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“You can’t improve what you don’t measure,” Peter Drucker – world-renowned management consultant and author of The Practice of Management
Drucker’s wisdom certainly rings true for greenhouse growers. The fast pace of the growing and selling seasons—along with data isolated in different applications and inside someone’s brain—sometimes makes it impossible to access KPIs (key performance indicators). Without a baseline to compare current performance to, the management team must go by hunches and tribal knowledge to make key decisions.
Before finding a way to measure your KPIs, it’s critical to align the KPIs to the goals of your business:
Be specific and set up parameters that clearly define your goals. You can then use corresponding KPIs to establish your baseline performance and measure your progress toward the goal at the appropriate time interval—which may be one week, a month, a quarter, or an entire year.
The KPIs you track will depend heavily on data. You must consistently feed each KPI with data, whether that’s in real-time, daily, weekly, or monthly.
This requires identifying the data sources for each KPI and a clear process for collecting, transforming, and reporting on the data. By having the data, you know what your benchmarks are, and you can see improvement or degradation by measuring against those benchmarks.
As you plan which KPIs to capture, here are 10 to consider that greenhouse growers can benefit from tracking:
Throughout the growing season, and even before the season, you can look at what your production space will look like based on your demand forecasts. You can identify weeks and months when you might be over capacity or where you have space available.
These KPIs include average capacity utilization as well as your peak-capacity and low-capacity time periods. These KPIs measure how much material you put into your greenhouse and whether you maximize the throughput of turning that material into finished products to deliver to customers. You can determine how well your facilities use the physical space and identify where you do not use space efficiently.
When you look at your space capacity plan, you can see where you have room to add or subtract products and that can make you more money.
Do you have room to plant flowers in hanging baskets, but not on tables? You might have to sell at a lower price, but you have room for the baskets allowing additional space on tables, so why not?
For greenhouse growers, revenue, costs, and margins are sometimes measured per square foot or by location. You can also measure by zones, bins or by products within your operation.
As you plan to produce any given product, you can identify the exact space it takes up throughout its entire growing phase. That space will vary as plants start out in a 128 tray and then shift up into a pot container or a hanging basket. As these changes occur, factor in how much square footage a product takes up from its starter size to its finished size.
Once you know how many products you can grow in a location, you can then determine the costs. This includes the costs of the materials as well as the overhead costs of the location. You can then look at this number to determine if you can cut costs by bringing in flowers and plants—rather than growing them where space may not be overly available.
Other cost factors to analyze include whether one greenhouse location has lower costs due to the local climate. Or how long you should hold onto a plant before you sell it. For example, does it make sense to grow and sell an item 24” tall or wait until it’s 36” tall? There may be a lower margin at 24” versus nurturing it and selling it later as a 36” plant, but is the space being used with margin in mind?
Many greenhouse growers find it beneficial to measure overhead as a percentage of revenue as well as overhead costs per unit. They may also look at water and energy usage by location or unit of production. These KPIs tell you how effectively you manage overhead costs not directly related to production costs.
You may find differences across facilities or a crop as far as your water and your energy consumption year over year or even within the same season. In some cases, there’s a good reason, such as a greenhouse built on top of a hot spring, which keeps heating costs low Or excess heating due to an exceptionally cold winter / early spring.
If you grow your operations by adding a location or a cooler to a greenhouse, you expect your utilities to go up. But will they go up at the rate they should? Here’s where you can break overhead costs down to the unit of production or square footage so you can make sure those costs trend appropriately.
With labor KPIs, you can determine the total cost of your workforce and the production you generate per employee. For example, if you normally produce 400 flower baskets each day but then produce 600, you can look at why that happened and how you can replicate it. By the same token, if that crew produces only 200 baskets, what went wrong? How can you prevent it from happening again?
For shipping, if you normally pull four full 606 carts an hour, but on this day, the shipping team pulls only 2, why did this happen? Was the crop not quite ready? Was there a partial crop failure that forced them to fix a lot of flats, or was the product not where it was supposed to be?
Analyzing your labor efficiency and combining that information with sales forecasts can also drive your seasonal hiring plans. Perhaps customer demand is changing so that instead of hiring your production team in mid-January, you delay hiring until early February, thus saving on two weeks of payroll.
Measuring waste helps evaluate the quality of your product line and the efficiency of your production processes. These KPIs look at your overall scrap percentage, comparing units scrapped vs. units produced across each genus.
In turn, this helps determine which products to grow and what grows well at specific times. Maybe some loss-leaders have a high scrap percentage but also generate higher revenues and margins. There may be others you can grow efficiently, so you try to get your sales team to push them.
One Velosio client determined if they reduced their scrap by 1%, it would increase their margins by 3%. So, they homed in on tracking scrap and looked at processes by location and by product to see what changes would reduce scrap.
With another client, certain flower varieties experienced a 10% failure rate. After looking at the germ rate versus what was expected, they reduced the failure rate to 2% (reducing scrap by 8%). For the next season, they reduced their seed and sewing costs since they needed to sew fewer seeds.
In the fulfillment arena, greenhouses will look at their average order volume, the fulfillment costs per order, orders picked and shipped per hour, and order accuracy. They also look at fill rates—the percentage of orders filled without delays or backorders.
With this information, as disruptions occur during the pick-pack-ship process, you can identify where bottlenecks slow the process down. The fill rate also tells how well you manage inventory relative to customer demand.
For instance, if an order is placed and the team picking the product tells you it’s in a different location or it is not ready, you know inventory accuracy is off. This has a detrimental impact on your picking efficiency and then slows down shipping. This potentially has downstream impacts too—drivers sitting at the dock or customers waiting for their delivery.
Rack space utilization measures the percentage of a rack used, indicating your efficiency in packing racks. You can also look at your rack count vs. unit volume and revenue. You want to ship as close to full racks as possible. This ensures that when they roll off the truck into a customer location, they are ready to be displayed or unloaded with a full inventory of products.
You can measure rack efficiency and the fullness of racks by a percentage per layer that’s full as well as the percentage of the entire rack that’s full. With this data, you might squeeze more product in than what the system tells you, or maybe you don’t want to squeeze so much product in for display ready racks.
To make sure you ship trucks as full as possible, you can identify full rack counts. Whether an order is a transfer to a pay-by-scan location or an independent garden center, you might have 1.25 partial racks. By identifying the precise rack count of 1.25, you can determine the order with a partial rack, you can look to increase the order size by layer QTY’s to get the rack count closer to two full racks and avoid shipping empty space.
These KPIs can be difficult to track if using third-party carriers. However, your logistics teams should be able to gain insight regardless. Teams can see how full your trucks are (from a rack or a volume perspective) and the number of loads you deliver per hour and per day. You can also look at the number of loads shipped vs. shipping labor, and freight costs vs. revenue by load.
Within your KPIs, you can account for trees and other larger pieces that don’t go onto a rack. You may store as much product as you have space available, but that doesn’t necessarily mean you’re loading trucks as efficiently and as fast as you want. So maybe these non-racked products are stagged in pre-loading zones so the team can quickly identify where these products are stagged to grab and load when that orders load sequence is ready.
In addition, you can identify how much time it takes to load each truck and rack. Within loads, you can calculate projected freight and then factor in actual freight to know if you charge enough for shipping.
The supply chain KPIs allow you to make decisions pre-season, in-season, and at the end of the season, you can see what sold and what didn’t to make your purchasing plans for next year. As part of this process, you can compare your past sales forecasts to what actually happened and then use that as your basis for ordering products and materials from your supply chain. You can do this from a budget perspective or a pre-booked perspective.
For example, what was the sell-through rate of products from the paid-by-scan perspective at the big box stores? Maybe you over-shipped and at first, sales were strong. But then they dipped, so the stores had to mark them down. Why? One client conducting this analysis increased their sell-through rate by 1.5%, which equated to nearly $500K in revenue.
You can also analyze individual customers when managing pre-booked sales vs. actual sales to see if it makes sense to hold onto product for a customer behind in their pre-books. Perhaps one pre-booked a certain quantity of products they were supposed to take delivery to by the third week of April, but they are 50 percent behind. Can you allocate that amount to another customer?
And what if a customer has ordered 50% more than anticipated? You will either need to take products from another customer that is not selling as well, or you will need to find another source to fill the extra 50%.
How often your inventory turns over shows how well your supply chain operates and the quality of the products. Are your products in enough demand so that inventory turns?
Within these KPIs, you can look at your cost of goods or your revenue in comparison to your average inventory value. The higher the turn, the better, while a lower number indicates inefficiencies in turning the product into revenue. Are you delivering quality according to customer demand, or are you giving them something they don’t want?
To generate better KPIs, many greenhouse growers have turned to SilverLeaf—a greenhouse management software, or an ERP solution that runs on Microsoft Dynamics 365 Business Central. SilverLeaf includes functionality specific to the horticulture industry and provides a complete solution for managing production, operations, sales, the supply chain, and finance.
The Velosio data analytics team can help you take on the challenge of aggregating data from different sources and running reports to generate KPIs. We also help you make sure the data is clean and served up to your users in a meaningful way—based on what you want to measure and improve for your greenhouse.
If some of the information you need does not live in your base ERP system, we can help you pull data from other sources, such as utility bills, weather reports, and environmental control systems. We can aggregate the data in a data lake and use the Microsoft Fabric reporting engine to provide accurate KPIs.
To dive deeper into the KPIs every greenhouse should track, watch our on-demand webinar: Ten KPIs Every Greenhouse Grower Should be Tacking presented by our experts in technologies that help growers run their operations more efficiently. And if you are looking to improve KPI reporting, contact Velosio today. We’re here to help!
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