Agribusiness Productivity: A Lean Perspective

Beyond Scale, Mechanisation, Automation & AgTech 

Lean is the strategy and source of sustainable competitive advantage. 

Conventional thinking for improving agribusiness productivity focuses on scale, mechanisation, automation, and technology. However, these strategies alone are not enough to ensure long-term success. To truly thrive, agribusinesses must adopt a lean perspective, which goes beyond traditional methods to eliminate waste and enhance efficiency. 

The Limitations of Scale and Technology 

Increasing scale does not automatically lead to greater efficiency or lower costs. Without proper control, scaling up can result in inefficiencies and 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 investment in mechanisation, automation, and AgTech is essential, these technologies are 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, it 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 with greater efficiency. It has been successfully applied across almost every industry worldwide. 

The eight Lean wastes are overproduction, overprocessing, transport, waiting, excessive motion, inventory, and underutilised creativity. These wastes exist in every agribusiness to varying degrees: 

• 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. 

• Waiting: Delays or idle time in the production process, including waiting for materials, equipment, information, or approvals. 

• Transport: Excessive movement of raw materials, work-in-process, finished goods, machines, inputs, packaging, spare parts, consumables, or people. 

• Overprocessing: Using more resources, time, or effort than necessary to produce a product or deliver a service. 

• Inventory: Holding too much or too little stock of raw materials, work-in-progress, finished goods, inputs, packaging, spare parts, or consumables. 

• Excessive Motion: Moving raw materials, machines, equipment, inputs, or people more than is necessary. 

• Defects: Producing products that do not meet internal or external customer requirements or expectations, leading to rework, scrap, or customer complaints. 

• 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 improve their processes, reduce costs, increase quality and customer satisfaction, 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 fruit 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 fruit freshness and minimising customer rejections and poor DIFOT performance. 

Satisfied consumers and customers drive increased demand, allowing marketers to confidently send fruit 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 can create a strategic competitive advantage within two to three years.