Procurement in Practice — Handling unique sourcing complexities at Carnival Cruise Line

Spend Matters is running a series of interviews with senior procurement and supply chain practitioners to highlight and share common experiences with their peers.

We recently had the pleasure to talk to a very experienced CPO who is at the helm (no pun intended) of a procurement organization whose supply base is probably the most diverse of any industry, not to mention large and complex.

Norbert Dean is VP, Strategic Sourcing, Supply Chain and Site Services at Carnival Cruise Line (CCL) — the largest cruise line in the world in terms of guests carried. In this industry, one can only imagine the logistical requirements of sourcing for, and delivering to, a vast and ever-moving target. It takes preparedness and, of course, experience. He was happy to share some of his experiences and advice with us (notwithstanding all the other concerns that a CPO deals with daily).

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Dean came to CCL having been CPO and head of shared services at SeaWorld Parks & Entertainment, and Director of Sourcing and Procurement for The Walt Disney Company, so he was no stranger to sourcing for a vast range of supplies.

“The interesting thing about Walt Disney World,” he told us, “is its sheer size. It covers about 50 square miles and has its own utility infrastructure, so it was like sourcing for a whole city. The diversity of products included anything from hamburgers to fine wine to electronics to high-end shows and entertainment.”

So moving into the cruise line industry meant little was lost in translation.

Founded in 1972, CCL is part of a family of companies owned by Carnival Corporation. It is the largest of Carnival’s nine separate brands, operating 24 ships departing from every coast in the United States to more than 700 ports across the globe. Dean (with his team of about 70 people — not quite at full strength since the Covid pandemic) has responsibility for all ships’ sourcing, procurement, delivery, transportation and warehousing activity, including facilities and site services at Miami HQ. And because a cruise features entertainment day and night, casual and elegant dining, gathering venues both indoors and out, and has guests on board around the world all of the time, procurement must be able to anticipate the needs of the guest, those of the crew and those of the ship, and respond rapidly.

Being a 24/7 operation is challenging enough, but stepping back and looking at it from an ongoing sourcing perspective is when things get really interesting.

“The difference between this industry and others, is that people stay on board,” Dean said. “So it’s rather like sourcing for a giant hotel in terms of the breadth of products and services required. That might be the combination of food and beverages, the medical items and equipment, and especially PPE right now, the consumables people use every day, the hotel goods, or the cleaning products and services. And then you have to factor in the quarterly and annual necessities, like changing out the TVs and mattresses — it’s a year-round operation.”

Some unique sourcing complexities

The importance of timing

Beneath the breadth of the supply base needed for the smooth operation of the cruise industry, lies another sourcing and delivery complexity that is not on the radar of most other industries, including hospitality — ships move.

“It’s a tricky business,” Dean said. “When it comes to delivery times for all goods and services, they must be on time, because when the ship leaves, it leaves. There is no room for lateness. If a supplier requests a day’s, or even an hour’s grace, the answer has to be ‘no’ because the ship won’t be there. A hotel or warehouse will be, but a ship won’t. So when I tell a supplier I need items by a certain time, I really mean I need them by that time. The alternative to a missed deadline means utilizing another option, and that of course could be expensive and environmentally unfriendly, especially given that we have many ships at different ports all over the world, from The Bahamas, to Europe to Australia.”

“The majority of our suppliers meet this need and understand it is critical. We do build this expectation into our agreements, and it is a topic of ongoing discussion with our vendors. We work very collaboratively with our internal stakeholders and supply base to minimize any disruption.

“From a sourcing perspective,” he continued, “visibility is critical. We need to know where the ships are located all of the time, and how we can coordinate delivery to those destinations. Fortunately, as a company, we do have great technology and a large operations center to monitor our ships in transit so that we can react to changes at a moment’s notice, which is imperative for our industry.”

(Read our analyst’s perspective on mission-critical supplies: who holds the inventory and who pays for lateness.)

Having local vendors, everywhere

“When it comes to the vendor base, it’s just as complex,” he said. “For fresh produce, which could be needed anywhere in the world, we may use national or local vendors. But a major machine part may need to go through the OEM, as clearly there are only a small number of manufacturers that build ships. It all adds to the sourcing dilemma and the way in which you have to engage with a vendor to get the parts you need whenever and wherever you need them.

“Now, we don’t have the luxury of just going to a new vendor and asking them to deliver to a port; they need special credentials and documents. Where a supplier doesn’t have those, you have to be a step ahead and give them enough time to coordinate. And what can go directly to a port and what should come to our warehouse, is another part of the sourcing equation. You can only have so many suppliers at a port in order to get them all through in the time required. This is different from most transportation and delivery issues.

“Sometimes you have a small vendor base with a large reach, and sometimes you have a large vendor base with a small reach. So you have to be fleet-of-foot in the way you look at it from a sourcing point of view to make sure your strategies line up with the needs of the business as they change.”

Extra-ordinary project strategy

One more thing that’s interesting about this business that differentiates it from others, is that ships require costly down time in dry docks.

“Ships might need a large redesign or a major refurbishment project,” Dean said. “And we aren’t just talking about a carpet refit; it could be an entire refurbishment or changing out major pieces of equipment. But when you pull those ships out, you have to get them back at sea as quickly as possible, because ships don’t generate revenue when they are empty in a shipyard. So in order to complete a large amount of work over very short periods of time, it requires good coordination and collaboration with our suppliers. I’ve worked on some large construction projects in my career, but none quite like dry docks in terms of urgency and timeframes.”

For this, he explains that the strategy is both complicated and simple.

“That sounds contradictory,” Dean said, “but it’s a strategy that hasn’t really changed over the years. You look at your supply base and you work out who are your critical suppliers, and your not-so-critical suppliers, and then you develop your sourcing strategy based on priority of goods and scarcity of the relevant supplier in the marketplace.

“But an important part of our strategy, owing to the need for speed and responsiveness, is openness and trust. It takes a lot to really open up to a supplier about what’s going on in your business, then ask them to be frank about what’s going on in theirs. Only then can you work out how to meet each other midway, in a way that benefits both parties. You can’t do that with all suppliers, but obviously, in areas where it’s critical, it is essential.”

The role of technology

Just how much of a role can procurement technology realistically play in helping to achieve all of these challenges, we asked him.

“The more we can lean on tech the better,” he said. “I believe we are all in just the early stages of our digital journey as it relates to S2P — a key component of it is complete visibility.

“Take an example from our industry: You are on a ship and a major part is needed. You place an order and you need that part tomorrow. That order comes to my team, and we rush to get it to the location. To do that my team needs to have the same visibility we have come to expect from buying at home: to order in the office, understand when that item is dispatched, where it is in transit and exactly when it’s going to arrive. This way you can start to rely on on-time delivery. It’s when you don’t have that reliability that people start to hoard (as we’ve seen with the PPE crisis) because they simply cannot be without that item. So the more visibility that tech can bring, to streamline the process, the more we gain confidence, the more we lean on tech, the more its use accelerates. And I believe the impact of tech on the supply chain is going to become more critical in the coming months.”

If he has one piece of advice on the subject of the digitization journey, it is this: “You need to look at the entire process. Being responsible for one part of the process, like ordering for example, doesn’t mean you automate just that part. You need to look at how one process will affect operations down the line, like payables — a process that is often overlooked — so that all processes work together. Then you make the complete process visible and more efficient.”

“The other thing I have learned as a head of procurement, is to consider your department’s relevance to the business as a whole. To be successful, to add tangible value to your organization, it’s imperative that you gain a deep understanding of and appreciation for the needs of the business and how you are going to fulfill them. While your strategy may be fantastic, without mapping the strategy to the overall needs of the business it will fall apart. So sit down with the finance operation, the legal team and the key operations stakeholders, and really understand what they need — then build your strategy around them. Because this approach will allow you to be successful, more relevant to your organization and the trusted advisor you need to be.”

Read more of Spend Matters’ coverage for procurement practitioners here.