good faith effort to enhance their owners’ reputation and buying power through face to face meetings with suppliers.

On one occasion, a supplier was invited by the broker to attend a meeting for the purpose of building a business relationship with a particular owner.  Appointments arranged, agenda put forth spelling out the purposes of the meeting, and ideas to build upon a long standing relationship for both parties, all instigated and arranged by the broker.

The face to face was successful. And, the broker’s prior efforts to establish credit lines and put his owner in the best light with the supplier were rewarding for the owner and the request for the supplier to travel thousands of miles also rewarding for the supplier. Yet, after the meeting the buyer secretly communicated with the supplier and they agreed to cut out the broker.

Customers say it’s not their fault because the supplier approached them.  And the suppliers claim it’s not their fault because the customer approached them. For sure, the standard is that it’s ultimately the customer’s choice.  These excuses should not be acceptable.

Why would a professional reputable broker give up valuable time and energy to connect worthwhile customers with reputable vendors? Does this volatile fragile market, we are currently experiencing, have any more room for misuse and mistrust?

There are possible solutions to avoid this bad business of bypassing. If the broker’s client communicates directly with the supplier, then supplier can make it standard practice to offer the price via the broker explaining to the new customer that they honour the broker’s introduction and the existing business relationship by offering the same price to both, hence there is no cost burden and in fact added value of a broker’s service. But, it would be wiser if an owner pauses to give thought to the action he is about to undertake and ask not only if it is the moral thing to do, but what is truly achieved.

Many suppliers are not keeping to ethical standards and are offering deals to everyone in a hit or miss style – just leaving it to chance by seeing who will  bring them the business,  even competing against themselves,  creates confusion and disharmony.

On a positive note, the suppliers who honour the channels that bring them business, and offer only via the broker (the original channel) contribute to a healthier business atmosphere. They help by stopping the disorder that is currently going on in the market.

Knowing the valuable role of a broker and differences from a trader, showing more respect to the work of our colleagues would all help the bunker market operate more smoothly.

We must bring back respect and honour to the bunker business,  without the brokers the industry has no proper foundation.

*Irene Notias is managing director of Prime Management Services, Glyfada, Athens

 

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