Kotahi and Coda: Lessons from Fonterra's export supply chain strength

​One of Fonterra's trump cards is its supremely effective export supply chain, based around the appreciation that this means much more than simply ‘logistics’. Central to this is Kotahi, the freight management partnership it established in 2011 with New Zealand’s other leading exporter, meat business Silver Fern Farms. Kotahi is now managing around 40% of New Zealand’s total container exports.

Supply and demand

The formation of Kotahi has had a significant influence on New Zealand’s domestic and ocean freight vendors, helping to contain supply chain costs while maintaining a regular shipping service. By pooling New Zealand‘s freight needs, Kotahi is able to match supply and demand to get products to markets around the world in a more efficient way.

The deal in June 2014 between Kotahi, the leading port of Tauranga and Maersk Line was a prime example of Fonterra's readiness to invest in its supply chain, with Kotahi even taking a small stake in the port.

Strong purchasing power

As a next step Kotahi established Coda – a new 50:50 joint venture with the Port of Tauranga. This amalgamated four of the partners' complementary domestic logistics businesses to create leaner and more efficient logistics in what is effectively a 4PL operation. At the same time, they do have 3PL options as well, meaning the ‘purchasing power’ of the organisations is significant although their combined operation is more synergistic rather than vertically integrated.

There is no doubt that Coda has been a great risk reducer in logistics design for many customers.

The model works well in New Zealand due the size of the agriculture export sector, the reliance that NZ has on shipping companies and the seasonal nature of the industry which leads to peak loading on warehouses and road/rail transport. The use of 4PLs is pretty standard globally, but may not be sufficiently exploited if 3PL operators are proactive in securing the business for themselves – there should be plenty of applicability for a Coda-type set-up in other settings worldwide.

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