Greenhouse inventory management: Reducing shrink through company culture

Company culture has a significant impact on the success of a production nursery’s inventory management program. I know, because we’ve been there.

Any business that has inventory will have inventory management issues. In our industry, those tend to focus on processes, like storing too many live products that are unable to sell or lacking inventory to fulfill orders. There’s also incorrect tracking, difficulty locating plant material on-site and not knowing the condition of inventoried plants.

But mitigating inventory shrink is not a process issue alone. Successful inventory management is strategic. It’s centered on the value that the company’s culture — its human component — places on its product.

Our inventory accounts for a large portion of the company’s assets. It is the same as cash in the bank. But if everyone on the team does not view it that way, those assets will not be treated like gold bricks. In creating a company culture that places high value on inventory, there have to be incentives to care about the company’s financial position.

Every day, team members have choices. They may choose to pick up a plant that fell off a trailer and return it to where it belongs. Or they may choose to leave it lying on the road and send it to the dump pile later. Our training programs and standard operating procedures cover this. But developing a company culture that values inventory goes deeper than having the right standard operating procedures in place.

Customers count on inventory management

Even within a culture that places high value on inventory management, shrink happens. None of us has a crystal ball, but anticipating change and building checks and balances into standard operating procedures ensures accuracy.

We’ve found that evaluating how every function of the business uses the nursery’s inventory is a good place to start. Standard operating procedures guide all our inventory management practices, from production and plant health to sales and shipping.

Having a reward and sharing in the company’s success creates a culture where employees value inventory because its importance is understood. Transparency about how the program’s success contributes to the nursery’s key performance indicators keeps the team engaged and invested.

Our inventory control manager is pivotal to ensuring team member engagement. She is a stickler for following standard operating procedures and holds everyone accountable for doing the same. There is no “close enough” with her. She knows exactly “how many, in what condition and where” at all times.

It’s a given that the condition of inventory can change, and it can change fast. It matters how well this is communicated between our production and sales teams and our customers. In addition to good old-fashioned data entry, we use handheld devices in the field to document planting, movement, quality and readiness, as well as priority pull locations for shipping and shrinkage.

Root cause of loss in greenhouses

We don’t wait until the end of the season or the start of the next one to figure out why we may have $1 million more or less in inventory than we did at the same time the year before. If we have more or less than planned, we determine why our counts trend one way or another. Unless we make a business decision to increase or reduce it, our inventory should be consistent, and if it isn’t, we find out why and adjust.

At Loma Vista Nursery, we use a system of standardized codes to help us identify and quantify loss by reason. Accurate inventory management is critical to identifying cause and ultimately to creating company budgets, sales plans and realistic time frames for product deliverables.

We are always looking for ways to mitigate shrink. Back in 2017, our largest dollar volume loss in the history of our company was attributed to a huge hailstorm that wiped out a large portion of our salable inventory. After that experience, we invested in a different type of shade cloth to cover every single hoophouse on the nursery that previously was left uncovered during the growing season. Nothing is foolproof, and Mother Nature does contribute to shrink at our nursery.

Sometimes things happen that are out of our control and cause shrink to be higher than we would like. But we can still examine what happened and try to improve for next year.

What’s in your greenhouse inventory?

Another aspect of Loma Vista Nursery’s inventory management strategy is diversifying the product mix relative to our customer base. We want to plan for every product we will grow. Some of our plants head to Midwest retail destinations. We grow others for the region’s landscape trade. And of course, there is a lot of crossover.

Maintaining just-in-time inventory matters to our customer base and is factored into our management strategy. Without proper checks and balances, managing smaller quantities of many items can be a strain on inventory control systems.

It’s also challenging to chase the market for crops that take months or years to produce. Maintaining a consistent sales, production and inventory management system enables us to enjoy high demand cycles and stay afloat during tough times.

Team buy-in

One of Loma Vista Nursery’s core values is “we grow plants we are proud of.” We do this by creating a culture of people who care about the plants we grow. On a micro level, we encourage individuals to ask, “What did I do today that positively or negatively impacted the company’s inventory?” On a macro level, we encourage team members to model leadership, knowing that overall reduction in shrink increases the company’s bottom line and leads to a larger bonus pool for everyone.

When all team members understand the value of the company’s inventory and how their daily action or inaction positively or negatively impacts the big picture, a culture of caring develops — and you can rest assured that your gold bricks are in good hands.