FARMERS from across the WA grainbelt have heard from the CBH Group’s boss about how the co-operative plans to reduce supply chain costs to remain competitive against the rising threat of the Black Sea, at grower group meetings across the State.
Over the past two weeks the bulk handler’s chief executive officer, Jimmy Wilson, has toured Mingenew, Dalwallinu, Green Range, Esperance, Moorine Rock and Kukerin, sharing CBH’s plans to drive down “paddock to customer” costs.
According to CBH figures, it costs about $248 a tonne for WA grain to reach Indonesian customers.
This includes on-farm costs, as well as land-bound and seaborne logistics.
Meantime, despite having to travel a further distance, it costs $51/t less for Ukrainian grain to travel to Indonesia at $196/t, giving Ukrainian exporters a significant competitive edge.
Mr Wilson said this was having a significant impact on WA’s harvest shipping.
“We’re seeing less grain moving out of WA, we’re seeing less harvest shipping and potentially a larger carry-over this year,” Mr Wilson said.
“The customer has optionality, they can decide whether they want to take that grain or not and so low and behold they’re sort of going down this end of the scale to the cheaper grains – they call it filler wheat – but there’s quite a broad spectrum in that area.”
The former BHP iron ore boss said CBH would focus on the “relentless pursuit of the basics” to lower costs and increase value within the outbound logistical chain.
Mr Wilson said several structural changes within the business had already been initiated to drive efficiencies and better define management roles.
“The structure that you had before was Operations that used to look after the planning side of the network, the building side of the network and the operating side of the network,” Mr Wilson said.
“What we’ve done is we’ve split up planning, building and operating and we put that under three general managers, as opposed to just one general manager who was trying to cover what was a very large scope.”
Mr Wilson said the delivery of the co-operative’s $750 million Network Strategy was another major area of focus.
Last harvest, 123 CBH receival sites were open across the four port zones, down from 142 in the 2016-17 harvest.
Of the 13.2 million tonnes received through the system last harvest, 96 per cent of grain was delivered to the 100 Network Strategy sites.
More than two thirds of the grain was captured in the largest 30 sites, with 22pc in the next 30 sites and 12pc in the remaining 63 sites.
The CBH Group’s general manager of operations David Capper said the co-operative was working to strike the right balance while delivering the Network Strategy.
Mr Capper said it was important receival sites were not closed too soon, before capacity under the Network Strategy sites was increased.
“We know we need to trend towards efficiency and move towards the Network Strategy but at the same time we’re very cognisant that it’s not built yet – we’ve got 4mt of storage to build and throughput gains to grab,” Mr Capper said.
“There’s a real balance there, to drive for efficiency but still provide the service while we’re building those 100 sites to where they need to be.”
With the number of receival sites reducing over time Mr Wilson said it would be impossible to please everyone.
He said while inevitably some growers would have to travel further to deliver grain as more sites closed, overall costs could be reduced by improving efficiencies throughout the network, which would ultimately be returned to growers.
“At the end of the day we’ve got to look at the average grower and that’s what we’ve got to focus on.
“If we are able to be successful at let’s say reducing our total costs by 25pc, everyone will be getting a benefit – some people will be getting a slightly less benefit than others – but at the end of the day everyone will get a benefit.
“What we aspire is to reduce the total costs quite dramatically, that is the whole idea behind the transformation.”
