In his book Logistics and Supply Chain Management, the Emeritus professor of marketing and logistics at Cranfield School, Martin Christopher, makes a comment about traditional supply chain management (SCM) that has since resonated across the business world: "leading-edge companies have recognised that the real competition is not company against company, but rather supply chain against supply chain".
Although Christopher’s comment, made back in 1992, was designed to address a general change in business management – that companies no longer compete as autonomous entities – its relevance to the cruise industry today couldn’t be any greater. While cruise companies compete over a broad range of items – from cruise ships to on-board provisions and websites – it remains rare, despite the size of the market, to find an approach to supply chains that could be described as genuinely holistic.
If there was ever a time to change this, it’s now. For operators and suppliers, optimising supply chains has always been fundamental business practice. Whether it’s organising transport services at ports, or smooth interaction with tourists agencies and cruise terminals, establishing strong levels of cooperation with suppliers is crucial for customer satisfaction and retention.
But as the industry develops new complexities, doing this efficiently has become even more important. In the past, the cruise industry was based around a small number of key areas, mainly in the Mediterranean and Caribbean, and was attractive to a limited subset of the population: the old and the wealthy.
As we all know, today the sector has changed beyond recognition. Cruising is now a mass-marketed product, and as competition between operators increases, the industry has become more international, always searching further afield for new destinations and markets.
Holding the chain together
For consumers, this means more choice than ever before, but for operators and vendors, it means increasingly complex supply chains. Working with vendors at established ports in Europe can be complex enough; doing it at locations as remote as the Northwest Passage – an area 805km north of the Arctic Circle that Crystal Cruises will be touring next year – is another world entirely.
"Logistics is becoming more and more complex, as well as being expensive because of different routes and circulations around the world," explains Crystal Cruises vice-president Toni Neumeister. "This has been made even more difficult due to certain geopolitical situations we are seeing right now."
Of course, cruise lines don’t need to reach locations quite as obscure as the Northwest Passage to see the importance of proper supply chain management. Any operator working on a global basis now needs to develop an international supply chain that can adapt to the safety and security requirements of individual areas.
Last year, demonstrating how operators are stepping up their game, Carnival Corporation brought together 23 different purchasing and logistics executives from brands across the industry to discuss the complex issue. Carnival Corporation’s vice-president of supply chain management, John Meszaros, described the company’s plans as a "vision statement" and "road map" for better supply chain management.
"Our vision is to have a global master plan," he explained. "We will integrate where the ships are sailing and sourcing, and acknowledge that some trade-offs may be made to the practical aspects of ship operations and for economic sustainability. But ultimately, it is about elevating the guest experience. Our goal is to better align our resources, leverage our scale, work with our culinary teams and integrate our processes on a global scale. This meeting was the first step in learning how we can work as a single team."
It’s certainly a bold plan. A big part of the trick, with so many exotic new locations, is striking the right balance between local and centralised solutions. For those in charge of supply chain management, having a centralised system that offers full visibility over purchasing activity from destination to destination is particularly important.
Independent trading platforms like ShipServ TradeNet – used by Crystal – or MXP purchasing system – used by Holland America – can provide a useful way of monitoring suppliers. The software tools currently available to cruise operators, however, lack the necessary customisation, and as so many in the industry point out, modern IT solutions will only go so far.
"You need local knowledge of destinations, and we are very reliant on our supply chain partners: vendors, carriers and transport companies," explains Alvin Dennis, former VP of purchasing and logistics at Norwegian Cruise Line. "Mainly, at Norwegian, SCM processes are centrally planned, but you must also work with ships on local operations teams; it is very much a team effort. The management is centralised, but you can still make local purchases, while ensuring that quality expectations are met."
Giorgio Zagami, corporate procurement manager at MSC Cruises, expands. "It is easier to work with partners, but we will also work with new suppliers," he says, "and for that you need a process through which to qualify them, especially in new locations. You need a very efficient process in terms of exchanging information, but you also have to visit suppliers in person."
A trial to meet high demands
As well as offering new locations, cruise operators have to cater for a client base that has become more demanding than ever, particularly when it comes to food and beverages. A recent consumer survey published by CLIA found that over half of regular cruisers now view dining as the central aspect of their holiday. For cruise ships keen to reach these consumers, offering more dining options and interesting external franchises has become paramount.
Norwegian Cruise Line is a key case to take note of. Earlier this year, the operator revealed plans for a number of exciting new partnerships, involving leading figures in dining, beverage and entertainment. Three famous Miami restaurateurs and an award-winning Iron Chef are being brought in for its Norwegian Escape, with the Wynmood Brewing Company and the Michael Mondavi Family providing beverages.
Like most other aspects of the cruise supply chain, managing food and beverage operations this complex requires striking the right balance between centralised control and micromanagement. Responsibilities are split between staff at headquarters and and staff on board the vessel.
"From farm to fork, the responsibility lies with the main onshore office," Enrico Borniotto, CEO of MSC Italcatering, explains, "Service and presentation flexibility lies with our on-board staff, whose main concern is the satisfaction of our guests. The secret is a combination of good planning, great professionalism, strong cooperation with suppliers and state-of-the-art conservation equipment for dry, chilled and frozen supplies. All these elements allow cruise companies not only to compete with, but also to surpass, onshore hotels, especially when you consider the hardware of our galleys."
Find your balance
For Disney Cruise Line, this balance between the central and local – from sourcing and procurement to quality control – is also deeply important.
"Our shoreside food and beverage teams provide consistency," says Anthony Wills, director of food and beverage at Disney Cruise Line. "Our products are aligned for a consistent experience. Sometimes that may mean sourcing in multiple regions, but global sourcing and the worldwide availability of products have made it easier than ever before to find supplies both locally and internationally."
Whatever aspect of the supply chain an operator is dealing with, in an industry as service-driven as cruising, having the right partner with the right level of socialisation counts. At the same time, without competition among different vendors across the supply chain, complacency may result and customer satisfaction may be damaged.
Finding that balance, while dealing with the additional complexities of new locations and demanding customers, can seem like a burden, but when the prize at the end is in sight – the prize being more satisfied customers – operators are finding it’s well worth the effort.
