Inputs: Over & Out

Jennifer Zurko

In the 1930s, Toyota created what’s referred to as “Just In Time Manufacturing.” In a nutshell, the whole point was to deliver automobile parts to assembly factories when they needed them, instead of having their customers order in bulk and stockpile the parts in a warehouse somewhere.

One theory is that Toyota wanted to “solve the lack of standardization.” But the more realistic reasons are because the country of Japan lacked the space and natural resources to make a bunch of parts at once and hold on to them until someone placed an order. After WWII, having to rebuild with a significant lack of labor also forced Toyota to streamline their processes. They were the first ones to really practice lean manufacturing.    

Over the last half-century, many other industries adopted this measure. Just In Time offered businesses a way to adapt to changing markets and consumer demands—all while cutting costs.

But, like many other things, we’ve realized that Just In Time isn’t pandemic-proof. Some businesses have run so lean that when they needed something from their own suppliers—who’ve also been running lean—there were no raw materials to be had. It’s been like a vicious snowball rolling down the supply chain. The result is shortages on a wide range of goods. You thought the toilet paper shortage at the beginning of the pandemic was ridiculous? Try buying lumber or a car right now.

Just In Time isn’t a failed experiment, by any means. It revolutionized the business world, opening the door for innovation and opportunities to better service customers, and promoting global trade. But what the COVID-19 pandemic brought to light is that this approach can have a significant, far-reaching impact when you don’t plan ahead and there’s a major disaster.

The New York Times had a piece on the recent shortages (“How the World Ran Out of Everything”) where Knut Alicke of McKinsey said companies have been acting like manufacturing and shipping were trouble-proof. He was quoted as saying, “We went way too far. There’s no kind of disruption risk term [in current business plans].”

In our industry bubble, we’re hearing about shortages and delays on everything from plug trays and pots to chemicals and poly film. Many growers and retailers reported another great sales year—some saying it was even better than last year’s spring season. But we’re also hearing how some of them were doing it while having to reuse trays and rationing growing media.

I asked a handful of hardgoods suppliers if they’ve had any challenges with regard to shortages and delays, how they were able to deal with it while still servicing their customers, and when they think the warehouses will be full once again.

Dave Stoltzfus
President—Advancing Alternatives 

Lead times are a huge challenge. Aluminum extruders are out 10 to 12 weeks, up from three to four weeks a year ago. We’ve also been put on monthly allocations for extruded aluminum and that may last until the end of the year. Steel tube and pipe mills have extended lead times because of raw material shortages. We’re also seeing raw material shortages for stainless wire, which is what we use for our zig-zag wire (wiggle wire). The stainless wire has been coming in three to six weeks late, which has resulted in our production being shut down for weeks at a time. (Dave says steel, aluminum, stainless, electronic parts and environmental controller components are the materials they’re struggling with the most.)

We hope to be back to normal by fall of 2021 or spring of 2022 at the latest. This will depend on how profitable growers were in the spring of 2021, and whether they’ll expand or improve their operations in the summer of 2021.

Advice for their customers: Don’t undersell your products—create value-added products for your customers, plan ahead by three to four months and expect 30% to 40% increased costs when expanding or building new structures.

We’re advising smaller growers to automate as much as possible. This will reduce their payroll and increase their bottom line. It’s never been easier to automate small high tunnels and greenhouses, and the ROI is often between one to two years. Automating side walls and roof vents also creates better growing environments that result in a better plant at the end of the day.

And expect higher prices—we get on average two or four notices a month from our material suppliers. Unfortun-ately, that will be passed on to the growers.

 

Craig Dodson
Head of Supply Chain—Bayer Environmental Science in the U.S.

We currently are in pretty good shape in our Ornamentals segment due to the nature of our production cycles for that portfolio. In a broader sense, there have certainly been COVID-related supply chain interruptions in our industry, as well as a multitude of others. The biggest impacts we’ve seen have been on the transportation and packaging sides. 

As a global company, we source materials from around the world. We generally keep inventory of key items on-hand to manage the occasional supply interruptions, so we didn’t really start to feel an impact until late summer or early fall last year.

On the import/export front, not as many ships were moving freight and the COVID-related items took priority, as they should have. There were also fewer trucking companies operating and those that were had reduced staff. So, eventually, that’s going to catch up to nearly every industry to some degree.  

On the packaging front, we were seeing lower supplies of things like bottle caps where inventory was being redirected for hand sanitizer and paper for label production, wherein, again, items needed for the fight against COVID were taking priority.

It’s honestly tough to know definitively on the transportation side [when things will catch up]. Our friends in India are seeing a COVID resurgence, which will redirect/reprioritize some materials to them to help in that fight, and it could have some ripple effect. Though, on the truck-fleet front, we’re working with alternative companies to help fulfill our needs in the short term. 

On the packaging side, we’re getting our hands wrapped around that and expect to be back to “normal” in that regard by the summer/fall time frame.

Advice for their customers: As noted, we’re in a good place with our Ornamentals portfolios right now and have worked to limit other impacts. That said, we’re employing alternate sources to have multiple options and we’re increasing our purchasing lead times to stay ahead of potential issues. We always recommend that customers keep their forecasts updated and that they stay in close communication with their Bayer and/or distributor sales rep so that the reps can, in turn, effectively manage expectations with manufacturing on what’s needed and when. Communication is always important, but it’s even more so when there are a lot of variables at play like this. It’s always our goal to put our customers’ needs first and we’re making adjustments accordingly as circumstances evolve.

Alison McFee
Head of Marketing—Bayer Turf & Ornamentals in the U.S. on how pricing is affected by the shortages:

We’re trying to minimize impact to customers by actively tracking the rising costs and mitigating them when possible. At this point, our product pricing is holding in the marketplace. Should we see sustained increases in our input prices, we’ll likely have to integrate this into our product pricing. We’ll proactively communicate any change through our sales reps and channel partners if/as the situation changes.

 

Bob Bollinger
CEO—ASB Greenworld

For the past 15 months, demand for growing media and most products in our industry has greatly increased. We’ve been able to keep up with this increase until recently when the shortage of perlite in the industry has gotten critical. Perlite suppliers are allocating perlite to all growing media manufacturers, therefore our availability of grower media with perlite is limited by the shortage of perlite.   

We’ve been given several dates when supply might be back to normal, but the dates have come and gone. The situation hasn’t improved and other suppliers everywhere are also experiencing shortages on things such as pallets, plastic, wetting agents, trucks and labor. When the raw materials are available, ASB Greenworld will have no issue catching up since we have the machine capacity to do more. I think it’ll be the summer of 2022 before supply is back to normal since it’ll require capital investments by suppliers and this takes time.

All of these shortages are resulting in all raw materials costing more, so we must raise prices. We normally raise prices once a year. In the past 12 months, we’ve raised prices three times, which causes a lot of confusion and stress in the market for everyone. The current peat moss harvest is in progress, and as many of our competitors are doing, we’re not planning to sell straight peat moss. ASB Greenworld is committing all our peat moss resources to making our own grower mixes since there’s a worldwide shortage of peat moss, too. Growers should order early since more price increases are expected between now and the end of the calendar year. 

Advice for their customers: The best thing that customers can do to manage this is to order early and look at alternatives. Many growing media suppliers are offering perlite-free mixes. ASB Greenworld offers grower mixes with HydraFiber from Profile Products. By using a 1-to-1 replacement of perlite, our HydraFiber mixes have growers telling us about better root development, no change in grower practices other than watering less and growers can catch up to the demand of their orders with faster growing times to bring plants to market. The best advantage is that we can supply a grower mix made with HydraFiber sooner than a perlite mix since the raw materials are readily available.  

 

Bill Riffey
Global Director—OASIS Grower Solutions

Supply of raw materials and increased demand has created a cascade affect that’s pushing our manufacturing to work overtime to keep up, and when supplies don’t come in a timely manner, we’ve been able to offer substitutions and/or ration supply to align when cuttings are arriving. Cuttings need a home when they arrive and our role is to make sure they have a substrate to put the cutting in.

I’m not sure what “the new normal” is when supply will stabilize. We’ve been making changes as an organization to stabilize our supply chain by ordering earlier and building inventory to respond to last-minute customer demands.

As with everyone, we’re seeing price increases in raw materials, especially in plastics. The driving shortage in labor is also driving our costs. People are getting harder to find and wages are rising rapidly. And freight is the other factor where we’re seeing increases.

Advice for their customers: Customers can order earlier by bringing product in earlier than they have in the past. The other point is to be open to substitutions. Normally, there’s another configuration of trays available. 

 

Ed Bloodnick
Director of Grower Services—Premier Tech Growers and Consumers

For our company, we have adequate resources of sphagnum peat moss and processed aged bark for manufacturing growing media. However, some of the ingredients that we use are from overseas—for example, the mineral ores for perlite and vermiculite are brought in by ships. COVID-19 also had impact for domestic ingredients due to worker limitation and supply chain disruptions.

I think many of the growing media companies were faced with the same situation that there just weren’t enough raw materials to go around due to disruptions in the supply chain. If garden centers are selling 30% more flowers and plants, and growers are growing 30% more, then 30% more growing media was required. Overall, all of the crop supplies that growers needed were delayed because of shipping and supply chain disruptions.

Some of our products contain coir, so at one point, there was a lockdown with COVID in India and Sri Lanka last year. Things started to get a little bit better going into late fall before Christmas, but we had another hit again in India because of the COVID variant.

When you order these ingredients from overseas, it can take four to six weeks before it is delivered, so we had to limit some of our products because we weren’t able to have all of the ingredients that we wanted. For our mainstream products, we were able to supply these, but that also meant that we had to step up our production and increase volume above normal capacity by working two shifts, and in some cases, three shifts. This put some strain on labor, since more team members were required, and with COVID, we wanted to be sure workers are safe.

One benefit for PTGC is that we have multiple facilities across Canada and one in Virginia, so we were able to move product across North America. We had to do a lot of cross-shipping to make sure that we could supply our customers. We definitely experienced some delays, but we did our best to service customers and ensure that they received their deliveries. And I think overall, our customers understood the delays, since they were facing a disrupted supply chain from all angles for all the materials they were buying.

We are catching up. I know at some point we were looking at three weeks, then four weeks or more. Our normal turnaround time in previous years was two to three weeks on most orders.

Our distribution network has played a vital role. If we’re not able to deliver a truckload, customers still can get a couple pallets from a distributor, so we always want to make sure the distributors have inventory. And in some regions, customers had to go to a distributor to get a pallet or two until the truck came. And that’s okay— they didn’t run out and they were able to get through the planting season until their delivery arrived.

We’re getting closer to normal now. Spring is always the crunch time because it’s the season when the most amount of growing media is shipped out. As an industry, we all take a little breather after Memorial Day and then it slows down a little as we enter into July, so that gives all of us a chance to catch up.

 

Gerry Giorgio
Creative Director—MasterTag

With regard to our source of supply for our products, we’ve thus far been able to supply what we’ve needed for our production. But where we’re really feeling it is the impact on cost due to tight supplies of the raw materials needed to produce the plastics.

An already tight resin market, as well as unexpected weather events in the Gulf Region (which is the primary hub for all plastic resin production and U.S. supply), has resulted in a situation that’s causing resin supply volatility across all polymers/resin types, including major supply disruptions, greatly extended resin lead times and continued resin price increases.

So far, our customers have been accepting of price increases. I think they’re seeing them from all vendors and have been expecting them to a degree.

Regarding a return to “normal,” I’m really not sure. The plastic industry was having supply and price pressure on our raw materials even before the pandemic and weather events. So we anticipate some mitigation on costs as supply chains and production levels return. But I doubt that things will go back entirely to what they were before. We’ll continue to watch things and adjust to the market as needed.

Tal Coley
Director of Government Affairs—AmericanHort

There was a period there, probably March/April, where we were hearing—not only about freight rates that were exponentially more than they’ve ever paid before—but people couldn’t find trucks to get their materials to where they needed to go. On the macro level, this has kind of been boiling for a long time, and the pandemic added to the perfect storm.

The trucking industry has had some serious headwinds initially through retirements, increased regulation and then through the new generation not really wanting to take on that lifestyle. The American Trucking Associations has estimated that we need at least one million drivers over the next 10 years to meet the demand.

In one of my connector meeting calls, I heard there were some growers down in Florida who couldn’t find trucks that were refrigerated, so they just winged it and put the plants in a regular truck. So people are taking some chances around this. It’s kind of like the “Hunger Games” out there trying to find drivers.

Some people are taking measures that they can internally—some have H-2A workers that have CDLs and they’ll sometimes get them to drive. I did hear of a report from a firm sending some folks in their business to go get CDLs, so they had more people on staff that were available to drive a truck.

Anything AmericanHort focuses on in Washington, D.C., as a potential solution is going to be long-term. We did get behind the DRIVE-Safe Act, which has a lot of associations and coalitions behind it. The bill basically peels back some of the regulatory restrictions on younger commercial drivers 18 to 20 years old, which right now they cannot drive state-to-state. The logic behind it is, how can you have a guy with a CDL in California who can drive 600 miles and then you got a guy in Connecticut who can drive 50? So it sets up an apprenticeship program for young drivers where they complete a set number of hours with an experienced driver. What they’re trying to do is sweeten the pot a little bit for people who might want to make it a career. (The bill was re-introduced in the Senate in March, along with a companion bill in the House.)

The hope is that things will kind of moderate across the economy and we’ll be able to find more drivers as things die down, but right now, supply chains are stretched so thin among everything. We’re all fighting from the same pool to get our products shipped.