This is again a unique phenomenon associated with the bunker industry. The earlier blog referred to the fact that quality commands no premium with respect to bunker fuels. The only variation in bunker fuel pricing is that due to logistics and demand supply factors.
Another anomaly that we see in the bunker industry is to treat services on a same footing as commodity. If an organization provides fuel testing services, this service can be presented at 4 levels.
Level 1 – Testing and advising the test results
Level 2 – Testing, advising the test results and diagnosing the potential problems
Level 3 – Testing, advising the test results, diagnosing the potential problems and providing solutions to solve the problem
Level 4 – In addition to Level 3, utilize the statistical data available; identify patterns leading to information on the evaluation of bunker suppliers, bunker ports and individual bunker fuels using quality benchmarks.
Unfortunately, the industry hardly takes notice of a service provider and the levels at which the service is provided. The comparison is always about the lowest cost, the quality of the service be damned. This is not an attitude in which excellence is encouraged and allowed to flourish.
Any lab technician can setup a lab, carry out the testing and carry out the service at Level 1 listed above at the lowest prices. At Level 4, the customer gets a solution to potential problems, gets advice on the best ports, best suppliers and best fuel. I cannot believe that this additional service commands no premium. The comparison is always made on the lowest pricing. This is not very different from the way fuel quality is evaluated.
Even Class societies were exposed to this “Price War”. The results of this started to show up soon enough. Ships that broke into two, Ships that sank, Ships in which it was established that the inspection was a farce and the casualties started increasing. To some extent, the industry took notice but did nothing. The Class societies on the other hand formed an association where they protected themselves by making it an exclusive club in which not all Class Societies could enter. They could thereby maintain their standards. Major Shipping companies themselves protect themselves from Price Wars by forming special arrangements or pools.
All right thinking stakeholders in the industry should put their foot down on the price war strategy. Ultimately, the quality of the service which is far far more beneficial than the small amounts saved should be the deciding criteria. At the present time, when shipping is in a bad shape, companies are ruled by the dictates of the accountants who can only look at the value of the figures and not of the service.
Once can only say “If the fundamental principle of Economic activity is that no man you transact with shall lose, then you also shall not”– Kautilya – Arthashastra (300 BC)