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Greenhouse owners face unique operational challenges. To start, they manage living inventory with a limited shelf life. This requires precise timing as to when to start growing flowers, shrubs, and trees—and when to move them out of production to become available. Getting this right allows deliveries to reach customers at the right time so they can sell to their customers.
Before the growing season, greenhouses must accurately forecast customer and speculative demand—matching customer and consumer preferences to the right product mix. Then, during each product’s lifecycle, managers must schedule workforce and production resources in a way that controls costs and ensures sufficient margins. At the same time, greenhouses need to manage supply chain activity, ensure purchase order and sales order accuracy, and coordinate shipping logistics.
It’s enough to make any greenhouse manager’s head spin.
In this blog, we delve into the top 10 operational hurdles for greenhouse growers. We also explore how ERP-driven analytics provide real-time, actionable insights that help anticipate problems and seize opportunities. These points of data visibility can also improve your production planning to control costs and increase your overall profitability.
Keeping inventory up-to-date is a constant challenge. Changing demand impacts sales in terms of the product types and the product quantities customers want to buy. Supply chain variations also have an impact complicating purchase order arrival, the quantity, the quality and product types. This is only the beginning of the puzzle with inventory management. Growers then have to adjust plans based on supply chain challenges, manage existing product in growing cycles, not to mention monitor existing and future inventory availability.
Even when customer forecasts and supply chain deliveries hit the target, communicating the latest inventory in real time presents a challenge. Without a centralized database that everyone has access to, there may be delays in information getting out. And by then, the information may have already changed.
Customer demand for specific products and product quantities fluctuates from year-to-year and during the growing and selling seasons. Perhaps over-priced flowers, shrubs, and trees caused your greenhouse to lose sales you might reel in this year. If you underpriced something last year, the demand could go down when you reset the price.
To get a handle on demand forecasting, the sales team also needs to know what they projected last year and last season, and how those numbers compare to the actual sales. Another area where the sales team needs visibility is the sell-through rates for each customer. This could impact what customers ask for this year.
After the sales team creates the demand forecast, accurate production planning requires answering several key questions when analyzing the previous year and selling season:
What did we produce?
What did we sell?
What do we want to produce?
When should we grow each product?
From there, operations needs to determine the required space, labor, materials, and resources to achieve the necessary output. If the product mix has changed, this might involve contracting out for some products.
Another challenge lies in comparing last year’s production plan to the actual output. As supply chain shipments arrive and space constraints change, the available labor resources may change. The operations team may not be able to meet its targets, or it may go over the projected outputs.
Greenhouse growers know their production costs go up every year. Labor alone accounts for about 30% of overall production costs. Additional costs, such as heat, fluctuate according to seasonal production plans.
The key is to determine how much costs will change and then control those costs by growing products more efficiently—with less scrap, quicker turns, and fewer credits.
For example, sowing seeds for a particular plant might project an 80% germination rate. In reality, the seed generated 99%. In this case, you could reduce seed costs 19% (as well as the sowing labor costs) and still meet the expected demand—with less waste.
It’s just as important to analyze profitability for each customer. If you sell more this year, will that growth be profitable? Are prices set high enough? Do any customers ask for higher quality for less money—which perhaps requires higher freight fees?
The operations team needs to know what to expect from purchasing and transfers, and the impact this will have on production and order fulfillment. Any delays in the supply chain or problems with orders—such as defective cuttings—will have downstream impacts.
Knowing what’s on hand and what’s on order informs your team how to manage the delays and coordinate with the purchasing and sales teams. With real-time data, greenhouses can change sales orders to prevent products from being over-ordered, use excess inventory elsewhere, and create purchase orders for items running low.
Labor is one of the biggest costs in the greenhouse industry. Growers need to minimize shifts with extra people who end up sitting around. Managers also need the flexibility to allocate extra resources and add shifts when customer or production demand spikes.
Allocating labor accurately can be difficult. Problems can occur due to poor product quality as well as poor product placement, stickering, and re-labeling products before they ship.
Additionally, managers need to ensure machine resources are available such as potting machines, sticking lines, and tables. These challenges can lead to slowdowns in production, too many or too few labor resources, and even complete production halts.
Customer demand and supplies constantly change. What a customer pre-books in the winter may not match what they order in the spring. Perhaps the customer does not follow through on their commitments. Will they complete their promised orders, or is it time to shift that product to another customer?
Or…a crop of flowers a customer pre-booked was not available on time. Maybe the crop failed. Some crops yield more product than expected while others yield less. In all these cases, the sales team needs to keep adjusting, all while the inventory team maintains and stays up to date with inventory availability
Plus, some customers have unique demands for value-added labeling and tags as well as racking and shipping.
The art of racking efficiently includes identifying what needs to ship and optimizing not only the racks, but also the build of those racks—by product attributes and by customer locations. Growers need to quickly determine how many racks a given order requires for loading.
Additionally, growers need to fill those racks and skids as much as possible to ensure streamlined procedures, reduce duplicate work, and lower overall variable costs. For example, it’s important to avoid filling 1.25 racks and leaving 75% of the second rack unfilled. Not knowing how to configure racks can impact labor and fulfillment times, and it could lead to delayed shipments.
If the shipping team is unsure what racks to load, they might start loading a truck before identifying all the racks needed for that truck. If the team discovers it missed four racks, they may have to pull products off and re-load once the correct racks are assembled and ready.
Internal logistics teams often struggle to determine how many orders need to go out the door each day. They need this information to know if enough trucks and drivers are available, if the orders will fill the trucks, and if any orders will get left on the dock.
To make delivery routes efficient, the operations team also needs to know which territories trucks will go to and what time customers expect orders to arrive. These challenges can pop up during the day or even a week out. Finding out is critical in cases where additional trucks and drivers need to be secured, not to mention ensuring the product is picked and staged at the right time.
To minimize warehouse labor costs, greenhouses need to determine the optimal way to pick orders. The traditional methods of picking by the order or by the load may not be the most efficient way to go. In many cases, greenhouses find the wave (bulk), supermarket, and/or post-office picking processes work more efficiently, but this varies on the operations size in addition to staff available.
Picking processes also impact the shipping team and ultimately, customer satisfaction. Orders can’t go to customers until they’re picked, and many customers have unique requirements for their orders. This keeps the shipping team and drivers possibly waiting around, which wastes more labor and could lead to increased costs. If orders take too long to arrive or are incorrect, customers may take their business elsewhere.
Many greenhouse operations teams have solved these challenges by turning to SilverLeaf, which runs on the Microsoft Dynamics 365 Business Central ERP platform. With a combination of enterprise-class financial management capabilities and workflows tailored for the horticulture industry, SilverLeaf centralizes and tracks all the data greenhouses need for complete visibility into their operations.
This includes sales demand, actual sales, sales prices, missed sales, product costing, production planning (timing and quantity), scrap, picking, racking and order fulfillment. SilverLeaf can also pull in sell-thru rates for customers and weather reporting to help plan for growing seasons.
Greenhouses can also integrate SilverLeaf with mobility tools so users can update data in real time. The solution also connects to Microsoft Power BI to produce dashboard reports to analyze sales, supply chain, and production performance. With this information, the management team can better plan what to change within growing seasons and for next year.
For a deeper dive into gaining visibility into data to help your greenhouse operate more efficiently, check out this webinar hosted by Greenhouse Management—featuring experts from Velosio who collaborate with greenhouses on deploying technology solutions.
In addition to hearing more about how SilverLeaf can help you solve your operational challenges, hear real-life stories of how other greenhouses unlocked the power of the data in their ERP platform to turn operational challenges into opportunities for growth.
Talk to us about how Velosio can help you realize business value faster with end-to-end solutions and cloud services.