$($Please answer all questions in this exercise, thanks!$)$

Analytics Exercise: Inventory Control at

Sebastian River Farms

Sebastian River Farms $($SRF$)$ is a wholesale tree farm with

approximately $300$ acres on Florida$$s east coast near Vero Beach

$($USA$).$ Forecasting yearly sales at this company was discussed in

Chapter $18.$ In this exercise, the decisions related to planting new

trees and managing inventory are covered. The farm grows over $75$

different varieties of trees and shrubs. The farm has approximately

$121,000$ trees. About $31,000$ are mature trees that are available for

sale. The other $90,000$ are growing which can take from two to three

years, depending on the type.

Although some of the trees are planted in the ground and grown

from small twigs, most are grown in $15-$ and $30-$gallon pots. Potgrown trees are much more convenient for selling to the over $200$

landscaping and tree supply companies that SRF sells to throughout

Florida. On an ongoing basis, the company evaluates current

inventory and makes decisions about what to plant. The farm has a

team of hardworking people who prepare the planting pots, plant the

trees, and then set up the irrigation pipes that are needed to water

each tree every day. Maintaining and pruning $($shaping$)$ over the

growth period is a daily task that is needed to grow top$-$quality trees.

Much of the cost associated with growing and maintaining involves

the workers employed by the farm. The team operates like a big

family. First priority is loading trucks that deliver trees to customers,

and much of this work is done in the early morning during the week.

Planting is generally done during slack periods and on weekends by

the team. From a cost view, it would be possible to allocate the labor

cost to different activities, but this is not currently done by the farm

accountant.

Other than labor, another major cost is running the irrigation

system. Water is supplied by a lake located on the farm. Electrically

operated pumps draw water from the lake and feed a network of

pipes that supply water to each individual tree. Since the pumps need

to run virtually every day, the cost of the electricity to run them does

not vary much from month to month.

Trees generally grow from $18$ to $24$ inches each year. The

desirable trees are between $4$ and $8$ feet in height. It generally takes

at least two years for a tree to mature to where it can be sold. If a

tree gets too large, it can be difficult to sell due to the problem of

transporting it to the customer. The inside joke between farm

managers is that old trees become $$boards$.$ Managing the

growth$/$sell cycle is important to the success of the farm.

The decision about when a type of tree should be planted and

how many trees to plant is made by management based on

experience and some guidelines that have been learned over time. In

general, the fast$-$moving, high$-$volume trees are generally planted

every other year. Slower$-$moving, low$-$demand trees are planted

every three years. The cutoff for high$-$ versus low$-$volume trees is

demand of $100$ per year. This is certainly not an exact science since

there is much variability in the demand and in the growing time for the

trees. Trees for landscape projects are generally specified by

landscape architects and designers. Their selections depend on the

location where the trees will be planted.

This exercise is designed to help structure the timing and quantity

of planting decisions using data from the inventory control

spreadsheet that the farm has recently developed. The inventory

system at the farm tracks the number of each type of tree, such as

Christmas Palm and Rosetta. Trees are tracked in field$($s$)$ where they

are planted and by row within the field. Trees of the same type are

often located in different fields on the farm, and the inventory system

aggregates the status of each type over the locations.

When a tree is initially planted, it is categorized as in$-$field with a

projected ready date. When the tree matures, categorization is

changed to for sale. Batches of trees are planted at the same time,

typically in consecutive rows in a field, making it easier to identify

trees that are for sale to customers.

When a tree is sold, the salesperson goes into the field and $$tags$$

the tree for removal from the field and pickup by the customer

$($typically multiple trees are included in an order$).$ Tags are colored

ribbons that are tied around the tree. A unique color is used for each

order. Tagging is a ritual done by the salesperson to ensure that the

appropriate quality of tree is selected. Trees that are identified as not

saleable are tagged with a special black ribbon and are periodically

removed from the field.