Cutting costs from the grain chain

When Openfield enlisted global logistics expert DHL to improve the efficiency of its grain transport around the country, it became the first UK grain business to outsource its haulage scheduling.

The move, Openfield says, will allow it to shift the same grain tonnage with 10% fewer road miles – a saving that it promises will be passed back to farmers.

Central to the success of the logistical collaboration is the access Openfield now has to DHL’s advanced computerised logistics systems; a similar version of the one it uses for its worldwide delivery business. The system uses order information provided by regional offices to automatically select the most suitable haulier and plan the best route between collection and drop-off points, taking into account backloads to maximise the use of vehicles on the road.

“Logistics are now our biggest spend, at more than £26m, but we would not have been able to get at the efficiency savings without investing in a new logistics hub. It would have been far too difficult and costly to do ourselves,” Openfield chief executive Tim Davies says.

Openfield runs a fleet of 30 of its own distinct orange-coloured vehicles, but has agreements with more than 230 independent hauliers and typically uses 100-110 different ones each day, varying from one-man owner-driver outfits to large operators running 70-80 trucks.

“Initially we budgeted on doing 450 grain movements a day, but actually we have been achieving more than 500 and peaked at 823 loads a day in January 2009.”

A comparison of the 12 months to 17 November 2008 (as Grainfarmers/Centaur) with the period since then (as Openfield) found that average mileage per load fell by 10.2% and the company forecasts a reduction in annual mileage of 16.2% for its fleet. The firm has also managed to do 24% more loads per shift and fuel economy (mpg) has improved by 4.6% over the same period. Together the savings equate to an estimated annual carbon saving of 2500t. “We are now working with a number of hauliers to extend the reach of this beyond our own fleet,” says Openfield director of operations Jim Hotchin.

“If we can do more loads in a week it makes a lot of sense. About one-third of the costs of running a fleet are fixed overheads, one-third is fuel costs and the other third is the driver. We’re already paying overheads and the driver, so if we can do more loads, it’s really only the extra fuel we’re paying for.”


Better traceability

Alongside the cost savings, the DHL system also records information about each load and makes it available through a web-based system.

“We scan and electronically process all delivery documents, such as weighbridge tickets, collection notes, passports and load sheets,” Mr Hotchin says. “A significant benefit of this is the potential improvement in speed if we ever needed to access documents for product traceability. In a product recall situation, previously it would have taken hours to find all the information, but now we can do it in minutes from anywhere with web access.”

Recording load information also allows the co-op to identify the main collection and delivery bottlenecks. “One failing of the sector until now is that it doesn’t measure how it’s performing very well. We’ve now got a lot more visibility through the chain,” Mr Hotchin says.

Time on farm

The average time lorries spent on farm in the first three months of 2009 was 47 minutes, with the best down to 15-20 minutes and the worst up to three hours. The average time at delivery was one hour 17 minutes, although this also varied significantly, from 36 minutes to more than three hours.

“This is an overall average of just over two hours a load,” Mr Davies says. “It costs the supply chain £40 a load more than those ‘best in class’ who can load/unload in an hour. If we can halve turn-around times, we could save £22,000 a day.”

Reasons for delays vary from farm to farm, with poor infrastructure (eg, store type, auger capacity, etc) and poor communication between hauliers and farmers cited as some of the most important factors. “Cancellations on the day and rejections are two of the top reasons why we’re not getting better performance,” Mr Hotchin adds.

“By focusing on the key areas in the supply chain in a collaborative fashion we believe we can unlock a significant part of this waste to the benefit of farmers and hauliers,” Mr Davies says.

  • Are you a farmer supplying Openfield? Tell us what you think about the new business at our forums

How it works

• Openfield regional offices pass order details to DHL based at the “control tower” at Openfield’s Honey Pot Lane site in Rutland

• A computerised “order optimisation system” is updated every hour

• After 2pm, the system plans routes and allocates loads to most appropriate hauliers (either Openfield hauliers or contracted hauliers)

• Each haulier receives a manifest with collection/delivery details

• Carrier calls farmer to confirm collection date/time

• After collection/delivery haulier returns manifest to Openfield with collection ticket

• All documents are scanned and data entered into recording system

Crops view

The tie-up between Openfield and DHL is an exciting first for UK grain businesses. There’s little doubt that such logistical expertise can help address inefficiencies and identify areas for improvement. But, the 7,000 farmers working with Openfield will hope these savings are passed back down the chain and don’t vanish into a mysterious black hole. Take an average haulage cost of £6/t, a 10% saving is worth about 60p on every tonne. The real success will be in whether this saving makes its way back to the farmgate grain price.

Improving supply chain efficiency

The HGCA supply chain partnership initiative is designed to help improve efficiency across the cereals supply chain. Below are the key findings from a recent round-table discussion on transport in cereals sector:

• Poor communication usually main source of problems

• Don’t rely on mobile phones alone – many rural areas are in signal black spots

• Make sure everyone knows what dates/ times farms cannot load

• Merchants must give hauliers enough notice to plan loads

• In turn, hauliers must notify farmer in advance and give a specific arrival time on the day of collection

• Merchants and hauliers need more information about how long it takes to load on farms, including loading method (auger, bucket, etc)

• If a problem occurs, farmers, hauliers, merchants and end-users need to be kept informed – rejections and missed loads can have knock-on effects throughout the chain

• Accurate record keeping needed – more than notes on scraps of paper

• Click here for more on the supply chain