By Mario Garcia, Executive Director of Exagro.
This “efficiency tripod” here represented by Figure 1, has high statistical correlation with the improvement of the results obtained, and R2 = 0.90, 0.99 and 0.94 for production of @ per head, per ha and costing respectively for the database analyzed.
The Forum Exagro 2013 confirmed the conclusions of previous editions, with a database of 640 results accumulated from 2009 to 2012, which further impacted on results was the production of @ per head, production of @ per ha and the cost per head.
Figure 1 – “Efficiency Tripod”
Even if it’s not this sample an average representation of the reality of Brazilian livestock, after all, is made up mostly by producers who have consulting to assist in conducting their projects, and the rest of the database is composed of producers who sought this service. The variables identified have high representation in obtaining best results when newly join farms results are reviewed in database.
From activities present on farms, some listed in Figure 2, many have direct relationship and other, indirect relationship with these variables and therefore, they must be subject to constant surveillance or periodic evaluation with predetermined metrics that must above all reflect the reality, so that decisions are taken in order to do the best possible.
We call Management, the ability of a rural company to manage in a harmonic and aligned way with the assumptions of the project.
Figure 2 – Activities that have direct or indirect relationship with the improvement of results.
Data collection occurs on a daily basis inside the farms, in addition to being a vital activity to obtain these indicators; it shows up a great challenge for several reasons, among them we can mention:
– Define which metrics are vital to conduct the company, which ones are important and which ones are simply interesting to be observed.
– In most rural businesses, we often found two extremes: companies that do not collect nor store data in a systematic way and others that store a large amount of data.
– About the last item, often, there is a lack of analyses of data stored and only with this analysis we can generated information that enable us to draw conclusions and take correct decisions.
– Use of various softwares to work with varied data.
-Training of employees.
All these issues are interlinked with the strategy adopted by the company. A good reference can be the use of generic strategies by Michael Porter, which may be used by companies to position themselves to differentiated way in the market in the medium and long term, they are:
Cost: For a commodity producer, the reduction of costs per unit produced can be fetched with the reduction of costs or increasing productivity. The first is limited in the short period.
Differentiation: Companies that invest in brand image. The main objective is to offer differentiated products.
Focus: Companies that choose specific opportunities through differentiation or costs.
To deal with this complexity, in the search for improved management, many companies use methodologies disclosed by Prof. Vicente Falconi (INDG), which are based on Japanese management system, with emphasis on the PDCA (Figure 3):
Figure 3 – PDCA – INDG
However, being cattle industry in large part composed by companies producing commodities and in which operational efficiency has great impact on the results achieved, it is necessary the use of PDCA when it is necessary to deploy or upgrade a given process. Using the tool SDCA (Figure 4) in which P (plan) is replaced by S (Standard), which refers to the standardization and systematization of standard operating procedure (POP). With this, the company has the potential to reduce errors in the work of the routine of everyday life. With this, the company has the potential to reduce
errors in routine jobs, facilitate the training of people and the checking of deviations that may occur.
Figura 4 – SDCA – INDG
Another way of positioning companies analyzed in this livestock database is the intersection of costing data x result (R $/ha), once funding appears to be a very important variable in order to achieve the desired results and have no direct correlation with productivity, leading to a great deal of confusion in planning.
Costing deserves highlighted attention because focus on its reducing can often be a misguided decision. As well as calculation of diets, that in the past the focus was the “minimum cost”, nowadays the focus is the “maximum profit”. To take high costs in order to improve results requires effective management, due to the risk of increased production may not be sufficient to cover commitments.
To assist us in this decision, the chart costing X result presented in Figure 5 can be useful.
Figure 5 – Chart Costing X Result
This chart is intended to assist the manager to define which strategies he will use in planning and conducting the company’s future. To explain better, let’s look at each one of the quadrants:
Low costing x Low R$/ha: at first glance it appears to be the worst position, despite the low result, the costing is also low, which allows interventions through process improvement and planning to insert new technologies.
Hi costing x Low R$/ha: position with a high risk of “financial health” difficulty in short and medium term. For the most part, they are poorly structured projects farms with low production in relation to costing assumed, disproportionate machinery structure to the need of the farm, headcount misfit with the demand for services or high cost comes from use of technologies that didn’t bring the expected result and sometimes these technologies cannot be withdrawn immediately. If reduction of costing isn’t possible in short term, the best option is to review all processes involved to get results that make possible the survival of the company.
Low costing x High R$/ha: position of extreme comfort, often represented by systems that have managed to assemble a simpler working model, objective and easy to administer, allowing insertion of new technologies that can even increase costs, but without loss of efficiency.
High costing x High R$/ha: position achieved by companies with great operational efficiency and that even with the high cost, obtain results that return the values invested, which demystifies that what should be sought is the reduction and adequacy of funding to return potential, with the use of new technologies.
Let’s examine a few options that can be followed in seeking improvement of results:
The option represented by the green arrow 1 is the first option of choice, first increasing the result, which it can assist in investment to later seek option 2. Option 2 is often pursued as first choice in the fight against time, carries some risks related to the learning curve, which is sometimes neglected. Another point of this option is to pass by quadrant ” High costing x Low R$/ha” and not be able to proceed to the planned quadrant.
Second quadrant – High costs X low R$/ha
Option 3 despite being a good option, it may not be feasible in situations where the infrastructure and/or technology used does not allow adaptation in short term without losses.
Option 4, in addition to the difficulty mentioned in option 3, it presents the challenge of improving performance. The major challenges are: determination, professionalism and sometimes the ability to identify, recognize and correct deviations.
In many situations, option 5 is a natural tendency given the time of the project and investments in infrastructure and/or technologies. It is time to hand in planned results.
Third quadrant – Low costs X High R$/ha
Option 6 may or may not be part of the goal of companies in this quadrant, whereas “tranquility” also has its value, but at the risk of difficulty in tracking the rapid natural evolution of productivity nowadays. And yet, have no money produced inside the company to finance changes if “comfort” undo itself.
In the course of option 6, pass through quadrant ” high costs x low R$/ha” may be inevitable given the goal of improvement over the size of the project and/or time as quoted above. In order to reduce the length of stay in an unfavorable situation or even cancel it, there are listed in the chart below some processes that may be useful to change the level.
Fourth quadrant – high costs X high R$/ha
In this quadrant, despite the relative “comfort”, attention to the processes and constant monitoring are essential not to lose the position achieved.
Many projects seek option 7 and frequently we face projects placed in quadrant “high costs x low R$/ha”, actually the original plan was a detachment of “ordinary” numbers of the most profitable companies. With technological developments increasingly present in our daily lives, this option will be an example to be followed and it will form the basis for new heights of livestock in near future.
Despite all technology available today, behind all there is human being, we need to address this issue in a comprehensively and multidisciplinary way to achieve evolution.