In this period of exceptionality brought about by the coronavirus crisis, we are in permanent contact with the entire fruit and vegetable sector. The general tone is one of effervescent activity and after seeing what we are capable of, in the last few days, of a certain complacency.
In a conversation with a company manager I said: “Impressive. The sector is spectacular. What this sector is capable of is miraculous. From farmers, packers, truckers and so on…”.
And he replied: “I hope that society and consumers will now learn to value the effort and humble commitment of so many people”.
Please let me start this article with my recognition to the many people who bring food to the table. But what is so special about this sector that is capable of doing what is impossible for others?
You have to ask yourselves how it is possible that powerful and modern industries, such as the automotive industry (and many others), have to stop production lines while agrifood continues to operate. Not only does it continue to function, but it is also successfully able to cope with a dramatic increase in demand.
And the understated reason is that: “our own weakness becomes our greatest strength”. To further explain…
As I keep repeating in my articles, the big difference in this sector is that it is mainly shaped by the Supply and not by the Demand.
In our business, we work on operational efficacy thresholds based on production decisions delayed by at least one year. Our products are produced by plants (not factory plants) with annual planting cycles (in fruit trees, cycles of 3 to 5 years) that only allow us to adapt to demand afterwards. Therefore, it is necessary to manage the processes from the perspective of supply.
And I highlight the following: “Efficacy Vs. Efficiency“. Due to the above, we are operationally Effective but, normally, not very Efficient.
In our world… “Everything that goes in (is harvested at the farms), must come out (to be sold) to maximize results”. As we cannot act on the supply, stopping or slowing down production at the farms (in the short term), we try to act on the demand (offers, changing prices, tactical modification of product specifications and so on).
As a result of the above, investments in production means are largely oversized in our industry (since are planned to be able to meet the production peak) and therefore, the production means are underused (production inefficiency) during most of the campaign. Moreover, the size of these production peaks is several times larger than the demand peaks.
This is why I previously said that our weakness becomes our strength. We are working at quite low thresholds of production efficiency but we are very effective operationally speaking. As we are used to managing production peaks of 4 and 5 times higher than normal production, processes and equipment are capable of managing this production stress over a period of time.
So, it is not surprising that at the moment fruit and vegetable companies are capable of “the impossible”. Having said that, this is not something that undermines the sector, but on the contrary, I want to emphasise that the sector is trained to do the impossible 2 or 3 times a year.
Adding to that, to guarantee a reasonable service to the clientele, extra production is annualy planted (in excess), so that the volatility of production does not affect the committed supply programs.
Now see how far the manufacturing industry differ from this. These are industries defined by the Demand and have been applying high efficiency production processes for decades (Just in time, Kanban, LEAN, etc.). They have been reducing stocks and other “waste” (Kanban terminology) for decades, controlling investments and outsourcing non-essential activities while their supply chains are globalized. In other words, if supplies of a component from China are stopped, the factory stops.
In this sense, our sector, by comparison, has a much more local supply chain. Obviously, the main “ingredient” (fruis and vegetables) is local; but also, the same applies to most of the inputs and auxiliary elements. The large Spanish Agribusiness Cluster can provide, with less international dependence, fertilizers, agricultural plastics, packaging materials and a thousand other needs. And in addition, due to the volatility (and unpredictability) of production, there are typically larger intermediate stocks of inputs compared to the manufacturing industry.
I am convinced that, from this challenge, we will go out on a high note. We will be able to make the professionalism and dedication of this sector visible to society and our customers. Let’s see if we can turn “this weakness” into a definite strength.