Last month, I made a field trip to a vegetable farm in Malaysia. It’s not a typical farm in Asia with 200 hectare in total whilst average holding size of Asian farmer is around 1 hectare; and the owner is more than just a farmer, his business group (YKV, which is a pseudonym name) managing the whole downstream of vegetable value chain from field production, processing, packing to delivery to super market. Such direct delivery model without any distributor is again not common in Asia; for example, chili produced locally in Indonesia may pass via 5-6 middlemen before it can reach the plate of consumers.
In terms of business volume, the whole group supplies 30 ton vegetable per day, 70% to Singapore and 30% to Malaysia. For detailed process, you may check Appendix I in the end of the article.
Business challenge
- How to manage cost in labor-intensive production.
Even with automatic packing line and large scale production ability, YKV field production is still following the labor-intensive approach. Seating in mountainous area does not allow it to have large scale mechanization for field production. From Appendix II, you can find a rough estimation for revenue and cost analysis on daily basis; more than 60% of the cost is coming from labor.
- How to ensure steady supply and high quality.
With a traditional production approach to supply Singapore super market, how to manage the production so as to meet high quality standard including appearance and chemical control?
- How to keep the freshness and appearance of vegetable at the same time, to reduce loss. Waste is not avoidable to keep the vegetable look good. Why? It is a choice of customer including you and me (so, start to be less picking about the look of vegetable).
- How to keep market share with competitors from China and Indonesia in such a price sensitive market.
Below picture list the business focus along the process and the tools which I think can help YKV group reach its management goals. While some of them are quite self-explanatory, let me explain how others can help.
- Field status & activity log
In the field, they only have a pole indicating when the crop is planted. To shorten production cycle and manage cost along the way, a better systematic approach may be helpful to monitor the status and activity in the field. Developed countries have started to use cloud based application like Climate; developing countries can have their own off line version which is still essential for business management.
- Team production/cost analysis
Field production is allocated on team basis; team production and cost analysis is to help internal benchmark analyzing to ensure best-practice is flowing to different teams.
- Daily harvest Estimation & Daily stock balance reporting
Daily harvest estimation works with daily stock balance report from processing plants, to determine next day’s harvest, shipping and processing schedule.
- For business improvement, value stream mapping can be a very helpful tool to reduce loss and shorten production cycle.
Personally, I really enjoy it because it’s kind of helping collect me to the big picture of the whole agriculture industry: from upstream to downstream, from the perspective of suppliers to the perspective of consumers, and from an in-house consultant to a freelancer drawing picture of another business model.
Appendix I: process details
Field Production
- Production Cycle: around one month.
- Preparation includes plowing field, fertilizer production, and field nutrition.
- Planting is to strictly follow the rule, like how to mix sands and seeds (seeds are planted together with sands to reduce waste), or how much to plant in specific area. It’s pure manual hence it’s another version of precision agriculture.
- Growing stage is to carefully monitor the field quality and spray chemical when and only when it’s necessary; overspray not only leads to higher chemical residue and impact quality, but may also damage the appearance and lead to higher production loss.
- Harvest is about being at the right time and keeping harvested vegetable look nice.
- Nursery is mainly for seeding stage of expensive seeds like lettuce to improve the germination rate (to avoid production loss as well); it can also help shorten production cycle and improve field utilization. After seeding, young plant will be transferred to field.
- Reduce production loss; especially avoid huge effort loss (mainly labor cost) due to controllable human issues or uncontrollable environment issues.
- And experience matters; it takes at least 6 month for a fresh employee to be equipped with the required skills; unexperienced employee can easily lead to more production waste.
Processing & Packing
- Cycle: 1-2 days.
- Cooling is to increase shelf life of vegetable by lowering temperature.
- Cold storage system is very simple: first in first out and pure manual. Before further processing, vegetable box is tagged with variety and customer name. After harvesting, normally vegetable does not have a long shelf life; all YKV needs to is to push vegetable out; and therefore, they do not need a robust inventory management system with fancy functionalities. Barcoding is good but too expensive.
- Cleaning is only to remove the dust or soil. Using tab water to wash will shorten the shelf life of vegetable.
- Selection is another waste producing stage to keep the pack look nice. To sell vegetable leaf which does not look good separately is not going to bring much revenue.
- Packing – automatic packing line, saving labor by 30%.
Reference II: Revenue and cost estimation on daily basis to understand labor impact.
Thinking Really Matters 