In recent years, the requirement to bunker multiple grades of fuel to comply with the different Emission Control Area regulations has increased the number of bunker stems which may lead to a rise in the number of bunker-related disputes. This Risk Alert is intended to provide Members with guidance on vetting bunker suppliers before awarding a bunker contract.
While considerable time and resources are dedicated to addressing fuel related issues post-delivery, there is significant value in exercising diligence during the bunker procurement process to mitigate the possible occurrence of these issues.

The procurement of bunkers should be a straightforward process, and in most cases, it is executed without issues. However, due to the competing interests of various stakeholders in the supply chain, there exists a potential risk that the quality and/or quantity of the bunker supplied to the vessel is compromised. Implementing a robust bunker procurement process would be supportive in mitigating this risk.

By establishing an internal process that ensures the credibility of bunker suppliers, Members will be in a position to make informed decisions when awarding bunker contracts. Exercising appropriate due diligence increases the likelihood that potential issues with bunker stems are minimised, if not eliminated.

The process of vetting bunker suppliers can vary significantly based on the organisation and its current management systems. Below are general guidelines for Members to consider when creating a bunker supplier vetting tool to integrate within the Bunker Procurement Plan.

Establishing a Bunker Procurement Plan:

The process of procuring bunkers can be developed either as a standalone Bunker Procurement Plan or as part of an existing Procurement Management System or Quality Management System (QMS) within the organisation.

Regardless of the chosen framework, the plan should include a methodology for evaluating bunker suppliers based upon identifying predetermined metrics for assessing their reliability. The methodology could involve assigning scores to various metrics, evaluating them according to their relevance, and calculating an overall score for each bunker supplier. This scoring system would enable Members to make informed decisions before awarding bunker contracts. Adopting the ISO 9001:2015 framework for evaluating and selecting suppliers would be beneficial, although not essential, to achieving the desired outcome of identifying a reliable bunker supplier.

Setting Evaluation Metrics:

The reliability of the process hinges on establishing robust evaluation metrics. These metrics should be designed to assess the track records of bunker suppliers at each port. While evaluating a bunker supplier on a global scale can be beneficial, it may also be misleading due to the influence of local factors within the supply chain.

Understanding and examining potential factors that may influence the quality and / or quantity of bunkers is essential for developing effective metrics against which to assess bunker suppliers. These factors may include identifying whether the entity –

• Acts as the physical supplier or utilises the services of third party entities.
• Maintains appropriate control over the origin and chain of custody of the bunkers
• Conducts periodic quality assurance checks and audits on the third-party entities involved.
• Has a record of the number of successful bunker deliveries completed in the port.
• Has reported instances of bunker deliveries that experienced quantity or quality issues in the port.

In developing the scoring system, it would be pertinent to note that all metrics derived from the influencing factors may not be equal, and the weighting of each metric should be assigned based on its influence on the outcome. For instance, a high weighting should be assigned to the metric “Supplier is the physical supplier?” which would provide assurance that the supplier has control over its downstream operations.

Collection of Data:

The effectiveness of the Bunker Procurement Plan as a vetting tool relies on the availability and veracity of data to evaluate the established metrics. This data can be obtained from two sources:

• Market intelligence
• Internal feedback from the bunker receivers

While market intelligence is generally accessible, the specific granular data needed may not always be readily available. However, it serves as a strong foundation to initiate and sustain the process. Initially, internal feedback data may be limited however, over time, it should develop into a comprehensive internal source of intelligence that can be highly beneficial. Therefore, the Bunker Procurement Plan should incorporate a streamlined feedback loop that captures data from each bunker delivery, thereby ensuring the ability to vet bunker suppliers is strengthened with each completed delivery.

Evaluation:

With the evaluation metrics that have been established and data available from market intelligence sources, as well as internal resources, prospective bunker suppliers can be assessed more effectively.

To ensure consistency in the evaluation process, the Bunker Procurement Plan should define clear acceptance criteria to guide the procurement team. Depending on the process flow outlined in the plan, these criteria can help the procurement team determine whether it is acceptable to proceed with a supplier or if additional approval is necessary.

In summary, the guidance is intended to highlight how a streamlined approach in awarding bunker contracts can reduce bunker related issues, and consequential disputes.
Source: Steamship Insurance