Stop losing money choosing wrong port to bunker your vessels

Stop losing money choosing wrong port to bunker your vessels

Sustained volatility of bunker prices creates headaches for bunker desks of shipping companies and charterers alike. Over the last 6 months, the price spread between low and high sulphur fuel oil remained negligible creating even more options to buy bunker strategically, comply with various (S)ECA bunker usage regulations, and make better than assumed net margin contributions to voyage P/Ls.

Existence of the opportunities doesn’t mean that many bunker buyers are able to realize these potential savings. It comes down to the overload of pricing information, rules, constraints affecting where and when to pick bunker a vessel. While bunker buyers may not readily admit it, the software that could support their decisions is not up to par.

Generally speaking, the bunkering port selection problem is currently solved by utilizing voyage management software. In its absence, bunker managers rely on spreadsheets providing only the most rudimentary decision support for what amounts to managing approximately 50% of costs of each voyage. Over the year, a ship may be used on approximately 8 voyages, adding up to the bunker cost cutting opportunities.

Learn why a major ship owner/operator empowered their vessel and bunker operators: Download “Top 4 Signs that your Shipping Business is ready to Profit from Optimized Planning”

But let’s assume that our shipping company implemented one of the commercial-off-the-shelf voyage management system (VMS). Using this software, the company is able to create a voyage plan including potential bunkering stops. The voyage plan is share by the vessel operator with the bunker manager to set up bunker purchases along the way. the bunkering port selection problem is solved.

For this method of selecting the bunkering port to work optimally, the bunker buyer should know volumes and qualities of bunker needed, prices available, and the precise date of ship’s arrival at the bunkering port. Therein lies the first problem. This can only work optimally when ship arrivals can be forecasted very accurately, and the primary limitation of using VMS for this decision is that it ignores unforeseen circumstances in actual operations. If the ship arrives a day late, the price of bunker will change creating uncertainty of voyage P/L. But a much bigger opportunity is given up by not considering potential bunkering ports that are not precisely on the planned course of the vessel, but are offering lower bunker prices, thus justifying course deviation.Now, every deviation has a trade off. A vessel can sail faster to reach the lower-price bunkering port and arrive on time at its final destination OR sail steadily and arrive late at the final destination port and pay a late arrival penalty. Bunker manager who could make all those calculations of alternative bunkering scenarios, assess the value of trade-offs and make the most profitable decision from the perspective of voyage P/L would be star.

Well, let’s not pop the champagne corks just yet. Bunkering port selection is typically a multi-criteria group decision problem, and in majority of practical situations, bunker managers cannot form proper judgments using incomplete and uncertain information in an environment with exact and crisp values. The help comes from specialized optimization tools like BunkerPlanner, which considers and processes the complex relationships of the relevant key performance indicators, sorts through strengths and weaknesses of each plausible bunkering strategy, and prescribes ranked selection of those strategies to the decision maker.

Learn how a specialized bunker strategy planning tool complements any typical voyage management system: Download “Is having a voyage management system enough?” briefing