How Greenhouse Growers Can Plan for Delays in the Supply Chain
September 12, 2021 
Supply chain strain. Rack shortages could be a widespread phenomenon in 2022. Photo courtesy of Container Centralen
A perfect storm has developed in the horticulture industry over the last few months, although perfect may not be the right word. Booming demand for plants, international recovery from what is hopefully the worst of the COVID-19 pandemic, and economic inflation have all contributed to a ripple effect in the supply chain.
What does this mean for you? Well, it likely means the potential for major delays in accessing plant products and materials, which isn’t ideal at a time when you’re trying to prepare for next year.
However, there are some steps you can take to weather the storm. Keep reading to learn more about what a few logistics and software suppliers are recommending.
Delivery Delays May Mean Deferring Investments
“We believe there is a risk that rack shortages could be a widespread phenomenon in 2022,” says A.J. Lambert, Vice President, Sales and Account Management at Container Centralen (CC). In July, CC, which provides shipping racks and logistical tools for using them to deliver plants, informed its grower and retailer customers that CC’s investment for rack purchases needed for the 2022 season are at costs that are more than 60% higher than prior average purchase costs. Major factors that have driven up these costs, according to the customer memo, include steel prices that are approximately 50% above historic averages, as well as cost increases for international sea freight. In addition to costs, there are also long lead times of six months or more on steel availability (for rack manufacturers) and difficulties with securing timely bookings on container ships to deliver newly purchased racks to the U.S.
In terms of how growers can plan ahead, Lambert says some growers who own and operate their own racks may decide, because of the spike in rack purchase costs, to defer 2022 investment for rack replacement and/or business growth. In addition, there may be some growers who are not aware of the long lead times for steel supply, and even if these growers decide to invest, they may not be supplied with racks until after the 2022 peak season.
“We also know from discussions with our grower customers that prices are up across the board as a result of manufacturing constraints as well as freight costs in general,” Lambert says. “The container shortage and ability to get product into the U.S. will be problematic for quite some time. With lead times for manufacturing increasing, growers will need to plan much more in advance or risk not getting the material they need in time for Spring 2022.”
Tracking Resource Requirements
The pressures of a high-demand supply chain, combined with a constrained labor force, mean materials and trucks are limited and come at a higher cost. Effectively managing them is key to maintaining margins.
While software cannot solve the issue of finding materials and inputs or cost-effective skilled labor, Melissa Herbst, Account Executive for Agribusiness at Velosio, a full-service information technology and software company, says it can help manage and identify what resource requirements are needed to meet growers’ plans, and if those resources are not sufficient, provide the tools to help pivot.
“Managing the supply of inputs and hard goods is tougher today than it has ever been,” Herbst says. “Having production, sales, inventory, and purchasing all in one system means that you don’t have to run to create or update another spreadsheet to track what is purchased. When the sales plan changes, the production team knows, and when the production plan changes and material demand changes, purchasing knows.”
Logistics and securing partnerships with reliable shipping partners at a manageable cost is also a huge challenge.
“Growers need the visibility to see what needs to ship tomorrow, next week, or next month based on sales demand and requested delivery dates,” Herbst says. “We can provide the tools to predict if supply will be sufficient to meet that demand and provide the tools to plan for number of packages and trucks needed to ship. This allows growers to effectively communicate and work with their shipping partners.”
This year, Herbst says Velosio has been working with growers who have had to manage their business with 40% fewer employees where they have had to make decisions to divert production resources to shipping.
“When these events occur, we provide the tools to quickly re-plan and adjust production,” she says. “This time savings will allow growers to plan for another year of record-breaking sales despite the challenges of managing labor and shipping.”
Maintain Your Supplier Relationships
BEST Human Capital and Advisory Group, which focuses on human resources, talent recruitment, and business management, works with a broad cross section of companies. According to Todd Downing, Managing Partner at BEST Human Capital, just about all suppliers have urged their customers to order earlier than ever.
“While ordering three to six months ahead of when one normally may have will help with a majority of products, there will still be supply chain and availability issues with a few products,” Downing says. “Hopefully, we can see issues resolving themselves for 2023. That said, the current uptick of the COVID-19 Delta variant remains a concern. While I pray we don’t have another vast shutdown of life/business, it could very well impact manufacturing even without a shutdown due to social distancing within a manufacturing facility.”
For growers that rely on imports, Downing says there are several resources to identify import timing when planning ahead.
“Staying super communicative with your suppliers will be critical,” Downing says. “Identify and develop a positive relationship with a backup supplier of key input products, but do not change suppliers just because supplier A may be having supply chain challenges, because chances are it is affecting the entire category. Supplier B is likely having the same challenge and will not put you in front of their own long-standing loyal customers.”
Downing also recommends being flexible and collaborative with all your partners, including any shipping companies you work with.
“There’s always a chance that trucking costs skyrocket, causing surcharges on shipments,” he says. “Hopefully this is not the case, but it is a very real possibility as trucking firms are struggling to get drivers.”
Keep Your Team Efficient
Aaron Allison, co-founder of SBI Software, says online ordering has exploded this year, not just at the retail level, but also in how wholesale growers deal with supplies. A simplified software system, Allison says, can allow anyone on your team to submit orders.
“With our PO Generator, we’ve streamlined ordering of inputs so growers can order sooner, which reduces the amount of subbing or shortages in inputs they may encounter,” Allison says.
Logistics efficiency also requires production efficiency, which is why Allison says SBI is pushing its clients to utilize built-in lean flow processes.
“We used to let new customers run our system in less efficient ways, but now we train and push them into a more efficient process,” Allison says. “We resist letting them settle into bad habits that would drive up their labor costs.”
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