How to minimize waste and maximize profit in your farm business

Anyone who farms knows that the word “farming” is often synonymous with “unexpected, day-to-day problems that disrupt workflow, causing delays and inefficiencies” — which also happens to have a formal name: operational efficiency.

The logistical and functional challenges of running a farm operation can be anything from technical failures to safety concerns, staff shortages and breakdowns, or spending 20 minutes looking for that dang 9/16-inch wrench you know you set down on the shop bench yesterday.

The thing is operational issues on the farm don’t just suddenly appear out of thin air. And they often aren’t noticeable day-to-day. They build up over time and slowly impose a cumulative drag on the efficiency and profitability of your farm business.

So, when does it get to a point where an owner or manager realizes they need to make changes?

“They start to feel overwhelmed in the day-to-day operating of the business,” says Josh Ramsbottom, a senior business advisor with BDC Advisory Services at the Business Development Bank of Canada (BDC), who helps businesses of all sizes improve their operational efficiency.

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“There is a lot of complexity in what’s going on, and they are trying to balance multiple priorities. Or they are looking at the balance sheet and see their margins are starting to get tighter, and they can’t control anything externally that’s happening in the world. They need to tighten down on what they do operationally to find and build margins.”

Generally, operational efficiency means using your processes, equipment, inventory and resources in the best possible way to create value for your business and serve customers more effectively.

On the farm, the process of improving overall efficiency starts with a farmer looking at the things within their ability to manage because, as we all know, there are many outside influences that are not. Although there are a number of efficiency models that different businesses across all sectors use to optimize efficiency, such as lean management or Six-Sigma, one thing they all have in common is a focus on reducing waste, i.e., anything that costs time or money but doesn’t create value and is not necessary for a business to function.

The eight types of waste

Ramsbottom begins by applying Toyota’s “eight wastes” framework, also known as the Toyota Production System, which is used to categorize different areas of the business where waste or productivity leakage can occur: defects, overproduction, waiting, underutilized talent, transportation, inventory, motion and overprocessing (see sidebar).

On a farm, for example, transportation waste may come from unnecessary passes across the field when seeding, spraying or harvesting. Inventory waste could tie into the concept of 4R nutrient stewardship (right source, right rate, right time, right place) but applies to all inventory, consumables and capital assets, not just fertilizer. Motion waste, defined as excessive movement of people, could accumulate fast as people wander around looking for tools, instructions or moving equipment from site to site. Waiting or inactivity — whether it’s people or equipment sitting idle — is another form of waste, as is defects (doing something wrong).

Arguably, underutilizing people’s skills and talents can be the biggest waste of all.

“When we are underutilizing people, technology and the intellectual property that we have, that’s a massive waste,” Ramsbottom says.

How to develop an operational efficiency plan

People often get into patterns and behaviours that are hard to change. Even when they know they need to make changes, it’s too easy to revert to what they have always done. Making meaningful change for some means moving into territory they may be uncomfortable with.

“You have to slow down to speed up,” Ramsbottom says. “That means tak(ing) a pause, examining what is actually happening around you and trying to reset your thinking. What am I trying to accomplish? What resources do I have? What can I influence? Knowing what the eight wastes are, how do I tackle them to improve efficiency and reduce operating costs?”

It’s often at these beginning stages that Ramsbottom and his team are called in.

“Bringing in somebody from the outside changes the environment, the conversation and the point of view — and challenges a status quo that hasn’t been working,” he says.

Once there is a plan in place to help reduce some of the waste and make incremental improvements, it’s important to establish some key performance indicators (KPIs) to measure the progress and stay on track.

“Having data and getting away from emotional decision-making becomes important,” Ramsbottom says. “Although KPIs will differ from farm to farm, there are certain things everyone should be looking at: how much am I spending per acre, for example, or what is the utilization rate of my equipment? How often is it down for maintenance?

“Improving any of those metrics will have a positive effect.”

The other thing Ramsbottom emphasizes is the importance of frequent tracking and evaluation of the plan and data coming in.

“One of the key challenges for many organizations and owners/operators is believing they win or lose based on year-end financial statements or what’s in their bank account on any given day,” he says.

“But with operational efficiency, we need more frequent data. We need to understand, what did I plan to do this month? What did I actually do? The year-end statement is just a summary.

“There should never be an ‘a-ha’ moment at year-end. We should know where we are throughout the year, because trends tell us whether we’re winning or losing — and what to double down on or correct.”

Do you need new technology to achieve operational efficiency?

Farmers already use a lot of technology in their everyday operations — from monitors in combines and tractors to sensors in the field and, in some cases, drones — meaning they are already collecting much of the data they need to improve efficiency and productivity.

“You have to start somewhere,” Ramsbottom says. “Even something as simple as an Excel spreadsheet that matches effort against expenses is a good start. But over time, this evolves into management information systems — and increasingly, AI — to help ensure the business is being run as effectively as possible.”

Not only is this kind of technology a powerful enabler, it is also essential if farmers want to remain competitive.

“Your competitors — internationally, nationally and regionally — are doing it,” Ramsbottom says. “If you assume others aren’t using technology, you risk becoming a laggard. Even when technology is in place, it always comes back to the eight wastes, finding ways to simplify, reduce waiting, overproduction and excess inventory, so those gains show up on the bottom line.”

Continuous improvement is critical

Improving operational efficiency is not a one-time exercise, but a continuous journey.

“It’s not about hitting home runs,” Ramsbottom says. “It’s about saving five dollars, five minutes, or reallocating someone to productive work that creates value. Over time, those small gains add up — especially in agriculture, where margins are incredibly tight. A one or two percent improvement can be meaningful.”

But it’s not just the bottom line that benefits from this type of management. Operational efficiency also makes the business more resilient and better positioned to seize opportunities.

“We’re operating in a global marketplace,” Ramsbottom says. “Understanding what’s happening in your business, diversifying customers and offerings and continuously looking for innovation and new markets — all while doing it as efficiently and cost effectively as possible — is critical.

“Entrepreneurs succeed because they focus on what they can control and create products and services their customers are willing to pay for.”

What is waste?

The Toyota Production Principles, also known as muda in Japanese (meaning waste), identifies eight sources of waste that can occur in any business. Originally developed by Toyota as part of its production system model, it incorporates the principles of lean management, an operational efficiency concept that can be applied across any industry, including agriculture.

1. Transportation – Unnecessary movement of materials, products or equipment (e.g., extra hauling, inefficient field to storage routes).

2. Inventory – Excess raw materials, work in progress or finished goods that tie up cash and hide problems.

3. Motion – Unnecessary movement by people or machinery (walking, reaching, repositioning equipment).

4. Waiting – Idle time when people, equipment or products are waiting for the next step (approvals, repairs, inputs).

5. Overproduction – Producing more, earlier or faster than needed often leading directly to excess inventory.

6. Overprocessing – Doing more work than required or using overly complex processes where simpler ones would suffice.

7. Defects – Errors, rework, spoilage or quality issues that require correction or disposal.

8. Skills (non utilized talent) – Not fully using people’s knowledge, experience or ideas to improve the operation.