Agribusiness Strategic Competitive Advantage
We operate in an increasingly competitive landscape and as a result, many agribusinesses look to scale, mechanisation, automation, and AgTech as the key drivers for productivity. While these strategies are important, they only scratch the surface. True, long-term success requires more than just expanding operations or adopting the latest technology—it demands a deeper, more strategic approach.
To gain a sustainable competitive advantage, agribusinesses need to embrace Lean principles. By eliminating inefficiencies and continuously improving market alignment, businesses can unlock higher efficiency, reduce costs, and position themselves ahead of competitors.
This blog explores why scale and technology alone aren't enough—and how Lean can be the game-changer for your agribusiness.
Beyond Scale, Mechanisation, Automation & AgTech
Conventional thinking for improving agribusiness productivity focuses on scale, mechanisation, automation, and technology. However, these initiatives alone are not enough to ensure a sustainable competitive advantage.
To truly set themselves apart, agribusinesses should implement Lean to drive continuous improvement in market alignment and operational efficiency.
The Limitations of Scale, Mechanisation and Technology
Increasing scale does not automatically lead to greater efficiency or lower costs. Without proper control, scaling up can create many inefficiencies and increase defects. Defective raw materials reduce marketable yields, increase supply chain costs, and limit marketing options. This limits the price an agribusiness can charge and increases the likelihood of customer rejections and poor Delivery In Full On Time (DIFOT) performance.
Overproduction compounds these issues, increasing the volume and duration of inventory held in the supply chain. This slows the harvest schedule, exacerbates underlying raw material quality issues, and increases grading, packing, and storage costs. The supply chain is forced to deal with less preferred customers, accept lower returns, and endure slower payment terms.
While calculated investment in mechanisation, automation, and AgTech is essential, these technologies are typically available to competitors as well. Any advantage gained through such investments is quickly neutralised as others adopt the same technologies.
The Lean Approach
A complementary strategy agribusiness can adopt is the application of Lean principles. Lean is not a new concept; it originated in automotive manufacturing and was refined by Toyota in post-WWII Japan. However, its application is not confined to the automotive or manufacturing sectors. Lean is a management discipline that emphasises eliminating waste while delivering quality products on time at minimal cost. It has been successfully applied across almost every industry worldwide.
The eight Lean wastes are defects, overproduction, overprocessing, transport, waiting, excessive motion, inventory, and underutilised creativity. These wastes exist in every agribusiness to varying degrees:
Defects: Producing products that do not meet internal or external customer requirements or expectations, leading to rework, scrap, or customer complaints.
Overproduction: Producing too much or too little volume or producing earlier or later than the next part of the value chain or the market can handle.
Overprocessing: Using more resources, time, or effort than necessary to produce a product or deliver a service.
Transport: Excessive movement of raw materials, work-in-process, finished goods, machines, inputs, packaging, spare parts, consumables, or people.
Waiting: Delays or idle time in the production process, including waiting for materials, equipment, information, or approvals.
Excessive Motion: Moving raw materials, machines, equipment, inputs, or people more than is necessary.
Inventory: Holding too much or too little stock of raw materials, work-in-progress, finished goods, inputs, packaging, spare parts, or consumables.
Unused Creativity: Failing to utilise the full capability or capacity of the available workforce, whether seasonal or permanent.
By identifying and eliminating these wastes, organisations can reduce costs, increase quality, customer satisfaction and profitability, and enhance employee engagement and environmental performance.
Conclusion
Removing waste transforms an agribusiness's competitiveness. Market-aligned primary production and the elimination of waste create a sustainable competitive advantage.
When produce quality and size align with customer preferences and demand, the market pulls the product through the supply chain. This results in timely harvesting, reduced costs for grading, packing, and storage, and decreased inventory levels, maximising produce freshness and minimising customer rejections and poor DIFOT performance.
Satisfied consumers and customers drive increased demand, allowing marketers to confidently send produce to various markets and customers, maintain prices, and enforce trading terms, maximising revenue and cash flow.
The targeted and systematic removal of waste from an agribusiness will create a strategic competitive advantage for the medium term.