From supply chain dynamics to sustainable futures

The demand for bunker fuel is mainly driven by the shipping industry, which accounts for more than 80% of global trade in terms of volume. Despite being a routine procedure, the industry faces significant challenges in the bunker value chain; from planning and procuring, to supplying and sustainability. 

These challenges are a mix of increased geopolitical complexity, rising fuel prices, increasing emphasis on sustainability and the influx of new fuel types. With regulations driving change, the urgency to optimise the bunkering process to ensure profitability and reduce fuel consumption is building.

In order to overcome these challenges, energy suppliers, traders and buyers need to be able to navigate through a hugely intricate data landscape.  However, many processes are manual and there is still a heavy reliance on physical paperwork. To address these concerns the bunker industry is exploring ways to digitalise planning and procurement practices and supply. However these efforts often occur in silos, resulting in fragmented data generated through a variety of disconnected processes and models. This lack of transparency makes it challenging for stakeholders to align their approaches and share valuable insights, which presents several significant challenges for the shipping sector.

Industry challenges

Financial risks: without transparency, it's challenging for vessel owners and operators to accurately assess the quality and quantity of the bunker fuel they are purchasing. This can lead to financial losses when fuel quality doesn't meet the required standards, or when the actual delivered quantity differs from what was ordered.

Fraudulent practices: lack of transparency makes it difficult to track and verify the quality and quantity of fuel, allowing fraudulent suppliers to exploit vulnerabilities in the supply chain. Bunker fuels constitute roughly 60% of a vessel's operational expenses, meaning fraudulent practices and supply chain mismanagement can have a substantial impact on profitability.

Operational disruptions: fuel-related problems can cause operational disruptions and financial losses. Engine issues, increased maintenance costs, and unexpected downtime can result from poor-quality or contaminated fuel, all of which negatively impact a ship's performance and profitability.

Environmental risks: contaminated or substandard bunker fuel can lead to higher emissions and environmental damage, as engines may need to burn more fuel to compensate for reduced efficiency. This not only harms the environment, but also exposes shipowners to potential regulatory violations.

Disputes and litigation: discrepancies in fuel quality, quantity, and price can lead to disputes between fuel suppliers and vessel operators, resulting in costly legal proceedings. The lack of transparency exacerbates these disputes, making resolution more challenging.

Lack of credibility and trust: incidents such as the OW Bunker bankruptcy in 2014 and the 2018 Gulf Coast bunker contamination incident, have caused a lack of trust in the industry.

Safety concerns: substandard fuel can also pose safety risks to ships and crew members. Quality issues may lead to engine failures or other operational problems that compromise safety at sea.

Fostering collaboration among stakeholders and ensuring transparency across the supply chain is crucial for achieving comprehensive and effective improvements in the bunker sector.

What now? Advancing from manual methods to next-level digitalisation 

The complexity and opacity of bunkering makes it difficult to track and report transactions. This leaves customers vulnerable to fraud and corruption. As a result, trust is a huge issue in the bunker industry. Bunkering is a vessel’s largest operating cost, accounting for roughly 60% of all spend, which means fraudulent practices and inadequate supply chain management can significantly affect the profitability of vessel owners, charterers, and fuel suppliers. Only this year, eleven ships lost propulsion and over 100 ships were affected in an incident of fuel contamination in Houston.

Even fuel that meets specified quality standards experiences volume or content issues, leading to financial losses or engine problems. In the past year, over 600 vessels were disabled through fuel problems, despite the fuel being ‘on-spec’, resulting in estimated global supply chain losses exceeding $5 billion. Both fuel suppliers and shipowners incurred financial losses, which are difficult to detect and make claims against.

To address the risks associated with fuel quality and fraudulent practices, the industry needs to fully embrace digitalisation. By leveraging advanced digital tools and technologies, the industry can ensure that all stakeholders across the value chain have access to accurate and standardised data. This shift towards transparent and real-time reporting will enable fuel suppliers to better understand and validate their offerings while allowing fuel buyers to combat fraud, reduce losses and mitigate environmental risks. 

From planning and procuring, to supplying and sustainability, the bunker industry is facing a massive transformation that will support smarter decision-making, foster collaboration, enhance accountability and expedite the green transition. It’s all about transparency.

According to Alexis Bateman, research scientist and director of MIT Sustainable Supply Chains at the MIT Center for Transportation and Logistics, there are two elements to supply chain transparency:

1. Visibility: accurately identifying and collecting data from all links in your supply chain.
2. Disclosure: communicating that information, both internally and externally, at the level of detail required or desired

All hands on deck for greater transparency

Optimising bunker planning
The cost, availability, and quality of fuel significantly impact the financial health of shipping companies. In this highly competitive and increasingly eco-conscious sector, efficient bunker planning is not just a cost-saving measure; it's a strategic necessity. 

Put simply, better planning leads to better buying.

There are three key decisions to optimise bunker planning: 

• What to buy: with the emergence of new eco-friendly fuels, choosing the right type is crucial. Each fuel type has distinct characteristics and emissions profiles. Deciding what to purchase should align with environmental goals and regulations.
• Where to buy: global fuel procurement involves complex considerations. Costs vary from port to port, but factors like the type of fuel needed, the current onboard fuel supply, safety parameters, in terms of how low you can go before refuelling, and local regulations all dictate where to refuel. Eg ECA zones - emissions control areas.
• How much to buy: this decision is often overlooked, as it involves manual estimations, which can be inaccurate and costly in the long run.

Bunker planning challenges

One of the primary challenges is that while the need for better planning is widely acknowledged, the shipping industry is facing crunch time, in terms of crunching data. Collating and analysing the multitude of data required for informed decisions is a daunting task. 

The industry has traditionally relied on manual processes, creating a resistance to automation. Further resistance comes from industry service providers, such as traders, suppliers and brokers, who rely on an imperfect market. A lack of transparency means they can provide those recommendations to buyers and therefore profit from high prices.

Another hurdle is the inertia of established relationships and processes, which can stymie change, even if unintentionally. The industry often defaults to the ‘copy and paste’ approach, replicating past practices.

Current solutions: shifting mindsets and the role of data

A promising trend is the industry's growing appreciation of data-driven solutions. Shipping professionals increasingly recognise that data can be turned into actionable knowledge, offering solutions to problems that have long plagued the sector.

However, achieving a change in mindset and full adoption of new solutions can be a considerable challenge. It requires a concerted change management effort and buy-in from top leadership.

Ultimately, the key to success lies in a three-way combination of software solutions, people, and processes. A shift in mindset is necessary for companies to embrace partnerships with software providers, recognizing that collaboration is the key to unlocking the full value of these solutions.

Efficient bunker planning is not just about saving money; it's about ensuring a greener, more sustainable, and profitable future for the shipping industry. The transformation may be challenging, but the rewards are well worth the effort.

How ZeroNorth can help

ZeroNorth is leading the digital transformation with its integrated bunker service, which offers full fleet bunker management. Bunker Planner utilises real-time insights on global bunker pricing, vessel performance, and position to calculate when, where, what and how much to bunker. This streamlines the entire process, providing users with transparent plans and fostering efficient collaboration among various stakeholders. The integration with Bunker Procurement and Analytics supports the industry's transition to cleaner energy, by offering a unified platform that improves processes and workflows, increases transparency among key stakeholders, and enables actionable insights using accurate and reliable data. As a result, customers benefit from coordinated fleet-level strategies for both environmental and revenue goals.

Key features

✓ One-click-decision recommendations based on data ecosystem 

✓ Ranked scenarios for when, where, and what to bunker 

✓ Real-time bunker pricing for hundreds of ports 

✓ Choose preferred price indication source from leading providers

 ✓ Insight on port details and costs automatically factored in 

✓ Choose between optimising for bunker uptake or target ROB 

✓ Seamless integration into ZeroNorth Voyage Optimisation and Bunker Procurement platform

Navigating the complex world of bunker procurement

In the maritime industry, bunker procurement is a pivotal operation. Operators need to purchase an average 250 million tons of fuel each year, generating up to 300,000 annual transactions. That's around 820 every single day, which is a monumental task. But it's not just the sheer volume that's daunting; it's the substantial value associated with each purchase, ranging from $1 to $3 million. We're not talking about buying office supplies; we're dealing with a high-stakes game.

When it comes to bunker procurement, three critical decisions need to be made:

1. How to buy: contract or spot? This choice can significantly affect costs and risks 

2. When to buy: in a world of volatile fuel prices, timing is everything 

3. Who to buy from: selecting the right supplier can make or break the deal

Procurement challenges

Making these decisions when procuring bunkers is increasingly complex. There are more products on the market than ever before, more suppliers to choose from and negotiate with and more traders entering the market to offer credit for profit. Added to all of this complexity is a lack of transparency and communication between vessels, chartering, operators and bunker buyers, which can lead to inefficiencies and missed opportunities.

The key challenges are:

1. The persistence of physical paperwork
Running a thorough price analysis is not only time-consuming, there is the added challenge of documenting everything. Many operators still rely on manual processes and cumbersome spreadsheets to when buying bunkers, which come with two key risks:

1. The practical quandary: With multiple people accessing a single spreadsheet, practical problems often arise, such as input errors, duplicated work, issues with controlling files, potential file corruption, auditing hassles, and a lack of accessible, consolidated business views for management.
2. The operational quandary: Delayed access to information can lead to vessels bunkering in high-priced ports instead of opting for more cost-effective alternatives. It might also result in vessels not reaching their full capacity, fuel requests not reaching the market on time, and buying more fuel than is needed for the voyage.

2. Regulations

Regulatory requirements are on the rise, putting pressure on compliance, audit trails and the need for better decision-making. In addition, the expanding landscape of available fuels makes data collection and decision-making an overwhelming task for a single person.

3. Financial risk

Financial risk looms large in this intricate process. Traders and brokers, often acting as intermediaries, play a substantial role, charging fees ranging from $2 to $10 per ton of fuel. They offer services that some buyers may need for operational or financial support, such as offering credit. However, understanding the price of this credit and evaluating margins is crucial for making informed decisions.

4. Fraud

As already discussed, bunker fuel procurement faces industry-wide fraud challenges due to outdated measurement methods. Unlike gas stations with accurate metres, the maritime sector relies on analogue systems, allowing for discrepancies. Collusion and off-the-books deals result in receiving less fuel than purchased. In addition, there is poor practice in landside operations, with operators and buyers only considering what benefits them as individuals, instead of the company they work for. While it’s not always outright ‘fraud’, there is a distinct lack of transparency and trust concerning measurements. Both the quality and quantity of fuel tend to fall short in this system, leading to inefficiency and unnecessary costs.

Current solutions: harnessing big data

Addressing these challenges represents an opportunity for the industry to reduce waste and eliminate frictional costs. Data is increasingly recognised as the solution to fostering a healthier and more transparent business model. But while the maritime industry has seen a surge of interest in digitalisation over the past decade, adopting a data-driven approach to bunker procurement comes with a whole new set of problems. One of the biggest challenges of big data is collating and processing vast amounts of raw data to create high-quality, usable business information. 

There is no doubt, the pursuit of market transparency, in terms of fuel quality, quantity, and pricing, is a complex undertaking. Therefore, ensuring internal transparency within an organisation is paramount, to ensure operators understand the actions of their procurement team. This process assists companies in ensuring compliance with internal company procedures and culture, as well as relevant laws, and also reduces the risk of damage to their reputation.

As the industry moves forward, the combined effort of embracing digital solutions and maintaining a clear oversight of your internal operations will open up opportunities for fuel buyers to make better decisions and reduce costs, which can then be reinvested into decarbonisation efforts.

How ZeroNorth can help

ZeroNorth’s Bunker Procurement simplifies the process of buying bunker fuel. It connects buyers and sellers in one streamlined system and helps match buyers with suitable suppliers. 

But it doesn’t stop there. This platform handles all aspects of the procurement process, including managing inquiries, contracts, quality testing, and payment. 

Bunker Procurement ensures that operators and masters follow the planned process to achieve the best outcomes, benefiting a company's finances and contributing to environmentally friendly global trade. Users can manage inquiries related to vessels, ports, suppliers, agents, labs, fuel testing and claims, while comparing the offers they receive from the suppliers on dynamic trading screens.

Key features

• Manage open enquiries (RFQs)
• Manage vessels, ports, suppliers, agents, labs, fuel test and claims
• Generate RFQs to the suppliers in a port
• Compare the offers received from the suppliers on dynamic trading screens
• Integrated with Voyage Optimisation and Bunker Planner

After just one year using our Bunker Procurement, customers have experienced:

✓ An average of 30% more offers per order

✓ An average 3% reduction of bunker spend 

✓ Significant improvement in procurement efficiency 

✓ Improved decision making, leading to cost savings

✓ Savings in analysed fuel data and calculators - mainly on density differentials

In addition to Bunker Procurement, ZeroNorth Bunker Analytics provides actionable, data-driven recommendations on the bunker market. Bunker Analytics is composed of three core modules: Pricing, Benchmarking and Data Feeds. These modules provide real-time pricing in over 170 ports around the world, keeping users up-to-date and on top of pricing volatility and spreads. It is also one of the most accurate predictors of marine fuel prices for forward curves. This is achieved through proprietary technology that combines real time actual stems in the market through the ZeroNorth Bunker Dashboard, with live swap curves to give market actors unparalleled insight into bunker prices at ports around the globe.

This market intelligence offering provides customers with the opportunity to learn from past decisions through actionable and data-driven insights and recommendations, helping them reduce costs while maximising their competitive advantage.

​​Beyond procurement: the importance of prompt bunker supply

The importance of supplying bunkers promptly and after procurement is paramount for efficient maritime operations. Once bunkers are procured, any delay in their delivery can disrupt vessel schedules, impact voyage timelines, and potentially lead to financial losses. 

Timely bunkering aligns with operational efficiency, upholds contractual agreements, and supports the industry's commitment to sustainable and uninterrupted global trade. However, the marine fuel supply industry operates within a highly intricate network, demanding extensive collaboration among various stakeholders in the supply chain. Add to this a number of operational challenges, and supplying the right bunkers, in the right place, at the right time, is far from a simple process.

Bunker supply challenges

1. Short supply, leaving buyers shorted

Short supply can leave ships high and dry. With the shipping industry's critical role in global trade, ensuring a constant supply of bunker fuel is essential. Ships left without fuel can disrupt supply chains, and finding a quick solution can be challenging.

2. Price volatility

Fuel prices can be as unpredictable as the seas themselves. The volatility in crude oil prices directly impacts bunker fuel costs. Shipowners often face the daunting challenge of navigating these price fluctuations and managing their operating budgets effectively.

3. Delivery of documentation

One of the most significant challenges in the bunker delivery process is the slow delivery of documentation between bunker suppliers and financial institutions. This delay often results in prolonged transaction times and increases the risk of errors or discrepancies. 

4. Manual data entry

Reliance on manual data entry and paper forms creates a heavy administrative burden on barge crews, slowing down operations and decreasing productivity. In addition, paper-based processes are vulnerable to tampering and errors, which poses a substantial risk to the security and integrity of the bunkering ecosystem.

3. Data accuracy and transparency

Ensuring accurate and transparent communication of data related to bunker deliveries is essential. Inaccurate documentation or lack of transparency can lead to disputes and difficulties in reconciling transactions.

5. Visibility and availability

Having a clear view of who supplies what products and where is paramount. The lack of transparency in the bunker supply chain can create uncertainty and monetary loss. Additionally, the limited availability of certain fuel grades can lead to fierce competition, with larger owners often securing these grades through contracts.

6. Competitive concerns

In an industry where suppliers are used to working in silos, joining a shared platform raises concerns about losing a competitive edge. Many suppliers are cautious about the transition to a more interconnected and transparent environment.

7. Green fuels and infrastructure

As environmental concerns rise, there's an increasing demand for cleaner, greener bunker fuels. However, the infrastructure for supplying these fuels is limited worldwide. To meet environmental regulations while maintaining performance, suppliers are challenged to develop cleaner and more efficient bunker fuel formulations.

Current solutions: embracing innovative technology

The industry is not idle in the face of these challenges. Efforts are ongoing to address these challenges and create a more efficient, transparent and environmentally responsible supply chain. As the industry navigates these changes, it's crucial to embrace digital solutions and innovative technologies:

• Mandatory Mass Flow Metres (MFM): in some ports, MFMs are mandatory, addressing the issue of short supply by ensuring accurate measurements.
• Cleaner fuel formulations: suppliers are working on developing cleaner and more efficient bunker fuel formulations to meet environmental regulations while maintaining performance.
• Mandated Electronic Bunker Delivery Notes (E-BDN): Singapore became the first port in the world to implement mandatory E-BDNs in November 2023. Under this initiative, fuel suppliers, ship owners, operators and crew will be encouraged to use mobile and cloud-based applications, to complete and issue bunkering documents. This will enhance transparency and streamline documentation processes.

Despite the industry's push towards digitalisation, notable gaps persist. Infrastructure issues, such as poor maritime connectivity and vessel design combined with an absence of cutting-edge technology have impeded the adoption of digitisation. Additionally, the industry is highly fragmented, with varying levels of technological literacy and readiness to change. These challenges have slowed down the adoption of digital solutions such as the e-BDN, which in turn have contributed to inefficiencies and discrepancies in the bunker supply chain, affecting the accurate recording and verification of delivered quantities and qualities.

These challenges underline the need for accelerated technological advancements and broader industry acceptance to bridge existing gaps and propel the maritime sector into a seamless digital future.

How ZeroNorth can help

ZeroNorth Bunker recently received whitelisting approval from the Maritime and Port Authority (MPA) in Singapore for our eBDN solution, standing among the three selected providers.

Our software draws on the rich heritage of industry insights, international customer base, and understanding of the challenges associated with using paper documents, and has paved the way for an innovative web-based application that seamlessly connects bunker suppliers, and buyers as well as financial institutions and ports authorities, within the same system. For those already using our other bunker supply products, the eBDN semlessly integrates, further increasing efficiency.

In addition to eBDN, ZeroNorth acquired BTS, a software platform for marine fuel suppliers, headquartered in Singapore in February 2023. This means we can now also offer BTS's leading suite of services, the Intelligent Bunker Management System (iBMS), designed specifically for the marine fuel supply chain. iBMS was among the initial projects endorsed by the Maritime and Port Authority of Singapore (MPA) under the Maritime Innovation and Technology Fund in the early 2000s and it plays a pivotal role in boosting the efficiency and profitability of marine fuel suppliers, traders and brokers. By digitising business processes, it eliminates unproductive tasks, automates workflows, facilitates information sharing and improves decision-making. 

Key features

• Streamlined operations: automated and digital solution to reduce manual workload and manual errors
• Swift documentation: seamlessly deliver crucial documents between stakeholders
• Enhanced security: mitigate risks of errors and tampering through our secure digital platform

Customer benefits

✓ At least 70% increase in productivity

✓ Real-time visibility enabling improved insights

✓ A single source of truth, ensuring all stakeholders can access key information

✓ Improved communication 

✓ Optimised costs and maximised profits

✓ Improved governance and managed risk

Sustainability

In 2022, international shipping contributed approximately 2% to global CO2 emissions. Although the recent adjustments in emissions reduction targets by the International Maritime Organization (IMO) align with the Paris Agreement, achieving Net Zero Emissions by 2050 necessitates concerted efforts. The maritime shipping sector needs to embrace technological innovation, supportive policies, and collaborative actions throughout the value chain to successfully embrace low- and zero-emission fuels for ocean-going vessels.

Sustainability challenges

1. Cost implications

The transition to green fuels involves substantial costs for both suppliers and buyers, impacting economic feasibility

2. Level playing field

Maintaining fair competition during the transition to green fuels is crucial. However, ensuring equal opportunities for all players in the industry is a challenge.

3. Fuel quality and compatibility

The quality and compatibility of sustainable fuels with various vessels and engines are critical. Inconsistent fuel quality can lead to operational issues and impact engine performance.

4. Industry standards

Deciding on a particular sustainable fuel is challenging if there's no established industry standard. Investments may be uncertain without a clear direction on the future standard.

5. Regulatory landscape

Navigating complex and evolving regulations in the sustainable bunkering space poses challenges. Complying with environmental standards requires continuous adaptation.

6. Adoption of new technology

Embracing new technologies for sustainable bunkering may face resistance or slow adoption, while integrating these technologies into existing infrastructures can be a complex process.

7. Supply chain alignment

Ensuring a smooth transition across the entire bunkering supply chain requires coordination. Compatibility between suppliers, transporters, and end-users is essential for success.

8. Global collaboration

Achieving sustainability goals necessitates international collaboration. Combining efforts across different regions and stakeholders poses a considerable challenge.

Current solutions: alternative fuels and new technologies

With the emission figures in mind, the industry is working towards reducing its overall environmental impact when it comes to CO2, NOX and SOX emissions. To get on track with the Net Zero targets, the shipping sector is exploring the use of alternative fuels and new technologies.

• Low-sulphur fuels: the adoption of low-sulphur fuels, particularly compliant with the IMO 2020 regulations, reduces sulphur emissions, leading to improved air quality and lower environmental impact.
• Biofuels: the use of biofuels made from sustainable sources, such as algae or waste products, offers a more environmentally friendly option.
• Alternative fuels: The exploration and use of alternative bunker fuels, such as LNG, hydrogen, and ammonia, offer cleaner and more sustainable options.
• Exhaust gas cleaning systems: the installation of scrubbers helps reduce sulphur dioxide emissions by cleaning exhaust gases from vessels using high-sulphur fuels.
• Emission reduction technologies: there are ongoing efforts to develop and implement technologies and additives that reduce emissions and improve fuel efficiency.
• Emission monitoring: continuous monitoring of emissions helps track and reduce the environmental impact of vessels.
• Emission control areas (ECAs): the establishment of ECAs in certain regions enforces stricter emissions limits and encourages the use of cleaner fuels.
• Transparency and reporting: greater transparency in reporting bunker fuel data and emissions helps track and reduce environmental impact.
• Global collaboration: international organisations and industry stakeholders are increasingly working together to create and enforce sustainability standards and best practices.
• Eco-friendly ports: ports are implementing sustainable practices, such as shore power, to reduce emissions during vessel stays.

How ZeroNorth can help

ZeroNorth is dedicated to making global trade green. Thanks to its integration with the ZeroNorth platform, ZeroNorth Bunker directly supports the critical activities of vessel, voyage and fuel optimisation, thereby slashing emissions. 

ZeroNorth’s Bunker Planner and Bunker Procurement guide operators and masters to execute clear plans, which not only positively impact the company’s bottom line, but also helps make global trade green. In addition, Bunker Analytics leverages ZeroNorth’s data and domain knowledge to help customers gain valuable insights on their past decisions to improve those of the future, in order to reduce emissions and fuel wastage.

Our ambition with this end-to-end bunker solution is to support and enable bunker buyers, suppliers and traders to digitalise their operations, reduce bunker consumption, increase earnings and, ultimately, enable the decarbonisation of the shipping industry.

Conclusion

The bunker space faces a myriad of challenges, including rising geopolitical complexity, increasing prices, the introduction of new fuel varieties, and an escalating demand to reduce emissions.  As a result, the need to refine bunkering processes to ensure profitability and reduce fuel consumption has never been more urgent. 

These challenges, alongside the traditionally manual, siloed nature of bunker operations, require a holistic solution. This solution is ZeroNorth.