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Cost Recovery in Monetization TOPS Knowledge Sharing Nov 2012

Discover innovative solutions and effective strategies to reduce costs and increase cost recovery in commodity shipments. Find out how Land O’Lakes International Development has consolidated shipments and implemented successful monetization programs.

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Cost Recovery in Monetization TOPS Knowledge Sharing Nov 2012

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  1. Cost Recovery in Monetization TOPS Knowledge Sharing Nov 2012

  2. Overcoming Obstacles • Current Trends and Issues: • Rising fuel prices have slowed or hindered commodity shipments • Organizations are seeking innovative solutions to reduce costsand increase cost recovery • Is there a role for a scaled up/more formal version of what these organization are currently doing? • Land O’Lakes’ Solutions: • Consolidating shipments saves freight • Follow monetization sales contract

  3. About Us • Land O’Lakes International Development founded in 1981; acts as a not-for-profit division of Land O’Lakes, Inc. • Implemented 275 programs in 80 countries • Focused largely on agricultural development, enterprise partnerships • Monetize commodities for USDA, USAID and other organizations

  4. Case Study: Liberia • Issue: Large shipment planned for Liberia • Action: Coordinate shipments • Result: “Recovery costs [95%] are very good relative to many other monetization programs,” Alliance for Global Food Security

  5. Case Study: Madagascar • Issue: Small shipment (7,000 MT bulk HRWW) and high rates; Buyer wanted to drop price by $25/MT • Action: Land O’Lakes identified cargo going into Mombasa and advised lead agency on possibility • Result: Cargo shipped in bulk as per sales agreement

  6. Case Study: Consolidation • Issue: Multiple agencies and donors shipping to multiple countries, worked to consolidate costs • Action: Consolidated shipments going to different countries • Result: Saved an estimated $1.7 million (actual $163-177/MT vs. rate of $215/MT)

  7. Case Study 3: Consolidation • USDA FFPrTNSKenyaApril 2012 - Mombasa 11,000 MT bulk HRW @$177.00/MT ocean (free out). 2. USAID Prepo$162.67/MT • Mombasa Prepo 5,000 MT bulk Sorghum ocean (berth terms) + $20.00/MT bagging/stacking. • Durban Prepo 10,000 MT bulk Sorghum ocean (berth terms) + $44.25/MT bagging & stacking into warehouse. 3. USAID Title II CRS Madagascar 10,000 MT bulk wheat @ $163/MT 4.Mercy Corp for Tanzania (FFPr)6,340 MT bulk HRW wheat. 5.CRS for Burundi (Title II)3780 MT bulk HRW wheat.

  8. Case Study 4: Coordination CDSO Combo - April 2012 • Issue: Tonnage small making freight rates costly • Action: Land O’Lakes working in Mozambique and Madagascar- advised lead agency on combo possibility • Result: Cost savings • $562,500for Malawi Program over actual rates or $803,000 over budgeted rate $270/MT for 4,500 MT to Maputo vs. earlier quote Basis 4,500 MT = $395 per MT). • $528,750 for Madagascar Title II ($270/MT for 2,350 MT vs earlier quote of Basis 2,500 MT = $495/MT).

  9. Other Steps We Took • Discussed with NGOs and their freight agents • Communicated between USDA/USAID • Provided more shipment and offloading oversight • Communicated more with NGO “partners” on sailing of vessels

  10. Ideas for Scaling Up • Compile annual synopsis of U.S. Port dates for all programs • Where would it be housed? • Would compile it? • What are the security concerns? • What else?

  11. Example Matrix of Port Dates

  12. Worth the Extra Effort • Additional resources would allow additional commodity to be shipped • No programmatic delays due to shipping • Increases actual cost recovery

  13. Interested? • Contact: • Matthew Smith, Commodity and Program Manager; MHSmith@landolakes.com; (202) 370-1665 • Website: www.idd.landolakes.com • Twitter: @LandOLakesIDD • Facebook: www.facebook.com/LandOLakesInternationalDevelopment

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