Nufarm Ltd (‘Nufarm’) is one of the largest agricultural companies in Australia. Its major ‘East-West Corridor’ linehaul transport is operated by third party logistics service organizations. The services are provided across six key transport nodes in the Nufarm supply chain and 10 defined routes. Total Nufarm stock transfers amount to approximately 17,000 annually.
In line with Nufarm’s rapid growth, the linehaul transport category grew exponentially. Nufarm deployed the Freight Capacity Auction solution to renegotiate its ongoing Linehaul Transport supply for a period up to three years, in a manner that achieves not just a low cost of ownership but a balance of price and services outcomes from appropriately qualified Linehaul Transport suppliers.
Nufarm pursued a number of objectives for the Linehaul Transport initiative, including:
- Reduced tender cycle time
- Optimal supply configuration
- Address spend leakage by reducing ‘non-approved’ supplier expenditure
Nufarm was adamant that it had to establish certainty of ongoing Linehaul Transport supply across its Australasian operations – ensuring ‘value based’ procurement outcomes are achieved (rather than simply lowest cost).
‘Non-price’ dimensions such as process optimization, qualifications, vehicle condition, electronic invoicing, RFID tracking ability, reporting, fleet size and reference customers had to be taken into account as they all contribute to Nufarm’s total cost of ownership.
- The first round of written tender responses resulted in a saving of 2.5%
- Applying the Freight Auction platform compressed costs by an additional 32%
- Nufarm purchased dedicated hardware for the Freight auction.
- Tradeslot has since moved the platform to Microsoft’s Windows® AZURE™ offering scalability and reliability at low cost to the end customer
- Tradeslot configured the auction platform to match Nufarm’s requirements – particularly around the weighting of non-price factors and the ability to combine lots (e.g. inbound / outbound combinations) to create maximum efficiency for the suppliers and in turn for Nufarm.
- All bidders were trained online and over the phone in the use of the auction platform.
- Tradeslot managed the live auctions – including the help desk function and post-event reports.
Nufarm invited transport service providers to submit written quotes in order to qualify for the auction and to baseline the auction event.
An auction event is typically run in less than a day, leaving suppliers sufficient time to respond to the market feedback.
Bidder specific non-price factures were factored into the bids:
- Reliability; Safety; Quality of Drivers
- Communication / Relationship
- Quality of Subcontractors
- Fleet; Incumbency; Availability
- Delivery Lead Times
- Invoicing; Reporting
- Product Quality on Delivery
At the conclusion of the auction, participants receive confirmation of what services have been awarded to them – as a firm commitment with no further negotiation required.
Business Outcome for Our Client
The introduction of a market based system to procure freight has not only led to dramatic cost advantages. More importantly, it strengthened relationship and capability factors that all too often are sidelined when the negotiation get bogged down on price.
By factoring these non-price elements into the auction, suppliers in fact have re-assurance that their investment in service, quality, invoicing accuracy etc. is recognized and rewarded adequately.