1. Dr. Charlie Hall Ellison Chair in International Floriculture Texas A&M University charliehall@tamu.edu Dr. Paul A. Thomas Professor & Extension Specialist University of Georgia pathomas@uga.edu Boost Your Bottom Line: Benchmarking Analysis

2. What I will cover: Operation Metrics Transportation Metrics Resource Metrics & Virtual Grower

3. Operational Profitability Net Income per Square Foot per Week – Net Income / GH Sq. Ft. X Weeks in Operation This adjusts income / sq. ft. for different lengths of operations. $0.034 per sq. Ft greenhouse space / week

4. Operations Labor As A Percent of Sales – Total Labor Cost / Total Variable Costs This is an indirect measure of labor efficiency and cost efficiency. $159,890 / $589,980 = 0.22 or 22.0% Operating Expense Ratio – Total Variable Costs / Total Revenue The average % of sales price needed to cover direct costs of crop. $440,768 / $589,890 = 0.717 or 71.7%

5. Production Efficiency Metrics Worker Equivalents. Total # of labor hours / year divided by 2760 (55h per week) This accounts for part-time labor and temporary workers. Let’s assume we have 8 full time and 19 part time workers: (8 wkrs x 51wks x 40hr/wk) + (19 pt-wkrs x 36 wks x 20hr/wk) = (16,320 hours + 13,680 part hours) = 30,000 hours 30,000 hours / 2760 hours = 10.8 worker equivalents! New York Greenhouses averaged 8.9 FTE Worker Equivalents for the average 40,000 sq. ft greenhouse.

6. So What? Once you have your worker equivalent (Full time equivalent - FTE) you can use that number to compare many aspects of your operation to the human resources you are paying! You can also look at how each manager is managing his/her area based upon output and FTE. This is a very powerful tool!

7. Production Efficiency Metrics Net Income per Worker Equivalent – Net Income / Number of Equivalent Workers This measures how well labor is used to generate net income. $8,065.00 per worker equivalent is average. Sales per Square Foot – Total Sales / Sq. Ft. Production Space This establishes how well use is used to generate sales $14.00 is the average for NY Greenhouses

8. Production Efficiency Metrics Square Feet per Worker Equivalent – Sq. Ft Production / Number of Equivalent Workers This is an indirect measure of worker efficiency / responsibility. 8,502 sq. ft per FTE worker Greenhouse Area per Operator/Manager – Total Sq. Ft. Space / Production Managers An indirect measure of how efficiently the greenhouse is managed 1.2 FTE-Managers per 40,000 sq. ft operation

9. Are My Shipping Costs In Line With Other Businesses? The national average for shipping costs is 1.5% of Total Sales. In the greenhouse industry, we average between 2.0 and 2.5%

10. Transportation / Shipping Costs Are Rising Rapidly Transportation Expense – Cost of Shipping and Transportation / Total Sales Income This establishes how well use transportation and shipping technology is used to generate sales! 2.0 % is average for NY Greenhouses. Total shipping costs have increased 87% in the last 5 Years, and predictions are that costs will increase another 30% in two years.

11. What’s Included In Transportation Costs? Maintenance & Repairs Freight Bills Rental Fees Gas / Oil Driver Wages Insurance Licenses, Fees Tolls, Tickets Taxes

12. Georgia Survey Results  Majority of participants responded that transportation is a key limiting factor for economic growth in ornamental production  80% of respondents stated that their transportation costs have increased in the last year (2009) at an average rate of 21%*  Transportation accounted for 10% of total cost of production * J. M. Compte and P.A.Thomas, 2010

13. Routing Analysis Order Sharing

14. Total Savings with 1, 2, 3, 4 and 5 Order Sharing

15. Location Clusters North Alliance 3 depots and 57 orders Central Alliance 8 depots and 157 orders South Alliance 4 depots and 81 orders

16. Cost Savings in Central, South and North Alliance Note: for central alliance one must include 4 orders per route in order to begin to see savings

17. Central Depot LocationMajor Avenue or Highway Location Production location Alliance distribution center location Location Clusters

18. Shipping Relocation Savings: South Alliance

19. Time Windows (time taken to load/unload) Average Cost Savings with 30, 60 and 90 min Windows

20. Shipping Metrics Route Efficiency – Dollars spent per mile – Dollars spent per unit load value – Load value per mile driven – Load value per hour driven – Number of client visits per day – Dollars spent per number clients on route.

21. Shipping Metrics Gallons Fuel Used / Week / Driver Miles off Route Distance / Week / Driver Percent On-time Delivery / Driver Percent Follow Up Orders / Driver

22. Conservation Metrics

23. Gallons Water Used / Week KWH Electricity Used / Week KWH Used Per $ Gross Income Generated / Week Gallons Heating Fuel Used / Week Gross Value In Truck per Shipment Per Mile Cost per Dollar Gross Revenue

24. An In-Line Flow Meter Water Conservation

25. EC-5 probes Solenoid unit Probe in container Datalogger and control system Automated watering system Water Nemali and van Iersel, 2006 Scientia Horticulturae Nemali and van Iersel, 2006 Scientia Horticulturae

26. 0.05 0.35 0.29 0.23 0.17 0.11 0.410.47 Quality Plants Grown With 70% less Water

27. Using Virtual Grower To Establish Energy Metrics

28. Tools: …… to Help You Make Decisions: Virtual Grower RET Canada Microsoft Excel Quickbooks Academic Software NC State Rutgers Ecke’s

29. It’s Easy To Input Data

30. Calculated Costs by Month

31. Generates Reports

32. Features Virtual Grower 2.0 Allows you to estimate energy costs Allows you to verify crop / heating schedule Allows you to play what if on technology upgrades and retrofits. Allows you to measure / track system efficiencies and weather / cost per hour metrics.

33. One Little Problem Our “Example” is based upon data provided to you from Wen Fei Uva, on Page 47. Table 34 of their publication. See “Heating Fuel” = $53,073.00 Please note that in 2001, the price of No. 2 heating oil was 97 cents / gallon. The 2009, price was 207 cents / gallon. To make this example more “real,” we corrected the fuel cost to reflect price increases. The cost of fuel for an average NY Wholesale firm would now be just over $112,000.00 We used a model GH in Virtual grower with a final heating fuel cost of $108,724.00 That should be close enough!

34. Example New York Greenhouse:40,000 sq ft - Old Steam Boiler Heating Schedule Sep 1 to May 1(60F-72F) Heating Efficiency: 69% Air Exchanges: 1.30 exchanges / hour No Heat Curtain! Fuel Types and Prices New York - Oil 2 at $2.07 / gallon Total Heating Costs: $ 108,724.00 Cost per Square Foot:$ 2.17 Maximum BTU Draw :4,340,579 btu’s Now let’s install a modern Hot water boiler:

35. Example New York Greenhouse:40,000 sq ft - Modern Heating Schedule Sep 1 to May 1(60F-72F) Heating Efficiency: 78% Air Exchanges: 1.30 exchanges / hour No Heat Curtain Fuel Types and Prices New York - Oil 2 at $2.07 / gallon Total Heating Costs:$ 96,179.00 Cost per Square Foot:$ 1.92 Maximum BTU Draw :4,340,579 btu’s Now let’s install a good quality heat curtain: Net change: $12,545.00

36. Example New York Greenhouse:40,000 sq ft - Modern Hot Water Heating Schedule Sep 1 to May 1(60F-72F) Heating Efficiency: 78% Air Exchanges: 1.30 exchanges / hour Energy Curtain Installed! Fuel Types and Prices New York - Oil 2 at $2.07 / gallon Total Heating Costs: $ 68,365.00 Cost per Square Foot:$ 1.37 Maximum BTU Draw :4,340,576 btu’s Net change = $27,814.00 Total Savings = $ 108,724.00 – $68,365.00 =.. $40,359.00

37. Pre-Curtain Strategic Profit Model

38. Post Curtain

39. Real-World Heat Curtain Impact: Heat Curtains cost $3.00 / sq. ft. ($120,000.00) What If We Really Did This? $27,814.00 Energy Savings With Heat Curtain ($15,912.00) Cost of Loan (10 Years @ 6.00%) ______________________________________ $11,902.00 Annual Operations Savings What Did We Forget?

40. Spreadsheet version of the strategic profit model Energy Curtain Alone 1%...Every Year!

41. FOR MORE INFORMATION: Ellisonchair.tamu.edu