Part C - Management and operations

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In developing institutional proposals for any market it is necessary to find a legal arrangement which balances the role of traders and other entrepreneurs, whose support will be essential if the market is to be commercially viable, with that of government agencies who may need to intervene in the marketing process (often by providing needed services).

This part of the manual, (comprising Chapters 7, 8 and 9) gives a brief overview of the creation, operation and regulation of marketing organizations, as a context for the development of physical master plans and building designs. For more detailed explanations of institutional options, reference should be made to the Bibliography at the end of the manual, in particular, the writings of Abbott, Harrison and Mittendorf.

7 market management systems

This chapter is largely concerned with the establishment or modification of larger urban terminal wholesale markets as their complex management needs particular attention. Secondary wholesale markets can obviously operate with simpler organizations, but the same basic principles need to be observed, including the need for a clear management structure and for a board with a broadly similar spectrum of representation and responsibility to that required for an urban wholesale market.

Why government intervention? Before considering alternative types of institutional strategies, the reasons why, might be necessary for governments to intervene in the marketing process need to be clarified.

It is possible for market developments to be fully implemented by private enterprise; most of the markets in, for example, New Zealand and Switzerland follow this pattern. In less-developed countries, however, government often has a decisive role to play in initiating and planning market projects, as well as financing major site infrastructure components. New markets cannot operate in a legal vacuum, and in the development of appropriate institutional arrangements, regulations and operational procedures, it is also often necessary for government to take the lead.

Type of market ownership

Alternative institutional strategies for the ownership and management of a market will need to be fully examined before selecting the ideal form. This might be a parastatal public enterprise, a private corporation or company, a cooperative or traders' group, or a combination of these. The choice will determined by local socio-economic and political factors, but the principal options are discussed here to provide a basis for evaluating their relative merits. A joint venture is often the most appropriate form.

Marketing corporations. A traditional approach to the problem is to establish a marketing corporation or authority (sometimes called a public benefit corporation). However, there are now pressures to reduce rather than increase the number of parastatal corporations. Public corporation performances are frequently poor and their operation bureaucratic. Because markets involve politically sensitive basic food commodities, such corporations cannot avoid government participation in much of their decision-making. This might lead to excessive control and interference. For a public corporation to implement new operational regulations commonly requires legislation, for which legal drafting and legislative processes may be protracted. For these reasons, management by a state corporation is not generally recommended.

Limited-liability companies. For the establishment of a limited-liability company, shareholders need to be identified and the directors would require a share holding qualification. This might not be feasible in a management structure where it is necessary to have a broad spectrum of expertise gathered together from both the private and public sectors. Private companies are flexible institutions, but their formation does not completely free a venture from detailed procedures, as it will still need to comply with the provisions of legislation.

Although a wholesale market may be set up on an alternative institutional basis, when it is fully functional and operating at a profit there may be pressure to pass the operation to the private sector. In the short term, when there are marginal financial returns, it may not be possible to attract willing investors. The registration as a limited company may be the long-term aim, but not necessarily a practical solution to immediate management demands.

Cooperative societies A cooperative society is another possibility for establishing a market, but must be viewed critically as it may not answer the need for effective management. Cooperatives often have a poor record in the management of markets, although it must be stressed that this varies substantially between countries, to the extent that some of the most successful markets in the world are cooperative nun.

A cooperative of wholesale traders is the most common form, but may be counter-productive; self-interest dictating behaviour which is detrimental to the needs of both producers or consumers. Often, a buying and selling ring is created, keeping prices down for the producers and high for the retailers and consumers. Again, there are exceptions to the rule and some of the most efficient markets in Europe are run by wholesalers themselves. The cooperative format is often the most appropriate method for a grouping of producers. It facilitates the concentration of produce at collection centres and the organization of joint transport to market. Other examples of cooperative ventures include markets established and run by religious organizations, friendly societies charities and ex-servicemens' organizations.

Local authorities. The most usual form of market ownership is by a state, local or municipal authority. These often have the power to establish and regulate markets, to lease space, charging fees as necessary, and to clean the market area. Although there are a number of significant exceptions, control solely by a local authority is unlikely to be the best management system for an urban wholesale market. Experience has shown that the main motivation of many local authorities is to maximize local revenues. Space is often let to retailers of commodities quite unrelated to agriculture, thus defeating the objective of a food market. However, as the relevant local authority, the municipal government will need to be represented on any proposed management forum.

Development boards. Legislation often exists for the establishment of a development board. This particular institutional format, one step beyond the standard government departmental organization, offers greater administrative flexibility in the management of specific projects. The principal advantage of this form of institution is that the authority has to be self-accounting. Staff may, however, need to be appointed in accordance with
government rules. This can allow management to remain closely tied to government for an interim development period while, in the light of experience, the final format of the market management system is evolving.

By special statute. Markets can also be created under Special Statute, which enables an institution to be created exactly matching particular local requirements. Such a measure could be used to establish a market authority and define the area within which it would be the sole authorized location for wholesale produce transactions. The main components included in a Special Statute might be a definition of the board representatives and their powers, the establishment of a self-accounting fund, the setting of regulations and the prescribing of penalties. This approach is often an ideal mechanism because it can accommodate the most appropriate mixture of private and public participation, allowing a mixed form of ownership, and equally importantly, a system for joint financing.

Short-term measures. The legal form in which a marketing institution might be created will need to be examined in detail. If appropriate measures already exist this obviates any operational delays that might occur whilst awaiting government approval for specific enabling legislation, such as a special statute. If a project is to proceed immediately there may be a need for such an interim institutional arrangement, but care should be taken that this will not preclude a more satisfactory long-term arrangement. A development board is often the most flexible form of initial institution.

Market management boards

Every market requires an overall control and policy body. This is typically a management board.

Composition of the board For a central wholesale market it is usual for the membership of the board to broadly cover the following sectors: fruit and vegetable producers; consumers including womens' groups; banks and credit organizations; local government; central and regional administrations; traders; cooperatives; and users' organizations, such as retailers and hoteliers.

Commercial representation on the board might be from the local chamber of commerce and from wholesale traders who are licensed to operate in the market. These may be elected by a local association of traders, although if this does not already exist it may need to be promoted by the market authority.

Government representatives arc usually drawn from the local ministry of agriculture, as technical advisers on food and agricultural marketing services, on horticultural matters and on quality control. Representation is also sometimes given to the police and public works departments, because of the importance of traffic control and waste disposal. Although these are important issues they can best be covered by an appropriate form of liaison, thus limiting the overall size of the board and reducing the influence of government bodies.

Chairing the board l he election (or sometimes appointment) of the chairperson of the board is a critical step in a market's establishment. With parastatal organizations this would normally be a prominent citizen, such as the governor of a province or state. Normally, the general manager of the market would act as the secretary to the board and the market's accountant would be treasurer, but neither should be voting members. They should attend all board meetings and, using their staff, provide the board with a full range of administrative services.

Board meetings. meetings would normally be convened by the chairperson as and when required, with more in the early years of market establishment than in subsequent years. A schedule of quarterly meetings is quite commonly adopted, but if producers' representatives are in dispersed locations this may have to be reduced to two meetings a year. Key appointments, the annual budget and the setting of fees and charges should require full board approval. The board can also, however, be represented on management information committees which would meet as and when required. Board members are usually paid attendance fees in accordance with those paid by similar institutions.

Powers of the board The overall administration of a market would be under the control of the board of director whose general powers should include:

· establishing trading systems;
· fixing of the times for buying and selling;
· establishing storage and protection facilities;
· maintaining a system of weights and measures;
· issuing licenses to traders and retailers; . recruiting and hiring staff;
· defining staff hours and conditions;
· drafting traffic and parking regulations;
· defining the conditions of leases and contracts;
· fixing rents, transaction and parking fees; and
· imposing penalties, in the form of fines, expulsions and the withdrawal of trading licenses.

Staffing the market

The board of directors of the management board should be responsible for the direct appointment of a General Manager (GM).

Staff appointments. Other staff appointments may be the delegated responsibility of the GM. Some of the key posts, such as the deputy GM and an auction-hall manager, should be appointed on the basis of the GM's recommendations to the board for its approval, as long as this does not lead to delays in decision making. The board should have power to appoint all staff and set such conditions of service as may be appropriate. Staff may need to be appointed through temporary or voluntary long-term transfers from government departments.

For the post of General Manager in particular, it will be essential to attract someone with entrepreneurial experience and considerable drive, who would be prepared to make a long-term personal commitment to wholesale marketing development. If the project is successful it may offer a model which can be replicated throughout a large country, offering long-term career prospects for staff who acquire expertise and experience in wholesale marketing.

Staffing levels. Staffing levels should be set at the minimum needed to run the market and the experience of similar markets is the best basis on which to approach the problem. Overstaffing can be a serious issue and establishment levels should be thoroughly reviewed during project preparation.

Numbers of staff used can vary considerably. The Marche de Gros in Rabat, for example, employs around 35 staff to manage the fruit and vegetable section of its wholesale market, which has a turnover of about 150,000 tons per annum. Amman wholesale market, with a similar turnover, employs around 114 municipality staff and a further 22 Jordan Agricultural Marketing Authority employees. Another significant difference between these two markets is in the usage of porters, reflecting their different operating systems. Amman has only 350 porters, while Rabat has about 3,000 registered porters of which perhaps 2,000 might operate on a particular day.

Maracaibo market in Venezuela, which specializes in fish and has a similar turnover to Rabat and Amman, is able to operate with a staff of only 22, largely because it uses modern bookkeeping methods and is well equipped. Hunts Point market in New York, with about 32 employees, has a similar staffing level to Rabat but has an annual turnover of over a million tons (over six times that of Rabat).

Table 7.1 Check-list of typical staff working at a major wholesale market

Guidelines on the type of staff that might be required for a medium to large wholesale market are given in Table 7.1. It should be noted that this table includes staff for the operation of an auction hall and farmers' market. It also assumes that the market is operating its own cold stores and that equipment and building maintenance is carried out by in-house staff. Sub-contracting of services, including cleaning, accounts and control services, is adopted in many markets to limit the number of permanent staff. Staff such as labourers, cleaners and porters are often employed on a casual basis.

Significant reductions in staffing levels can be achieved by adopting modern technology. Examples include the use of special identity cards to photo-electrically operate entry gates (used in Hamburg) and the linking of weighbridges to computers so that invoicing for tolls are immediately available and market sales records are generated automatically (used in Thailand at the Phitsanulok Agricultural Central Market).

In addition to the management personnel the following staff are normally required, the roles being filled by employees working directly for government departments:

· public health inspectors and laboratory assistants, employed by the ministry of health;
· price information officers and recording clerks, employed by an agricultural economics or marketing section of the ministry of agriculture;
· post-harvest officers and extension workers, employed by an extension section of the ministry of agriculture; and
· weights and measures inspectors, employed by the ministry of trade or commerce or by a municipal authority.

Staff structure The best technique for developing a staff structure is to prepare a simplified organization diagram showing a hierarchy of management responsibilities, such as is illustrated in Figure 14. Typically, a market's management structure, excluding any specialized functions, will be divided into the following broad areas of responsibility:

· Finance and Administration
which as well as providing secretarial facilities, legal and accountancy services, and personnel administration, also includes security and building maintenance:

Figure 14 Kalimati wholesale market, Nepal - organisation structure

· Operations Sales
which covers the handling of produce within the market and all revenue collection, including any auction activities;
· Quality Control
covering post harvest activities and public health; and . Extension encompassing extension, market information services and training.

The responsibility for the latter two functions will vary depending on the market's ownership. If the market is privately owned, these services are normally provided by government; the private owner often cooperating by allocating space within the market free-of-charge so that the services can be set up.

Estimating establishment levels. Preliminary estimates of staff establishment can be derived from the scenarios of turnover which have been prepared in designing the market (see Chapter 4) The initial step should be to estimate the tonnage to be sold by private treaty or auctioned per day and relate this to the average size of consignment. An estimate should then be made of how many of these consignments might be sold or auctioned per hour during the peak period, which can be established from roadside survey data or by making assumptions about when the peak period might occur (often between 0500 hours and 0800 hours). From the estimate of peak consignments the need for entry supervisors and tally clerks to check and weigh consignments and, if applicable for auctioneers, can be established by making assumptions about how many consignments each individual might handle.

As the market develops it will be reasonable to assume that the average size of consignment will increase and that the task of entry supervisors will be adjusted from the examination and weighing of every load to one of random inspection. The numbers of general support staff, including entry supervisors and auctioneers, will decrease in proportion with this improved efficiency.

Training. The development of a wholesale market may be a completely new venture and while potential staff may be graduates few will have specific training in horticultural marketing. Overseas study tours can to some extent fill this gap, but there may still not be sufficient expertise available to undertake the management of a wholesale market without specific additional training and continued technical support. A comprehensive training programme may need to be set up, focussing on in country training and short-term courses in neighbouring countries.

The types of courses that might need to be organized include: commercial accounting procedures; computing; recording of price data; packing; grading; vegetable and fruit sales; auctioning; fish marketing; building maintenance, leasing and rentals; market operations; small-scale processing; environmental health; weights and measures; cold storage management, operations and equipment maintenance. In designing appropriate courses full use should be made of the staff resources of the agricultural economics and marketing departments of local universities and agricultural colleges. Some useful material is available from the international institutions specializing in the training of market management staff, such as those in India and Korea (see Bibliography).

Management information system

It is essential that an effective management information system (MIS) is set up. There must be a regular flow of data upon which management can make informed and timely decisions. Data needed will include:

· monitoring of project implementation;
· a training programme, to ensure that staff acquire necessary skills;
· financial monitoring, to keep management regularly appraised of market profitability; and
· monitoring of produce demand and prices (in conjunction with government officials) to be fed back to producers and available for evaluation against baseline projections made of the project's performance.

To ensure that only data with a practical application is collected, it is essential to determine the users of data, their individual needs and the frequency and format for data presentation. For larger markets data storage, processing and retrieval should be computerised.

Operational committees. A common method of maximizing the exchange of information by the market management staff is to institute a system of operational committees, with responsibility for the collection of data. The board should appoint observer members to each of the committees. These committees are part of the management information structure concerned with reviewing day-to-day performance and are not board sub-committees with delegated responsibility for policy making. The observers act as a liaison between board and management, particularly when several months may elapse between meetings of a full board. Committees might be convened for the following subject areas:

· operations and maintenance;
· development and finance;
· administration and personnel; and
· overall executive coordination.

The general manager or his deputy should normally chair the committee meetings and other staff members, appropriate to the business to be discussed, would be in attendance. Committees would meet, as required, to deal with performance constraints but otherwise not less than monthly, to prepare a performance report covering their activities. An overall executive committee would be concerned with general coordination of all activities and would decide which matters should be reported to a full board meeting for information or decision.

Methods of financial control

So far as possible within the enabling legislation, a board should be self-accounting and operate upon commercial principles. Fees and charges should be set to cover all costs, including staff, and maintenance and depreciation of assets. For its day-to-day operation a market has a considerable number of cash transactions and a daily internal audit should be an essential part of the accounting system. External audit on an annual basis is also essential. Profits should be reinvested at the discretion of the board, possibly in other market improvement programmed.

Joint financing A joint-financing method is sometimes adopted in market development. A government organization or local authority finances the main infrastructure and a traders', wholesalers' or growers' association is responsible for the erection and maintenance of the buildings. The method of financial control will need to be more complex, where the traders, for example, contribute to a proportion of the recurrent costs of the market.

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