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ZAB101 - Agribusiness Management Introduction to agribusiness planning & planning for integrity and quality

So far in this unit, we have discussed the particular challenges that the ‘agribusiness environment’ throws at us. All these challenges are really characterised by one thing: uncertainty. There’s uncertainty in many contexts and over different time-scales. There’s the vagaries of the weather, markets and biological processes and these can have short, medium and long-term impacts.

We have also discussed how the physical and geographic location of agribusinesses influences their character, in terms of what they can produce and how they sell their produce.

We also discussed the concept that it is through the act of management that we respond to these influencing factors; and it is how we respond that shapes our agribusinesses.

When people respond in a similar way to these influencing factors, we tend to get a fairly homogenous mix of agribusinesses. In these cases, we get clusters of similar agribusiness models, producing roughly similar products or services, and selling into similar markets. Examples of such agribusinesses include: - the concentration of wool producers in the ‘Western District’ of Victoria or the Midlands of Tasmania; the pasture-based dairy industry in North West Tasmania; the intensive vegetable production on river flats in the North West; and the apple and pear orchards of the Derwent Valley. Whereas other agribusinesses will deliberately seek to be unique in some way, to create a market niche that differentiates them and their products or services from their key competitors. For example, Tasmanian truffles, saffron, and agritourist ventures uniquely Tasmanian.

I like to think of agribusinesses as being like individual plants within a sword of pasture. Sometimes there’s a relatively small number of species all competing within the same space. In other words, there’s a limited number of agribusinesses, all with fairly similar business models, in an area. Sometimes there’s a more diverse mix of species in the pasture. In other words, there’s a greater number of agribusinesses with different types of business models and operating at different scales, in an area.

In a biological ecosystem, like a pasture, each species has different requirements that enable it to take advantage of its particular place in the pasture ecosystem. And it can be the same if we apply this ‘ecosystem’ concept to agribusinesses.

Think about the concept that it is possible to plan an agribusiness to take advantage of its particular place in the ‘ecosystem’ of the agribusiness environment within which it is located, to take advantage of a ‘niche’ in that ecosystem so that it can thrive and survive.

So this is the basis of how we have structured this MyLO topic on agribusiness planning & planning for integrity and quality. There's a lot to get through in this module, so make sure you set enough time aside before coming along to our week 5 tutorial, to work through it all and make the most of your learning. So let's get started!

Agribusiness planning

As an agribusiness manager, one of the things you’ll do over your career is to assemble a ‘tool kit’ of planning tools, such as SWOT Analysis . Some of these will be simple and you’ll pick them up and learn them very quickly. Others will be more complex and will take some time to master. We're not going to focus on specific tools in this unit, although we will look at some business plan templates. If you are curious, more information can be found in our Practice and Portfolio Toolbox and Coach Support MyLO site you all have access to. In essence, I’ll be asking you in this module, to think more about ‘what we need to plan for and why’, rather than jumping straight to the ‘tool box’ to look for a planning tool that might help.

Why Plan?

The fundamental reason why we plan is because, if we don’t plan and set goals, how are we going to achieve our plans and goals? We will never succeed in achieving our ‘why’. We all use planning to varying degrees in our personal and professional lives. I’m sure you’ve all set out plans and goals for achieving things, whether it’s a savings plan to buy your first car or planning a holiday.

After all, “A goal without a plan is just a wish” (Antoine de Saint-Exupéry).

So what is planning, in its essence?

I define planning as the process of documenting a logical progression of tangible actions that, when combined, contribute to a defined outcome or goal.

Planning is a primary function of management.

There are many reasons why we need to plan in any agribusiness. The relative emphasis we need to put on each area of planning depends on the nature of the business, the scale and scope of the business and how much of the value chain it encompasses.

An important starting point is to develop (and regularly review/update) an overarching ‘business plan’. This sets out the vision, goals, value proposition and assumptions underpinning your agribusiness. It is this plan that is often used to take to financial institutions or private equity funders to secure financial resources to start or expand an agribusiness.

But the process of developing a business plan is probably more important than the plan itself, because it is through the act of planning each aspect of the plan that you can design, refine, test and re-design your agribusiness.

Watch this short video that describes why a business plan is important and the key components of a business plan | 8:49mins

The key reasons 'why' you need to plan in agribusiness include:

To define your goals: Establishing a mission and vision will help you define the scope and scale of your agribusiness.

To set goals and set out how they will be achieved, by setting short, medium and long-term goals.

To help your investors, staff and customers identify with your vision, your purpose, your 'why'.

To define your value proposition or unique selling proposition.

To understand where you ‘fit’ – who are your competitors? Are there similar products/services in the market? What are the trends in your market?

To identify your customers and their needs, wants and expectations, to analyse the size of the market, and so on.

All of these things help you consider the opportunities, constraints, enablers and blockers to you achieving your business goals – your ‘why.’

Other reasons to plan

There are many other reasons why we need to plan and many of these will inform the overarching ‘Business Plan’.

For example, a primary producer will have to plan things like:

The physical layout of the farm, to ensure the most efficient production from the land and water resources available and to match land capability and productivity expectations. Without having a good understanding of the carrying capacity or productivity of the physical assets of the farm, developing production forecasts, to inform the assumptions within your business plan, cannot be completed without a level of confidence to support your business case.

Conformity with legislative requirements: work health and safety, food safety, etc. all have their own systems and record-keeping requirements which will require attention to how you plan and manage your business.

Quality management system: many primary producers are now required to implement some form of quality standard, whether part of a supply contract (e.g. with a supermarket) or an international standard (e.g. ISO)

Labour: planning for peaks and troughs in labour requirements, for example at sowing, harvesting, etc.

Production planning: timing of sowing, agronomic inputs, watering, harvesting. These would all need to be timed in accordance with seasonal requirements and possible variations, and may need to be refined based on the timing of the product hitting the market, for example to take advantage of higher seasonal prices.

Water use and water supply: particularly where irrigation is used.

Cashflow planning: funding of input costs, cashflow budgeting, production forecasting, estimated crop values, etc.

Financial planning: Funding capital works; calculating the best return on investment etc.

Livestock planning: breeding, animal health (vaccines, inoculations, drenching, etc.)

Plant and equipment: all need to be justified financially and their maintenance and replacement programmed.

Fixed infrastructure: buildings, fences, reticulated water supplies, etc. need to be planned and designed to meet their functional requirements; we also need to plan for their maintenance and their replacement, particularly for fixed assets that have shorter life-spans.

An agricultural contractor (or an agribusiness servicing primary producers), in addition to many of the above, would also have to think particularly about:

Workflow planning: balancing seasonal variations in labour and equipment demands.

Customer management: attracting, keeping and managing customers. You have to be able to service your customers’ needs, on time and on budget or you won’t have them for long, so planning workflows, plant and equipment requirements, communications etc. are keys to sustainability.

Business financials: time and expense tracking and invoicing, record keeping etc.

Business Plan Templates

There are innumerable templates for ‘business plans’ available on the internet. Some of the better ones for agribusinesses are those developed by banks that sell products into the agribusiness sector.

We are not asking you to complete a business plan here, now. What we want you to do though, and to reflect upon in your Agribusiness Practice Journal, is to identify and describe the key headings/sections you would use in an agribusiness plan you would write for your bank/funders if you were starting a new agribusiness and/or expanding an existing one.

TASKS

1. Download two or more business plan templates from an online source, such as NAB or ANZ. Compare the content/headings of each.

2. In your Agribusiness Practice Journal, list the headings (and briefly describe what you might include under each heading) that you might use in preparing a business plan for a new agribusiness or expansion of an existing agribusiness.

Planning for integrity and quality

As well as the financial and business operational planning we talked about last week, the other key areas in which agribusiness managers need to focus their planning efforts is in the area of product integrity and quality. Product ‘integrity’ encompasses various considerations. These include, that the ‘product’ is: what we think it is ie. what is on the label is what is in the packet; meets minimum quality standards; looks, feels, performs as it is intended to do; is safe to eat; meets food safety regulations; is safe to use; meets health and safety, environmental and other statutory requirements.

We won't go into these issues in too much detail in this unit, but we do want to emphasise why it is important that product integrity is considered up and down the agribusiness value chain; that there are planning and monitoring systems available and we will introduce you to some of these; and that it is important to start to think about when and how you might need to apply these planning and monitoring systems in your agribusiness careers ahead. Bit, let's first take a closer look at planning for product quality.

Planning for product quality - an introduction to Total Quality Management (TQM)

‘Quality’ is a relative term and the key thing to remember is that it’s the customer who sets the expectations of quality, or defines what quality means to them. Quality can also be expressed in terms of the product’s reliability and longevity. These attributes are less subjective, because they can be measured in absolute terms (e.g. years in service; hours of service; number of repetitive cycles of performance etc.); but they are also relative measures. For example, what benchmark performance measure are you assessing quality against? Quality can also be thought of as the output of a process – a production and/or manufacturing process. Therefore, quality can be thought of as a way of working; a culture. It is in this context that the ‘total quality management’ approach to business management has emerged.

Total quality management in agribusiness, is the overall approach to ensuring that the critical components and/or production processes take into account the quality of the end product and enable problems in the supply/manufacturing process to be identified and solved.

Watch this video for an overview of a general quality management system and what it does:

A Quality Management System (QMS) is a systematic approach to focusing all business processes towards the quality of the outcome or end-product of that process. Whilst QMS is a general overarching approach to quality management, there are a plethora of specific schemes, standards and proprietary (paid) systems. You probably use one of these in your workplace, or would have experienced or seen one referenced in many of the things you buy. Let's have a closer look at some examples.

HACCP - Hazard Analysis of Critical Control Points - is a system that originated in the 1970’s in America and has been widely adopted and systematised around the world. HACCP can be followed as a general approach to managing hazards and risks in any food-related agribusiness. But the full benefits are really only realised if you are certified by an independent organisation. For example, HACCP Australia are specialists in this HACCP food safety methodology and offer a range of services to food (and non-food) businesses in implementing, auditing and certification. The following video provides a case study that shows how this system is applied in the agribusiness sector. To learn more, click here.

ISO - The International Standards Organisation - The International Standards Organisation is an independent international organisation made up of 164 member-nation national standards bodies. It brings organisations together to develop agreed standards and specifications for products, processes and services with a focus on safe, quality, efficient and reliable outcomes. As well as acting collaboratively to design and agree on standards, ISO sells standards covering private and government sectors across an array of products and services. To learn more about the ISO standards for the agriculture industry, click here.

LPA - MLA’s Livestock Production Assurance Program - The MLA has developed and promotes a quality management system for meat producers. It is a voluntary program, but opens doors to supplying many of the larger processors and retailers. It integrates 5 key components for meat producers: property risk assessments; safe and responsible animal treatments; stock foods, fodder crops, grain and pasture treatments; preparation for dispatch of livestock; and livestock transactions and movements. Watch the following video to learn more.

TASK

1. Next time you bring your shopping home from the supermarket or farmer's market, have a look at the packaging and see what, if any, promotion is included about the quality management system utilized.

2. In your Agribusiness Practice Journal, reflect on these questions: Do food companies promote their quality management systems as part of their branding and marketing campaigns, or are they doing it to conform to legislative (e.g. Food Standards) or market access requirements?

3. Also reflect in your Agribusiness Practice Journal on what you think about QMS, HACCP, ISO and other quality management systems generally… Do you think it’s worthwhile? How would you go implementing a QMS in your workplace? Do you think it’s too onerous?

Planning for product integrity - an introduction to value chains and traceability

What are value chains and what are examples of value chains in the agribusiness sector? Watch the following videos for an introduction.

Wherever an agribusiness is positioned on the value chain, there are 4 key reasons to consider product integrity (apart from our moral duty to ensure that our products are safe and authentic). These are: -

1. Legal/Statutory requirements - there are myriad legislative requirements to ensure product integrity, particularly in the food industry. The key one to know about is the Food Standards Code, which we will look into further a little later.

2. Market access - Many businesses require a quality assurance system in order to supply a business. For example, the major supermarkets require conformity with their quality assurance programs. Processors require their inputs to meet quality assurance schemes, for example the Livestock Production Assurance Program (LPA), which we will discuss later. As a supplier into a value chain, you are an integral part of someone else’s ‘total quality management’ system; your input is what contributes to the quality of their product, so you have to conform to their quality requirements.

3. Continuous improvement and product refinement - Monitoring, evaluating and refining your production systems can help identify savings in the costs of labour and direct input costs. More importantly from a product integrity perspective, continuous improvement in production systems and processes can help identify critical control points where loss of product integrity or quality can occur, enabling those problems to be fixed and thereby ensuring an overall increase in product quality. - Monitoring, evaluating and refining your production systems can help identify savings in the costs of labour and direct input costs. More importantly from a product integrity perspective, continuous improvement in production systems and processes can help identify critical control points where loss of product integrity or quality can occur, enabling those problems to be fixed and thereby ensuring an overall increase in product quality.

4. Business reputation and sustainability - You won’t be in business for long if you produce a bad product. Conversely, if you’re known for your product integrity, you are more likely to thrive and survive well into the future. Attention to product authenticity and integrity helps ensure the sustainability of your business.

Let’s look at some videos that illustrate why product integrity, traceability and quality assurance programs are so important in an agribusiness context.

TASKS

Reflect on what you learned in the videos above about some examples of product integrity systems used in the agribusiness sector. In your Agribusiness Practice Journal note down your responses to the following questions: -

1. At Homebush Cakes, what did you learn about GS1 Australia Recall and the processes this agribusiness uses to maintain customers when there is a product recall.

2. What is NLIS and why is it important? How does the cattle industry in Queensland integrate this system into their agribusiness systems, processes and practices?

3. How does the OnTrace Agri-food Traceability system work in the Canadian farm gate to dinner plate value chain? What are some of the advantages for suppliers and customers?

We are now going to look briefly at two examples of Australian legislation around product integrity, particularly in the food sector, and how this relates to food traceability.

The National Livestock Identification System: - The National Livestock Identification System (NLIS), whilst not a QA system in itself, is a legislated system that is supported by and integrates with various quality management systems. Cattle, sheep and goats cannot be sold into the food supply chain without being tagged with a registered NLIS identifier, which is tracked back to the property upon which the animal was born. It is a critical tool that facilitates the traceability of livestock, enabling outbreaks of disease to be contained in a timely manner. The NLIS is one of the key tools that enables our livestock producers to have access to international markets, because it enables us to support our claims about the safety and quality of our products. If you want to do some more reading on the NLIS, click here.

The Food Standards Code: - In the diary industry and producers of ‘ready to eat’ food (like salad leaf vegetables etc) these agribusinesses must conform to the Food Standards Code. The code is administered by Local Government Authorities and industry bodies. Conformity with the Food Standards Code is a pre-requisite to sell food at various stages along the food chain. The Food Standards Code comprises four chapters, which encompass all facets of the food chain from primary production and processing through to packaging and labelling. One of the key components of the Food Standards Code is the Food Safety Standards, which establish systems of management and documentation of processes to enable recalls to be made should a problem be detected in a product. If you want to do some more reading on the Food Standards Code, click here. To learn more about traceability, click here.

TASK

Reflect in your Agribusiness Practice Journal why it is critical that Australian livestock be tagged with an NLIS identifier before it goes into the food chain? What are some of the ways the NLIS system protects farmers and consumers? Can you think of examples of meat products that have reached consumers (in supermarkets, in food vans, in restaurants) where food safety or legislated standards have been compromised? What were the consequences?

From the reading you have done about the Food Standards for Australian agribusinesses involved in the food chain, write down 3 examples of processes or practices an agribusiness might implement to ensure they comply with the Food Safety Standards.

This brings us to the end of our module on Agribusiness planning & planning for product integrity and quality. It was a big one, so well done indeed for wading your way through all the content! Over the next week or so, start to think about the kinds of questions you might want to ask the agribusiness managers at the agribusinesses we will be visiting on our Fieldtrip to the Cradle Coast in week 6. How might these site visits help translate what you are learning in these MyLO modules into practice, into what happens in real agribusinesses?

Credits:

Created with images by janua2000 - "pepper vegetables vegetable" • herbert2512 - "sheep lamb animals" • Kris Atomic - "untitled image" • yoppy - "planning" • WerbeFabrik - "plan build draw" • DariuszSankowski - "old retro antique" • StartupStockPhotos - "office startup business" • qimono - "idea empty paper" • Joanna Nix - "Crisp and Fresh" • ShireShy - "carrot carrots produce" • woodleywonderworks - "eggs of many colors" • Dan Gold - "untitled image" • Alex Munsell - "Steak Dinner" • Alasdair Elmes - "Grapes in a vineyard" • Engin_Akyurt - "tomato pepper onion" • meknits - "Random Acts of Art Fibers" • Engin_Akyurt - "bacon meat protein"

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