Supply Chain Issues May Force You to Re-Think How You Do Business

Today if you made the same call, you may find that the specific product that you need is out-of-stock or that delivery cannot be made for 2–3 weeks or longer. Supply chain issues are being observed in every area of agriculture, and farmers/growers may need to change how they operate if they are going to remain competitive in the market.

Most agricultural operations do not want to be in the warehouse business and have not invested in dry storage facilities on their farms. Farm and greenhouse operations, like manufacturers, have adopted a "just-in-time" philosophy in which raw materials or supplies arrive onsite from their suppliers as needed by the farmer/grower. The adoption of a "just-in-time" philosophy by agricultural businesses reduced the need for on-farm warehousing since large amounts of supplies or inventory would not be required to be kept in inventory to operate efficiently. Utilizing a "just-in-time" philosophy also meant that farmers/growers would not need to tie up large amounts of capital in inventory or supplies that may not be needed for the immediate future.

COVID-19 created an epidemic of supply chain shortages and price volatility. One hydroponic lettuce grower saw his profitability take a tumble when his supplier indicated that they could not locate monopotassium phosphate fertilizer. The grower spent hours on the phone trying to track down this specialty fertilizer before finally locating a supply in California at triple the Pennsylvania price. In the interim, the absence of this key ingredient in this grower's hydroponic solution left him with nutritional imbalances that compromised both crop lettuce quality and marketability. In this case, the grower's adherence to a strict "just-in-time" philosophy negatively impacted farm profitability because he had not maintained a supply of this specific fertilizer in his inventory.

I do not believe that supply chain shortages will go away in the short term, so farmers/growers may wish to reconsider how they operate their businesses. First, farmers/growers must take the time to have honest, frank discussions with their key suppliers. One supplier confided to a farmer/grower that a key component to growing their garden mums was back ordered and that the manufacturer did not anticipate delivery for 18 months. For the grower to produce this crop in 2022, they begged and borrowed mum pans from every relative they had in Pennsylvania to meet their production needs for this year. When they finally placed their mum pan order with their supplier, they purchased enough containers to carry them through 2024. In the future, this grower has decided to carry a two-year supply of mum pans on his farm. To some people, it may seem like this grower is hoarding pots, but in reality, he is just protecting his ability to deliver products to his customer while trying to remain profitable.

Throughout Pennsylvania, agricultural businesses are being forced to adapt to meet ongoing supply chain issues. Some farmers/growers are building dry storage facilities to maintain larger inventories of key supplies like fertilizers and plastic pots. Some farmers/growers are joining or forming buyers' groups to increase their purchasing power to get more favorable pricing from suppliers and manufacturers. On some operations, farmers/growers are trying to adopt a more sustainable approach by making their own compost-based potting mixes or by reducing their need to purchase nitrogenous fertilizers by growing nitrogen-fixing cover crops in their vegetable fields.

There are many ways to remain profitable when economic uncertainty looms, and if you have a suggestion that you would like to share with me and our readers, please contact me at the Cambria County Extension office, 401 Candlelight Drive, Suite 220 Ebensburg, PA 15931, or email me at tgf2@psu.edu. I will take some of our readers' best suggestions and share them with you in a future article.