Time Is Money
Growers share the unique ways they measure return on investment at their own operations.
June 18, 2008
From labor savings to quality of life, there are many ways growers measure return on investment (ROI) that go beyond the traditional monetary payback. In the end, time spent doing a task that could be quicker, more accurate and more efficient if it were automated translates to dollar signs anyway. It's all in how you look at it and what your end goal might be.
Aside from the general three-to-five-year ROI rule of thumb, there are times when an investment can be considered a "no-brainer," but there are also times when a grower has to stifle enthusiasm about an investment. We talked to representatives of two very innovative grower operations - one large and one small - with very different philosophies. Both are cautious and calculated about making buying decisions and their methods clearly work for their own needs and goals.
The smartest decision Lloyd Traven, owner of Peace Tree Farm in Kintnersville, Pa., says he has ever made is investing in his Argus control system to automate his operation's environmental controls and irrigation system.
"I can tell you beyond a shadow of a doubt the Argus control system is my favorite thing," he says. "It is a wonderful system - it has been an absolutely flawless control and irrigation system from day one."
The story goes back to the early 1990s, when Traven says his operation was already "marching down the pathway of automation." At the time, Traven did not allow anyone else to touch the greenhouse thermostat because, he says, he was the only one who knew how far off the temperatures were and where they were supposed to be. If he wasn't there to turn the temperature down at night and back up again in the morning, it didn't get done, he says. At that point, DIF (difference between day and night temperature) started to become a promising technique and Traven had to dramatically change his schedule to use the method on his crops. In addition, his ebb-and-flood irrigation system had to be turned on by hand and it often took Traven five hours daily to water the crops. All of this combined, Traven realized a completely automated irrigation and environmental control system was really necessary.
Not one to enter into purchasing decisions lightly, Traven scheduled meetings with four environmental controls companies at OFA Short Course to discuss their systems and get quotes.
"Argus could not have been more willing to take the time to do the whole process," Traven says. "The manager of the company and the sales guy were going over my specs and they kept telling me I was out of my mind, that it was overdone and that I couldn't justify the cost for this complex system. And I told them I am in complete agreement about being out of my mind but one thing I do know is what I need to do. I said I understand this is an unusual system, probably at university level of control but this is what I need, just tell me how much it is. We came up with a price and I said let's do it."
Ecstatic with the results, Traven says when it came time to expand his operation, he had no questions about where to start to automate his new greenhouses.
"I definitely didn't pick the cheapest system; I picked the best, which is what I always do anyway," he says. "It was absolutely worth it because when we built the new greenhouse, we started with Argus. We said, 'Okay, we know we're putting Argus in, what else do we need?' It was not even open to consideration."
Traven says he measured payback of the complex control system, installation and everything associated with it in a straight line calculation based on time savings of his own labor, which freed him up to focus on other areas of his business.
"Let's say, for example, that I pay myself $20 an hour and I'm saving myself five hours per day. That means I'm saving myself $700 in my own labor every week," Traven says. "Now if I spent $20,000 on the system, we're talking an ROI in 30 weeks or nine months. That is a direct money savings because I'm able to set up my water and be done with the greenhouse stuff and work on the sales, marketing and planning stuff that I'm really supposed to do."
Because the system manages temperature control and irrigation more accurately than Traven did, he says, it has helped him reach his target dates for crops like gerbera and dahlias. Even more importantly, perhaps for Traven, is that he has freed up his personal time.
"The key for me was I have always said I bought my weekends back," he says. "I had more time for my wife and kids and that was huge. That was more important than the actual money, it was time."
Traven has invested in other pieces of equipment since, such as a tower bail soil handler from AgriNomix that paid for itself in one year, and an ebb-and-flood filtration system he bought last fall and paid off May 31. His next anticipated investment is a transplanter, which he acknowledges his operation may be too small to justify, but it may be worth it to avoid hiring more unreliable temporary workers and to complete jobs in a more timely manner.
"One of the critical questions I ask myself is, 'Do I need that or do I want it?' That's big for me because a lot of times, I've just got to have it and I just don't need to spend that kind of money on something," Traven says. By the same token, sometimes you have the issue of trying to explain to somebody, I know it's a lot of money, I'm aware of what it costs but we need this to get the job done the way we want it done."
Go Forth With Caution
No matter how committed a grower is to incorporating a particular technology, sometimes the investment has to wait for a more opportune time for the sake of the business, says Paul Karlovich, general manager of production for C. Raker & Sons, a young plant operation in Litchfield, Mich.
"Sometimes you can see that there's an ROI once you get where you want to go, but getting there is so expensive or so painful that you choose not to do it."
For example, C. Raker & Sons plans to invest in radio frequency identification devices (RFID) in its barcode system, a technology the operation already has in its greenhouse to track inventory. Raker has been waiting for the per tag cost to lower over the last few years but it's not coming down fast enough. Beyond the per unit price and the infrastructure required to read the tags, such as wireless scanners and other technology, there is also significant time, cost and training required to integrate the system into the operation, Karlovich says.
"We know what the investment is to adopt RFID but the ROI is a little too long and it wasn't just that it was a lot of money, but it was a big changeover for the organization," he says.
The same goes for the telephone technology VOIP, or Voice Over Internet Protocol, a system Raker has decided is in the cards but isn't moving on yet due to cost and conversion factors, Karlovich says.
When making investment decisions, growers have to weigh all the intangibles associated with buying equipment and not expect a purchase to fit right in from the beginning, Karlovich says.
"We have heard about growers who buy robotics and they don't train their staff to use them and they don't understand how long it takes to adopt the technology," he says. "A lot of people think, 'Well if I buy this, I'm going to drop it in here and it's just going to work.' We don't really see that happening very often on a lot of equipment."
Karlovich says in addition to the cost of the equipment in question, there are other considerations to make before the investment is made.
"You have to invest in build-out on the piece of equipment and you also have to make sure there is a system for delivering the product to the system you have developed," he says. "If you're changing it quite dramatically, people may not understand what you intend with it and they may not use it the way you think they logically would. That happens all the time."
To avoid miscommunication, a lack in training and hard feelings among team members, Karlovich says groups that are considering new equipment at Raker often enlist input from the people who will be using the equipment.
"We work to make sure we're not bringing something in and isolating the rest of the system," he says. "That's a big job for a big company because sometimes the people who make the decisions aren't necessarily the ones who are running the equipment or using it; that just comes from experience here."
Laura Drotleff is a freelance writer based in Willowick, Ohio. She spent seven-plus years as an editor on Greenhouse Grower. Reach Drotleff at firstname.lastname@example.org.