April 1, 2022
Managing product shortages and rising costs
By Karina Sinclair
One of the most common topics for discussion during the pandemic (other than the pandemic itself) has been supply chain issues. Just about everywhere you turn, you’re bound to encounter either sticker shock or something out of stock. Landscaping has not been immune, with all sectors facing difficult decisions about what products and services they’ll be able to offer during a time of uncertainty.
A variety of landscape sector representatives were invited to share their perspectives at the Landscape Ontario Virtual Congress Conference, held Jan. 18-20, 2022. The panellists included: James Riddell, SiteOne Landscape Supply; Jeff Olsen, Brookdale Treeland Nurseries; Mike Schiedel, Greenhorizons Sod Farms, Jason Ireton, Plant Products; and Jason Vettese, Best Way Stone. They all agreed supply chain issues will continue causing challenges through the 2022 season.
Unexpected consequencesAlthough the pandemic has been a major disruptor, other factors have also added to the difficulties. Major climate events like floods, droughts, and hurricanes disrupted exports around the world. For example, an unexpected deep freeze in Texas in 2021 interrupted the availability of resin, which in turn affected output of PVC pipes and plastic pots needed for irrigation and growing inputs.
Labour disputes at ports across North America created long delays in unloading shipping containers. Some containers were even lost at sea. Since early 2020, COVID-19 has only intensified those existing complications by straining the workforce and presenting new barriers.
Labour shortagesMany growers rely on the 25,000 to 35,000 seasonal workers brought to Canada each year through the Temporary Foreign Workers Program. COVID-19 caused major disruptions to the program. Outbreaks, travel complications, red tape and ever-changing testing protocols meant less temporary foreign workers were available. Workers who contracted the virus needed time off to recover. Those who were exposed needed to quarantine, resulting in temporary closures or complete shutdowns. There were capacity limits for indoor spaces, and for a while, the government stopped all “non-essential” construction, even if that work was outdoors.
Some businesses reported they were able to fill some of the labour gaps with employees who moved into the horticulture profession from the service and hospitality industries. However, a significant gap remains.
Availability is a long gameNot every supply chain pain is the current pandemic’s fault. Growers face supply availability that was set many years ago due to long growth cycles. Jeff Olsen referenced the Christmas tree shortage in 2021 as something that was created at the planning stage “10, 12 years ago. And so in our world and the growers’ world, decisions we’re making today are going to impact you three to five to seven years to 10 years from now. And so just keep that in mind when you’re thinking about live goods in terms of what you need on your jobs or in your retail stores.”
Plants with long production cycles will continue to be in extremely short supply, especially for residential projects. This includes large cedars, boxwoods, Japanese maples, columnar trees like beech, and large conifers like blue spruce.
Olsen suggests it will be difficult to find “anything that you think of when you look at a nice house getting the landscape done. That’s the stuff that’s going to be short.”
He predicts this shortage will continue for the next five years, as it takes that long to grow.
There has been less demand for commercial projects, so caliper trees for street or park landscaping are still readily available. “There’s some shortages in certain varieties, but generally across the board, they’re not in as bad of shape as the rest of the goods,” Olsen explained.
While sod also has a long production cycle, it has a very short shelf life.
Mike Scheidel says “it’s a two to three year crop… and once it’s harvested on that skid, it really only has a one-day shelf life.”
Sod is also highly localized and perishable, so extra supply can’t be imported from beyond about a 200 kilometre radius.
In the pandemic’s early days, the uncertainty had some sod farmers looking toward alternative crops.
“A certain percentage of sod farmers during that time decided that the demand direction was going to go down and they decided to plant corn and soybean, eating up all those available side acres,” Scheidel says.
Their forecast was wrong; demand from homeowners rose roughly 35 per cent during the pandemic. The wholesale market also increased about 20 per cent. Thanks to over planting in 2021, Scheidel does expect sod supply to normalize, but not until the 2023 season.
Jason Vettese says the hardscaping industry has been “having a pretty great growth year over year” thanks to a value perception shift away from travel toward outdoor living. But when the pandemic began in 2020, most manufacturers shut their doors.
“We didn’t know if people were going to lock up their wallets or were going to start spending,” Vettese says. “So everyone kind of took a careful route, not just Best Way Stone, but most manufacturers, also for the safety of our employees. We kind of locked everything up and that really put us behind the eight ball.”
New stone and hardscape production facilities are being built in Ontario but even those are at the mercy of limited raw materials. Some manufacturers have been forced to limit their product offering.
Vettese says “product innovation has really been paused. Why come up with all these new products when we can’t even supply them?”
Short supplyBoth raw and finished goods continue to be hard to source. For instance, growers are challenged with finding enough plastic pots for inputs — something that would normally be ordered a month or two in advance.
Olsen says “we are ordering and taking delivery of pots for 2023 just to ensure supply.”
The price of pesticides like glyphosate has risen roughly 50 per cent. Demand for grass seed, driven by both homeowners and contractors, has driven prices up 50-75 per cent.
According to Scheidel, “everybody relates to fuel and equipment, and both of those line items are in that 25 per cent range. It’s just every year hit from all sides that there has just been increases across the board.”
Panellists advised that if you can get your hands on fertilizer and you need it in your business, take it. Some growers are placing orders up to 18 months in advance just to ensure they’ll get some — even though fertilizer has seen a tremendous price increase. Historically, a typical farmer might have paid between three to four hundred dollars for a ton of urea. In early 2022, farmers may need to budget closer to $1,200 for the same amount.
Pass it alongHigher costs are affecting all sectors. The panellists agreed that to maintain a viable business, those costs must be passed along to the end user.
Jason Ireton says “make sure you’re increasing your program cost to your customers. You do not need to absorb this alone.”
Vettese says his company has tried to “eat what we can along the way as a manufacturer just to try not to disturb our customer base as much. But at the end of the day, there’s only so much you can do.”
The panel also advised contractors to reach out to suppliers and partners early to gather information on availability and potential cost increases that may come later in the season. This documentation can be presented to clients to explain why their project may cost more or take longer than expected.
Contractors should also consider adding caveats to quotes, like a 30-day expiration date, to protect against cost increases.
Vettese suggests “whether you’re a manufacturer, supplier or a contractor, because pricing will fluctuate, you may have to adjust a quote that’s already gone out already. So having something in there to help protect you in terms of quotes, if you’re quoting three or four months down the road and pricing changes 20-30 per cent, you can’t be expected to do that job for free.”
Planning and communicationJames Riddell suggests the best way forward is to take time during the off-season to set a more detailed schedule.
“In the past, we didn’t know what month the project was going to fall. This is the year where you over-communicate and work with your partner. Your supply chain partners are going to have the greatest impact on your business.”
Riddell advises his peers to prepare by buying materials ahead of time for projects in the first half of the year, but to be wary of buying too far in advance, knowing that demand and prices could soften.
“We encourage everybody to have lots of communication with their supply chain, with their suppliers and with their customers, and we feel that that’s going to be the most important point for a successful 2022.”
Setting expectations is also critical.
“Don’t offer the world,” Vettesse says. “If you don’t think you’re going to be able to supply it or service it, try to really narrow what you can control.”
The futureThe big question is whether strong demand will continue as the pandemic subsides and the travel and hospitality industries open up.
Vettese says “depending on how this COVID situation unfolds, we may be hitting a saturation point or tipping point where it might start returning back to more normal demand levels in the next couple of years.”
No one has a crystal ball to predict how it will all play out in the coming months. But each of the supply chain panellists believes that by communicating early and often with suppliers, being diligent with planning, and passing on increased costs to the end user, you can find success in 2022.