Get in early: the lowdown on early order programs

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Lawn care operators share five considerations for participating in early order programs.

About five years ago, Brian Wiese began taking advantage of the early order program offered by his fertilizer supplier. Each December, Wiese, the turf division manager for SunCo in Omaha, Neb., preorders enough fertilizer for rounds one and two at a discounted rate and with delayed payment terms. Come spring, the product is waiting and ready to go. For Wiese, the cost savings and peace of mind that come with the early order program are too valuable to pass up.

“As long as our vendor offers this program, we will participate,” Wiese says. “I think it is a win-win for both parties.”

Lawn care operators (LCOs) share why they participate in early order programs, as well as a few reasons why the programs may not work for everyone.

1. Save money. The biggest reason most LCOs participate in early order programs is the cost savings. Chris Andersen, president of SunCo, says his company saves anywhere from 5-10 percent annually on the cost of its fertilizer. Early order programs also allow the firm to lock in fertilizer prices for the year and build the predetermined cost into the pricing structure, Andersen says. SunCo Lawns is a $4.5-million company that provides 20 percent lawn and tree care, 30 percent maintenance, 30 percent irrigation and 20 percent hardscape services to a half residential, half commercial clientele.

“The amount of savings really depends on the price of fertilizer,” says Wiese, adding that he uses square footage of treated turf and the year’s sales projections to calculate how much product to order. “This year, we are paying $12.50 a bag on the preordered materials. It has since gone up to $14 a bag, so we saved 12 percent this year.”

Jerry Grutz, owner of a Lawn Doctor franchise in Dubuque, Iowa, also participates in early order programs for the cost savings. The company orders enough product for one and a half rounds and saves 7-16 percent each year. Grutz’s firm provides lawn care and pest control services to 90 percent residential and 10 percent commercial clients.

“The savings is significant,” Grutz says. “I like to use any extra savings we have toward our employees’ pay and benefits. We have a generous pay scale and time off, and we will be adding retirement and some health insurance in the near future. I recommend doing the early ordering for the cost savings, provided you have enough space (to store the inventory).”

2. Build relationships. Participating in early order programs has strengthened the relationship between SunCo and its fertilizer supplier. Andersen says being a loyal and committed customer has garnered some special treatment. For example, when the company unexpectedly acquired a large commercial account in the spring and needed more product on short notice, the supplier was willing to help out.

“They take care of us and give us special attention for committing to ordering a certain amount of bags,” Andersen says. “We like to lock things in before the season gets rolling.”

3. Be prepared. LCOs agree that early order programs allow them to get organized and prepared prior to the start of the next busy season. Accounting for the amount of materials used the previous season plus the percentage of expected growth, Grutz calculates the amount of preemergent herbicide, fertilizer, grub control and postemergent weed control products crews will need for the first half of the season. He says this allows them to start the season with a plan in place and the materials ready to go.

“Getting our product early means one less thing to worry about when it gets closer to the season,” Grutz says. “It enables us to have a game plan on the different materials we will be using.”

Wiese completes his preordering in December, which is an otherwise quiet time for the company. He adds that preordering his fertilizer guarantees that he won’t be impacted if a product shortage arises.

“Spring can sneak up on you quickly,” he says. “If I preorder 30 pallets per round, I know that I already have that product. I don’t have to worry about not having what I need because it’s already been set aside for me.”

4. Create cash flow. By preordering his product in December, Wiese is able to take advantage of his supplier’s delayed payment terms and does not receive a bill for the product until June. SunCo relies on snow removal services to pay the bills during the winter, so not having to make a large product purchase at that time provides some financial security leading up to spring.

“We have so much more cash flow at the beginning of the year because we didn’t have to put all that money up at once,” Wiese says, adding that other divisions at SunCo also take advantage of early order programs. For example, the company’s hardscape division preorders its pond installation and maintenance materials and receives a similar discount.

“It’s industrywide that you can do this—not just on fertilizer,” he says.

5. Consider space. For some LCOs, having the space to store so much extra inventory can be a deal breaker when it comes to early order programs. Chris Casselberry, CFO of GreenSeasons in Greenwell Springs, La., says his company participated in early order programs for about five years but no longer does, primarily because of space concerns. The company used to preorder its fertilizers, herbicides, insecticides and fungicides and saw a savings of about 5 percent each year. While he agrees that early order programs helped protect the company from potential product shortages, he says the cons outweighed the pros for his organization.

“We used to participate in early order programs, but the cash outlay and the need for extra warehouse space outweighed the early order discount,” Casselberry says. GreenSeasons is an $8-million company that offers lawn care, maintenance and irrigation services to a 50 percent residential, 35 percent commercial and 15 percent industrial/municipal clientele.

Casselberry says storing so much product in the warehouse clogged up the company’s production flow. Holding a large amount of inventory also made the company susceptible to theft. Inventory management was another issue. At times, the company ordered too much product and had to either hold the inventory for an additional year or pay a restocking fee.

Before deciding to participate in early order programs, Casselberry suggests LCOs first consider opportunity cost and an assigned cost-per-square-foot of warehouse space.

Grutz agrees that having too much product in inventory can backfire.

“Sometimes the weather is too dry or too wet, or we have different pests that need treated,” he explains. “I wouldn’t order some products too far ahead in case a situation would change your plans.”