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Murray Goulburn Co-Operative Co Limited

The Organisation

Murray Goulburn is a dairy co-operative with over 3,200 farmer-supplier members. It is Australia's largest food exporter, with an export volume of 240,000 tonnes in 1996-97.

Total turnover is in excess of $1 billion, of which export revenues accounted for $582 million in 1995-96. Export growth is projected to continue at 10-15 per cent per annum, based on international marketing strategies and developing business relationships with overseas partners. An integral part of achieving this goal is to manage the supply chain more effectively.

Cheese exports from Australia are expected to approximately double by the year 2004. In catering for this market opportunity, Murray Goulburn has spent over $50 million in establishing a state-of- the-art cheese making plant at Cobram, Victoria, and has undertaken a significant upgrade of the chilled warehouse and distribution centre, also at Cobram.

The management and operation of its supply chain is a key area where Murray Goulburn's international competitive position can be improved.

The Project

The project focussed on the supply chain for cheese exported to overseas markets, of which Japan is the world's largest importer. Australia is one of the key exporters, supplying over 40%per cent of the Japanese market. This market continues to grow at over 6 per cent per year.

Some unique features and challenges of Murray Goulburn's supply chain include:

• cheese may be held in storage for in excess of 12 months;
• the Japanese market is fickle in regard to flavour development;
• storage conditions, ie temperature and handling, affect substantially the life and product characteristics of cheese;
• different customers have different requirements, which means that cheese exports must be tracked by their respective batch.
  
  The project objectives included:
  
  
• reduction of production and inventory costs on a per tonne basis on cheese to export markets;
• introduction of electronic trading with partners and those involved in the supply chain;
• introduction of a distribution system which reduces costs while improving product handling processes throughout the chain;
• developing and implementing an ordering, delivery and payment processing system which reduces administrative costs and components.

Project Methodology

The key to developing supply chain partnerships was the use of workshops, both internally and with external partners. For this purpose, a project team was created, consisting of several specialist consultants and a dedicated staff group at Murray Goulburn. These workshops helped provide a focus and framework for a number of discrete projects, on some of which Murray Goulburn had already embarked.

Visits were made to Murray Goulburn locations and discussions held with supply chain partners. A wish list' of improvements was compiled and discussed, and priorities agreed, ensuring the commitment of all parties.

A review was carried out of the paperwork flows associated with exports, and of the internal supporting processes. These reviews identified opportunities for improvement, on which work is now underway.

A critical review was made of a number of areas of the supply chain processes, including:

• information flow (electronic, written and verbal) to external parties;
• international adoption of real time electronic information flows;
• information reporting; • product traceability;
• sales forecasting for production scheduling;
• processing of export documentation;
• internal information flows;
• storage and transport related activities.

These process changes were augmented by a substantial effort towards cultural change, focussing on customer needs, distribution channel systems and skills enhancement.

Project Benefits and Outcomes

The project has provided many benefits for the supply chain partners. For Murray Goulburn, it has resulted in:

• a substantial reduction in inventory holding costs of about 7 per cent, with work in place to ensure continuing reductions;
• reductions in transport costs; • improved supply chain performance accommodating a 20 per cent increase in export cheese sales;
• improved quality cheese through improved procedures along the supply chain;
• improved information availability and accuracy on maturing cheese stocks, as measured by lead times to answer sales enquiries;
• introduction of key performance indicators to monitor ongoing performance.

For Murray Goulburn's supply chain partners, the project acted as a catalyst for the adoption of E- commerce, thereby improving information flows and reducing costs. The project has been a success in the creation of a catalytic group within Murray Goulburn to focus on achieving improvements in the operation of its supply chain. It has also provided management with an understanding on how to use supply chain management as a competitive edge.

Murray Goulburn Co-operative Co Limited