Managing Spares on Commercial Ships

With millions of miles traveled and hundreds of millions of tons of cargo transported each year, the commercial shipping industry serves as a powerful global economic driver. Shippers face myriad risks, including equipment failures while at sea. As a risk management practice, commercial marine insurance serves as a foundational element, but shipping companies also have many other tools at their disposal. One of these is managing spares, keeping ships operational as well as reducing overhead costs. In this guide, we will explore the concept of spares procurement and management, helping shippers overcome the challenges posed by breakdowns and equipment failures.

What are Ship Spares?

Ship spares are any specialized materials or parts needed to keep a ship operational. In many cases, ships carry a selection of spare parts, particularly those that are consumable or prone to failure. In other cases, spares are delivered to ships from third-party vendors while at sea. Spares may include engine bearings, seals, circuit breakers, lashing equipment, and many more items. Think of spares like an insurance policy; just like commercial marine insurance, ship spares help to ensure continued operation if a system should fail during voyages.

Spares Management: Identification

Thousands of commercial ships ply the waters of the world. Within these ships exist many different powerplants, cranes, material handling equipment, and ventilation systems. To begin the process of spares management, it is critical that required parts are identified properly. Parts may be identified by:

• Part number
• Drawing number
• Item or position number
• Material number
• Parts specification
• International Maritime Purchasing Association (IMPA) number

It is important to understand that each of these potential identification numbers may vary, depending on the specific equipment aboard a commercial ship. Spares suppliers often require additional information to properly identify a part, such as engine serial numbers, equipment model designation, or machinery manual details. Maintaining a spares catalog requires thorough knowledge of the details needed to properly identify the parts.

Supply Chain Management

Ships often carry an assortment of spares aboard the vessel. Typically, these spares are parts that commonly fail or are consumed in use. Unfortunately, it is impossible to anticipate every type of equipment breakdown, and spares must be procured from vendors. It is this supply chain that can make or break a voyage; any interruption in the supply chain can result in costly delays as well as shipboard hazards that put vessels and their crews in danger.

Supply chain management is a crucial step of the spares management process. It consists of:

• Identifying parts needed for replacement.
• Working with suppliers and vendors.
• Balancing costs and lead times for spares procurement.

Commercial shipping firms often work with trusted vendors under postpaid or pre-paid agreements. This can help streamline the spares procurement process while maintaining control over expenses. As a risk management practice, focusing on smooth supply chain operations supports the protections afforded by commercial marine insurance.

Managing Spares Costs

Obtaining required parts for repair or replacement is a complex process. At every step in the chain, unexpected costs can quickly overrun budgets. Expenses can often vary depending on vendor and transportation charges. For example, engine bearings purchased from a European vendor may include high taxes and transportation expenses, while the same parts ordered from an Asian vendor can have lower tax rates and cheaper transportation fees. It is imperative that shipping companies work with vendors that are positioned to deliver parts at cost-effective rates.

Purchasing spares in bulk orders may also save money. This method is often used for common parts that are expected to fail or need replacement during shipping operations. The concept of “economy of scale” in bulk purchase orders makes financial sense and helps hedge against supply chain risks.

Commercial marine insurance is the backbone of risk management in the shipping industry. With this valuable insurance and with logical spares management practices, commercial shipping entities can continue to perform vital transportation operations while avoiding delays and cost overruns.

About Merrimac Marine Insurance

At Merrimac Marine, we are dedicated to providing insurance for the marine industry to protect your clients’ business and assets. For more information about our products and programs, contact our specialists today at (800) 681-1998.