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Grain chain pours one million a week down the drain

New Report Highlights Opportunities for Farmers, Processors & Retailers The UK cereals industry wastes almost £1 million a week through inefficiency and must embrace new thinking if it is to have a profitable future, according to a new report published today (Friday 13 April 2007).

The report, Against the Grain, was commissioned by farmer-owned grain marketing business Centaur Grain and prepared by English Farming & Food Partnerships (EFFP). It identifies gross inefficiencies within the cereal supply chain and for the first time quantifies the annual cost to the industry as at least £40 million, including:

* Rejected
loads: £3m

* Unnecessary waiting
times: £15m

* Fragmented haulage
industry: £15m

* Inefficient storage
strategies: £1.5m – £3m

* Unnecessary multiple
testing: £2m

Because of the structure of the industry, it is the farmers who bear the bulk of these costs, which equate to around £2 per tonne.

The logistics part of the chain is singled out as the best opportunity for improvement, as it makes up the bulk of the £40m inefficiencies in the chain.

Malcolm Parkinson, managing director of Centaur Grain says: “Blinkered vision is denying the cereals industry a potential £40m windfall. An empty lorry can pass by the end of a farm, because there is no culture of collaboration, leading to huge wastage. The industry urgently needs a constructive dialogue on how this can be improved.”

Overall, the report concludes that:

It is time to break down the silos

* Bridging the chasm between best practice and current cereals industry practice requires a fundamental change in business culture, strategic vision and industry structure. Senior managers must break down the silos within and between businesses to be competitive and profitable in the new era

Growers have the chance to grow

* Arable farmers can increase their worth by identifying ways of adding value to or differentiating manufacturers’ brands – through growing crops that satisfy consumer interest in ethical or environmental concerns, for example. To do this they must first improve their understanding of current and emerging consumer trends and then provide manufacturers with compelling reasons to deal directly with them

* Finding a partner or partners in the supply chain is key to a more profitable future for farmers. Growers must also collaborate more – with each other, to reduce the variability and improve the quality of their grain, and with others, to find ways of adding value to processed cereal products

Less is more

* The current fragmented and complex network of independent growers, agents and merchants is inefficient and ultimately unsustainable. Processors and manufacturers should seek to rationalise and consolidate their supply base. This in turn will enable suppliers to align themselves more closely with the specific requirements of end users

Merchants must adapt or die

* While some merchants currently provide sound advice to growers, a ‘best practice’ supply chain will see farmers rendering simple intermediaries redundant. Grain merchants need to leverage their knowledge in a way that genuinely adds value if they are continue to have a role

Supermarkets can show the way

* Supermarkets have been successful in improving the efficiency of operations at the front ends of their businesses but have shied away from tackling the chain upstream. For the whole chain to succeed, supermarkets must be prepared to engage in that process of change, as they have with other sectors

The time to act is now

* Any chief executive in the cereal industry who fails to recognise the urgent need for a fundamental overhaul of the structure and operation of the UK grain chain is either blissfully ignorant or a beneficiary of the current system. Failure to embrace the supply chain philosophy and pursue best practice will result in the failure of the UK cereals industry to compete effectively in the long term. The time to act is now – before it is too late.

Parkinson says: “This report is a wake-up call to the entire cereals industry. For the first time we can put a figure on the extraordinary waste that too many have been prepared either to tolerate or ignore for far too long.

“It is quite clear that we as an industry need to be more professional. Failure to do so means at best we continue to pour millions of pounds of profit down the drain, but at worst it means the end of the road for many currently involved in arable production and processing.

“However, if we take on board these findings it is a win-win for farmers and manufacturers, who will share in the extra profits that can be achieved.”

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