Minimising costs, maximizing service
Cooperatives can increase the financial returns to their members only through business transactions. Typical transactions include members delivery of produce to the cooperative for processing or marketing, or purchase of inputs and materials from their cooperative. Member loyalty is essential for maintaining a strong and successful operation - the basis for a sound cooperative business. Promoting increased member patronage should be a key element in the cooperatives new strategy.
Cooperatives that pay little attention to serving their members are unlikely to survive against the competition. In order to improve services, the cooperative must first be sure what the members want - what are their needs and priorities? Perhaps the cooperative no longer provides a service that members want, or perhaps the same service is provided better or more cheaply elsewhere. Members are more likely to make use of a cooperative if it provides responsive services at competitive prices.
To be successful, a cooperative needs at least to maintain its volume of member transactions. With increased competition, it can do this only through continual improvements in services while maintaining competitive prices. Improved service may mean expanding the range of services offered to members or improving the delivery of existing services.
Among the issues to consider in maintaining member loyalty is prompt payment to members for produce delivered. Cooperatives may also consider offering credit, both to keep existing members and to attract new ones. For example, a marketing or food processing cooperative may provide advance payments to its members during the growing season to be repaid after the sale of the crop delivered to the cooperative. Input supply cooperatives may provide goods on credit, to be repaid after harvest. Prompt payment and provision of credit are of course possible only when the cooperative has funds to advance to members.
In a competitive market, members will increasingly seek providers who serve them best. As member service-oriented businesses, cooperatives should lead the way in providing the services they need, when they need them.
To be competitive, cooperatives have to offer efficient services at attractive prices. Increased efficiency means reducing or minimizing costs while maintaining or improving quality This can be achieved in a number of ways:
· Through better management and use of existing facilities, equipment, finance, procedures and people.
Many cooperatives have reduced their costs significantly through improved management. Management training programmes can help to improve the efficient use of available resources. General member education is also important so that democratic control is exercised intelligently in ways that are consistent with efficient operations and long-run sustainability Technical skills training may also help to ensure equipment and facilities are operated as efficiently as possible.
· Through purchase of new or more efficient equipment.
Replacing old technology with improved technology can contribute to efficiency and reduce costs. More efficient equipment can increase the rate, volume or quality of output, or reduce the quantity of inputs used per unit of output. It may also reduce the amount of labour needed per unit of output, allowing an increase in production for the same labour requirement. However purchase of new equipment is worthwhile only if the returns to the business are higher than the cost of the equipment (since the cost of the new equipment has to be repaid by higher turnover and income to the cooperative).
Businesses that cannot purchase more efficient technology because it is too expensive are likely to face increased competition from those with the funds to purchase it. Those that are able to purchase improved technology but unable to manage it so that it produces increased returns to the cooperative, are also unlikely to be competitive. Similarly, the cooperative needs to ensure that it will have sufficient demand for increased or improved production to justify the costs of the new equipment.