Good-Enough Data Isn’t Good Enough Anymore
For years, JCS Family Farms did the majority of its record keeping on legal pads and spreadsheets.
The problem was, that process created too many stand-alone reports on the thousands of acres the farm managed.
“We had six people who had six separate lists. It was impossible to get accurate information when we worked off so many different silos of information,” says Rob Sladek, a fifth-generation farmer at JCS Family Farms. “It was so frustrating knowing we generated all of this data, yet we questioned its validity.”
In 2013, the Iowa family’s lack of confidence in the numbers reached a tipping point.
“If you don’t know where your inventory is at or if you aren’t confident about how much finished goods are in your bins, you get to a point where that’s uncomfortable,” he says. “There is too much at risk to have data you’re not confident in. We had to start doing a better job of managing by the numbers.”
However, when they considered investing in farm management information software (FMIS) for the first time, they questioned whether or not they really wanted to spend the dollars.
“We’ve known for years that data is one of the most important things generated on our farm,” says Sladek. “However, paying for software we had no use for just a few years ago took some adjustment in our mentality and in how we do things.”
a change in mind-set
If it was going to stay relevant, as well as position itself for the next generation to farm, the family knew it had to start treating the operation as if it were more of a manufacturing facility – with raw goods in and finished goods out – that based decisions on concrete figures.
Once the Sladeks came to that realization, they could justify the cost of the software – and the pain that would come along with adopting a new program. They invested in Conservis in 2012, a platform that would be a good starting point for monitoring inputs and finished grain.
“It was a great initial experience in having a web-based system, because it helped us refine our processes and procedures,” he explains. “Because multiple people were using the platform, we also began to understand the importance of having accurate information in the system.”
While the software did help consolidate certain processes, it still didn’t integrate the 12 data silos that existed across their operation. That chore fell to their accountant, who would take the different spreadsheets generated from the silos, piece them together, and put the information into Red Wing, which was the accounting software they were using at the time.
“If you do not have a near-real-time view of the integrated data from all aspects of your operation, you will never have any real, fact-based insight into what works, what doesn’t work, what has happened, what is currently happening, and what will happen in the future,” says Douglas Hackney, president, Enterprise Group, Ltd.
For the Sladeks, incorporating the data silos meant investing in one complete system – with financials at the center – to streamline processes, procedures, and information across their entire business. Finding an ag-specific platform that met their criteria, however, would be a challenge.
In working with the FamilyFarms Group, the Sladeks turned to 15 of the largest farms in South America to learn about what they were using to manage their operations. The member-based organization, which is located in Brighton, Illinois, has been helping family farms for more than 10 years.
“When we sat down with each of those operations and asked them what they had to have to be successful to run a large business, every one of them said an enterprise resource planning (ERP) system,” says Harold Birch, executive vice president, FamilyFarms Group.
Thus began the process of creating a high-horsepower, high process and procedure system that would give the Sladeks a competitive advantage as they scaled their business to compete with the farmer not only down the road but also across the globe.
“As margins have gotten tighter, it is all the more important to have a firm understanding of where the nickels and dimes are being poorly utilized,” Sladek says. “This system helps us manage to that level and begins to close the gap on our true competition in the world of million-acre farms.”
The ag twist
ERP is not a new concept. Its roots date back to the 1960s, when the approach was applied to inventory management and control in manufacturing. By 1990, these systems expanded beyond inventory control and other operational processes to functions like accounting and human resources. This set the stage for the ERP systems we see today.
“There’s a lot of best practices from an ERP system that have happened for years in areas like manufacturing that are now being adopted by the farming industry,” says Richard Jones, chief technology officer for LinkFresh.
For over 20 years, the British company has worked with the fresh food industry and Microsoft to develop an ERP platform. When FamilyFarms went shopping for a partner to transform an off-the-shelf product for its members, the Microsoft and LinkFresh combination was a natural fit.
“We went with Microsoft NAV, which is the most widely used middle-tier system in the nation, and we built in modules specific to row crops,” says Birch.
“Developing story boards to help Rob visualize what would be seen screen by screen on an iPad, ensuring whatever we built would also work offline, and actually seeing these guys in action were all invaluable steps,” says Jones. “It gave us geeks a real handle on what Rob wanted.”
PAIN OF CHANGE
There is not one facet of the Sladeks’ operation this program does not touch. That’s the power behind the system, but it’s also part of the pain.
“Did this transition come without headaches? Absolutely not,” says Sladek. “However, we would rather go through the pain now when we have 150 fields rather than when we have 750 fields.”
In the end, he believes the headaches will be worth it. “I think this system is going to revolutionize how we farm. Once we get over the pain and embrace it, we’ll get data that means something,” he says. “In the next five to 10 years, we will look back at the ERP system as the thing that really helped us turn the corner in managing our business.”
NOT FOR EVERYONE
While the Sladeks may have found a solution, adopting a full-blown ERP system is really prohibitive on a number of levels for most farms.
“Implementation costs are usually three to five times the cost of the ERP software,” says Hackney. “You spend a lot of money customizing things to find some middle ground between how the ERP system comes out of the box and the way your business actually works and all of the other non-ERP vendor systems your business uses and relies on.”
By working as a group, FamilyFarms is trying to bring that cost down. “Even the Sladeks couldn’t implement this without a group like us,” says Birch.
To on-board an operation in year one costs around $100,000. After that, the yearly cost drops to about 50% of that figure.
SMALL- TO MEDIUM-SIZE SOLUTION
In the early 1990s, Mitchel Konen’s father was progressive enough to see that change was needed, but it would be up to his son to implement a solution.
“A better accounting system was needed to simplify things,” says the Montana farmer, who farms about 1,500 acres. “All of the new rules and regulations that come with the government programs and the social hyperbole for accountability also meant that a system had to be put in place that could make the necessary reports or records readily available.”
While he may not have been able to justify the cost of a full-blown ERP system, Konen believes what he has implemented is a basic – if not more – form of one.
“What sealed my decision to go with Farm Works was the various modules that were available and the fact that they were all integrated,” he says. “Financial management has been the biggest result of the software implementation.”
The platform provides true expenses and revenues on a per-acre basis. That gives him great insight into what is really going on financially at any point in time. The enterprising by field, farm, and crop reveals where profits and losses are truly coming from. Debt management is also better serviced.
“All aspects of financial management are accounted for from budgeting, cash flow, payroll, balance sheets, income statements, depreciation, inventory, and ratios,” Konen says.
He has also seen benefits on the agronomic side.
“When I started, I got into site-specific farming and scouted and recorded precise weed patches,” he explains. “Chemical applications were performed on a site-specific method resulting in reduced chemical use and cost. Yield maps proved the variability within a field. These differences are zoned and researched for the cause.”
As inputs are applied, they are allocated to those fields and crops. This provides an on-the-go true cost for production. Sales of crops are also assigned to the fields or acres from which they came to reveal the break-even revenue needed based off yields, resulting in profit or loss on an enterprise statement for that field or crop.
Over the last 20 years, Konen has fine-tuned the platform to add value to his initial investment.
“I have started using Trimble’s Ag Mobile app on my smartphone, which has the ability to upload field data to the web. It syncs to my home computer for a thumb drive-free transfer of data,” he explains. “This is the latest progression of the software, and it’s still a learning process.”
Since the initial investment, Konen has spent approximately $30,000 in hardware and software. The main desktop system has a fee of $995 with an optional yearly maintenance fee of $499. To add web and app functionality to the desktop system, the annual cost for everything is $1,788 (including desktop updates).
DAY OF RECKONING
Cost aside, Hackney says the majority of farmers do not have the technical skills or sustainable resources required to install and use even a small or medium business-scale package, much less an enterprise-class ERP system. Konen admits the lack of knowledge in computers (and the time it would take to learn the platform) was his biggest reservation.
“Plus, it was a change in an existing system (i.e., paper, pencil, and notes on NRCS maps), which seemed to work at the time,” he says. “Until I looked at it as an investment that needed to be nurtured, it was just an added cost both in time and money. Now, it is a tool for tracking farm records and financials that is just as important as a good seed drill, sprayer, or combine.”
For farmers who still do not embrace this mind-set and are operating without a sense of economic sustainability, Rabobank’s Kenneth Zuckerberg believes there will be a day of reckoning in the next year.
“Ultimately, the pain associated with delaying adoption will reach a catalyst,” says the senior farm inputs analyst. “Growers will be faced with the reality that, in order to survive, they either have to take an aggressive, assertive effort to really adapt or face a precarious future.”