Getting the most out of your greenhouse means operating an efficient business model. Business efficiency is synonymous with leveraging all of your resources to their maximum potential. This would include heating systems, labor, equipment and the greenhouse itself.
Margins for many greenhouse crops can be thin and growing the right plants to meet market demand in an efficient timely manner is key. Though energy may be the first area that comes to mind when many growers hear the word “efficiency,” streamlining a greenhouse operation can also mean investing in the right talent, equipment and management systems to maximize the return for each dollar invested.
Fuel and labor efficiencies
When it comes to energy efficiency, growers must assess their fuel source options and their level of investment in heat retention equipment and systems. Fuel cost is a significant expense for each greenhouse operation, so it is critical to assess whether an investment in an alternative heating system will enhance greenhouse efficiency. For example, up until a couple of years ago, natural gas presented a very significant economic alternative to traditional fuel oil, which presented a competitive advantage for growers with access to natural gas. In recent years, oil has come down in price to narrow the gap, so a pencil needs to be put to paper to assess the best option.
The challenge with natural gas is its accessibility. While common in Northeast suburban areas, the necessary infrastructure may not exist in more rural areas that have traditionally relied on propane or fuel oil. If that infrastructure is in place — or it can be easily added — it can potentially create a competitive advantage as a heating source.
Leveraging labor talent, coupled with investment in mechanization, are two key considerations when a greenhouse operation looks to improves its efficiency. The most efficient greenhouse operators can typically have labor costs around 20 percent of total gross sales.
Investment in mechanization has been occurring in the industry for years and it continues today in an effort to improve production capacities and drive labor efficiency. Through investments in new, more efficient technologically advanced equipment, like watering, integrated ventilation systems, production/transplanting lines and inventory management equipment, labor costs can be cut by both making existing mechanical jobs more efficient and, in some cases, replacing or augmenting a more costly human labor force with mechanized equivalents.
Although the number of laborers is typically reduced when investing in this type of equipment, hiring high quality talented labor is critical to achieving the return on investment of this equipment. All capital investment decisions should be done at a measured pace and each investment requires careful consideration.
Efficiency through market attentiveness
Another way to maximize greenhouse operation efficiency is by maintaining a sharp focus on what the retailer, and ultimately the consumer, seeks in local products. Growing the right product at the right time for the consumer is critical to the efficient use of a greenhouse. This all starts with understanding market demand. Once market needs are known then formulating the right product mix and delivering a high quality product at the right time is crucial to success.
Production plans and scope of the business varies dramatically from one greenhouse operation to the next depending on the market served. Markets range from retailers and small local garden centers to food stores, landscapers and large box stores. Each market has its own demands and the grower that meets these demands effectively improves their business efficiency.
Efficiency through managing space
Maximizing facility efficiency goes beyond simply updating power sources and infrastructure. When viewing facilities alongside market demand, producers can maximize facilities — even if they’re outdated — in the context of space, both horizontally and vertically, and what plants can maximize that space for the most potential profit. Ultimately, it’s more about thinking in terms of maximizing square footage and the amount of time required for production.
An important measure of greenhouse efficiency and productivity is the number of “turns” in inventory that can be produced in a given year. Looking at available space on a square-foot basis and finding a product niche to both maximize marketed price and greenhouse space utilization is one way to maximize efficiency.
Each grower will put together a production plan to leverage space, which may include hanging baskets or the use of rolling benches to increase production capacity of the greenhouse. By increasing the dollars per sq ft, whether it is by growing and selling a higher priced product that takes longer to grow or a lower priced, higher turnover product, an efficient plan entails both the number of plants produced and the number of turns with all associated costs, accounting for every square foot of usable space in a greenhouse.
Interested in learning more on the efficiency of your greenhouse business? Try our Green Industry Benchmarks Program.