MANAGEMENT FUNCTIONS IN AGRIBUSINESS SYSTEMS
ARIZONA STATE UNIVERSITY
AGB 410 - AGRIBUSINESS MANAGEMENT
WEEK 2
Introduction:
Until now, there is still no consensus, both among practitioners and theorists regarding
what are the functions of management or elements of management. Various opinions
regarding the functions of management will appear by putting forward several opinions
contained in Manullang's book (1996: 17), for example according to Henry Fayol (planning,
organizing, commanding, coordinating, and controlling); The Liang Gie (planning, decision
making, directing, coordinating, controlling, and improving); Louis A Allen (leading,
planning, organizing, and controlling); and Winardi (planning, organizing, coordinating,
actuating, leading, communication, and controlling). Meanwhile, Manullang's own book
describes management functions consisting of planning, organizing, preparing, directing or
commanding, and supervising. Furthermore, Terry and Rue (1993: 9) say management
functions consist of planning, organizing, staffing, motivating, and controlling.
A.
Management Functions Agribusiness
In various activity systems, management functions or elements of management can be
used based on the conditions of the object to be applied. In essence, the management
functions that can be applied to agribusiness companies are planning, organizing, directing,
controlling and evaluating.
Planning is the determination of a series of actions to achieve the desired results;
organizing is grouping the necessary activities, namely determining the organizational
structure and duties and functions of each unit in the organization and determining the
position and nature of the relationship between each unit; directing is a management function
related to efforts to provide guidance, advice, orders or instructions to subordinates in
carrying out their respective duties so that tasks can be carried out properly and truly aimed at
the goals that have been set initially; and controlling is often called control is one of the
management functions in the form of conducting assessments and corrections so that what
subordinates do can be directed to the right path with the intention of achieving the goals that
have been outlined initially (Manullang, 1996. 18):18). Then evaluation is to assess the
results achieved with the plans that have been made regarding whether there are deviations
and whether the goals or objectives have been achieved.
1. Planning Function
A good planning function can contain six elements, namely the way, the why, the where,
the when, the who, and the how (Manullang, 1996: 39). So a good plan must provide answers
to the following six questions: What action should be taken? What is the reason why the
action must be done? Where should the action be taken? When will the action be taken? Who
will carry out the action, and how will the action be carried out?
In answer to the above questions, an agribusiness system plan should include the
following:
(a)
An explanation of the details of the activities it requires such as in the creation of an
agribusiness product through production factors and the production/operation process
and the distribution of products through the agribusiness marketing process so that what
is the goal can be achieved.
(b)
An explanation of why agribusiness activities should be undertaken and why the
specified objectives should be achieved, such as sales for profit and marketing for
customer satisfaction.
(c)
A description of the physical location of each agribusiness activity that must be done, so
that all the facilities needed to do the work are available, such as the location of
agribusiness activities strategically located, for example, close to raw materials and
consumers.
(d)
A description of the time at which the work starts and finishes, both for each part of the
work and for the whole work. It is important to set time standards for work, both for the
parts of the work and for all the work done in the agribusiness, such as when does the
order start? And when will it be completed?
(e)
A description of the human resources (officers) in agribusiness or who will do the work,
both regarding quantity and quality and continuity, namely employee qualifications, such
as expertise, experience, and so on. Here must also be explained about the authority,
responsibility of each employee. whether the employee or manager is doing / carrying
out the task?
(f)
An explanation of the technique of doing work in agribusiness can be done by applying
manual work or technology. Handling in the agribusiness technology system aims to
produce products based on Quality, quantity, speed produce a product, and so on.
2. Organizing Function
The organizing function is to group and determine various important activities and
provide power to carry out activities (Terry and Rue, 1993: 9). Meanwhile, according to
Hasibuan (2000: 20), organizing is an activity to organize all employees by determining the
division of labor, work relationships, delegation of authority, integration, and coordination in
the organization chart.
In this function is the main task of an agribusiness manager. Agribusiness managers
must be able to make the right decision (decision maker) in determining the work duties of
employees / workers so that all employees have a clearly defined role based on their
respective fields or expertise. The placement of these employees is based on the right
position or better known by the motto "the right man on the right place and the right man on
the right job".
According to Downey and Erickson (1992: 34) the organizing function includes efforts
to: (1) establish a structure; (2) determine the work to be carried out; (3) select, place, and
train employees; (4) formulate lines of activity; and (5) form a number of relationships within
the organization and then appoint staff. Meanwhile, according to Terry and Rue (1993: 11)
organizing functions include: (1) identity, determine carefully and determine the work to be
carried out; (2) break work down, divide the work into tasks for each person; (3) group tasks
into positions; (4) group tasks into positions determine the requirements of each position; (5)
group positions into manageable and well-connected units; (6) divide the work, responsibility
and extent of power to be exercised; (7) change and adjust the organization in light of the
results of the supervision to be carried out; and (8) keep in touch throughout the organizing
process.
So, as part of the organizing function, agribusiness managers must be able to select,
determine, and place the division of labor, even train them and provide authority and
delegation of authority based on all organizational goals. According to Hasibuan (2000: 4),
authority is a tool or legal basis for action, while delegation of authority is the key to
organizational dynamics.
3. Directing Function
The directing function can be interpreted broadly, namely as the task of keeping the
organization alive, achieving conditions that foster work interest, strength to act, imaginative
thinking, and sustainable work groups (Downey and Erickson, 1992: 36).
The main task of making an organization or company continue to exist is the leader or
manager of agribusiness because the leader or manager is a person who has line or staff
authority. According to Hasibuan (2000: 13), a line manager is a leader who has line
authority, has the right and is directly responsible for realizing company goals, while a staff
manager is a leader who has staff authority who is only entitled to provide guidance to the
company advice and services to facilitate the completion of line managers' tasks.
In agribusiness, both farming (on farm / up-stream agribusiness) and manufacturing or
agro-industrial processes (of farm / down-stream agribusiness), each has a leader or manager
who provides direction to employees or workers for their work for the smooth completion of
their tasks. Furthermore, according to Downey and Erickson (1992: 35), direction can be
aimed at determining obligations and responsibilities, determining the results to be achieved,
delegating the necessary authority, and creating a desire to succeed.
4. Supervisory Function (Controlling)
The controlling function is the measurement of the implementation of company
objectives and the determination of the causes of deviations and taking corrective actions if
they are not in accordance with the objectives where the aim is to find out the weaknesses
and difficulties faced by employees or workers based on the findings that occur so that action
can be taken to correct them, both at that time and in the future.
A supervisory system in an agribusiness company can be said to be effective and
efficient if when an error occurs, the activity is immediately reported where the error
occurred and who is responsible for the error. This is in accordance with the purpose of
supervision, namely to find out the mistakes and difficulties encountered. According to
Manullang (1996: 130), there are four basic types of classification of types of supervision,
namely supervision time, object of supervision, subject of supervision, and method of
supervision collecting facts for supervision. (1) Supervision time, can be done with: a).
preventive supervision and b) repressive supervision. Preventive supervision is supervision
carried out before the occurrence of fraud, error or deviation. So, preventive measures are
taken so that mistakes do not occur in the future. While repressive supervision is supervision
after the plan has been carried out, in other words, measuring the results achieved with a
standard measuring tool that has been determined in advance; (2) the object of supervision,
the object of agribusiness supervision can be carried out starting from upstream / input to
downstream / output such as procurement / distribution of raw materials, production
processes (farming), agricultural product processing, marketing / distribution, and finance or
budgeting; (3) the subject of supervision, relating to who conducts supervision, both within
(internal) companies, such as production processes and finance, as well as outside (external)
companies such as marketing distribution; and (4) how to collect facts for supervision can be
done by personal observation, oral reports, written reports, and control by exception.
5. Evaluation Function
The evaluation function is an effort to assess the implementation of the plan (both plans
that are being implemented and those that have been implemented) regarding whether or not
there are deviations and whether or not the goals or objectives that have been set are achieved
based on the plans that have been made.
Evaluation is carried out in all agribusiness subsystems, for example, the procurement of
raw materials can be assessed, both in terms of quantity, quality and continuity. Results
production process (farming) and agro-industry results based on quantity or volume of
production and quality and on time. Marketing results based on product sales value, product
form or characteristics, proper placement or distribution, and promotion. If we review the
functions of agribusiness management above, then its application depends on what
subsystems are suitable and needed by each agribusiness subsystem.
B.
Functions of a Manager Agribusiness
An agribusiness manager is a decision-maker for the objectives to be implemented. To
achieve these goals, agribusiness managers must decide exactly what actions are needed, and
what new ways to introduce, and what must be made to maintain satisfactory work results.
According to Terry and Rue (1993: 17), making a decision is choosing an alternative from
two or more options to determine an opinion or course of action. For decision making to take
place, there must always be two or more alternative choices. In many cases there are usually
only two choices, such as the highest or lowest type or the yes or no type.
In advance, it has been explained about the functions of management (managers),
namely planning, organizing, directing, controlling and evaluating. The five functions of
management are something that is repeated (cycle), the five functions are in addition to being
named aspects of management or elements of management, also called the management
process (Figure 3.1.).
Figure 3.1 Functions of an Agribusiness Manager
In an agribusiness company, an agribusiness manager who performs his five daily
functions, inevitably moves in various fields of agribusiness according to his field of
expertise such as raw material procurement, production (processing), marketing, finance, and
human resources. The field is called the field of management and it can be imagined that the
activities of managers are very complex. The complexity of manager activities is shown in
Table 3.1.
In an agribusiness company, each agribusiness manager essentially performs the same
functions (especially in terms of processes, such as planning, organizing, directing,
controlling, and evaluating). However, in terms of the style of activity there are differences,
according to the levels of managers in a company.
Supervisory Manager/First Line Manager
Strictly speaking, the functions of each manager are the same, only the style of activity
is different according to the manager's level in the company or agribusiness organization
where the manager works.
Organizing
Planning
Directing
Evaluation
Supervision
(Controlling)
Figure 3.2. shows that there are three levels of agribusiness managers, namely (1) Top
Manager or the highest manager, also called the top; those included in this group are
members of the board of managers (board of directors) and the president of the company; the
type of activity is usually managing the agribusiness / agribusiness manager and managing
manager / managing manager, (2) Middle manager or middle manager; Included in this level
are heads of sections, heads of divisions, and heads of sections; the type of activity is head
superintendents/head supervisors, and (3) Supervisory managers or first line managers of the
first level; included in this group are head foremen and foremen; the type of activity is
general foreman/general foreman and managing the workers/managing the workers.
To achieve the company's goals, managers use -Six M plus one I‖. In other words, the
means or management tools to achieve goals are men, money, materials, machines, methods,
and markets which are called 6 (six) M and information which is called 1 (one) I.
Men (humans) are an important means or the main means of every agribusiness manager
to achieve the goals that have been determined in advance. Various kinds of activities that
must be carried out to achieve the objectives and activities that we can review from the angle
of agribusiness management activities such as planning, organizing, directing, controlling,
and evaluation, and can also be viewed from the angle of the process of raw materials,
production, marketing, and finance, To perform these various activities required humans.
Without people, agribusiness managers will not be able to achieve their goals. It must be
remembered that a manager is a person who can achieve results through other people.
Money is the second agribusiness management tool. To carry out various activities,
money is needed, such as wages or salaries for people who make plans, conduct supervision,
work in the production and marketing process, buy equipment materials and so on. Money as
a means of management must be used in such a way that the goals to be achieved when
valued in money are greater than the money used to achieve these goals. The failure and
inefficiency of the management process is more or less determined or influenced by the
calculation or accuracy in using money.
Materials are a tool or means of agribusiness management to achieve goals. Similarly, in
the process of activity, especially in today's technological advances, humans are no longer as
helpers for machines as during the industrial revolution. Instead, the machine has changed its
position as a human helper.
Methods or ways of working are activities that are efficient and effective when done
well. Therefore, methods or ways are also considered as a means or tool of agribusiness
management to achieve goals. For example, the case method, incident method, games, role
playing, and lectures. Each of these methods is certainly different in its use and results to
achieve certain educational goals.
Markets are an important agribusiness management tool. Without a market for their
products, it is clear that the goals of agribusiness industry companies cannot be achieved. One
of the main problems is that the company at least maintains the existing market, if possible
trying to find new markets for its products. Therefore, one of the other important agribusiness
management tools specifically agribusiness industry companies and generally for all entities
that aim to achieve profit is the market.
Information is the most important tool of the 6 M because information can be said to be
the source of the manager's decition maker, both short and long term based on the conditions
experienced by agribusiness companies.
A. Up-Stream Agribusiness (Agribusiness Raw Material Procurement
Management Subsystem):
Before carrying out the production process, both on the land and in the company (agro-
industry), a raw material procurement process is first carried out where the system is an up-
stream agribusiness or upstream/input for industrial activities that produce primary
agricultural inputs (means of production), in the form of the agro-chemical industry
(fertilizers and pesticides), the agro-automotive industry (agricultural machinery and
equipment), and the hatchery and nursery industry.
For the production process on land, it can use production factors such as land, labor,
capital, and management. While in agribusiness companies carry out stock management, such
as purchasing and storing raw materials, as well as managing inventory.
Agribusiness raw material procurement management (stock) is the procurement of
purchases and then storing in warehouses for a while before the raw materials are used
(Soekartawi, 2000: 50). In addition, the inventory system is also used.
4. Purchase of raw materials:
Generally, agribusiness companies do not have their own agricultural land to produce
agricultural products that are used as raw materials for agribusiness products. If there is, then
the area is also insufficient to produce agribusiness products raw materials required. For this
reason, purchasing planning is required, including how many raw materials to buy and how
many products to produce. For the purchase of raw materials, specifically in Indonesia, it can
be done by: (a) entering into purchase contracts with farmers or other parties; (b) cooperating
in the procurement of agricultural raw materials through partnership principles, such as
cooperation with PIR (Perusahaan Inti Rakyat) or BAA (Bapak Anak Angkat) techniques;
and (c) making purchases.
5. Raw material storage:
In storing raw materials, the following points should be considered: (a) raw materials
from agricultural products are fresh (perishable) and very vulnerable to being stored for a
relatively long time. When the raw material is still fresh, it should be used immediately
because otherwise the raw material will soon be damaged; (b) raw materials for agricultural
products are bulky (large volume but small value). This requires a large space, which means
storage costs are expensive. For bulky agricultural products, the product should be used
immediately; (c) in carrying out stock management, the first in first out technique should be
carried out (materials that enter earlier should be removed earlier as well) to keep the stored
goods from being damaged; (d) in stock management for agricultural products used as raw
materials for production or agro-industry, it should be known how long the product should be
stored in the warehouse because storage is too long and exceeds the shelf life will make the
product damaged. It should be noted that each agricultural product has a different shelf life;
and (e) the warehouse manager or purchasing manager of the agricultural product must be
familiar with the product.
For example, for paper raw materials in the form of rice stalks, a good storage method is
standing stock, meaning that the rice stalks no longer need to be put into the warehouse
(because they are bulky), but from the field they are brought directly to the factory and this
method is the most efficient. Of course, the harvest turn must be considered so that the
required raw materials are not lacking. In addition, bulky raw materials, such as rosella and
kenaf stalks for the sack industry, and sugar cane stalks for the sugar industry, need to be
stored in a standing stock manner. However, this method can also be used for other products
as long as there is the ability to manage it. Therefore, it is important to know the
characteristics of the plants that produce these raw materials.
6. Inventory:
In addition to stock management, the term inventory management is also used in
agribusiness raw material procurement management. Basically, inventory will facilitate or
expedite the operation of agribusiness companies which must be carried out successively to
produce goods to be subsequently delivered to customers or consumers. Inventories held will
start from raw materials to finished goods in order to eliminate the risk of delays in the arrival
of goods and the risk of damaged goods, maintain the stability of company operations,
achieve optimal use of machinery, and provide the best possible service for consumers.
Inventory is one of the most important elements in operations that is continuously
obtained and changed, then resold. Inventory, according to Rangkuti (2000: 3), is intended to
anticipate demand needs. These requests include inventory of raw materials, work-in-
progress, finished goods or final products, auxiliary or supplementary materials, and other
components that are part of the company's product output. This type is called product
inventory (product output). Inventory according to Sutrisno (2001: 95) is a number of goods
or materials owned by a company whose purpose is to be sold and or reprocessed.
Meanwhile, the inventory system can be defined as a series of policies and controls that
monitor inventory levels and determine the level of inventory to be maintained, when
inventory should be provided, and how large orders should be placed (Rangkuti, 2003: 14).
The system aims to determine and ensure the availability of the right resources, the right
quantity and at the right time; or in other words, aims to minimize total costs through
determining what, how much, and when orders are placed optimally.
Each type of inventory has its own properties or characteristics and different ways of
management. Inventory can be divided into:
(1) Raw material inventory, which is inventory in the form of tangible goods, for example
on up-stream/on-farm such as seeds and seedlings, while on down-stream/off-farm,
such as rice and wheat.
(2) Work in process inventory, which is the inventory of goods that are the output of each
part in the agribusiness production process that has been processed into a form, but
still needs further processing into finished goods, such as wheat flour and wheat flour.
(3) Finished goods inventory, which is the inventory of goods that have been processed
or processed in the factory and are ready to be sold or shipped to customers such as
bread and instant noodles.
(4) Supplies inventory is the inventory of goods needed to complement the agribusiness
R
Ordering Cost ---------- =x O
Q
production process. Examples on farm such as fertilizers and on farm such as
preservatives and alsintan (agricultural tools and machinery).
(5) Purchased parts/components inventory is an inventory of goods consisting of
components obtained from other companies which can be directly assembled into a
product, for example packing (cans, plastic, and cardboard).
In managing raw material inventory, two types of costs are considered to determine the
most optimal amount of inventory. The two types of costs are order costs and storage costs.
Ordering costs are all costs incurred as a result of ordering. This cost is variable or
variable in nature which changes according to the frequency of orders. Included in this cost is
the cost of materials ordered until the raw materials enter the warehouse, which consists of
the cost of order preparation, receiving costs, checking costs, weighing, and other costs until
the raw materials enter the warehouse. Mathematically, it can be formulated as follows:
Description:
R :required raw material purchase quantity (unit)
Q : quantity of raw materials purchased each time (unit)
O : cost per order (Rp)
The cost of storing (carrying cost) is the cost incurred by agribusiness companies to
store inventory for a certain period so that the quality of the raw materials stored is as desired.
This cost is variable or changing, which changes depending on the amount of raw material
stored. Included in this cost are warehouse rental costs, raw material maintenance costs,
insurance costs, quality decline costs (absolescence), taxes, and capital costs. Assuming the
purchase rate of raw materials is constant, the storage cost is calculated from the average raw
material stored. If the raw material ordered each time is Q, then the average storage cost is
Q/2. The amount of this storage cost can be calculated through :
Q
Carrying Cost -------- =x C
2
2.R.O
EOQ =
√
---------
C
The magnitude of the ROP is :
Safety stock
Needs during lead time
- Reorder Point (ROP)
xxx
xxx
xxx
Description:
C : storage cost of the average stored material (Rp)
a. EOQ (Economical Order Quantity):
In doing the above, the company certainly tries to reduce costs to a minimum so that the
profits earned become greater, as well as inventory management. The method that can be
used to determine the most optimal inventory is Economical Order Quantity (EOQ). EOQ is
the quantity of materials purchased at each purchase at the least cost or in other words,
several optimal orders. EOQ can be achieved when the message cost is equal to the storage
cost and can be formulated as follows:
b. ROP (Reorder Point):
After the amount of material purchased at a minimal cost is determined, the next
problem that arises is when the agribusiness company should reorder so that the company
does not run out of material. The point at which the company must reorder so that the arrival
of raw materials is ordered exactly when the inventory above the safety stock equals zero or
in other words, when to start placing orders is called the Reorder Point (ROP). ROP can also
be called the limit / point of the number of reorders including the desired or required demand
during the grace period, for example an additional / extra stock.
What needs to be considered in determining the ROP is the need for raw materials
during the waiting period or lead time and the amount of safety stock.
Inventory functions according to Rangkuti (2000: 15) consist of: (a) decoupling function
is a supply that is allows the company to meet customer demand without depending on the
supplier. Raw material inventory is held by the company in terms of quantity and delivery
time. Inventories held to deal with fluctuations in consumer demand that cannot be estimated
or predicted are called fluctuation stock; (b) economic lot lizing function, this needs to be
considered for savings or purchase discounts, cheaper transportation costs per unit and so on.
This is due to the company making purchases in large quantities compared to the costs
incurred due to the amount of inventory (warehouse rental costs, investment, risk, and so on);
and (c) anticipation function if the company faces fluctuations in demand that can be
estimated and predicted based on experience or past data, namely seasonal demand. In this
case, the company can hold seasonal inventories. In addition, companies also face
uncertainty in the delivery period and demand for goods during a certain period. In this case,
the company needs extra inventory called safety stock inventory.
The determination of the cost of inventory is highly dependent on the valuation method
used, namely the FIFO method (first in, first out), the LIFO method (last in, first out) and the
average cost method (Rangkuti, 2000: 116). The FIFO (first in, first out) method is used
based on the assumption that the calculation of the cost of goods is based on the order in
which the goods are purchased; the LIFO (last in, first out) method is the opposite of the
FIFO method, namely the assumption used in calculating the cost of goods inventory is used
from the cost of goods at the time of the earliest purchase; and the average cost method is the
cost of goods inventory.
The calculation of cost of goods is based on the weighted average price per unit of goods
sold.
B. On-Farm Agribusiness (Agribusiness Production Management Subsystem):
Production can be expressed as a set of procedures and activities that occur in the
creation of products (goods or services), either in the form of farming activities or
manufacturing activities, so it is not so difficult to study production management/agribusiness
operations as a support for the production process. In the early days of the development of the
agribusiness production discipline, it was farms and factories that benefited most from
advances in science and technology (IPTEK).
On-farm production or agribusiness production factors are often called agribusiness
production costs because they are sacrificed to produce agribusiness production. In English,
agribusiness production factors are also called agribusiness inputs. Therefore, to produce a
product, the relationship between agribusiness production factors (inputs) and agribusiness
products (outputs) is required. According to Soekartawi (1994:3), the relationship between
inputs and outputs is called -Factor Relationship‖ (FR).
Mathematically, it can be written using the Coob-Douglas production function analysis.
The Coob-Douglas production function is a function or equation that involves two or more
variables (independent variable and independent variable).
To estimate the parameters, they must be transformed in the form of double natural
logarithms (ln) so that they are multiple linear forms which are then analyzed by the
Ordinary Least Square method.
Ln Y = Ln β0 + β1 Ln X1 + β2 LnX2 + β3 LnX3 + β4 LnX4 + β5 LnX5 + μ
where :
Y : Agricultural production factors
β0 : Intercep/constant
β0. .β6 : Regression direction coefficient of each independent variable
X1....X6
X1 : Agricultural land (are or ha)
X2 : Labor (HOK)
X3 : Capital (Rp)
X4 : Management
X5 : Technology
μ : stochastic disturbance or error (disturbance term)
In the agribusiness production process Y can be the production of agribusiness products
and X can be agricultural land (X1), labor (X2), capital (X3), management (X4), management
(X5), and technology (X6). According to Soekartawi (1994:4-12), agricultural land can be in
the form of soil fertility level, location, topography, land status, and environmental status;
labor in the form of availability of labor, quality of labor, gender, seasonal labor, and labor
wages (market mechanism, gender, quality, age, length of time working, and non-human
labor); capital in the form of fixed capital and non-fixed capital; and management in the form
of education level, skill level, business scale, size of credit, and type of commodity. However,
in practice, these factors of production are not sufficient to explain Y. Other socioeconomic
factors, such as education level, income level, and skill level also play a role in influencing
the level of production. Therefore, before designing to analyze input and output linkages, it is
necessary to understand and identify the variables that affect the on-farm production process.
Furthermore, to find out the scale of farming, you can add up the regression coefficients
or elasticity parameters, namely :
β1 + β2 + β3 + β4 + β5
By following the Return to scale (RTS) rule, i.e. :
1.
Increasing RTS, if β1 + β2 + β3 + β4 + β5 > 1. This means that the proportion of
additional factors of production will result in a larger proportion of additional
production.
2.
Constant RTS, when β1 + β2 + β3 + β4 + β5 = 1. This means that under these
circumstances, the addition of production factors will be proportional to the addition of
production obtained.
3.
Decreasing RTS, when β1 + β2 + β3 + β4 + β5 < 1. This means that the proportion of
additional factors of production exceeds the proportion of additional production.
In practice, factors affecting production can be divided into two groups, namely (1)
biological factors, such as agricultural land with its variety and level of fertility, seeds,
varieties, fertilizers, medicines, weeds, and so on; (2) socio-economic factors, such as
production costs, prices, labor, education levels, income levels, risks and uncertainties,
availability of credit, and so on. However, there are often obstacles in the production process
of increasing agricultural production. According to Soekartawi (1999:48), constraints that
often affect agricultural production are classified into:
(1) constraints affecting yield gap I, which consist of variables beyond human
capabilities, making it difficult to reduce yield gap technology transfer due to agroclimatic
differences and technology that is difficult to adopt; and (2) constraints affecting yield gap II
consisting of biological technical variables (seeds, fertilizers, medicines, land, etc.) and
socioeconomic variables (price, risk, uncertainty, credit, customs, etc.).
When examined from the various factors that influence it, agricultural land consists of
soil fertility, location, topography, land status, and environmental factors; labor in the form of
the availability of labor, the quality of labor, gender, seasonal labor, and labor wages; capital
depends on several things, including the scale of the business, the type of commodity, the
availability of credit; and management (Soekartawi, 1994: 3-12).
So, the final result of an agribusiness production process is the product (output).
Products or production in the field of agribusiness can vary due to quality or quality it is
understandable because good quality is produced by a well-executed process; and vice versa,
the quality of production is less good when farming is done poorly. Measurement of
agribusiness production needs to be careful because there is a variety of quality. For example,
from the food crop subsector, rice production is 5 tons per hectare, then it needs to be further
examined whether the 5 tons are in the quality of harvested dry grain, barn dry, or milled dry.
In addition, the plantation crop subsector for cocoa (Theobroma cacao L) is measured
whether in dry or fermented form, while from the forestry subsector the measurement is per
m3 whether in the form of logs or blocks.
The agribusiness production value of these agricultural products sometimes does not
reflect their true value, so the production value is measured by shadow prices. Shadow prices
accounting prices) are prices that describe the real social value or economic value of the
elements of costs and results (Kadariah, 1986: 4) While the Shadow price, according to Muda
(2003: 310), is the maximum price that management wants to pay for an additional unit of
certain limited resources. The use of the term shadow price is relatively new. In various
socialist countries, accounting price or recoupment price is more widely used. All three terms
are similar in principle, the price is based on calculations that do not actually occur in
practice.
According to Sumayang (2003:8), production/operations management is a conversion
process in which applicable resources are converted into goods or services. Products of goods
and services are commonly referred to as outputs. Sumayang (2003:4) says the term
"production management" changed to operations management since 1970 along with the
development of service products that are much more striking when compared to
manufactured products so that the orientation of operations management becomes broader,
not only in the field of manufacturing but also in the management of service products and
services. Operations management as an agricultural business system can be seen in Figure
4.1.
The functions of agribusiness production management (on-farm) consist of planning,
organizing, directing, coordinating and supervising.
5. Planning:
Agribusiness production management (on-farm) requires careful planning in planting in
farms, such as food crops, horticulture, plantations, as well as maintenance in livestock and
forestry businesses, as well as fishing and fish farming businesses on the farm.
fishermen and farmers. Then, who will carry out the activities and how many seeds,
pesticides and fertilizers are needed.
6. Organizing:
Organizing is the process of creating relationships between organizational components
so that activities are directed at planning the goals of the agribusiness organization. The
components in question are the work to be done by people and the tools used to carry out the
work. The production manager carries out his function to achieve agribusiness production
goals and the company is responsible for and The manager has power over the production
activities of his subordinates, while the relationship is usually operational. Organizing on-
farm production can be done by dividing and selecting work groups or workers in farming
activities, such as seeding and fertilizing crops (food, plantation, and horticulture), as well as
seeding (aquaculture) based on their respective expertise.
7. Directing:
Directing in agribusiness production is a management function that can function not
only so that employees carry out or do not carry out production activities, but can also
coordinate agribusiness production activities of various elements so that they are effectively
directed towards the realization of previously set goals. It is the leader's job to direct or
provide instructions to workers based on procedures suitable for the production activities of
each agricultural commodity, such as those carried out by plantation foremen and field
extension workers for food crops and horticulture.
8. Supervision (controlling):
The last production management function is supervision of production activities.
Production supervision can be carried out at the time of planting, production process, harvest,
and post-harvest (horticultural, food, plantation, and forestry crops) so that the process can
run in accordance with the previously implemented plan because if there are errors in field
procedures, they can be immediately corrected to make it more effective and efficient.
