The Smell of Success

Viewed from above, the Aalsmeer operation is a mass of colorful chaos. Flowers of every shape, shade and hue arrive by truck from Schiphol Airport in Amsterdam or from regional growers. The flowers—20 million stems per day—are hustled onto carts and whisked to a staging area. Those carts are assembled into "trains" that slither around pillars, posts, pedestrians, other carts and floral trains bound for one of the 13 auction rooms where over 1,000 buyers are waiting to bid on the cut stems and plants in a unique form of auction that is distinctly Dutch.

Inside the auction room, large screens display a countdown clock along with information on the current lot. Buyers crammed into row upon row of stadium seating watch the time tick down and the price climb up as they enter their electronic bids.

Many of the flowers and plants that pass through Aalsmeer come from over 5,000 international growers as far away as Kenya, Israel, Zimbabwe and Ecuador, and over 85% will be exported the same day they are sold. To keep things flowing, the Aalsmeer auction employs 1,800 workers. Over half its balance sheet is facilities and material handling, and very little of the operation is automated.

While the floriculture industry has some unique challenges, it faces some of the same issues as other sectors. Aalsmeer is a pivotal point for some 5,400 international suppliers who ship their highly perishable product in bulk to the facility. Average order size is dropping, says Dr. Timo Huges, CEO of Bloemenveiling Aalsmeer, as the flower cooperative is officially known. There is also a need to move product to the customer faster. And while all of this is evolving, the pressure is on to push ownership (and risk) up the supply chain to the grower.

Though direct buying is on the rise, Huges says the top 25% of buyers purchase 50% of their product at Aalsmeer. "The trade will find its own way, not only here in Aalsmeer but elsewhere in the world."

There has been a lot of consolidation in the industry, he explains. The net result has been no decrease in square footage of greenhouse space, but the concentration of market power in fewer hands.The Aalsmeer auction has experienced some of this first hand.

Aalsmeer has announced plans to merge with FloraHolland (Naaldwijk, www.floraholland.nl) to form a $5.2 billion group that will be headquartered in Aalsmeer. "This network must expand its position as a whole to remain strong within the international competition in the floricultural market," says Jacques Teelen, general director of FloraHolland. "The Dutch floricultural position is influenced by worldwide production, trade, logistics and [information technology] developments," he continues.

The stated aims of the merger are to strengthen the market position for suppliers and clients and provide supply chain cost savings through increased efficiency. The merged entity will consist of three export auctions and three regional auctions, a mediation office and an import sourcing department.

"The market specifically demands standardization and unity from the auction organizations in the area of product sourcing, marketing services, logistics and infrastructural facilities," adds Bernard Oosterom, chairman of Bloemenveiling Aalsmeer. FloraHolland has 2,800 employees and over 16 million square feet of building space. The merger is expected to be complete by January 2008.

Back at the Aalsmeer auction, about 62% of annual revenues come from the cut flower trade, 70% of the items that enter the facility are sold via the "auction clocks" and 30% represents forward buying or purchases by intermediaries. About 60% of the world's exports are from the Netherlands, about a third of which move through Aalsmeer.

Most of the exports handled at Aalsmeer go to European destinations, with increasing business coming from the newest European Union members in Eastern Europe. North America, which traditionally buys from South and Central America, accounts for only about $130 million in exports. One-third of the North American trade is handled by a single company: Holex Flowers.

Topping Aalsmeer's import origins are Kenya ($147 million), Israel ($49 million), Zimbabwe ($19 million), Uganda ($18 million) and Ecuador ($9 million). Flowers and plants fly into Amsterdam in the cargo hold of commercial aircraft and they are trucked to the flower auction in time for the early-morning opening.

Upon arrival at the breakbulk center in the auction building flowers and plants are separated into lots and loaded onto rolling carts. The carts are staged for examination by buyers and chained together into trains that are pulled by a motorized tugger to one of the 13 auction rooms. The carts enter and the auction begins as the items are displayed in the "stage" area of a tall, narrow theater-like room with two massive projection screens. The auction clock and information on the products being offered appear on the screens. Bidders in the room and at remote locations enter their bids electronically and the goods are pulled out of the auction room through a door on the opposite side of the stage.

From the auction room, the flowers and plants move into another massive staging area where orders are assembled and moved to a loading center where transport companies and forwarders will pick up the shipments and, in the case of European orders, haul them to the destination. Export orders will typically go back through Schiphol Airport.

For buyers with facilities in the industrial park across the road from the auction building, an electric, suspended rail system handles the carts and delivers them directly to the company's facility for processing and transport. The Aalsmeer Shuttle, as it is known, has a total rail length of 10 miles and can handle 2,600 computer-controlled carts per hour (the equivalent of 120 full truckloads). The shuttle will move over 2 million loads per year between the auction building and the industrial park, which lies on the opposite side of a major highway.

The distance and the fact that the plants have to cross a highway made it inefficient to use tuggers to transport the carts. An air-conditioned overpass helps avoid exposing the flowers to harsh conditions during the short journey to the industrial park. The average move takes 12 minutes via the shuttle vs. 30 minutes using electric tugger cars

Despite the market challenges mentioned by Aalsmeer's Huges, the operation has continued to grow. In May 2006, it announced a further expansion of its east business park.

Aalsmeer is seeing some changes in distribution channels as well. Its virtual marketplace allows for more remote buying. Flower sales by the major European retail chains (including retailers, supermarkets and do-it-yourself outlets) have increased to more than 31% of the total, according to Aalsmeer figures. Bloemenveiling Aalsmeer executives expect sales to almost double by the year 2025, by which time the facility is expected to grow by another 222 acres.

"The continued concentration of auction and trading on a single site means that the Netherlands will retain its role as an efficient logistics hub for international production and trade," concludes a statement by Aalsmeer's management. "As such, floriculture continues to make a substantial contribution to the Dutch economy."

Long trains of cut flowers and plants snake through the 1 million square meters of floor space at the Aalsmeer Flower Auction.

Buyers examine lots on the floor of the Aalsmeer Flower Auction.

Flowers are paraded before buyers with data on each lot projected on a screen along with a countdown timer for the auction.

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