Sustainable sourcing and why people matter

This article was featured in the official IMPA publication - Supply Chain and Sustainability Magazine, Issue 5 2023

A conversation with John Beck, Vice-President, Procurement at Wilhelmsen Ship Management brings out some clear themes – of transparency, values, balance, respect, and how people can and do make all the difference. Felicity Landon reports.

There has been no shortage of challenges for those involved in purchasing over recent years – and there are plenty more to come, says John Beck. Nevertheless, he has positive advice for anyone considering a career in purchasing. “It’s a great career – jump at the opportunity!” he says.

Part of Wilhelmsen Maritime Services, Wilhelmsen Ship Management is one of the world’s largest third-party ship managers, with a portfolio of more than 450 vessels and 11,000 active seafarers. It provides technical and crew management services for a variety of vessel types – LNG/LPG, ro-ro and car carriers, FPSO/FSOs, containerships, and vessels in the cruise, bulk, seismic and offshore sectors. Vessels are managed from seven offices worldwide, alongside a network of 21 manning offices in 13 countries.

“Our procurement policy has always been to maximise value for our clients, by searching the market for the best deals, while ensuring that goods and services meet the required quality standards,” says John. “Consolidating spend on goods and services with key suppliers to promote stronger cooperation can bring tangible benefits to both parties that can translate into savings to our clients.”

But that is only the start. Alongside its core policy, Wilhelmsen insists that suppliers adhere to its supplier code of conduct, which defines the standards of business ethics that are acceptable to the company. “Wilhelmsen is committed to conducting business in a responsible and ethical manner within our own operations and in our business relationships,” says John.

This ties into Wilhelmsen’s commitments on sustainability, decarbonisation and wider ESG (environmental, social and governance) goals. In essence, it’s all about knowing both your customer and your supplier.

“The EU’s Corporate Sustainability Reporting Directive requiring EU companies to report robustly on ESG has put sustainability firmly in the spotlight. This in turn has increased the focus on ‘responsible sourcing’, with much more emphasis on human rights, decarbonisation, sanctions compliance and governance,” says John.

He notes that when the Transparency Act came into force in Norway, Wilhelmsen was already focused on what were the ‘absolute key things’ it wanted to do in terms of ESG, and on what to measure and report on. “The strategic topics of carbon reduction, human rights and sanctions are important to Wilhelmsen Ship Management, support the core values of the Wilhelmsen Group and are aligned with our intentions to contribute actively and positively to the targets of the UN Sustainable Development Goals (SDGs).

“With our vendor database, we have designed a questionnaire that covers these key points. We ask new suppliers to go through the questionnaire and commit to our values – and we are also following up on a rolling basis with our existing suppliers, to remind them or make them aware of what Wilhelmsen’s requirements are and ask them to make a similar commitment.”

Some suppliers may not respond. “In this case we will ‘inactivate’ that account until we need them, at which point we present the commitments to them,” John explains. “It is about encouraging them to be aware of our values. A lot of ESG is at a very early stage. Much of the industry is just starting to set standards. We ask them the questions that make them think.”

Is this a balancing act, as costs must always be a factor? John says: “It is about analysing and knowing your supplier base. Typically, we have 80% of our supplies from 20% of our suppliers.” As he points out, suppliers can’t hide from ESG – these expectations will come from across their customer base, including from outside the shipping industry.

Meanwhile, the partnership approach is central and purchasers need suppliers to come to them with solutions and improvements, he says. “The supplier knows much more about their products or services than you do. We run quarterly business reviews with our key suppliers, and we expect them to tell us how we can do things better.”

In today’s shipping climate, purchasers are under particular pressure to compare the costs of supply in different ports to find potential savings. “This has increased their workload as they look for alternatives. Logistics costs have increased and there is more focus on reducing emissions. Purchasers now must be as skilled in logistics as they are in procurement,” says John.

“There are several challenges for purchasing ahead. We have recently seen levels of inflation which many of us have not seen during our careers. Supply chains are stretched and capacity is limited, which has resulted in higher logistics costs. The geopolitical picture is somewhat concerning, with no signs that the war in Ukraine will end, putting pressure on oil and food prices. The deteriorating relationship between China and the US is a major source of concern, as China is a key source of stores, consumables and spare parts.”

Change always brings significant opportunities, he adds, whether that is in digitalisation and new tech, regulatory changes or the push for sustainability.

“The EU Ship Recycling Regulation (SRR) legislation on Inventory of Hazardous Materials (IHM) certification and compliance has encouraged the industry to use advanced data analytics, machine learning, AI and automation to identify potentially hazardous materials from large datasets. This is now well established, and the same techniques can be used when the IMO Hong Kong Convention comes into force in June 2025.

“The EU’s Corporate Sustainability Reporting Directive (CSRD) will drive similar change with respect to Scope 3 emissions data and the assessment of where there might be potentially high risks of breaches of human rights within the marine supply chain. Data analytics and mapping techniques will be at the core of addressing these issues going forward.”

The CSRD will also require companies to report on their supplier payment practices, to speed up the pace of frictionless trade, says John. “Shore-based industries and public sector bodies in the EU started to adopt the PEPPOL standard for e-business as far back as 2008. The marine sector is highly transactional and fragmented and must modernise, especially with respect to purchase to pay process. There is a big opportunity to use established technology to make this process more efficient.”

What has he learned in his own career in procurement, manufacturing and shipping? “I learned many things along the way but I guess the most important are that people make things happen, to know who to call when all else fails you need to fix something fast, the importance of making procurement decisions based on facts and that good planning is one of the most effective tools when it comes to controlling costs.”

This is an industry where there are major players but also smaller ones that are just as important in their own way, he says. It’s also an industry where people often have to wear many hats – handling orders, arranging POs, talking to vessel masters, working out with freight forwarders the most efficient routes, and so on.

“People make things happen,” says John. “Even with all the clever smart stuff and automation, you need people if there’s a problem to be solved or something that doesn’t fit the normal route.”

He says he recognised early on that getting a professional qualification would be helpful to his learning and career. That led him to study for his membership of the Chartered Institute of Procurement and Supply (MCIPS) – “and I have never regretted it”.

IMPA is a strong focal point for the industry, he says. “I value the good work that IMPA does to bring the industry together. The Marine Stores Guide is a de facto standard for the industry and IMPA’s initiatives on sustainability have ensured that ESG is firmly on everyone’s agenda.”

As for those just starting out in procurement – he says: “Join CIPS, study to become professionally qualified, learn as much as you can about the products and services and always treat stakeholders with respect. Remember you may have upper hand today, but you may find that you need that supplier again in the future.”