By Madelyn Walters
Granular Customer Success Manager, Champaign, IL
How do you define operational efficiency?
Operational efficiency refers to managing your farm’s cost of production in a way that enables you to be profitable and minimize waste. You can always improve your operational efficiency, but you have to start with at least a good understanding your costs as they relate to the revenue they play a part in driving. For example, I don’t know if buying another combine is a good idea until I know how many additional acres I’ll be able to harvest with it. Do I have enough acres to maximize (or at least come close to) the use of one more machine? If I hire an additional truck driver, what will that cost me, and how much more hauling can be done as a result? Do the potential revenue or time savings surpass the cost of another truck driver?
Why, and how, is operational efficiency critical to the long-term success of a farm business?
Operational efficiency is critical because it can mean the difference between a profit and a loss in years like 2016 where farm margins are tight, even if you think you’ve got a good handle on your cost and revenue. A loss this year means a tough start to next year’s crop, and then things can quickly start to spiral out of control.
Based on your experience working with farms, what are the 3-4 best practices that any farmer should keep in mind to make sure they’re being operationally efficient?
- Understand field-level profitability. Measuring profitability at a farm level is table stakes - you need to get to the field level in order to really improve. If you can identify fields that are continually not profitable, it may be time to re-negotiate those leases or consider giving those fields up to free up resources to take advantage of better opportunities.
- Streamline communication. A lot of time is spent on the phone or radio directing people where to go and what to do every day, at all times of day. Efficient farms understand where work needs to be done, and are able to communicate and assign it to their crew without a ton of back and forth. Work order systems, when supported by the right technology like Granular, can cut down on misunderstandings and lost time.
- Eliminate extra office work. Time spent in the office is time that 1) most farmers don’t enjoy, and 2) can be spent on activities that are worth more in terms of potential revenue. Most operators write down what they do in the field on pen and paper, and then hand those notes off to a bookkeeper in the office. This person in turn has to spend more time entering that same information in another system. Look for ways to transfer information directly! In hectic times like harvest, a bookkeeper can spend 20 - 25 hours entering ticket information - we streamline all of that for customers, so that information is captured in real-time directly from the field, scale, delivery location, etc.
- Do your homework to manage input costs. Successful farms understand when they’re getting a good deal on their inputs or not. They request quotes or have a bid process in place to purchase seed, chemicals, and fertilizer. Counter to what most farms may be susceptible to, they don’t rely on relationships alone to make purchasing decisions.
About the author: Walters grew up on a grain farm in northern Illinois and earned a Bachelor’s degree in Agricultural and Consumer Economics from the University of Illinois. Previously she worked on market research and strategic planning projects with an ag consulting firm in Indianapolis. At Granular, Walters works with 26 farms that range from the Midwest to the west coast and grow anything from almonds to corn and soybeans, and everything in between.