The 19-deck ship Ventura is a challenge for Carnival's procurement team ©P&O Cruises/Carnival UK
The 19-deck ship Ventura is a challenge for Carnival's procurement team ©P&O Cruises/Carnival UK

Case study: how to hit a moving target

That’s what procurement must do at the cruise firm. The solution: planning and interdependence

It’s an exercise in complexity management, Carnival UK’s vice president, procurement and supply chain Sermet Baykaner tells SM at an event organised by the cruise company and the CIPS Southampton branch. The event was held on board the 19-deck P&O ship Ventura during the short eight-hour window when it was in port for guest changeover and loading of supplies.

With the ships sailing 365 days a year, the team has to provide for: 35,000 passengers and staff at any one time, hundreds of ports all over the world, a daily consumption of 100 tonnes of fruit and veg, and 100s of thousands of stock keeping units – from sugar cubes to an 18-metre propeller shaft. “It is like supplying a town and all its people, but without a network of roads and rail, just a procurement team,” Baykaner says.

Planning is key. “We know two years ahead where our ships are going to be and when,” he explains. For a ship on a round-the-world cruise, Marmite supplies, for example, are transported months in advance to meet the ship in Australia, and a week ahead of it arriving in the Bahamas. The Marmite schedule will be in a difference sequence from the ship’s, and must take into consideration the varying port rules regarding alcohol – which for some include Marmite because it is yeast-based. And that is just one SKU.

In the last three years, Baykaner and his team have shifted from ship-focused to category purchasing, creating centralised teams such as technical, food and drink, marine or hotel (the onboard guest element). But they do not focus exclusively on leveraging scale by being central. Rather, they focus on interdependence between the central supply chain and the ships.

“The fundamental purpose of our company is to delight the guest,” he says. “We look like a centralised supply chain, covering catalogues, forecasts and so on, but in reality if something changes in the moment, the ships need to have the freedom to make the decisions there and then.”

“We suggest a forecast but the ships tell us what they need,” he adds. Suppliers all over the world can meet the guests’ needs, and look for niche advantages, such as booking empty banana containers returning to the Caribbean.

Category expertise has led to improvements. Rod Day, senior manager of technical purchasing, explains that performance-based logistics for the engine contracts has been introduced, which gives the supplier Wartsila an incentive to monitor condition as well as search for innovations. Day has also moved to leasing two inflatable safety products: the crew’s lifejackets, which often suffer screwdriver punctures when thrown in lockers, and the emergency inflatable life rafts that need regular, expert maintenance. Again, suppliers are safety experts in this area.

In the last three years, procurement has become involved in 80% of Carnival UK’s spend, up from 40 or 50%. Savings have doubled year-on-year. That’s pretty clear proof of this approach’s success.

Ditching diesel

In 2020, Carnival UK will take delivery of a new ship fuelled by liquefied natural gas (LNG) rather than diesel, as part of its sustainability commitments to transition to cleaner fuels. The ship, a P&O cruise liner, is one of seven such ships commissioned by parent company Carnival Corporation. It it looking into incorporating its latest technology, such as a wearable Ocean Medallion for guests. These devices simplify communication, helping guests request services and access information.

While shifting to LNG will not cut costs in the short-term as it requires substantial upfront investment, Baykaner says it is “the right thing to do, to move the industry in this direction”. Fuel is Carnival’s biggest cost, with an annual spend of around $2bn.

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