What if you had to move 10 million cut flowers a day in and out of a complex with over 1,000 truck docks – how would you do it? Netherlands-based Royal FloraHolland wrestles with the complex logistics of moving that quantity to destinations to retailers in Europe, North America and Asia.
Royal FloraHolland is a logistics marvel. Each weekday, some 10 million cut flowers and plants are shipped into and out of the growers cooperative’s cavernous facility, just down the road from Amsterdam’s Schiphol Airport. Hundreds of workers zip around the gigantic complex on electric tractors, all towing trolleys containing buckets and buckets of flowers. As many as 22,000 trolleys are staged daily in this elaborate shuffle. Some carry freshly shipped flowers from trucks to vast cold storage. Others ferry those sold at auction from cold storage to be processed and then to waiting trucks or to wholesalers in adjacent warehouses.
This more than 5.5 million square feet facility in the town of Aalsmeer, along with four satellite auction buildings around the Netherlands, represents the epicenter of the global flower trade. Some 40% of worldwide flower exports flows from these operations. Aalsmeer is the single largest distribution facility in the world today. FloraHolland sells 12 billion products a year and is a more-than $5 billion business.
New Business Environment
But — and it’s a big but — FloraHolland must face a changing business environment. Direct sales of cut flowers are growing rapidly, while traditional auction sales are shrinking. (FloraHolland’s business is now 43% auction and 57% direct.) Direct buyers are far more diverse, both in terms of what sorts of businesses they represent and what they want. Consumers, meanwhile, are demanding more rapid delivery even on the smallest of orders, and retailers must respond. Markets are diversifying geographically, and becoming more far-flung.
All this puts additional stresses on the supply chain, as it impacts FloraHolland, and the cut flower trade in general.
Just one example: Auction buyers are now purchasing on average smaller lots than in the past. That necessitates more trolleys and more time needed to separate orders and process them. Far from promoting a more automated system, this paring of order size means there needs to be more labor, not less.
FloraHolland is grappling with one more trend: The global marketplace in cut flowers is increasing, but the cooperative’s share in that universe is contracting. FloraHolland is leaning on its logistics for ever-more improvements in process and technology, even as its business model evolves.
“We look where we can to facilitate innovation in the supply chain,” said Eline van den Berg, program manager with Holland Flower Alliance, a strategic alliance between FloraHolland, Schiphol Cargo and KLM Cargo. Van den Berg, who for many years was a senior logistics consultant with FloraHolland, met with a group of journalists recently at the Aalsmeer facility. This was part of a briefing sponsored by the Netherlands Foreign Investment Agency (NFIA).
However, improvements at the distribution facility alone won’t overcome many of the biggest logistics-related issues. FloraHolland needs other parties — from growers and freight forwarders to distributors and transport operators — along the chain to buy into shifts and advances. “Our supply chain is quite complex. It’s an ecosystem,” said van den Berg. “If you want to make a change in the supply chain, you have to work together.”
Rethinking the System
Take, for example, packaging. There are more than 300 different types of boxes used to transport flowers between Kenya and the Netherlands alone. None of them is tailor-made to maximize storage on air cargo or trucks. That results in wasted space, more damaged goods and a more difficult time keeping temperatures constant.
So, FloraHolland is working with box manufacturers, growers, freight forwarders and transporters to come up with a better design, one that helps maximize useable space and stacking capabilities.
Like those in many other industries, FloraHolland is struggling with product visibility up and down the supply chain.
“It’s kind of weird, but with our supply chain, we don’t know where the boxes are right now, at any time,” said van den Berg.
FloraHolland and its partners are now building an information sharing platform so that the parties can better trace products from production to consumption.
While the organization grapples with digitization and information flow, it continues as well to tinker with the physical aspects of its operation. Needless to say, “cooling is the most important thing in our supply chain,” said van den Berg.
Improving cold storage operations “is a continuous process,” said Frits Jonk, FloraHolland team manager, product quality, in a subsequent interview.
So, for example, FloraHolland is now in the process of designing a new cold store facility, with an emphasis on flexibility, where walls can be raised or lowered, providing for multi-zoned temperatures, since different flowers and plants should be stored optimally at different temperatures.
FloraHolland is attempting to better tailor its logistics-related infrastructure for the changing flower market.
For example, the cooperative is moving more and more into fulfillment, where it processes orders not from auction, but directly between growers and customers. Fulfillment can run the gamut between spot sales and forward contracts.
The system, by its very nature, is different from an auction-based work flow, where flowers are stored overnight in cold storage, then moved out once they are auctioned, and finally processed for the buyer. With fulfillment, flowers can be stored, sold and then processed, all the while kept in cold storage. Orders can be brought directly from the cold storage to buyers, many of whom have their own facilities across the street from FloraHolland. “That’s quite new demand on the market,” said Jonk.
This new system brings advantages to both buyer and seller, but also logistical challenges. Because the flowers can stay in cold storage longer, they stay fresher. For Dutch growers, who still make up three-fourths of FloraHolland’s supply, it’s possible to deliver full truckloads of flowers to Aeelsmer, with smaller orders being distributed from there. In the past, growers selling directly were forced to make several trips to customers, an inefficient and wasteful system. It also reduces the need for growers to keep flowers in their own cold storage facilities.
Buyers can purchase their flowers tailored more in terms of just-in-time delivery, with all sorts of attendant advantages: fresher flowers when only when they need them, better cashflow, less waste, a more accurate match with customer demand.
“Growers want to have less small deliveries and the buyers want to have their products sooner,” said Jonk.
These new demands can actually benefit FloraHolland. The system has been traditionally geared to a few hours of peak shipping. That revolves around the quickest processing of the auction, which begins at 6:00AM. With deliveries spread out over the entire day, FloraHolland can better manage its workers. “You get a smoother labor flow,” said Jonk.
Can FloraHolland automate? During a tour of the facilities, Van den Berg was asked about autonomous vehicles. FloraHolland had investigated its use, she said, but decided the trolleys movement is far too complex and unpredictable to support autonomous vehicles, at least at this time.
As cut flower sales and marketing channels change and expand, FloraHolland wants to remain relevant to its grower members. “We focus on developing the combination of the digital and physical marketplace for flowers and plants,” said CEO Steven van Schilfgaarde in the company’s most recent annual report. “That is where our future lies.”
One initiative is a worldwide digital platform called “Floriday.” The platform links growers, buyers and service providers and includes parallel logistics and fulfillment systems. Floriday was first launched two years ago, with features being added gradually. According to Jonk, it will take another two to three years before these systems are completed.
Among the changes this would bring to the overall supply chain, Floriday cuts out the need to bring all the flowers first to the Netherlands, and then disbursed from there to the buyers. That means the facility at Aaelsmer may lose a bit of its singular significance, but FloraHolland itself can remain central to global trade.
