Metcash turns to Linfox to boost DC efficiency

Metcash calls in Linfox to boost DC efficiency, but not before the competition watchdog got involved

Metcash turns to Linfox to boost DC efficiency
Metcash turns to Linfox to boost DC efficiency
By Brad Gardner | March 26, 2010

Marketing and distribution company Metcash has turned to transport and logistics giant Linfox to boost efficiency, but not before the competition watchdog got involved.

The company signed a contract with Linfox this year giving it sole access to Metcash’s distribution centre at Creastmead south of Brisbane, which supplies retail and grocery items to IGA and Foodworks stores in northern NSW and Queensland.

The supermarkets were in the past allowed to select their own carrier, but under the new deal must use Linfox directly to collect orders.

A spokesman for Metcash says Linfox was chosen because the number of different companies entering and leaving the distribution centre caused delays.

"It promotes greater efficiency," the spokesman says of the deal.

He says Metcash’s decision will help it keep pace with the supermarket giants, Woolworths and Coles, by ensuring it can deliver goods as quickly while keeping costs down.

"Clearly the company is in a ferociously competitive market against the major chains," he says.

While declining to mention specifics, he says Linfox offered a good rate and improved coordination through its sophisticated transport management system.

But the decision sparked protest from smaller transport carriers, which claimed they were being forced out.

If supermarkets still want to use their preferred carrier, they must get Linfox to collect the goods from the DC and then take them to the other operator which will then do the delivery.

Although the Australian Competition and Consumer Commission (ACCC) declined to comment, SCR can reveal it received complaints over whether the contract was anti-competitive.

SCR understands the watchdog looked at the implementation of it and determined no action should be taken, instead choosing to monitor the situation.

Transport operators claim the deal has cost them business.

"It’s priced us out of the market," the owner of a NSW Northern Rivers transport company who declined to be named, says.

"All the independent private carriers are going to be pushed out because there is no work…We’ve suffered a loss in income."

Colin Scott, who runs the family-owned K&S Transport near Brisbane, used to directly deliver to regional and rural IGA stores throughout the state.

"We’re not allowed on site," he says.

Scott originally anticipated losing as much as 90 percent of his contracts with IGA stores, but says he has been able to maintain some because of his company’s reliability.

"We can’t compete with the likes of Toll and Linfox. All we can offer is the service," he says.

But the spokesman for Metcash says the company is mindful of the impact its decision has had.

"Unfortunately it means smaller [trucking] companies will lose business and we regret that," he says.

"We do feel for those companies that might have lost work out of this."

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