December 2019 - 19

DUETS
container sizes, successive plantings and so on. I even included columns for
dumped plants at the end of the season to record shrink. The table filled a
page with two dozen cultivars (rows) and columns containing a half dozen
ship dates, various container sizes and multiple plantings.
My decision criteria started with what my mother wanted to have at her
fingertips in the spring to offer our retail customers. Next was managing
the rooted cutting orders to minimize waste. At our next seminar stop John
referenced watching me methodically working through that table. Another
objective was to never have more
than a half tray of cuttings of any
cultivar left over after planting.
Partial trays become whole
trays quickly and waste money.
Tell us more about your " lost
opportunity value of shrink. "
Will: When we look at the lost
opportunity value of shrink,
my " back of the envelope "
calculation showed that for
every dollar we sell we lose at
least a dollar of retail potential
in shrink. As I tell people, the
seedling shrink is where the lost
opportunities exist. The retail
shrink is where we see the most
dollars lost. The reason shrink
management is so critical to business success is that shrink gobbles up
profits faster than any other cost component. If the profit margin on a $3
wholesale product is 30% ($0.90) - which makes the production cost
70% ($2.70) - for every $3 plant you shrink you consume the profit from
three plants you sell!
Peter: We're in lock step, partner, on the cost of dumping plants. My
equation is essentially the same as yours, it says every plant dumped erases
the profit from two and a half plants sold at full price. I learned to believe in
it after my first year selling Christmas trees. After the back breaking work
of handling them, it hit me like a ton of bricks how costly every tree left on
Dec. 26 was to the final profit. The best seasons saw a few customers turned
away, which meant I had sold out.
Shrink is NOT
what you throw away,
but rather it is the
lost opportunities of
not having the
product to sell!
Will: So, where else is the shrink in your business? EVERYWHERE!
Remember the key to managing shrink is to target, record and improve
activities where you think you have excess shrink. Dumping plants is an
easy shrink target but look for other sources of shrink that represent
costs you aren't getting paid for. Set up teams of employees to manage
different shrink areas. Excess
fuel consumption is an obvious
shrink target. Incorrect
temperature settings, inaccurate
thermometers, heating empty
areas and not filling heated
areas are all examples of shrink.
Electricity is a quiet cost we
overlook - HPS lighting when
the sun was shining, work areas
with fluorescent vs. LED and
fixing water leaks which cause
pumps to run. Conduct a power
down where everything is turned
off to see if the electric meter
still spins. Record daily water
consumption with a meter to
identify underground leaks and
inaccurate billing. Reducing shrink
requires you to engage your employees to identify a couple of shrink areas,
solve these and then identify other areas that represent costs that don't add
value to your products - like the trash!
Peter: I opened with the remark that both of us have been around for
decades. During a conversation like this one I flash back to the '70s and
'80s when margins were high and business was booming. Back then it was
possible to be sloppy in many of the management areas you list and still be
profitable. Good or bad, right or wrong ... everything has changed.
Will, thanks for sharing your experience. Several topics remain on our list
of industry discussion points, I hope you will join me again soon.
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December 2019

Table of Contents for the Digital Edition of December 2019