Content uploaded by Jashim Uddin Ahmed
Author content
All content in this area was uploaded by Jashim Uddin Ahmed on Dec 09, 2018
Content may be subject to copyright.
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
1
Case Authors: Jashim Uddin Ahmed, Israt Jahan Linda & Mohammad Abdul Majid
DOI: http://dx.doi.org/10.4135/9781526461919 Online ISBN: 9781526461919
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-
study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed
to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university,
and cannot be forwarded outside the university or used for other commercial purposes. 2018 SAGE Publications Ltd.
All Rights Reserved. Publisher: SAGE Publications Ltd (2018)
Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
Abstract
With the rise in flower demand across the globe, the cut flowers industry has turned to an advanced
industry for the developing and underdeveloped countries. Royal FloraHolland (referred as
FloraHolland) had initially started as a cooperative for the local suppliers, and since then it has
successfully created a global robust platform. The flower production process, which focuses on
offering products like fresh cut flowers and flower buds, has been moving to countries where
advantageous production conditions like availability of lands, low labor costs, suitable climate, and
fiscal incentives are available. For this reason, flower production is rising in the developing countries
such as Colombia, Kenya, Ecuador, etc. With more and more occasions to celebrate and observe and
more people willing to work with flowers, the world floriculture market is growing globally in both
the developed and developing countries resulting to new product innovation at cheaper cost. This
growth means rising competition for FloraHolland, which will have to make changes to adapt to a
newly competitive market.
Learning Outcomes
Through completing this case study, students should:
gain understanding of the cut flower industry in Holland;
explore the opportunities and challenges faced by Royal FloraHolland;
explore how Royal FloraHolland achieves its competitive advantage in Holland;
gain understanding of supply chain to processes at Royal FloraHolland;
understand the factors that affect the growth of the flower industry.
Introduction
The history of floriculture is extensive, with references as ancient as the hanging garden of
Babylon. But the modern days of floriculture started with the first greenhouse in the United States in
1737. By 1825, the use of greenhouses for the purpose of floriculture started becoming common all
over the world. With various product types, producers from both developed and developing countries
and continuous innovation in production and logistical processes, the industry is a highly dynamic one
in nature.
Cut flower sales in the floriculture industry also includes other crops, like breeding plants,
houseplants, pot plants, and cut cultivated greens. However, the product in this case is defined as
“fresh cut flowers and flower buds used in bouquets or for ornamental purposes, and dried, dyed,
bleached, impregnated or otherwise prepared cut flowers used in bouquets or ornamental purposes”
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
2
(Industry and Trade Summary, 2003). Cut flowers are the blooms or ‘inflorescences’ of plants that
have some attached plant materials, but that do not include roots and soils. Since the fresh cut flowers
maintain a very limited process of life-support by taking up water through their stems, they are very
perishable and hence have a very limited shelf life (Industry and Trade Summary, 2003). The top cut
flowers that are sold all over the world in cluderoses, chrysanthemums, tulips, lilies, gerberas, lisian
thus, and cymbidium (Royal FloraHolland Annual Report, 2017). Roses are the most popular among
all these options and there are at least 100 species and thousands of different varieties of roses
available (Industry and Trade Summary, 2003). This great popularity of rose is the main reason many
of the flower producing countries like Ecuador and Zambia concentrate solely on rose production.
These various types of flowers are used by consumers from all over the world for various occasions.
Major purposes include self-gift, decorating homes on various events, decorations for weddings,
funerals, and also gifts on special days like Valentine’s Day and Mother’s Day, and on holidays like
Christmas and Easter (Flower Industry Statistics, 2016). At present, cut flowers are the 325th most
traded product according to the Product Complexity Index (PCI) and the industry has an annual
turnover of USD 7.97 billion (OEC, 2017).
Even though the recession of fall 2008 led top lummeted profitability of the major exporters,
the industry has since then been recovering slowly and is again trying to boost sales (CBI, 2013). On
the occasion of Valentine’s Day in 2017, FloraHolland, the world’s largest flower market in the
Netherlands, recorded its highest ever week’s turnover of €142 million in the sixth week of the year
(Horticulture Week, 2017). Similarly, the sale of cut flowers on different occasions has slowly been
gaining momentum. The largest import market, the US, has been experiencing increase in sales for
four consecutive years. This optimistic situation has encouraged many developing countries to be
more vigorously involved in flower production despite having considerable barriers to entry including
high capital requirement, know-how as well as infrastructure, etc. (Gijsbert van Liemt, 1999).
European Flower Market
European flower market is one of the major markets for cut flower and plants. It is the biggest
market after the US and Japan. Every year many developing and underdeveloped countries supply
flowers to the European flower markets. In addition, the suppliers of cut flower from developing
countries are increasing day by day. In 2013, a total of about €3.5 billion worth of flowers and foliage
were exported by all European Union (EU) countries in intra and extra EU trade (CBI, 2013). Among
all the suppliers, Kenya is the largest supplier of cut flower among the developing countries. In 2013,
it supplied around €485 million worth of flower in EU flower markets and around €225 million in the
Netherlands flower market (CBI, 2013). The country mainly exports Rose, Dianthus, Alstroemeria,
Lilium, and summer flowers like Hypericum. In 2013, around €967 million worth of flowers were
imported in EU from the non-EU countries, with the majority imported from developing countries.
Approximately 25 percent of cut flower and foliage are directly imported from developing countries
and this amount is increasing gradually (CBI, 2013). Among the European countries, Switzerland,
Germany, the UK, the Netherlands and Italy are the leading market for flower consumption.
In Europe, the flowers and plants consumption is increasing continuously. However, the local
growers face a constant downward pressure on their profit margin because of the rising cost and
stagnant prices. Moreover, the foreign supply of flowers also works behind it. Hence, many growers
are following the cost leadership strategy to optimize the problem, which means they scale up the price
and produce bulk amount of products. Other growers specialize in niche products targeting specific
market segments. In most European countries, local production of flower and plants is not sufficient to
the local demand. Hence, imported flowers play an important role in this market. Additionally,
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
3
European growers are relocating their production to the lower cost countries with favorable cultivation
conditions. As a result, the production area of cut flowers in Europe is gradually decreasing.
The Netherlands is the largest European cut flower and foliage supplier in EU countries. Its
flower market plays a vital role in distributing the flowers around the world. Among the EU flower
markets, the Netherlands flower market is the most important flower-trading hub as approximately 60
percent of imported flowers enter the EU through it. The cut flowers and foliage which are exported
from the other countries through the Dutch floral market are again re-exported to other European
countries. About €2.7 billion worth of flower were re-exported to the European countries in 2013
(CBI, 2013).
The Dutch Flower Business: From Past to Present
Considering its perishable nature, the major producers of the floriculture industry have
historically been located near the main consumer markets. For the Netherlands, the journey of flower
cultivation started in around 1570 when the first tulip was exported from Turkey. Soon the Tulip
cultivation boomed as the sandy coastal grounds of the Netherlands proved to be suitable for growing
tulips (Porter et al., 2011). As there was a boom in the flower cultivation and also improvements in
social conditions in Europe, demand of flowers started to increase and the export of flowers started
taking place. Consequently, flowers started to gain significant importance and at its peak tulip bulbs
were even used as a form of currency. Over the next few centuries, flower cultivation in the
Netherlands spread across the country and continuous innovation took place regarding year-round
production through glasshouses, increased quality of flowers, and flower type variations.
The first formal organization for flower trade, the Dutch Horticultural Council, was established
in 1908. The auction houses were strategically situated near the waterways since it allowed the local
growers to transport their product through boats and bicycles. To further transport the flowers to the
Amsterdam transportation hub, railways played an important role. Through the 1960s, the flowers
were distributed to the European market by trucks with assistance from a transportation cooperative
company named Express Bloemen (express-bloemen.be). Amsterdam Airport Schiphol and KLM
Royal Dutch Airlines have played a major role in transporting auctioned flowers to all over the world.
Apart from flower cultivation in its own country, the Dutch flower cluster also started to
develop collaborations with other flower growing nations from the late 1950s. As Dutch companies
began investing in foreign production, information regarding best sustainable practices in this sector
was also shared. With time, the Dutch floral market had positioned itself as the leader in this market
and it currently accounts for an annual turnover of €4602 million (Royal FloraHolland, 2015). It has
become a world hub for the producers and sellers of cut flowers not only from the Netherlands but also
from many other parts of the world. FloraHolland, a cooperative organization that is established for the
sole purpose of managing the floral business in the Netherlands, is the largest floral auction center in
the world.
Royal FloraHolland: An Overview
Holland is a former state of the Netherlands which is located in the western coast of the
country. It is also informally used to refer to the whole country of the Netherlands. The climate of
Holland is quite suitable for flower production. Thus, it has long been a famous hub for flower
production as well as flower business management. The biggest flower market in the world, ‘Royal
FloraHolland’ originates from Holland. FloraHolland is a cooperative that was established in 1911 and
has since been playing the most significant role in shaping the world floriculture industry. It now has a
supplier group of 6,153 suppliers, out of which 3,775 suppliers are from the Netherlands and 638 are
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
4
from abroad. Non-members who participate are 1,740 in number (FloraHolland, 2016). In 2016,
FloraHolland traded 12.5 billion flower and plants worldwide. In its FloraHolland 2020 strategy, it
described its main motto as – ‘Flowering the world together, planting seeds of opportunities for our
members’ (FloraHolland, 2016).
The Process at FloraHolland
FloraHolland has market places at six different locations, five of which are located in the
Netherlands: Aalsmeer, Eelde, Naaldwijk, Naaldwijk Florists’s clock and Rijnsburg. Among these
locations, Eelde is for serving the domestic market and the rest are mostly focused on export
customers. There is a sixth location of FloraHolland named Veiling Rhein-Maas, located in Germany.
FloraHolland consists of three flower auction complexes, Aalsmeer being the largest one. The
auction house has 36 clocks and 8 bidding halls and an area of 2.47 million square meters with 1.106
customers with accommodations on auction grounds (FloraHolland, 2016). Suppliers from the
Netherlands and abroad bring their flowers everyday to be auctioned and sold. Roadways and
waterways are used to bring the local growers’ products to the auction places. Also, sea cargo and
airways are also used by the suppliers of other countries to bring their products to the auction places
(Porter et al., 2011). The processes and departments can be divided into three main functions at
FloraHolland – supply, distribution and delivery (as shown in Figure 1).
Figure1: Supply Chain Network of the Dutch Flower Market
Domestic Grower
Foreign
Retail Sector
Exporter
Domestic
Importer
FloraHolland:
Auction Clock & Direct Sale
Domestic
Wholesaler
Domestic retail
Sector
Foreign Grower
Foreign retail
Sector
Foreign
Wholesaler
Foreign
Importer
Domestic retail
Sector
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
5
FloraHolland has a 24-hour, 7-days-a-week supply process as a part of the unique service it
provides to its suppliers. Since most of the products arrive at the auction center at night, they are
stored at the cold storages and are kept at low temperatures as much as possible till they are ready to
be sent to the auction places. The flowers are brought in two different types of carriers – the auction
trolleys (or in Dutch staple wagon, STW) and the Danish Container (DC). The STWs are used for
transporting both flowers and plants whereas DCs are used for transporting plants only. On an average,
6,615,146 trolleys and CC containers are processed at FloraHolland through 1,483 docks everyday
(FloraHolland, 2016). FloraHolland works as the platform where the flowers sent by the suppliers are
stored, controlled, auctioned, distributed, and delivered to the traders. The traders include the parties of
importers, exporters and wholesalers.
The Auction Process
There are two major types of flows through which the flowers get auctioned – the Connect and
the Clock flow. The connect flow refers to the trollies of flowers that are already bought and the clock
flow refers to the flower trollies that still need to be auctioned and sold. The starting and ending time
for the connect flow is usually 5am and 5pm. The timings for the clock flow starts at 6am and
continues till all the trollies are sold through auctioning. Once the auction starts, the traders can place
bids either at the auction rooms or through remote buying. This is the first option that can take place.
In the second option, traders ask for certain types of products and Flora Holland Connect, an
intermediary agency, directly distribute the products to the traders as per their requested requirements.
Here, no auction is involved. The third option is to trade outside the distribution auction and directly
deliver the products to the box of the trader. In this case, FloraHolland plays no role in the storage and
distribution, but FloraHolland Connect manages the purchase on behalf of the traders and also
manages the financial process. The last option (as shown in Figure 2) takes place outside the scope of
FloraHolland and the products are directly delivered to the traders or exporters without any sort of
intervention by FloraHolland.
Figure 2: Logistics flow of Royal FloraHolland
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
6
The Key Market Players
The flower producing countries can be of four possible types. The first group includes
countries like India, Japan, and China, which mainly produce to meet the local market demand and
that do not have significant exports. The second group of producers involves countries that mostly
satisfy their need for cut flowers through import, such as Germany and the UK. The third group
comprises of countries that have low domestic demand and export in a large volume. These are Kenya,
Colombia, and Ethiopia, where most of the production is exported to the flower-consuming countries.
Lastly, the fourth group includes the countries that produce a great volume of cut flowers and have
large domestic market as well as a substantial share of export. The Netherlands is one such example
for this kind of producer (Gijsbert van Lient, 1999).
Due to the perishable nature of cut flowers and foliage, the cut flowers have a low average
shelf life of 5 to 8 days without the use of preservatives (Porter et al., 2011). This is a major reason for
which in earlier days the flower producing nations would usually be situated very close to the
consuming countries. However, due to tremendous improvements in logistical support over the years,
there are now many nations in the country that are producing flowers and exporting them to far away
countries at the expense of the already established producers in the market. Moreover, many
developing countries like Kenya, Ecuador, and Zimbabwe have joined the industry as new entrants
and have been gaining market share rapidly over the last few decades. The competition has intensified
with new competitors like China, India, Malaysia, South Africa, and a host of some other countries.
Many of these countries are blessed with excellent favorable climatic conditions for producing
flowers, but most of them are situated far away from the most demanding markets for cut flowers, the
European and North American markets. Nevertheless, a more efficient and technologically-advanced
logistical system has allowed these countries to give tough competition to the already existing players
from the European markets (African Business Magazine, 2012).
Exports
Among the exporters of cut flowers, Europe has long been playing a dominant role in the world
floral export market. Despite the fierce competition faced by many other competitors, Europe still
holds 49 percent of the total cut flower export market (OEC, 2017). The Figure3 shows the major cut
flower exporters in 2016.
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
7
Figure 3: Major cut flower exporting countries in 2016 (Source: OEC, 2017)
Imports
Europe is also dominant among the countries that import cut flowers. As of today, Europe
takes around 65 percent of the world import in the cut flower market. Most of this trade is intra-
European trade. The United States is also a prime importer (OEC, 2017). The Figure 4shows the import
countries for cut flowers in 2016.
Figure 4: Major cut flower importing countries in 2016 (Source: OEC, 2017)
Export
Netherlands Colombia Ecuador Kenya
Ethiopia Belgium-Luxembourg Malaysia Italy
Thailand China Lithunia
Import
United States Netherlands Germany United Kingdom
Russia France Japan Switzerland
Italy Belgum-Luxembourg Austria
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
8
Key Challenges and Issues
FloraHolland has been in action for over a century now, and it has played an immensely significant
role in developing not only the Dutch flower market, but also in shaping the overall market scenario
for the floriculture industry worldwide. The platform it has created is now the most organized one in
the sector and hence offers a guideline for other similar initiatives. However, in recent years, there has
been increased competition and changes in the nature of the business. These changes have been caused
by certain issues and in order to sustain its leadership in this sector, FloraHolland must address the
issues with utmost significance. Lucas Vos (CEO of FloraHolland), is consistently trying to create new
opportunities that would allow the cooperative to extend its offerings to new markets and hence help
the growers of the floriculture industry. The key challenges and issues faced by the cooperative at
recent times are the following:
Changed Scenario in the Competitive Market
Since its inception, FloraHolland has been the global trendsetter in the floral industry and has played
the dominant role in the global floral trade. Though, this undisputed market leadership of the
cooperative is now at stake as the competitive playing field scenario is changing with the emergence
of countries like Kenya, Ecuador, Colombia, Malaysia, Ethiopia, etc. in the industry. The Dutch
auction house has been losing its market share in many countries because of these countries. For
example, in Japan, the import of cut flowers from Netherlands decreased from 8to 2 percent from 2003
to 2008. During this time period, the import from Malaysia grew from 14 to 22 percent in Japan
(Rabobank, 2015). Figure 5 shows how the market share of the Netherlands is diminishing over the
years to its other competitors:
Figure 5: The diminishing market share of the Netherlands (Source: UN Comtrade, 2014)
This gradual decrease in the market share has been a great concern for FloraHolland and thus, the
management is coming up with various initiatives to ensure the market leadership of the cooperative.
Digitalization
With the whole world becoming more accessible through digitalization, the horticulture sector
is no exception. One of the major challenges for FloraHolland will be to cope up with the changes in
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
9
trends in the sector, and digitalization is one of those major trends. As per the words of the CEO of
FloraHolland, Lucan Vos, “Royal FloraHolland is the world’s largest marketplace for flowers and
plants. The floriculture industry is constantly changing and evolving, with digitalization being the
main driver. We are responding to these changes by integrating all digital trading instruments into our
upgraded Digital Trading Platform. Digital is the new standard!” (Floribusiness, 2017). His words
indicate how significant it is for FloraHolland to ensure its partners a digitalized experience that will
allow them to have a more accessible as well as simplified platform for trade.
The Chief Digital Officer (CDO) of Royal FloraHolland, Gerhard van der Biji, has been
consistently working to incorporate all the growers, buyers and cooperative colleagues so that the
digitalization process works effectively. This has been a major challenge for FloraHolland and this
change is considered inevitable and expected to have major impacts. By automating today’s services,
the cooperative intends to digitalize the future marketplace. Digitalization will play a very important
role in achieving the goals of the 2020 strategy for FloraHolland. However, this process will bring
certain challenges. Some growers may not be comfortable with the new ways of conducting business
and the uncertainty may cause reluctance in accepting the new approach. To overcome this challenge,
Gerhard wants to ensure that the growers are properly aware of the added value they will receive from
this process and then they are provided assistance with the implementation. The advantages for the
growers are steady pricesand an efficient trade platform. The challenge is equally applicable for the
buyers as well. They must be assured that even though they complete the purchase process online, they
will receive the same quality as before. As such, Gerhard considers it important to ensure that the
buyers accept the new trend and receive the advantages of excellent quality at convenient timing and
location (Royal FloraHolland, 2017).
In the recently held World Floral Summit, Lucas Vos talked about the threats the industry
could face from big parties like Alibaba and Amazon unless digitalization is accepted and
implemented in this sector. To carry that out, he emphasized that collaboration from all the related
parties from this industry is required in order to create a proper control of the trade chain (World
Floral Summit, 2017).
Another major challenge that arises with digitalization is the increase in small scale orders. The
digital platform makes it possible for everyone to avail the services from FloraHolland, be it a small
florist in Malaysia or a large trading company in the Netherlands. However, the logistical problems
associated with small scale orders can cause problems for the cooperative in terms of added cost and
inefficient logistical support. The current transaction fee is set too low (per transaction €0.90) to attract
and motivate the users to use the digital platform, but this is not cost efficient nor profitable for the
organization. Royal FloraHolland must resolve these issues to generate an efficient and profitable
digital platform (Floribusiness, 2017).
Globalization
FloraHolland had initially started as a cooperative for the local suppliers, and since then it has
successfully created a global platform for the related parties from the floriculture sector. The effect of
globalization has been extremely important for the cooperative, though according to CEO Lucas Vos,
it has not yet been able to deal with this in an organized way. Regarding the issue of globalization, he
implies that though the growers are quite innovative and hard-working who love their products, they
are very Dutch and thus, are more focused on each other. Therefore, though the worldwide demand is
increasing, the Dutch growers are not much concerned about it and thus, the cooperative is losing
global market share while other countries are faring better than the Netherlands. The CEO feels that
there is a need for the Dutch East India Company mentality to return (Floribusiness, 2017). He further
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
10
emphasizes on the importance of globalization and the need to secure opportunities worldwide in order
to recover their stronghold in the floral industry. Lucas Vosbelieves that to continue business and
improve their position in the market, the cooperative must invest in business relationships without
being intimidated by the rivals (Flora Daily, 2017).
Need for more Organized Logistics
Since the starting of floriculture business in the Netherlands, logistics has always played a vital
role. Though it was considered a competitive advantage for FloraHolland in the past, now logistics is
more of a major concern due to the smaller transactions at the auction system. As a result, the lorries,
trolleys, and containers are not being filled optimally as they are carrying smaller loads. Consequently,
this causes logistics cost to increase as well as a greater cost per stem. FloraHolland is determined to
treat this issue seriously and take initiatives that will allow the logistics systems to be more cost
efficient (Floribusiness, 2017).
Sustainability Issues
Consumers from all over the world have been becoming more and more aware of
environmentally friendly products that have been grown in a sustainable way (Burnett, 2011). It has
even been estimated that customers would not mind spending up to 15 percent more for substantially
produced floricultural products compared to conventionally produced products (Behe et al., 2010). The
facts that a single rose grown in Kenya needs about 10 liters of water to be produced and the water
footprint level there has more than doubled over the period of last 15 years have sparked great
criticism among stakeholders (The Guardian, 2012). This increased attention has made the growers
more interested in producing their products in a more sustainable way (Dennis et al., 2010).
Company Initiatives
To ensure and strengthen the international leading position of the Dutch horticulture industry,
numerous initiatives have been taken to ensure more efficient trade and logistics by different relevant
partners from the Dutch horticulture sector. Some of the important initiatives are mentioned below:
FloraMondo
FloraMondo is an online trading platform offered by FloraHolland that offers the widest
assortment of flowers and plants to interested buyers from all over the world. It is the meeting place
for growers who can showcase their product and the buyers who can have access to the world’s largest
auction by viewing the entire clock supply. The buyers are provided with convenient buying options
for making small-scale purchases through Auction Presales or direct trade and they can access the
latest and up-to-date overview of the FloraHolland auction supply sitting at their own work station
from all around the world (RoyalFH.com, 2017). Since the amount of direct selling is rapidly
increasing, FloraHolland is taking various initiatives to make this platform more popular among the
buyers. As a part of such initiatives, on January 1, 2017, it made direct sales through FloraMondo free
(earlier a monthly fee of €110.50 per month was to be paid) and instantly there has been an enormous
increase in digital purchasing in the first four weeks of 2017 (a growth of 40 percent). This initiative
was adopted to ensure further participation by growers so that they are willing to participate at the new
digital platform. However, the web shop services cost € 27.50 per month and there is also a transaction
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
11
cost of € 0.90 for the users. It is predicted that this platform will become more popular with both the
growers and the buyers with time and this will also help FloraHolland to face the increasing
competition from parties like Amazon and Alibaba.
Future Auctioning Process
To further improve the activities by FloraHolland, many initiatives have been taken to ensure a
more efficient auctioning system. For this purpose, it has chosen a new direction and it includes
evolution of the clock and revolution alongside the clock (FloraHolland, 2016). A nationwide virtual
clock is introduced in Aalsmeer and Naaldwijk to provide a smoother auctioning process. At other
locations, a number of physical clocks will remain for a fee. For more effectiveness and efficiency in
the process, availability of accurate information is a must. To accommodate its buyers’ needs,
FloraHolland is planning to introduce the ‘Today for Tomorrow’ facility where buyers can place an
order today and receive the delivery tomorrow. To make this possible, FloraHolland is continuously
working round the clock along with its partners to produce the best possible logistical support for its
growers and buyers.
Customized Logistics
One major goal for FloraHolland is to ensure the best possible logistical support system for the
benefit of the growers and the buyers. Since the recent market trend shows a steady increase in smaller
order units, the need for a more sophisticated logistics process becomes more important than ever
before. The cooperative is constantly working on this issue and has begun introducing robot
technology to help organize the logistics more efficiently and effectively. Technologically advanced
solutions like robotisation are now being tested by the organization to ensure a higher level of
efficiency. In this case, robotic carts are used to maximize efficiency in the warehouse. The
management believes automation with robots will help the organization with the complex logistics
process. In Aalsmeer, initial tests have been conducted to uncover the required conditions that must be
fulfilled in the process. This test proved to be very helpful to realize how an AGV (automated guided
vehicle) manages the trolleys at the warehouse. The information is now being used to prepare a wider
range of experiments (The New Auctioning at Royal FloraHolland, 2017). If this initiative is
successful, it can be inferred that the logistics process will become more efficient in terms of
productivity and costing. This can also reduce the number of part time employees which was 2,956 in
2016 (a 3 percent decrease from 2015) (Annual Report, Royal FloraHolland, 2016).
Floriculture Logistics Optimization Worldwide
Floriculture Logistics Optimization Worldwide (FLOW) is a part of the Royal FloraHolland
2020 strategy. Through this international program, FloraHolland, along with various other chain
partners, provides insight into the existing supply chain system of the horticulture sector so that future
innovation can be made possible to improve the competitive strength through collaboration. The
eventual goal of this project is to achieve an improved profit margin for the chain partners to reach a
15 percent savings in cost throughout the supply chain; this may ultimately allow a drop of €64 million
(FloraHolland, 2016).
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
12
Sustainability Initiatives
To address the issue of sustainability, the management of FloraHolland has incorporated
sustainability at the heart of all the initiatives by the cooperative. Since the inception of the
cooperative, maximum attention is paid to the sustainable production and the trend still remains the
same. FloraHolland believes that all the stakeholders must work together to ensure a sustainable
practice in the sector. Thus, they emphasize and incorporate sustainable practices including energy
consumption in the supply chain, water consumption, waste management, transport packaging, safety,
employee satisfaction, customer and member satisfaction, etc. to create a sustainable and
environmentally friendly overall process (Annual Report, Royal FloraHolland, 2016). FloraHolland
arranges workshops with its various stakeholder groups to increase their awareness of these standards
and provides training to the different groups in the supply chain so that they can properly maintain the
standards. Following are some of the initiatives by the cooperative (Sustainable healthy future, 2017):
Sustainable Horticulture Platform: This is a platform jointly established by LTO Glaskracht,
the VGB, and Royal FloraHolland which works with all the important chain partners of Dutch
horticulture sector to ensure sustainable production practices and communication.
International Corporate Social Responsibility: Royal FloraHolland works with numerous other
groups like trade and branch organizations, NGOs, social organizations, unions, and the governments
to promote the various initiatives under international corporate social responsibility. As per this
initiative, International Responsible Business Conduct Agreements for the horticulture sector have
been agreed upon by the participating members and together, they work to prevent abuses including
exploitation, animal suffering, environmental damages, etc. (IRBC, 2017)
Floriculture Sustainability Initiative: The cooperative is one of the founder members of the
Flower Industry Statistics (FSI), which works as a platform between the supply chain partners of the
floriculture industry and various non-governmental organizations (NGOs). Together the partners have
come up with a ‘Basket of standards’ for the industry for both business to business (B2B) and business
to consumer (B2C) members (FSI, 2017). The aim of FSI is to ensure that 90 percent of all the flowers
and plants are grown and marketed sustainably by the members by 2020.
Moving Ahead
In the Dutch auction houses, most flowers have to physically pass through the auction process
stages for physical inspection and quality control before they are sent to the domestic and foreign
sellers. However, recent trends of virtualization and internationalization have made it inevitable to
explore an alternative logistics and control mechanism that will be more effective and efficient and
will allow collaboration with the partners (Van Der Vorst et al., 2016). Since the assurance of quality
is an important issue for the buyers, FloraHolland ensures scanning during inspections two-sided, both
by the growers and the cooperative, so that the overall quality control is maintained properly (Royal
FloraHolland Extra General Members’ Meeting Minutes, 2017). The major purposes as per the Royal
FloraHolland digital strategy are – reliable, digital, momentum, and together (Royal FloraHolland,
2017).
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
13
Discussion Questions
1. How might the digitization of flower auctions affect quality control of the product? Do the benefits
of such digitalization outweigh the drawbacks? Why or why not?
2. FloraHolland tried to increase its global sales by offering free direct sales through FloraMundo.
Do you think this solution is sustainable? If not, how else might FloraHolland encourage Dutch
farmers to look beyond Dutch borders for business?
3. What are the benefits and drawbacks of using robotisation to ensure the efficient transport of flower
products? Do you think the benefits outweigh the drawbacks? Why or why not?
4. Considering the amount of resources needed to grow floral products, do you think the sustainability
initiatives of FloraHolland are feasible? How might sustainability efforts help or harm the business?
5. How should Royal FloraHolland use its strengths and resources in an increasingly competitive
market?
References
African Business Magazine (2012, February 9). The Global Flower Trade. Retrieved from,
http://africanbusinessmagazine.com/special-reports/sector-reports/floriculture/the-global-
flower-trade
Ayers, C. (2016).The History of Floriculture. Retrieved from,
http://www.ehow.com/about_6824455_history-floriculture.html
Behe, B. K., Campbell, B., Dennis, J., Hall, C., Lopez, R., & Yue, C. (2010). Gardening consumer
segments vary in eco practices. HortScience, 45(10), 1475-1479.
Burnett, S., Mattson, N., Krug, B., & Lopez, R. (2011). Floriculture Sustainability Research Coalition:
Bringing the Latest Sustainability Research to the Industry. Hort Technology, 21(6), 692-693.
CIB (2017). CBI Competition: Cut flowers and foliage in Europe. Retrieved from, https://www.cbi.eu/
Dennis, J. H., Lopez, R. G., Behe, B. K., Hall, C. R., Yue, C., & Campbell, B. L. (2010). Sustainable
production practices adopted by greenhouse and nursery plant growers. Hort Science, 45(8),
1232-1237.
Flora Daily (2017). Without global trade, there will be no growth. May, 2017, Flora Daily. Retrieved
from, http://www.floraldaily.com/article/10128/Without-global-trade,-there-would-be-no-
growth
Floribusiness (2017, April 19). Royal FloraHolland trades 12.5 billion flowers and plants in 2016.
Retrieved from,https://www.hortipoint.nl/floribusiness/news/royal-floraholland-trades-12-5-
billion-flowers-and-plants-2016/
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
14
Floribusiness (2017, June 30). FloraHolland needs to make choices. Retrieved from
https://www.hortipoint.nl/floribusiness/marco-zijverden-dutch-flower-group-floraholland-
needs-to-make-choices/
Floribusiness (2017, April 6). Customers are not providing enough added value. Retrieved
from,https://www.hortipoint.nl/floribusiness/articles/according-to-lucas-vos-customers-are-not-
providing-enough-added-value/
Flower Industry Statistics (2017). About Flower Industry Statistics. Retrieved from,
http://www.statisticbrain.com/flower-industry-statistics/
Gijsbert van Liemt, (1999). The world cut flower industry: trends and prospects. ILO Working Papers,
International Labour Organization (ILO).
Horticulture Week (2017). FloraHolland turnover breaks Valentine’s Day flower supply record.
Retrieved from, http://www.hortweek.com/floraholland-turnover-breaks-valentines-day-
flower-supply-record/ornamentals/article/1424654
IRBC Agreements (2017). IRBC Agreements. Retrieved from,
https://www.internationalrbc.org/?sc_lang=en
Observatory of Economic Complexity (OEC) (2017). Cut flowers and flower buds for bouquets, fresh.
Retrieved from, http://atlas.media.mit.edu/en/profile/hs92/060310/
Porter, M. E. and Ramirez-Vallejo, J., & van Eenennaam, F. (2011). The Dutch Flower Cluster.
Harvard Business School Strategy Unit Case No. 711-507.
Rabobank Industry (2015, January). World Floriculture Map 2015.Rabobank Industry Note No. 475.
Retrieved from,
https://www.rabobank.com/.../World_Floriculture_Map_2015_vanRijswick_Jan2015Royal
FloraHolland (February, 2017). Digitalization is the key to 2020 strategy. Retrieved
from,https://www.royalfloraholland.com/media/8124538/Royal-FloraHolland-
Digitalization_EN.pdf
Royal FloraHolland (2017). Minutes of the extra General Members’ Meeting of Royal FloraHolland
held on Thursday 21 September 2017 at Royal FloraHollandNaaldwijk location. Retrieved
from,https://www.royalfloraholland.com/en/about-floraholland/who-we-are-what-we-
do/policy-topics/digitalization
Royal FloraHolland (2017). The New Auctioning – Our progress so far. Retrieved from,
https://www.royalfloraholland.com/en/about-floraholland/who-we-are-what-we-do/policy-
topics/floraholland-2020/the-new-auctioning/our-progress-so-far
Sustainable Healthy Future (2017). Sustainable Healthy Future. Retrieved from,
https://www.royalfloraholland.com/en/about-floraholland/who-we-are-what-we-
do/sustainability-horticultural-sector
Author’s copy Royal FloraHolland: Strategic Supply Chain of Cut Flowers Business
15
The Guardian (2012). Water footprints: lessons from Kenya’s floriculture sector. Retrieved from,
https://www.theguardian.com/sustainable-business/water-footprints-lessons-kenya-floriculture.
Van Der Vorst, J. G., Ossevoort, R., De Keizer, M., Van Woensel, T., Verdouw, C. N., Wenink, E.,
...& Van Willegen, R. (2016). DAVINC3I: Towards collaborative responsive logistics
networks in floriculture. In Logistics and Supply Chain Innovation (pp. 37-53). Springer
International Publishing.
World Floral Summit (November 6, 2017). World Floral Summit: Vertical Integration in the
Horticulture Sector. Retrieved from, https://www.ciopora.org/single-post/2017/11/16/World-
Floral-Summit-Vertical-Integration-in-the-Horticulture-Sector?L=1
