Address by Mr Craig Deamer - Montville Australia
To the Agribusiness Association of Australia & Agriculture, Fisheries & Forestry Australia
Advances in Agribusiness Chain Management - Chains of Success Briefings
It sounds trite but there can be no doubt that the north Asian markets are changing. Genuine market forces are pushing their way into the marketplace and companies are finding that they have to start competing for capital from banking systems that are only now starting to apply rational lending policies. In this environment, management is becoming serious about cost, profit growth and manageable risk rather than simply aiming to boost market share. Traditional structures and relationships are being eroded. In their place, we are seeing the emergence of chains that are more streamlined, more efficient and as a consequence better able to deliver quality and consistency at better pricing than has been the case. These changes are fuelling a wholesale change in business attitudes.
It is the emergence of these chains and what that means for Australian shippers that I wish to focus on today; what Australian shippers can do to secure their place in these changing times within these chains or indeed to form their own chains, how to manage these chains for their growth and how to grow these chains through whole chain approaches.
The bulk of this will be specifically in regards to the Japanese market by virtue of the fact that this is the market with which I am the most familiar. I make no apologies for that; Japan is the world's second largest economy, it accounts for 20% of global GDP and over 70% of East Asian GDP. For more than thirty years, it has been Australia's largest single export market. It is very much the centre court of the Asian markets. To be able to be a success there can usually be equated with the ability to be a success anywhere. I would point out though, that this focus on Japan should not be interpreted as my being an apologist for Japan or indeed Japanese business process and practice.
If you are doing business in Japan or intending to do business in Japan then I could never adequately warn you. No matter whom you do business with, no matter how deep your relationship with the Partner Company is to take care. I have seen all manner of companies come down in the past year because of problems that they have had with their own customers. There is as much deceit and sharp practice in Japan as there is anywhere else in the world. Credit reports do not come cheap but they can be worth their weight in gold. When you get a new query or substantial order, Teikoku data bank or Tokyo agency should be amongst your first ports of call. It was not that long ago that Yamaichi securities and long term credit bank were highly respected names in corporate Japan. Constant checking of all customers credit status is sop for Japanese companies in Japan; it should be a standard business practice for all exporters as well. (Updating yearly)
At this point, it is probably of some use to establish what is meant by the term supply chain. Simply it is the chain and linkages that extends from the producer of a product all the way through to the end customer, no matter what changes and processes that may occur to the product during that chain. Building supply chain awareness is to know intimately what is happening to your product all the way through to the end customer who is handling it and what they are doing with it. Is value being added along the chain commensurate with the margin that is being charged or is value being subtracted? How is your immediate customer handling changes in market structure? Knowledge throughout the chain is sop for Japanese companies in Japan; it should be sop for exporters as well
This brings in the need for intelligent informed and detailed market information. Investigating your market needs constant data; if possible from independent sources if that is not within your reach then from as wide a variety of sources as possible. Constant data, not simply a once a year update but a constant drip of information. Look behind the news for details that may be missing from initial reports, do not neglect any shred of information. Again, this is the approach that all successful Japanese business people adopt. Employ similar strategies for similar success; neglect at your peril.
The key is to know whom you are dealing with at all times. The past five years prior to 1998 I have been involved in the foodex show in Tokyo. It has never ceased to amaze me when the people I have been exhibiting with; normal, sensible focused shippers throw all shred of caution to the wind. Any one can come up and show moderate interest in a product, the discussion turns serious and samples are passed over. Never once does the seller ask this new contact who they are what they do and how they are going to use the product, beyond any sort of superficial chat. These are all vital points because that person is going to be the face of your product in that market if they buy it. They will be your sales representatives in Japan. You do not hire a new sales rep in the Australian market without considerable checking and comparison; why do it in Japan?
Ask yourself at all times what is happening to your product not just at the key points in the chain but at the linkages as well. Is your importer using an inappropriate customs agent and freight receiver? Is your importer cutting cost by using an ambient temperature truck to deliver product from the port to warehouse. If you have product with specific keeping requirements are these being adhered to throughout the chain? If not then the problem will not impact on your customer or importer who may be causing the problem, it will impact on you and your brand. Next time you go to Japan time your trip to arrive with your own product. Go through the whole system with it, know intimately what changes are being forced on to your product, what stresses it is going through and what attributes are helping it to survive.
This exposure to the whole chain will also give you the opportunity to see where you can do additional business. Especially in agricultural products look to forming alliances with the suppliers whom naturally complement you, coming before and after you in seasonal timing. Work with other like companies in your own environment to broaden and deepen your supply capability. Look at your customer and see what there is that you can do for them in the way of easing their business, streamlining their operations. Taking on their role in sourcing in order to secure constant support for your own activities.
Union and Southern Fresh.
Prior to committing to any relationship, no matter how trivial look at how the product is going to be used. It only takes one accident to bring about public liability claims. Make sure that they do not come about as a result of your inattention.
Bento
This shows up the importance of sharing information throughout the chain. Start to cooperate throughout the supply chain, stop competing with your customers. If you are unable to trust your importer or customer sufficiently with fully shared information then perhaps you are working with the wrong company. At the end of the day, what matters the most is how well your product is making it to the end user. If quality cannot be lifted to a point adequate to deal with this because of some flaw in the supply chain then find out where the flaw is and rectify it.
Although I have stressed Japan, do not neglect the rest of north Asia. If you are focused on export then you need a degree of flexibility in your markets, the ability to switch product around when demand and circumstances require it. As you evolve these markets then your need for supplies will deepen. No matter what you need always have more on hand at any one time than you have committed in advance to a market.
I can not count the number of times that shippers of fresh produce have boasted to me that they only ship the best; if the quality is not there then they will not ship. That is often the main claim that many shippers make to quality. That is fine and good but where does it leave the end customer who was dependent upon contracted delivery? If the occasion arises that at any stage you do not have the quality goods required to complete a delivery then you need to be looking for alternate supplies that you can feel confident of being able to source as and when required. That would lay the seeds for the beginning of a network that is the basis for the foundation of a focused supply chain.
As a buyer if some one said to me that they would only supply the best quality and would prefer to skip a week in the case of something going wrong with quality then that was a sign to start looking for a new supplier. By the same token, if you indicate a date of delivery then stick to it. A first load will be departing on November 23 means just that and not December 3 because there was some hold up. Force majeure is an excuse for incapability to plan contingently. Always remember that average suppliers are expendable. Good switched on capable suppliers are absolutely vital.
Buyers are demanding far greater degrees of reliability from their suppliers. Those that can deliver are the ones that buyers are seeking out and looking to form more formalized arrangements with.
Botman
I would say unequivocally that this is a transformation that many Australian companies are capable of making once they understand and accept the level of commitment that is required by the Japanese market. Once they can do this then there is little problem in finding the ideal partner who will make the commitment to building a winning supply chain with you. Especially in the current business environment in Japan.
In the brief time that I have left, I would simply touch upon the book chains of success and a mention of the Agri Chain Competence Foundation. This is an independent agency that works under contract to the Dutch govt. Through this organisation the government aims at maintaining and building on the countries competitive advantage in supply chain management. It runs pilot projects where at least two companies forming successive links in a supply chain work together with a research institute to improve chain coordination.
The scheme is divided into seven agricultural sectors and the pilot projects are run under the auspices of sector teams who ensure that the pilot project serves to strengthen the sector as a whole.
