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Operations and enabling environment for Agro-industries
Contributor : FAO-AGS (2008-02-28 14:50:42)
Improving Efficiency: agro-industries operations management
The Proposition
Agro-processors in developing countries must improve their operations management if they are to achieve, and maintain, competitiveness in domestic and international markets. The public sector can, and should, facilitate the process.
Rationale and Recommended Response (Click here to read)
Update on the debate
Comparative cost of production is the defining benchmark for efficiency. Industries do this through increasing their scope for improved economies of scale but for small agro-enterprises, the emphasis has been on efficiencies within the enterprise. With the changing environment, this may not be good enough to compete. However, the value of building the management capacity is emphasized and that the management capacity must proceed that of investment and growth.
Current focus of the Debate
Should management capacity building programmes be delivered within the context of a national competitiveness strategy, or a strategy that focuses exclusively on the agro-industrial sector?
What are examples of better practices?
For summary of previous round of debate and questions click here
7 Comments
Dave Harcourt , (2008-04-03 10:35:47)
In the food manufacturing area, the cost of production is a major definer of competitiveness and is critical aspects of operations management.
It is radically different in small and large enterprises. The small enterprise needs to focus on efficiency within the operation whereas the large company has the opportunity of managing economy of scale to reduce its cost of production.
Public Policy can not have a direct effect on production cost but should look in supporting small business in other ways eg reduced administrative requirements and appropriate regulations and licensing
In the food manufacturing area, the cost of production is a major definer of competitiveness and is critical aspects of operations management.
It is radically different in small and large enterprises. The small enterprise needs to focus on efficiency within the operation whereas the large company has the opportunity of managing economy of scale to reduce its cost of production.
Public Policy can not have a direct effect on production cost but should look in supporting small business in other ways eg reduced administrative requirements and appropriate regulations and licensing
Peter Steele Consultant Agricultural Engineer, FAO/UN [ www.fao.org ] (2008-03-20 10:41:35)
Talking the talk - walking the walk; management & more.
These are a couple of odd questions given the ease with which you can evaluate the performance of a great many small enterprises in the low-income countries (and if only because of the openness that you normally meet with these kind of business people in their home markets). You can sum performance in two words, viz. ´Quality management´
Evaluating the performance of 13 of 50 small seeds processing enterprises scattered across a small but highly challenging country in Central Asia recently two businsess-related issue were quickly highlighted, viz.
1. Manpower training – that people are able to manage their existing enterprises successfully; and,
2. Market development – that trading people and their advisors can continue to grow and exploit markets for high quality seeds and associated services.
Simple conclusions then from an industry with estimated >US$3M already invested in plant/structures required for the existing network of 50 enterprises, and minimum US$20M estimated invested in auxiliary support structures, frameworks, systems and similar directly linked into the sector. Of the order 85% of this investment represented donor/NGO-led assistance; with buildings and plant relatively easy to supply, but with considerable (you could say irresponsible) lack of capacity building within the service industries required - and particular for the tech/financial assistance needed to keep the enterprises afloat. Managers were - in general - patently unable to keep a reasonable accounts book, and were well aware of their deficiencies; and training was scheduled. Sitting with those in charge with files, books and accounts scattered around (and with some quality reference/teaching material on-hand) it was relatively easy to direct the enthusiasm of keen people ìnto decision-making that linked into cash flow, to profitability, to risk and so on.
Messages then? Don´t ´walk before you can run´; don´t pile in the resources unless management can handle them; and, importantly, ensure that investment links into the extent of the markets that exist or those that can be developed. Above all - teach simple book-keeping skills. Efficiency, etc? This can come later.
Peter Steele, Rome. 20/03
Talking the talk - walking the walk; management & more.
These are a couple of odd questions given the ease with which you can evaluate the performance of a great many small enterprises in the low-income countries (and if only because of the openness that you normally meet with these kind of business people in their home markets). You can sum performance in two words, viz. ´Quality management´
Evaluating the performance of 13 of 50 small seeds processing enterprises scattered across a small but highly challenging country in Central Asia recently two businsess-related issue were quickly highlighted, viz.
1. Manpower training – that people are able to manage their existing enterprises successfully; and,
2. Market development – that trading people and their advisors can continue to grow and exploit markets for high quality seeds and associated services.
Simple conclusions then from an industry with estimated >US$3M already invested in plant/structures required for the existing network of 50 enterprises, and minimum US$20M estimated invested in auxiliary support structures, frameworks, systems and similar directly linked into the sector. Of the order 85% of this investment represented donor/NGO-led assistance; with buildings and plant relatively easy to supply, but with considerable (you could say irresponsible) lack of capacity building within the service industries required - and particular for the tech/financial assistance needed to keep the enterprises afloat. Managers were - in general - patently unable to keep a reasonable accounts book, and were well aware of their deficiencies; and training was scheduled. Sitting with those in charge with files, books and accounts scattered around (and with some quality reference/teaching material on-hand) it was relatively easy to direct the enthusiasm of keen people ìnto decision-making that linked into cash flow, to profitability, to risk and so on.
Messages then? Don´t ´walk before you can run´; don´t pile in the resources unless management can handle them; and, importantly, ensure that investment links into the extent of the markets that exist or those that can be developed. Above all - teach simple book-keeping skills. Efficiency, etc? This can come later.
Peter Steele, Rome. 20/03
Christian Fischer Associate Professor, Massey University, Institute of Food, Nutrition and Human Health, agribusiness division [ www.christian-fischer.de ] (2008-03-19 23:24:24)
The title of this roundtable may perhaps be improved. From the discussion so far it seems that “Improving managerial effectiveness in agro-industries” is meant. “Improving efficiency” is too close to “improving productivity”.
As to how to improve managerial effectiveness in agribusiness and agro-food industries, one problem is that working in this field is often not seen as attractive as compared to more “advanced” sectors such as banking, IT, telecommunications, chemicals, automotive, etc. The consequence is that there is a relative lack of managerial talent in the agro-food industries. Education and training can only do so much. Governments (and industry associations) do have the means to help to improve the image of the agro-food industries. However, this probably becomes only an issue once a country is comparatively well developed. Thus, improving existing training programmes and offering attractive tertiary food-industry management degrees (e.g., MBAs) would be one possible option.
The title of this roundtable may perhaps be improved. From the discussion so far it seems that “Improving managerial effectiveness in agro-industries” is meant. “Improving efficiency” is too close to “improving productivity”.
As to how to improve managerial effectiveness in agribusiness and agro-food industries, one problem is that working in this field is often not seen as attractive as compared to more “advanced” sectors such as banking, IT, telecommunications, chemicals, automotive, etc. The consequence is that there is a relative lack of managerial talent in the agro-food industries. Education and training can only do so much. Governments (and industry associations) do have the means to help to improve the image of the agro-food industries. However, this probably becomes only an issue once a country is comparatively well developed. Thus, improving existing training programmes and offering attractive tertiary food-industry management degrees (e.g., MBAs) would be one possible option.
Carlos A. da Silva , (2008-03-19 20:07:57)
Concerning the first question, it is hard to generalize about the different needs of different industries and countries. In any case, it seems to me that there is scope for upgrading managerial skills even at the very basic level (e.g. cost accounting, production planning and control, inventory management, etc)
Concerning the first question, it is hard to generalize about the different needs of different industries and countries. In any case, it seems to me that there is scope for upgrading managerial skills even at the very basic level (e.g. cost accounting, production planning and control, inventory management, etc)
Carlos A. da Silva , (2008-03-12 09:31:26)
In fact, the title of this roundatable is incomplete. In the Forum´s program, the complete title appears as "Improving efficiency: agro-industries operations management". While I agree with Calvin that efficiency encompasses aspects beyond operations, I feel that the area of operations management in the context of small and medium scale agroindustries in less developed countries has not received sufficient attention in agroindustrial development efforts.
That´s why this roundtable has been proposed. What can the development community do to improve operations management in SM agroindustrial enterprises?
In fact, the title of this roundatable is incomplete. In the Forum´s program, the complete title appears as "Improving efficiency: agro-industries operations management". While I agree with Calvin that efficiency encompasses aspects beyond operations, I feel that the area of operations management in the context of small and medium scale agroindustries in less developed countries has not received sufficient attention in agroindustrial development efforts.
That´s why this roundtable has been proposed. What can the development community do to improve operations management in SM agroindustrial enterprises?
Calvin Miller , (2008-03-08 12:54:39)
Damian, I tend to agree with you. Improving management and management operations are a central part of improving efficiency but while the proposition is under the term of "Improving Efficiency" the proposition primarily focuses only on the management aspects. Efficiency can also be improved by improving productivity, financial access and improving infrastructure as also noted in this e-forum. What else can be highlighted as important ingredients?
Damian, I tend to agree with you. Improving management and management operations are a central part of improving efficiency but while the proposition is under the term of "Improving Efficiency" the proposition primarily focuses only on the management aspects. Efficiency can also be improved by improving productivity, financial access and improving infrastructure as also noted in this e-forum. What else can be highlighted as important ingredients?
Dr. Damian Ihedioha , (2008-03-07 09:55:31)
There is a disconnect between term ´Improving Efficiency´ and the proposition statement. Why not change Improving Efficiency with ´Improving Agro-industry Management´, or ´Improving Management´. The adjustment would sufficiently contextualize the proposition statement.
There is a disconnect between term ´Improving Efficiency´ and the proposition statement. Why not change Improving Efficiency with ´Improving Agro-industry Management´, or ´Improving Management´. The adjustment would sufficiently contextualize the proposition statement.
