It’s no secret that Australian agribusinesses are under unprecedented pressure. Hit with the rising cost of everything, including consumer/customer quality expectations, and intense marketplace competition, only those able to continuously improve quality and productivity will grow their profitability.
In this article, we discuss how improving agribusiness profitability is totally achievable, but first let’s paint a very clear picture of what the Australian primary producers are currently facing.
Consumer & Customer Expectations
Spoilt for choice Australian consumers are becoming increasingly discerning and for those disgruntled ones, social media provides the perfect platform to share their dissatisfaction locally and globally.
Brands are perpetually scrutinised and consequently, retailers have become highly sensitised to their own brand integrity. This new found sensitivity has led to retailers placing extra pressure on suppliers around increased quality specifications, food safety and compliance protocols.
Price Pressure Here to Stay
Historically, major domestic retailers have set the standards and pace in the marketplace. As large and sophisticated as Woolworths and Coles are, they are now being dwarfed by global competitors ALDI and Amazon. This increased competition, along with each retailer striving to be recognised as the ‘best value’ fresh food offering, ensures downward pressure on prices will remain.
Looking further afield, there’s no reprieve in our export markets either. As high cost producers, every Australian exporter must compete with lower cost producers who continue to target and infiltrate Australia’s premium markets.
Rising Input Costs
As if this wasn’t enough, there’s also the pandemic and Russian/Ukraine conflict causing serious disruption to global supply chains.
Key inputs such as fertilisers and freight costs have increased between 300% – 500% in some cases and are unlikely to normalise in the short to medium term. The real kick is that the vast majority of agribusinesses are not in a position to pass on these increases and are having to wear the costs.
Labour (or lack thereof) remains a huge issue and despite advances in technology and automation, this key input remains a major cost in many agricultural enterprises – particularly for intensive horticulture. With minimum hourly rates now the norm, cost structures will not return to pre-Covid levels even after international borders normalise. Compounding the problem is the increasing regulations to ag workforce streams which add to indirect and direct costs.
Picky Permanent Workforces
Quality casual and seasonal staff are difficult to come by, but permanent workforce acquisition is also proving to be just as big a challenge. The war for talent has never been as intense and anyone in the industry will tell you it is a candidate’s market. Like consumers, this demographic is spoilt for choice and have high expectations around pay, conditions and work life balance.
Good candidates want (and can get) the lot, including motivating, collaborative environments, quality training and technology tools to do their job. Culturally they’re also looking for businesses that reflect their own values.
To put it bluntly, if you’re taking a business-as-usual approach to workforce design, management and development you will neither attract nor retain quality staff.
Finding Light in a Field of Darkness!
While agribusiness is being seriously challenged at present, there is a positive way forward. It all comes down to Lean. Implementing proven methods to improve your quality, efficiency and profitability, Lean is not a fad or some radical new way of doing business. Quite simply, it’s a proven, practiced and holistic business approach.
Lean in Agriculture
Unlike quality expectations, marketplace competition and rising costs, removing the ‘waste’ from your agribusiness is something that’s actually within your control. Today, Lean is being applied to more and more Australian agribusinesses and reaping excellent results.
Pioneered by Toyota, Lean is a business management system designed to create more value for customers while using resources more efficiently. Implemented by global giants including John Deere, Caterpillar, Nike, Intel and Kimberley Clark, Lean systematically identifies and removes ‘waste’ to optimise product and service quality while reducing costs.
Lean is much more than pack sheds and factories – every single function within your agricultural operation will benefit from its application. When systematically applied to an agribusiness, the principles, tools and techniques of Lean can:
· Reduce waste across growing, processing, maintenance, supply chain systems and finance
· Improve product and service quality, customer satisfaction, raw material flow, productivity and profitability
Adopting Lean is the key to ensuring your business succeeds in what is arguably one of the most challenging times in Australian agriculture.
Begin Your Lean Journey & Reap the Rewards
PSVC Managing Director, Simon Drum, has over 25 years’ experience in Australian and international agribusiness. Based in Melbourne, Simon has built his unique expertise working for major Australian agribusinesses and large food producers in senior strategic, commercial and operational roles. Simon has been applying lean principles to a diverse range of agribusinesses for more than a decade.
Contact us today to learn how to improve the profitability of your agribusiness: simon@psvcadvisory.com.au or 0407 567 250.
PSVC ADVISORY