Getting Smarter as We Work Together

Dec 27, 2021


Gustafson Way at Federated Osceola location
For 2020’s last newsletter, I used the words “Stay Safe and Healthy” for 2021. Those words still apply as we leave ‘21 and move into ‘22. My hope was COVID-19 would be behind us by now, but unfortunately, that is not the case. In fact, the effects of COVID have created some very challenging headwinds for all businesses.
 
At Federated we are realizing increases on wages, health, fuel, equipment, parts, and the commodities we sell to you, our patrons. Not only are wages up but sourcing new employees has also been a challenge as more people have left the work force. I have heard from many patrons that you are feeling the same pressure in your operations. If there is any silver lining from COVID for the team at Federated, it is we were forced to look at things differently as we tried to social distance and reduce the touches. It forced us to get smarter!
 
The co-op is positioned to deliver our plan for 2021. Our agronomy business will be on plan; our energy business continues to add new customers and will deliver plan. Price is important, but safety and service are critical for this business. The investments in new spreaders, sprayers, trucks, phone system – and our team members – made a big difference in both the service we provide and helping us be competitive on price in both businesses.  
 
Our retail business, convenience stores, country stores and lumber yard had traffic increases as more people were commuting and traveling again. We did have challenges within our country stores on some items as product supply on power equipment and parts were not available. We were down over $275,000 on Cub Cadet sales alone versus the previous year. At the lumber yard, the price increases were unprecedented; in some cases, prices were changing daily. We were challenged because our system was not built to be as flexible as we needed to be.
 
As we move into 2022, we will use our learnings to continue to drive efficiencies to become an even stronger partner with your operation. The biggest gap we identified over the last couple years is that we have not made investments in technology. In 2022, we will invest in a new Enterprise Resource Planning (ERP) system. ERP is a business process management software that will manage and integrate the co-ops’ financials, supply chain, operations, commerce, reporting and manufacturing.
 
ERP will tie our three businesses together – agronomy, energy, and retail. It will make it easier for you to do business online, reducing costs on paper and mailing. It will also allow us to make decisions more quickly and give us insight to help drive synergies. It will further support our mantra of the Power of One. If we all work together as one, we will be stronger and more agile in the marketplace to help you be more profitable on your land.
 
Our new ERP system is scheduled to be in place in March 2022. Like anything new, there will be a learning curve for everyone at the co-op. We will be changing and improving process and breaking some old habits. As part of the transition, we looked at every process and found many opportunities to get smarter. We found some processes that needed to be revised because, as the saying goes, “We had always done it that way.” I am confident we have the right software partner.
 
We are also making investments in cyber security. Recently two co-ops were attacked and forced to shut down their operation for three weeks. They were essentially held hostage.  The investment in both time and money will help us combat the headwinds we are facing in conjunction with protecting our IT infrastructure.
 
I have had the good fortune to be leading the team at Federated for just over six years. I have learned a great deal, but I know I have plenty of opportunities to get smarter. There’s one thing I know for sure: You have a great team of employees that are laser focused on you, the patrons. They have worked through some challenges none of us could have ever imaged before COVID. I am so proud of the team and grateful every day for their commitment and dedication.
 
We had a key employee, Craig Gustafson, our vice president of agronomy, retire in October after 45 years. His dedication to the patrons and the co-op will be greatly missed. We dedicated a street at our Osceola plant as “Gustafson Way” so his legacy will be felt for decades to come. I am also excited about his backfill, Scott Nelson, our new director of agronomy, who joined the team this summer. He has big shoes to fill but he brings great experience, and I am confident he is the right person for the job. Scott is working hard on learning our operation, visiting patrons, and he wants to get smarter on what we can do to leverage the co-op system to benefit you. 
 
I have one ask of you, the patrons: What can we do together to get smarter? The co-op system is strong if we work together. I hope you felt that benefit this past March as we returned $3.1 million in patronage at 100% payout to you, our patrons. The co-op was established to meet the needs of the patrons, so any feedback is welcome. Please reach out to me if you have any thoughts. My number at the office is 763.389.7486.
 
On behalf of your board of directors and the 290 employees at Federated Co-ops, thank you for your patronage. I look forward to getting smarter as we work together.
 
Stay Safe and Healthy.
 
Merry Christmas and Happy New Year!
 
 
Mike McMahon
CEO, Federated Co-ops
 

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