29 May - 28 July, 2000
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E-mail conference on Discussion Paper 3.2: Organisation and
Management of Milk Producer Organisations |
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Discussion
Paper 3.2: Organisation and
Management of Milk Producer Organisations By: J. Phelan, International Consultant
on Livestock Food Systems and Rural Development Organisational Aspects Informal collaboration between milk
producers in production enhancement, processing and marketing, has been practiced
by milk producers for centuries but the emergence of formal milk producers'
groups has only happened in the last hundred years in the west and more
recently in most developing countries. The type of association varies
considerably with country and ranges from informal groups and partnerships,
through formal democratic co-operatives structures, to so called national
co-operatives, which are controlled by governments. The term co-operative
means different things in different regions but there has been a gradual
evolution towards democratic structures in most countries. The formation of
groups of milk producers has progressed more rapidly in developed economies
where governments have limited themselves largely to providing supportive
legislation, and selective tax concessions in the fledgling stages, as part
of an enabling environment for development of producers' organisations. |
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In the emerging economic
trends towards liberalisation, privatisation, and market orientation, the
governments in many developing countries are reducing their direct
involvement in assistance to agriculture and people are being given more
responsibility for their own development. In future there will be
greater emphasis on self-help groups and a participatory approach to
development in order to mobilise local resources and knowledge for the
benefit of rural communities. This environment will be much more conducive to
the formation of bottom up producer organisations but it is important
that the institutional and legal frameworks and modus operandi for these
groups are based on the successful experiences of similar groups elsewhere in
the same country or in other countries. Dairy farmers experience common problems
and have similar interests. They therefore tend to form groups for the
purposes of : Exchange of experiences; Training; Savings and
credit schemes; Veterinary and other service delivery and drugs; and
Marketing of milk. The basic unit in any form of joint activity is the group
and working in groups confers many advantages but it does involve
commitment and obligations. The degree of formality needed in the structure
of groups, varies with function and stage of development of the joint
activity. Informal groups tend to become more formal as the numbers and
geographical cover increases. Milk Producers should be encouraged to
build their own groups from the bottom up through a participatory approach
and should adopt constitutions which preclude dominance of the group's
activities by a few. The initial steps in the formation of a group are
critical to establish the necessary trust and cohesion. In the beginning the
farmers may prefer to work together in some informal or loose association to
solve common problems and become convinced of the benefits of joint activity.
In general there is a greater chance of success when an integrated approach
is adopted to address production, as well as marketing, processing,
management and credit issues. The most important thing is that the members
agree on the modus operandi and the objectives and that these are fully
explained in a written document to which the members have access. This is
achieved through a series of meetings, election of an Advisory Task Force,
with responsibility for assembling and analysing all the relevant information
through baseline surveys, marketing and feasibility studies. The use of
planing techniques such as SWOT (Strengths- Weaknesses- Opportunities-
Threats) and Logical Framework(LFA) analysis, and calculation of Break even
point can be helpful at this stage. The Advisory task force should consist of
not more than seven people. It is important that they have a complementary
range of qualifications and abilities and share a strong commitment and
dedication to the task entrusted to them. The task force has the
responsibility to fully investigate the proposal to establish an MPO and
advise the potential members of the advantages and obligations involved. The
following terms of reference are suggested:
Once the draft rules are agreed, the
formal registration can proceed. The details will vary according to the
arrangements in the particular country but there are basic steps, which are
common. These involve the submission of a completed application form to a
national authority, together with copies of the constitution, registration
forms for founder members, evidence of paid up capital and payment of a
prescribed fee. This is followed by formal approval, and acknowledgement by
the registrar. The national organising bodies usually provide the model
rules and a registration assistance package, for a set fee, which also covers
registration. When the Provisional Committee of
Management has registered the milk producers' organisation or society and
received a number of completed application forms, it should proceed with the
first General Meeting of Members to inaugurate the group enterprise. The
Provisional committee must report on the tasks entrusted to it by the meeting
of prospective members and tender its resignation. The members are then in a
position to exercise their rights according to the rules of association,
since the members in general meetings are the supreme authority in the
affairs of the society. In practice most of the authority is delegated to the
Board of Directors, who in turn may devolve that authority to managers and
office holders. However, the board is still responsible to the members. Managing a Milk Producers' Organisation Management Structures and
Organisational Development The inaugral meeting of members, elected a
Board of Directors and delegated to them the responsibility of running the
organisation between delegate meetings. Group members of a Milk Producers'
Organisation will be positively disposed towards the organisation only if it
continues to create benefits for them. An MPO must therefore be structured and
managed so as to provide members with the best cost-benefit package of
markets and services available in their area and make economic provisions for
the future of the organisation. Successful management of group enterprises is
linked with promotion of a participatory approach to involve members in the
affairs of the organisation. The members need to take an active part in
shaping and implementing the policies of the organisation but since many of
them may not have the required skills and knowledge to do this effectively,
training must be provided to encourage participation and develop leadership
qualities within the group. The management structure will depend on
the size and complexity of the enterprise but there are basic elements, which
are common to all enterprises. The members elect a Board, which
appoints a Manager and agree on initial Staffing levels. In more complex
enterprises there may be a two - tier system, involving a Supervisory Board
to safeguard members' interests. The main duties of the Board is to give
effect to the proposals, contained in the report of the Provisional Committee
of Management, and endorsed by the first General Meeting of members. While
delegating management to their elected and appointed leaders, members need to
provide clear objectives and take an active part in the shared decision
making processes associated with the wider development issues involved in the
overall development of the group. The business management in a very small
MPO may be carried out by an unpaid, elected member. As the enterprise grows,
a management team must be formed, which includes the Board of Directors and
salaried professional management staff. While members retain ultimate
governance, most of the work of controlling should be in the hands of the elected
leaders, who in turn should rely on appointed managers. The latter are
responsible for the day to day business management, specified in the business
or operational plan, This plan is essentially a set of guidelines for running
the enterprise and its complexity will depend on the range of activities
envisaged. The plan consists of a set of targets related to the group's
objectives with assigned responsibilities for each activity. It must set out
clearly what is to be done, by whom, when and how. In the initial stages of
development of an MPO, the responsibility for implementation of the business
plan may be in the hands of members and leaders, but as the MPO grows, it
will be necessary to engage professional management and technical
staff. A synergistic interaction is needed
between the members, the board and the manager in order to shape a suitable
management ethos for the group enterprise. The selection of leaders and
managers is therefore critical in ensuring success. It is important that the
roles of all parties are clearly defined and understood and for this reason
it necessary to write down and agree on the job descriptions or function
statements of all concerned. Function of the Board of Directors The overall function of the Board is to monitor
and control the operational plans to ensure conformity with the policies,
strategies and interests of members. However, details will vary depending on
the form of association as well as the size and complexity of the
enterprise. The initial duties will include:
In order to carry out
these functions effectively, the Board should have a programme of activities
at regular intervals and a monitored plan covering specific periods (normally
one year). The agenda of the routine monthly meetings of the Board should
include an update on membership, and reviews of performance relative to
predictions and the financial situation. The following twelve items have been
suggested for inclusion in the annual plan for the Board of a Co-operative,
but these would equally apply to an MPO, which was not a co-operative. Staff Recruitment There are subtle differences in the
requirements for general managers or chief executive officers of MPOs because
group based organisations are more people oriented than purely commercial
companies. However, there are no differences in the essential tasks of entrepreneurial
management between the two environments and both recruit from the same labour
pool. The relationship between manager and Board is critical to the success
of the organisation and the importance of selecting the right candidate
cannot be over emphasised. Senior managers must combine management
skills, leadership and organisational abilities, with a good understanding of
the nature of the business and the priorities of the owner members. The Board
must clearly define the functions of the manager relative to their own
responsibilities and must give the incumbent sufficient authority to
create a working environment which will both challenge and stimulate
staff. After selection the manager should be given appropriate
induction training to get to know the Board and the business and there should
be a probation period and preferably a fixed term contract. Rewards should
reflect progress in matching the member objectives. The senior manager will be responsible for
setting up the mechanism to select and appoint all staff below the level of
those reporting directly to the Board. Guidelines on staffing levels are
usually set by the delegate meeting. The Board may retain control over wage
and salary scales, promotion policies and health and safety issues or insist
on consultation prior to introduction of significant changes in these areas
of employment policy. If members of the MPO work for the group, their status
as a worker will depend on the form of association chosen by the group. If
they have formed a partnership, then all the workers, who are partners,
will be regarded as self-employed for legal and taxation purposes. In a
partnership each partner takes weekly or monthly drawings from the
partnership bank account which are set against their profits at the end of
the financial year. Partners are not protected by employment legislation and
will not receive state benefits. The rights of each worker/partner should be
set out in the partnership agreement and if they wish to enjoy similar rights
to those of the employees, they must make the necessary provisions in their
partnership agreement. If the group has registered as an Industrial or
Provident Society, or as a Company, then the workers will be employees and
the fact that they own or control the employer does not affect their legal
status as employees. Each employee should have a written contract of
employment setting out the terms and conditions of employment and this helps
to balance the rights and duties of a worker against the interests of the
milk producers' group. The conditions governing employment are covered by
state legislation in most countries but in addition there are conditions
governing workers shares in co-operatives in some countries. There are no special conditions applying
to employees in MPOs, so standard procedures and techniques are used to
select, appoint, evaluate and reward performance. Each position must be
specified through a job description and the appointee must have the necessary
technical skills and personal qulities to take on the responsibility.
Training on the job must also be provided where needed as part of the overall
human resource development programme for the organisation. Accounting Systems Up to date and accurate information to
support decision making is the key to successful management of any
enterprise. The keeping of proper records of all business transactions in an
MPO is essential to meet internal needs and external obligations and to
overcome problems. The group must have information on cash flow, the amounts
they owe and are owed and by whom, what stocks and equipment are on premises,
what products or services are making a profit or loss, and any indication of
likely emergencies such as cash flow problems. The external factors
relate to, legal requirements for keeping adequate records, to provide
information to lending institutions and to State agencies and revenue
Commissioners. The FAO Trainer's Manual on Agricultural Co-operative
Development, states two fundamental rules which apply to all systems of record
keeping, even the simplest (FAO,1998). - Responsibility for keeping records must
be firmly assigned The basic books which the group should
keep are: a) Receipts and Payments Book, b) Sales Ledger, c) Purchases
Ledger, d) Petty Cash Book, e). Wages and Salaries Book and f) Fixed Asset
Inventory. Other books and records are added as deemed necessary and
pre-printed account books can be obtained from stationery shops or the group may
wish to have ones printed with the name and logo of the group. The above
records relate mostly to financial management and additional records and
tools to refine operational management will be included under Milk Plant
Management and Quality Control. Organisation of Milk Collection Routes
and Centres The baseline study will provide the
information base for planning the collection routes and deciding on the type
of facilities to be provided. A decision will have to be taken on the number
of collection points and/or centres that are needed in the area covered by
the group. The number will also be influenced by the type of processing,
and/or marketing envisaged. Suppliers may be required to transport their milk
to intermediate points or to the centres, once or twice per day at agreed
times. It may be appropriate to organise group transport of individual
supplies in containers provided by the farmer or alternatively the centre may
provide and clean standard milk churns to improve hygiene in handling. The emphasis must be on hygienic
production and handling and the movement of the milk as quickly as possible
to the point where cooling or processing takes place. The challenge is
to cool or process milk during the 3-4 hour period after milking, when the
natural bactericidal properties of milk, are preventing growth of
micro-organisms. The importance of milk quality cannot be over emphasized as
it governs the quality and shelf-life of the dairy products derived from it.
The layout of routes must be planned to minimize holding time and temperature
rise during transport. The management must stress the collective
responsibility of group members in conforming to agreed schedules for
collection to avoid undue delays and consequent deterioration of milk
quality. The manner in which milk is used varies
with circumstances and location relative to the markets. An effective
collection system provides rural milk producers with access to the rapidly
growing urban markets for milk and milk products. The distance, from which these
markets can be reached, varies with the product, the level of organisation
and the transport infrastructure in the country. The basis on which milk is paid for by the
group, and the frequency of payment will be influenced by the arrangements
for disposal of the milk. The actual price paid to producers, must
reflect the reality of the market place and the overall processing and
marketing costs incurred by the group enterprise. Dairy Plant Management Milk Producers' Organisations may limit
their activities at the beginning to collection of milk and wholesaling it to
a processor but most MPOs establish a milk processing facility at some stage
to improve returns from the market. When a group enterprise such as setting
up a milk processing plant is envisaged, it is necessary to analyze the
situation in a thorough and professional way to give a clear understanding of
the project and to get members to share a common ownership of the project.
The same participatory planning, outlined in section 2, must be applied and
the techniques such as LFA and SWOT analysis and other planning tools should
be used. Plant Design and Operation Management of a Dairy Plant involves
identifying the right product mix, efficient processing, transport and
distribution of milk and products and control of quality from primary
production to the final marketing. Since milk processing is the core activity
of the group, it is important to explore techniques in planning, monitoring
and control which improve efficiency and enhance profitability. The essential features of an efficient
Dairy Plant are: well designed equipment and premises, operated and
maintained by well trained and motivated staff, where each task is clearly
described and properly monitored. Milk is an excellent food for man and
micro-organisms but it is also highly perishable and potentially harmful to
man. Because of economic and health reasons, milk and milk products should be
handled, transported, processed and packaged under the most hygienic
conditions possible. In addition every step in the chain from cow to
consumption, should be rigorously controlled to ensure correct processing and
prevent post-processing contamination, which is the most frequent cause of
problems. The importance of hygiene in dairy processing cannot be over
emphasised and special attention should be given to cleaning and sanitation
when preparing instructions for process operators. Milk Plant Hygiene Milk hygiene implies good quality raw milk
being handled by workers observing good personal hygiene, using
properly cleaned and sanitised equipment, working in clean premises. It is
important for plant operators to appreciate the difference between the
cleaning and sanitation processes. Cleaning involves the physical removal of
all traces of milk solids from the milk contact surfaces through a cycle of
pre-rinsing, scrubbing action with detergent and final rinse with clean
water. Sanitation is the final step in the treatment using heat or chemical
agents to sterilise the plant immediately preceding the next cycle of use.
The two are related because it is difficult, if not impossible, to sanitise
or sterilise equipment that is not properly cleaned. The key factors in
efficient plant hygiene are:
The planning of cleaning
and sanitising procedures should involve discussion between the plant
manager, detergent /sanitiser and equipment suppliers, processing and
laboratory staff. Feed back discussion on results by the laboratory control
group to cleaning staff is very important. Separate routines should be
developed for each processing operation and operators should be thoroughly
trained. Particular attention should be paid to safety aspects in relation to
high temperatures or steam pressure as well as handling chemicals. Plant Operation and Maintenance The efficient functioning of a dairy
processing plant is a key factor in the success of an MPO. Staff must have
the appropriate level of skills and understanding of the processes to
optimise manufacturing procedures and equipment must be properly maintained
to minimize downtime. The latter aspect is becoming increasingly important as
processing units handle greater quantities of milk and become more
mechanised. When new plant is purchased, it is important to make arrangements
for the training of the staff who will operate the equipment and to have
operating and maintenance manuals for each item of equipment in a secure but
accessible place. It is advisable to build in a provision for staff training
at commissioning and where possible, arrange training visits to other plants
where similar equipment is currently in use. Manufacturers' Manuals must be
supplemented by in-service training and precise operating instructions and
maintenance schedules for each item of equipment. These instructions must be
in an appropriate format to be understood by all staff responsible for operating
the equipment. The staff must also be informed about the key factors, which
influence the economic efficiency of the process and the corresponding
control points, must be monitored. The main inputs into each processing unit
(materials, labour, and energy), must be accurately measured and recorded at
regular intervals, and compared with actual and predicted outputs over the
same time intervals. In a milk processing unit, this in effect means a mass
balance on milk solids purchased and sold on a daily basis, and a comparison
between the actual and theoretical amounts of labour, energy and packaging
materials used per unit volume of milk or milk product. The systems necessary for detailed
measurement, compositional analysis, calculations and recording at the
sub-unit level, must be put in place as part of the planning and management
process. The theoretical yields of different dairy products can be calculated
from a given quantity of milk of known composition by assuming certain losses
at each step of the process and assuming order figures for the amount of
labour, energy, cleaning and packaging material per unit of output. However,
the target levels must be realistic for the equipment used in the plant and
the length of each process cycle. There are substantial differences
between the skimming efficiency of separators resulting in different losses
of fat in skim milk. The fat losses in buttermilk during churning of butter
vary considerably with the churn type and size. Design of cheese vats
significantly affect the amount of fat lost in whey. A new system for
pasteurisation of milk in pouches, developed in South Africa and described by
B. Dugdill in this E-mail Conference, minimizes losses of milk and allows
very small quantities of milk to be processed. Energy requirements for
heating milk can be dramaticall y reduced through use plate heat exchangers
with regeneration sections. Short process cycles translate into higher than
average milk solids losses in cleaning and a greater proportion of total
energy and labour being used in start up and cleaning cycles. It is
important, therefore to select the appropriate size of processing plant for
the projected milk supply. All these factors influence the yield of product
from a given quantity of raw milk and the amount of energy used in processing
and should be taken into account at all stages of planning and implementation
of the project. The targets set must be adjusted according to the equipment
used in the plant, as setting unrealistic yield targets can demoralize staff.
In some cases investment in new equipment may be justified on the basis of
improved yields or reduced energy use in addition to labour efficiency
considerations. Equipment malfunction and breakdown can
have a significant influence on costs through downtime and product rejection.
Preventive maintenance and quality control programmes are essential in a milk
plant. Appropriate records must be kept and the staff responsible in both
areas must liaise actively with processing and management staff to ensure
that recommendations are acted on. A complete set of record forms should be
developed for each process, along the lines of the examples given for
accounting systems, and this will facilitate efficient management of the
plant operations. The process, accounting and auditing records are
supplemented by a well planned and properly recorded inventory and
stock control system to provide a comprehensive information base for
management decisions. |
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