Growers who serve box stores are assuming more supply chain burdens on a large scale.
December 22, 2008
Walmart pulled the rug out from a couple hundred large growers last fall, when it downsized its vendor base for spring 2009. The growers were essentially given less than three months' notice, sending shockwaves through our industry. While those who weren't cut will be doubling their store base, those who were have been scrambling to find buyers for spring production.
The same thing happened heading into poinsettia season, with the base of grower vendors reduced from 100 to 30, sources tell us. Walmart still needs the same number of plants for its stores. It just doesn't want to deal with the complexity of our supply chain. No other product line has the level of fragmentation and complexity that ours has at mass retail, as far as I know. Other perishable products, like produce, are more streamlined in their distribution. A base of 400 flower growers probably was at least 200 too many, even for the largest national retailer.
Many growers who serve Walmart also serve Home Depot, Lowe's or regional chains, like Menard's. Walmart has been a customer growers like to serve, because it pays for and honors what it orders and doesn't require additional services and risks like merchandising and pay by scan. Walmart owns the inventory. Growers also value the real-time information Walmart provides vendors on how products are selling at each store. Performance is transparent. The numbers don't lie.
It is our hope many of the growers who were cut are able to work with the growers who still have the sales contracts. One grower, who doesn't serve Walmart but works with other contract growers, told me he had been getting calls from a number of growers he has never dealt with looking for channels to move product. He is concerned there will be a lot of uncommitted product flooding the market this spring.
Growers who have been selected to be regional leaders in their box store markets have earned it by investing not only in their production capabilities but their reliability as a vendor servicing the stores. Instead of growing the complete spectrum of products themselves, they contract with others on select items. The retailer used to worry about securing the complete product assortment. Now the grower does.
These growers who have achieved the dominant role in their regions have indirectly become big-box buyers. They have to worry about sharing risks and rewards with their contract growers even more than when they were just serving retailers.
When I think about the logistical complexity these growers have to manage, my head spins. I have heard horror stories about how difficult it is to coordinate retail orders from multiple sites at a single business, let alone from multiple growers in a region. Sophisticated inventory technology and distribution hubs will be the future. Perhaps this is where RFID (radio frequency identification) chips can provide the most benefit.
As the grower's job becomes more complex on the service side, suppliers are looking for ways to make production simpler. For instance, if a grower is deeply involved in managing retail relationships, does he also need to worry about mixing his own soil and creating his own substrates? No. A lot of things growers used to do can be outsourced, just like cuttings and stock plants. Suppliers who can make this a value proposition for busy growers will succeed by relieving headaches.
There's no question that the grower's role is evolving well beyond growing.