Today's agricultural products marketplace is tougher than ever.
Large fluctuations in seasonal orders and costs driven by global supply and demand require agricultural supply firms to run leaner, smarter and more responsive organizations. That is why, in an ongoing effort to improve business efficiency and service performance, Incitec Pivot Fertilisers relies on i2 solutions to support crucial supply chain planning activities.
An agricultural leader
Incitec Pivot Fertilisers, a business of Incitec Pivot Limited (IPL), is a trusted name in Australian agriculture. Incitec Pivot Fertilisers specializes in the marketing and distribution of fertilizers, and is the number one source of fertilizers in the Australian marketplace. It sells primarily to a network of distribution customers who, in turn, supply growers.
Incitec Pivot Fertilisers distinguishes itself by offering focused customer solutions, which include important add-on capabilities such as soil analysis, agronomic support and financing packages. Australian fertiliser seasons tend to be compressed and farmers often need fertilizers delivered at short notice to take advantage of favorable conditions. Incitec Pivot Fertilisers has built a responsive supply chain capable of meeting these unique needs.
"We differentiate ourselves primarily through customer service, with our add-on services and the reliability of our delivery capabilities," says Brian Clatworthy, business analyst with Incitec Pivot Fertilisers. "Our goal is to deliver the product where and when the customer wants it, particularly because the season for fertilizer can be very compressed. Once it rains in Australia, everybody wants to fertilize as soon as possible, so we must be able to handle those sorts of swings in the market."
Advanced planning and management
How does a company position itself to meet those requirements? For Incitec Pivot Fertilisers, the answer was to create a more visible, responsive and cost-effective supply chain. Company managers established some clear objectives in retooling their supply chain systems. They hoped to reduce their working capital requirements and to optimize fertilizer inventory during the peak Australian growing seasons. The company wanted to control both incoming and outgoing freight costs, to balance domestic and international material and product supplies, and to better manage its network of production facilities and primary and secondary distribution centers.
The company also hoped to reduce the time required to complete the important sales and operational planning process, and to fine tune production volumes to achieve peak efficiencies at the company's manufacturing plants.
Like many organizations, this agricultural supplier had previously relied on a mixture of software systems, spreadsheets and human talent to plan and manage material supplies, production, distribution and other key activities. After considering supply chain management solutions from several major vendors—a process that included a rigorous evaluation of the stability of the available systems, an evaluation of the key optimizer element within the solutions, and discussions with companies that were using each solution in real-world supply chain environments—Incitec Pivot Fertilisers implemented i2 Demand Manager in the late 1990s and i2 Supply Chain Planner approximately one year later
"We were looking for a solution that could do demand planning and supply chain planning," explains Clatworthy. "We also wanted a system to handle material availability and to manage the higher-level distribution activity. i2 emerged as the preferred vendor for a variety of factors, including overall cost, Supply Chain Planner's representation of business rules and objectives as well as the i2 team's extensive understanding of supply chain process issues."
Organizational challenges
In the years following the successful implementation of i2 solutions, the company pursued a growth strategy through the acquisition of Southern Cross Fertilisers in 2006 and of Dyno Nobel Limited in 2008. That growth strategy has delivered significant results, but it also created some significant supply and distribution-related challenges. Throughout this period, the company has strived to realize synergies in the consolidated organization, and to integrate previously diverse supply chain systems and technologies.
"There were significant drivers pushing us to improve supply chain management, from reducing our inventory and related working capital requirements, minimizing stock outs, and better managing inbound and outbound freight costs," says Clatworthy. "But while we needed to streamline our supply chain, we did not want customer service to suffer. We decided to re-implement Supply Chain Planner to ensure we were receiving the maximum benefits from the solution."
The company now uses i2 Demand Planner to generate monthly forecasts, and the results of those analyses are uploaded to the company's SAP R3 Enterprise Resource Planning system.
i2 Supply Chain Planner is used to formulate weekly and monthly sales, production procurement, and distribution plans and to manage the long-term balance between domestic and imported product supplies. Incitec Pivot also uses Supply Chain Planner to run ad hoc analysis and various "what-if" business queries.
Harvesting SCM benefits
By leveraging i2 solutions as part of a robust supply chain management effort, Incitec Pivot Fertilisers has gained real competitive advantages in the Australian agricultural marketplace.
"Overall, this project has allowed us to more rapidly deliver a supply chain plan of a higher quality with less effort from the planners," says Clatworthy. "That gives our business greater confidence in our master supply chain plan. It also allows us to evaluate more readily and effectively any subsequent changes in supply or demand, as well as the impact of any response we take to address those changes."
Since the reimplementation of i2 Supply Chain Planner, the time required to complete Incitec Pivot's crucial monthly sales and operational planning cycle was reduced from as much as seven to nine days to as little as three days. Meanwhile, the weekly planning cycle, which used to take one or two days, can now be run many times in a single day.
Incitec Pivot has significantly reduced incidents or errors, constraint violations and shorted demands related to its critical supply chain planning activities, and planners now better understand the cause and effects of issues when they do occur.
As a result of these and other related efforts, Incitec Pivot has achieved significant reductions in both inventory levels and land freight costs. According to Clatworthy, the combination of the powerful statistical capabilities of Demand Planner and the advanced optimizer of Supply Chain Planner enable the company to better predict and respond to substantial shifts in demand for its core agricultural products.
"I attribute the success of this project to the efforts put into the pre-planning and design phases, to the subsequent control of scope creep, and to the excellent interaction among the technical and business team members throughout the implementation," says Clatworthy. "The quality of the i2 people assigned to the project was outstanding."
—Jon Kemp
