In anticipation of releasing a fully integrated Production Planning module this fall, LFM is featuring expert planning advice from food hub managers and others working in local food systems.
For this installment, we interviewed Johnice Cross about her experience forecasting production and sales for local food. Below is Part 2 of a summary of our conversation on the mechanics of planning. Part 1 on why planning is important and what needs to be in place to begin planning is here.
Johnice will also be joining us for our November 13 webinar, “Production Planning for Success” where she will present on best practices and be available for questions. Register here, space is limited!
About Johnice Cross
From 2007 – 2012, she served as the Coordinator of GROWN Locally, a producer cooperative in Northeast Iowa. As Coordinator, Johnice managed all aspects of running the cooperative, including production planning. During her tenure, GROWN Locally became the first cooperative to become a qualified vendor for Sodexo. She is a food safety coach for the USDA GAP certification program.
Johnice has a degree in Finance from the University of Arkansas in Fayetteville. Prior to her work with GROWN Locally, she owned an IBM Midrange Computer Consulting Company where she specialized in financial analysis and planning for manufacturing and distribution companies. She is currently consulting in the local food world of NW Arkansas.
Plan everything or just specific products?
This a question most food hubs wonder about, and there isn’t a single right answer. Certainly, the food hub must take into account the amount of time and capacity available for planning and determine the best approach for their hub for that season.
One advantage of planning all (or most) food hub products, although more time consuming upfront, is that it results in a sales plan and cash flow projection for the food hub and its producers. Planning all sales also gives the food hub a head start when dealing with new customers. If the food hub knows what volumes producers are growing and how much is already reserved, the hub knows what products they can sell more of and thus how to more efficiently use their sales and marketing efforts. This approach will also make the degree of over or under supply of each product more visible, and thus, actionable.
If planning all products a food hub sells is overwhelming or seems unnecessary, planning just those that drive sales or are in short supply still adds significant value to the food hub. Through planning, the food hub can be more strategic in the sales of products that are in limited supply and recruit producers to fill in gaps.
Putting the plan together
Depending on the type of entity and level of producer engagement, putting the plan together will vary slightly. Regardless of the entity type, the production coordinator will meet with customers and producers, typically individually, to simultaneously review the previous year and determine volumes for the next year. Based on these meetings, the production coordinator determines how to best utilize available supply. In deciding what producers to plan for which products, the production coordinator takes into account many different factors, including:
Producer experience growing the product
-Has the producer grown the product before in similar quantities for similar types of customers?
-Have their results been predictable in volume and quality?
-How flexible is the customer on product consistency and quality?
-Will the product be used for value added products or sold as harvested?
-How flexible is the customer with pricing?
Food hub requirements
-What are the “costs” of working with each producer and customer? For example, are they easy to work with? Are they responsive?
-How does each producer and customer fit into the long term strategic goals for the food hub? Will working with the customer provide experience that can be leveraged to work with other similar customers?
Mainly, the production coordinator is maximizing the available supply while managing risk to ensure the food hub has a reasonable chance of meeting commitments to customers and producers.
In producer co-ops, producers often meet as a group to review results from the previous year, discuss varieties and available acreage for each crop. The co-op’s bylaws typically dictate how a co-op establishes producer priority and assignment of products. Based on the producer meetings, the coordinator establishes a primary producer for each product and sets pricing. Producers then use this plan to purchase seed and finalize their rotational plan.
How long does all of this take?
Typically, individual buyer or producer meetings take about 1.5 to 2 hours each, plus preparation and follow-up. For some buyers (small or those not interested in forecasting), the coordinator can assume demand, typically based on sales from the year before. Often in producer co-ops, individual producer meetings can be eliminated in favor of several producer group meetings.
Between producer and customer meetings, Johnice estimates that she spent about 3-4 person weeks creating and finalizing a production plan. Obviously, this can vary tremendously by the size of the food hub, number of producers and customers, number of products planned, and the food hub’s experience in planning.
Managing the plan
Producers provide weekly updates on availability throughout the year, relying on their plan to guide volume and pricing. Producers should be responsible for notifying the coordinator of crop failures or other circumstances that prevent them from meeting their commitments. The coordinator should also regularly check on how well producers and customers are meeting their commitments, and keep detailed notes on failures and successes. These notes are vital in doing a proper review at the end of the year.
In some producer co-ops, primary growers are responsible for mentoring secondary growers to increase their quality and yields. Secondary growers can call on primary growers to help troubleshoot problems. This system greatly accelerates the learning process of newer growers and allows the co-op to grow more quickly and serve more customers.
An important aspect of taking on less experienced growers is finding a market for seconds. Inevitably, the first or second time a producer grows a new crop or grows it at scale, product quality issues crop up. Food hubs can help producers take risks on growing new products if they can help find customers for “seconds”.
What would make planning easier or more effective?
Besides having more product (almost all products were short on supply), a planning database that is integrated with orders to communicate and track plans greatly enhances a food hub’s ability to learn from and improve future sales plans. Here are specific areas Johnice cited:
– An easy way to communicate the plan to producers & customers.
– A quick comparison of plan vs actual sales so issues can be spotted earlier.
– A way to easily track missed opportunities to inform production in future years.
How LFM addresses planning
When we began specifying the planning module, we noticed that many food hub production plans were stand alone spreadsheets and went nearly untouched during the sales season. Of course, the planning process itself provides great value to the food hub, but a food hub can realize much more value by using and updating the plan on a regular basis.
While LFM’s database driven planning module helps production coordinators develop a production plan and spot excess supply and demand in the planning stage, it also helps them manage and execute the plan throughout the season.
The planning module integrates with the producer interface, informing the producer of expected weekly volumes and sales of each product, and customer orders, allowing the food hub to create “reserve” orders based on the plan. LFM also provides reports on plan versus actual for customers and producers. These reports will not only reduce the prep time for the annual review meetings, but also help the coordinator spot problems earlier.
Want to learn more?
For more expert planning advice please check out Part 1 of our conversation with Johnice. We hosted a webinar featuring Johnice on production planning on November 13, 2014. If you missed it, you can find a link to the recording on our Resources page. We also interviewed Mary Oldham, Regional Coordinator for Value Chain Cluster Initiative. Read a summary of our conversation here or register for a webinar on January 22, 2015 where Mary will share her advice on working with new and emerging food hubs. Also, be sure to check out the publication Production Planning for Aggregators written by Mary Oldham and Savanna Lyons, Leopold Center.