If they have heard about “lean” management, most business managers think of it in the context of lean manufacturing, a system pioneered by Japanese car maker Toyota in the 1970s.
Now, however, more farmers are successfully applying lean principles to their farms, and they’re ending up with healthier balance sheets as a result.
One of the pioneers of lean farming in North America is Ben Hartman of Clay Bottom Farm in Goshen, Indiana, who has borrowed the concepts of lean manufacturing and adapted them to make his farm more efficient and profitable.
“Lean is like a coin with two sides; the one side is about providing value, and the other side is about eliminating waste,” says Hartman. “These are universal concepts because all businesses have customers, and waste is prevalent in any type of business.”
A decade ago, Hartman and his wife Rachel had just established their small farm growing greens and heirloom tomatoes for local customers. Although the couple knew they wanted to be involved in agriculture, it just wasn’t feasible for them to get into grain production because it would take such a large upfront investment.
That left one possible strategy. “It was to get into something on a smaller scale with a minimum amount of initial investment,” said Hartman.
The first couple of years took a lot of hard work to grow the business, and although they were profitable, they were tiring themselves out. That’s when one of their customers, the owner of a manufacturing facility close by, suggested they consider applying some of the lean concepts that he was using successfully in his business.
Waste = free capacity
“I was skeptical at first that the concepts would apply, because farms are very different from factories,” says Hartman. “I told him, imagine running your factory without a roof over your head, and then try to standardize anything. It’s very difficult to do here.”
Hartman also had some ethical questions. “One of the concepts at the heart of lean is maximizing fixed costs, getting as much as possible out of the money spent on buildings and infrastructure,” says Hartman. “For a manufacturing facility that’s a good thing environmentally. On a farm, I thought that meant stuffing as many hogs in a hog house as possible, so I had some ethical concerns.”
However, the customer convinced Hartman that lean boils down to a very simple formula; waste equals free capacity. “He explained that if you can shave just one hour of time a week, over 20 years you free up more than six months of time,” says Hartman. “If you shave four hours per week, you can take a year off every 10 years, or you can use that year to produce more.
“At that time, we didn’t have a lot of capital available to us, and we thought to add capacity would mean building another greenhouse, or buying more land, or getting a bigger tractor, or having to make large investments to add capacity. He said, ‘No, lean offers another way to add capacity for free if you use a better process.’”
After the customer came out to their farm and helped them analyze the Hartmans’ work procedures, the couple identified a couple of areas of waste immediately that they wanted to target in the first couple of years.
“The first type of waste was over-production. We simply were not producing what our customers wanted,” says Hartman. “We were growing what we wanted, and pushing it on to the marketplace hoping we’d find customers. As an example, we used to grow one type of tomato, and take it around to the restaurants and any businesses in town that we thought would want tomatoes.
“With the lean system, over the winter we talked to restaurants and chefs and produce managers at the local stores, and asked what type of tomato they wanted, when they wanted them, and how much they wanted. So we let them pull production.”
As it turned out, their customers wanted different types of tomatoes. The local store wanted orange tomatoes of multiple sizes because that was what their customers wanted, a local bar and restaurant serving half-pound hamburgers wanted big, meaty tomatoes. The Hartmans began growing and providing what their customers wanted, and have kept mostly the same customers for more than 10 years.
“It’s all because we’ve taken extra steps to learn what our customers want, and then to match our production to their needs, and that step has made us more profitable,” says Hartman. “Farmers, typically, don’t put a lot of energy there. We’re excited about growing tomatoes, or raising cattle, but we need to apply that same level of excitement to learning about our customers.”
Root out the waste
Eliminating waste is the other important pillar of lean. “Once you learn what your customers want, all your efforts should be directed towards providing that, and everything else is considered muda, a Japanese term for waste or any activity that’s not in the service of providing for customers,” says Hartman. “The eventual goal is 100 per cent value-adding activity and no waste.”
There are 10 types of muda, and a number of them are especially applicable on farms, says Hartman. One of the most prevalent forms of waste on many farms is over production.
On horticultural farms, the USDA estimates that 20 per cent of fresh fruits and vegetables never even leave the field.
But on any farm, another waste is waiting waste, when a product or people are standing around and not being productive. Hartman worked hard to eliminate these kinds of waste in his operation.
“In just a few years on our farm, using the lean system, we’ve been able to get rid of half of our tools, and instead of working 60 or more hours a week, we work 30 to 40. We shrunk our farm from more than three acres to less than one acre, and every year that these contractions happened, our income went up. It’s a powerful tool, especially for small farms. It’ll definitely work for any size or type of operation, but on a small farm it’s like an extra sling shot that gives you a boost.”
Hartman uses the “Lean 5S” system, which has five pillars — sort, set in order, shine, standardize, and sustain.
The first pillar, sort, is the most important. “It means to remove from your farm any item that is not used on a regular basis for adding value for your customer,” he says. “This can be very hard to do. It was for me, because I love to collect tools, but we had barns full of them, and all the time I’d spend looking for a lost hoe was time I could have been spending adding value to the customers.”
Set-in-order is the next, organizational step, which requires that every tool used in production should have its place. “The idea is to set your tools close to their points of use,” says Hartman. “For example, we had a centralized tool storage area and whenever we pruned the tomatoes, we had to walk to that storage, get the pruners and walk back to the greenhouse. So we hung hooks in all of our greenhouses, and hung a pruner in each greenhouse, and it’s always within easy reach at pruning time. We eventually got rid of our central tool storage area because we took all of our tools and spread them out around the farm close to where we’re actually using them. This very simple thing eliminated thousands of wasted steps every year.”
Step three — shine — is designed to help make sure unwanted waste doesn’t come creeping unnoticed back into the system. “Keep work spaces clean and well lit, not just for show, but so you can see when waste in entering into your production or product,” says Hartman.
Step four is standardize, to make sure that all operations are performed the same way every time. “One way that we standardize our 5S system is through pictures,” says Hartman. “We took a picture of our work spaces — such as our processing area — when they’re in perfectly clean condition. Then we posted that picture on the wall and told our workers to make sure the workspace looked just like the picture when they were done, which saved me a lot of wasted time taking them through the process. It’s a quick, easy way to communicate and make sure that the farm stays in order.”
Finally, sustain means to apply self-discipline through regular farm audits. “We don’t literally walk around our farm every week and give ourselves a rating, but we do go on vacation every July, and our goal is every year when vacation time comes around, we want our farm to be slightly cleaner than it was the previous year,” says Hartman. “We don’t have a numerical method of measuring progress. We have the pictures that we take and so that’s a timely reference. We look at last year’s picture and think about how we can improve it this year. We want to be always heading in a direction of getting more orderly and less cluttered. The 5Ss are not something you have to do overnight. In fact, you can’t often do it in one year. It can take a period of several years, but the point is to continue to head in one direction.”
A visual system
Visuals are a big part of lean, and Hartman has found that pictures are the best way to communicate procedures and ideas to his staff.
“We have pictures posted all over the farm. For instance, there are pictures with bunches of turnips, or beets or carrots that communicate to our workers how we expect them to wash, process and package those items, so we don’t have to constantly communicate to them what our standards are; it’s obvious based on the picture,” says Hartman.
“That could be true in a meat packing facility, or when it comes to feeding livestock or making silage. I could see this method being useful for filling seed hoppers on a larger operation, to explain how full to fill them, how to calibrate and set the seed plates. Some of these very technical details are much more efficiently communicated through pictures than through words to new workers.”
Hartman’s farm now has four greenhouses and grows produce year-round. Hartman grows 30 types of crops, and also sells at farmers markets, and direct to customers through a Community Supported Agriculture program.
He sells 90 per cent of his produce within 10 miles of the farm. He and Rachel have two toddlers, so that takes up most of Rachel’s time these days, and Hartman has two part-time employees and usually one or two seasonal interns to help out.
Hartman’s farm is small, so I asked: does he see lean being applicable for larger operations?
Having grown up on a large corn and soybean farm, Hartman thinks it could. “One area I see as having a lot of potential is equipment sharing,” he says. “It doesn’t happen very much in North America but it happens all the time in Scandinavia, where it’s very unusual for farmers, by themselves, to own lots of equipment. Here, we think every farmer needs to own their own $100,000 tractor, so that could be one way to minimize fixed cost investment and to grow your profits.”
Where’s the five per cent?
Another thing any farm can do, even large-scale operations, is to print their expense ledger out at the end of the season and ask the question, “Where is the five per cent?” adds Hartman. “In other words, where could you have cut five per cent out of your cost?”
“It’s going to be different on each farm, but I bet any farmer could come up with an idea for cutting five per cent. If you cut just five per cent over 10 years, you’ve grown your business by 50 per cent over those years. That’s a respectable rate of growth.”
The lean mentality isn’t about getting bigger, it’s about becoming more efficient through better processes. “You don’t have to get bigger every year to grow your farm,” says Hartman. “That’s a legitimate way to grow, I’m not knocking expansion because at some point you need more customers and it’s the right time. However, you can grow your business by being more efficient and cutting costs. It’s worked for very well for us.”