3 February 2021

Value of Voyage Optimization

Strategic bunker planning proves valuable in any price impacted market whether it be Rising, Falling, or Stable.

Given the current rising nature of the market, which all owners have witnessed the last 4 months and can be associated to the Aphorism – A rising tide lifts all boats, ClearLynx performed a brief case study on the ROI of optimizing your bunker purchases.

Rising prices of all petroleum grades, LNG, and Methanol has impacted:

  • Vessels
    • Owners
      • Ports
      • Grades of fuel
      • Stems
      • Type of contract - spot or term contract

The impact has been in the millions of dollars and has posed the following question: Could this have been minimized? And the answer is: Absolutely.

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Some options ClearLynx has identified for trying to minimize fuel spend laid out below:

  • Hedging
    • Time charter out the fleet
    • Use of voyage and bunker optimization software tools

This case study will discuss point three and how available software from Clearlynx can optimize many levels of purchasing:

Where to buy: The tool will recommend best port to lift in based on prices in each port. Can also add deviation to bunker only ports along the voyage route and the tool will calculate the added cost of the deviation and factor that into its decision as well.

How much to buy:  Optimizer will recommend volume in forward port dependent on forward price. Can build the voyage with current spot prices, while also making use of forecasting tools to complement use of spot price and gut feel, which is obviously speculative due to market’s high daily and weekly volatility.

When to buy: Proper stem timing by Bunker Buyer or Operator can have a huge impact on whether the deal is “good” or “bad.” Through the use of various ClearLynx benchmarks, one can see their purchasing performance based on spot or 9-day window performance – one way to gauge whether you timed your stem correctly.

Based on data from ClearLynx about 26% of stems have only 0- 4 days notice. Meaning that in a rising market you will have stemmed near the top of the price curve and also with most likely have less suppliers offering due to short notice. These have a price impact.

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Tank Inventory Management:  Can configure tanks by grade or volume to match trade routes and regulations.  Have the ability to set your commingling policy, whether it be none or a ratio (90/10%  or 80/20%.) Can set-up the use of specific tanks if wanting to burn out based on the voyage to give an empty tank in next cheapest port.

Data Flow: The tool gives visibility to all internal stakeholders to help make a team decision. Full 20/20 hindsight backtest reports give owners the ability to review all purchase decisions, giving clear data on volume, stem timing, and port choice which can all be helpful when reviewing a bunker budget and trying to see the impact of each decision made. A collaborative platform with proper communication and feedback on past decisions will help owners build a better a discipline to follow for each voyage and vessel. This will help eliminate “sub-optimum” decisions, which can have a conservative 1% impact on 4 months fuel spend or an opportunity cost of $280,000 for a 50 vessel fleet to $1,150,000 for a 500 vessel fleet.

We have done a brief table of internal stakeholders and their lack of  information on key variables needed to make the most informed united bunker decision .

Table of information gaps:

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The cost reward matrix or ROI

ROI is very high compared to other spend items like samples and surveys which have value for safety and shortage but a very small percentage of true cases of negative variance. It is estimated that 90% of samples get a “Pass” versus “Fail,” yet these samples and surveys cost many multiples the cost and use of a planning tool which can deliver millions of dollars of hard cost reduction.

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For more information or to get a demo and free trial on your vessels please reach out via the CONTACT US link below.

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Through our bunker procurement, pricing and analytics platform, we have unique visibility of actual and indicative pricing, product requirements, availability and completed transactions across the market. By aggregating this anonymized data, coupled with over a decade of historical data, we can provide insight into market activity, current trends and commentary on potential future outcomes. 

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