Sun World International: Harvesting business insights to maximize profitability

If you look at the world of commercial farming on the surface, it looks a lot like it always has. It conjures a sentimental image that resonates with most. But on a deeper level, the increasingly globalized nature of commercial farming industry today leaves little room for sentimentality when profits are at stake. That’s why producers are increasingly looking to a new kind of harvest—the ability to extract insights from data—as the key to their future success.

Steve Greenwood, Director of Budgets & Reporting for Sun World International—a mid-sized grower based in Bakersfield, CA—has seen this shift firsthand. Greenwood and his team have a direct impact on what crops go into the ground and Sun World ultimately brings to market. It’s a decision where—in Sun World’s case—rational analysis trumps sentimentality. You’d think, for example, that as the first company to develop seedless watermelons, Sun World’s planners might hold a special place for them in their heart. But when a closer look at the numbers showed that the company was bringing more and more product to market just as prices were plunging, Sun World abruptly changed course, dramatically cutting acreage and shifting to a new breed of table grape that now produces twice as much profit on a quarter of the acreage.

The seeds of smarter planning
The lesson of this story isn’t just that there are no sacred cows in commercial agriculture. Nor does it signal a change in the importance of supply and demand in determining profitability. Instead, it is more a reflection of how—in an industry where market globalization has increased risk and made profitability more elusive—timely and accurate decision support is more important than ever.

As Greenwood explains it, profitability in commercial agriculture is in large measure a function of a provider’s ability to come to market with the right product at the right time. But it’s not as easy as it sounds. While the rhythms of seasonality may be a basic part of life to the average consumer in the produce aisle, commercial growers see them as a sort of moving landscape from which evolve threats and opportunities. To be avoided, he says, are crops whose harvests come due when the market is crowded with abundant supplies and falling prices. “Our aim is to produce quality products when they’re currently not available,” says Greenwood. “It’s about hitting the market window when nobody else can.”

One key dimension of Sun World’s targeting strategy is its world-class breeding center, located on a 180-acre experimental farm not far from the company’s headquarters. A complement to the Sun World’s focus on specialty-branded (as opposed to commodity) produce, the center’s seeks to breed and patent crop varieties with targeted characteristics (such as red seedless grapes that harvest in September, which, as grapes go, is late on the calendar). That’s where the second important dimension comes in. Greenwood explains: “Pursuing a proactive market targeting strategy requires accurate, granular and up-to-date forecasts of what’s going on in the market. That’s how we find opportunity and catch our competitors flat-footed.”

A new culture takes root
Greenwood was at Sun World when the pieces of this capability began falling into place. The watershed moment was a change in management and a corresponding shift in the company’s competitive strategy. Sun World’s executives—recognized that successfully competing on a global level required a more information-driven decision-making culture. It also realized that for such a culture to take root, Sun World needed to fundamentally transform the way it managed key business data.

One holdover of its old way of doing business was a reliance on manually updated spreadsheet data, which, for the purpose of decision-making, became stale the moment it was entered. What’s more, beyond being inefficient and error prone, this fragmented approach made it impossible to perform the analytical functions Sun World would need to execute intelligent market planning as well as the optimization of its everyday operations. Sun World put that building block into place when it worked with Applied Analytix Inc., an IBM Business Partner with vast experience transforming data into actionable insights. Applied Analytix implemented IBM Cognos TM1 and redesigned Sun World’s processes to take full advantage of its advanced functionality.

Sun World’s 16,000 acres of farmland are clustered into four growing areas in the San Joaquin and Coachella Valleys of California, each of which is directed by a farm manager. Greenwood is on a first name basis with all of them, the result of a close and ongoing working relationship. Once a month, they come to Bakersfield to sit down and go through the numbers, discussing budgets, costs and productivity. That is, unless it’s harvest time, when their 18 hour days make it more practical for Greenwood to make the drive to them.

The aim of these meetings is to take stock, identify trends and figure out the best way forward. With IBM Cognos TM1 helping Greenwood and the managers to glean insights and improve forecast accuracy and granularity, these sessions have become much more fruitful. Fed from Sun World’s ERP system, the analytics solution can provide a granular breakdown of sales, costs and profitability by product type, variety, region and individual ranch. Part of what makes a solution such as valuable forward-looking tool is its ability to do “what-if” analysis around parameters like water costs, fuel costs and changes in consumer buying patterns, and to use these insights to optimize its planting mix.

Data-driven insights complement intuition
Like most experienced farmers, Sun World’s farm managers and their foremen have learned to trust their gut in determining which practices—in areas like irrigation and fertilizing—work best. Greenwood doesn’t dispute the value of experience, but he sees the insights derived from Cognos TM1 as adding the level of precision needed to optimize everyday farming practices. Take irrigation as an example. Given the water shortages endemic to the region, high-efficiency drip irrigation methods are gaining in favor as an alternative to traditional surface irrigation. Because Sun World can compare the costs of both at a granular level, it’s been able to make better judgments about where to apply drip irrigation, resulting in the lower water usage and better nourished produce. In the growing of table grapes, the targeted use of drip irrigation has resulted in a five percent reduction in harvesting costs, a 20 percent reduction in fuel usage and a 50 percent increase in yield over the past five years.

Harvest time produces a series of important decisions that impact the cost and efficiency of the harvest—and thus the bottom line. There was a time when Sun World executives and farm managers didn’t see the productivity numbers until the harvest was done, when it was too late to do anything different. Today, farm managers out in the field during the harvest can use their cell phone or PDA to get an up-to-date view of productivity metrics at the level of individual ranches or work crews. “This means that if a manager finds something wrong with a particular ranch or crew, he can find out the root problem and address it proactively to maximize the overall productivity of the harvest—as it’s happening, not after it’s done,” says Greenwood. “In the same way, we can flag superior practices among specific crews and try to promote them where it makes sense.”

In addition to the vagaries of nature, Sun World’s profitability also depends on its ability to negotiate the best prices with retailers in a fluctuating market. The ongoing consolidation of the grocery business has exacerbated this challenge. To ensure that the sales staff has the most up-to-the-minute price data as they negotiate with their customers around the world, Sun World displays them on the selling floor via a ticker display, drawn from a near-real-time feed from Cognos TM1. “This gives our salespeople the ability to continually understand market conditions,” explains Greenwood. “A penny here, a penny there matters when you're shipping 11,000,000 boxes per year.”

The Parameters of Sun World’s Smarter Agriculture
Instrumented: Highly granular sales and cost data is fed from Sun World’s ERP system to Cognos TM1 in real time.
Interconnected: Farm managers in the field can access reports from wireless devices, enabling them to take immediate action in the event of abnormalities.
Intelligent: Advanced analytics enables Sun World to pinpoint best practices around irrigation and fertilizing and apply those practices where it makes most sense.

A new breed of commercial grower
The combination of operational efficiency and world-class breeding capability has provided Sun World with a powerful advantage over competitors. That success is perhaps best exemplified by the Scarlotta red grape, a late-season variety that’s proven to be a winner for the company. But as Greenwood is quick to point out, advantage in the premium produce arena is a fluid thing. “Once you have a winner, it doesn’t take a whole lot of years for everybody else to have it,” Greenwood explains, “and the cycle repeats over and over again.”
So what’s next? “What the industry doesn’t have right now is a late white or green seedless table grape, and that’s what our Breeding Center is working on everyday,” says Greenwood. “The fact that we can make smart decisions based on advanced analytics ensures that we’ll make the most of that opportunity when the time comes to bring it to market.”

Sun World’s analytics solution is…

Software

• IBM Cognos TM1, IBM DB2®

• IBM Power Systems

• Applied Analytix Inc.