FINANCIAL MANAGEMENT AND SUPPLY CHAIN MANAGEMENT
Profit is the driver for agribusinesses as they work to generate the greatest possible
returns from their resources. Successful achievement of this objective means making
good decisions, and it means carefully managing the financial resources of the firm.
Financial management is involved in these areas and includes generating the data
needed to make good decisions, using the tools of fi nance to make effective decisions,
and managing the assets, liabilities, and owner’s investment in the firm.
Financial information allows managers to understand the current “health” of the
firm as well as to determine what actions the business might take to improve or grow.
Balance sheets and income statements can provide a wealth of information useful in
making decisions. Financial analysis provides agribusiness managers with insights by
which to better base decisions. The tools of finance such as budgeting, ratio analysis,
financial forecasting, and breakeven analysis can be used by agribusiness managers to
develop long-rang plans and make short-run operating decisions.
Another way in which the financial agribusiness scene continues to change is in the
sourcing of funds. Agribusiness firms are increasingly accessing larger amounts of funds
or money from national and international capital and financial markets. To be competitive
in those markets, firms must generate rates of return comparable to other industries. In
the past, small agribusiness companies may have been allowed by local lenders to
exhibit only modest financial performance. Today, the national and international financial
markets expect performance in agriculture comparable to that in other industries if they
are going to provide the agribusiness sector with the funding needed for expansion,
growth, consolidation, technological advancement, and modernization.
The sheer amounts of funds needed to fi nance the future operations of a company
will continue to increase dramatically. So will the need for managers who understand the
tools and techniques used to source and manage those funds. For most agribusinesses,
financial management will be a critical component of agribusiness management.
Supply Chain Management
New technologies and concept are rapidly hitting the workplace. This, in turn,
changes the way agribusiness do what they do. The push for quality, the drive for lower
costs, changes in the supply chain, and general pressures to be more efficient in meeting
consumer demands are swiftly alerting the production and distribution activities of
agribusiness. Supply chain management focuses on these areas and provides the tools
managers need to meet these operations and logistical challenges. As a result, supply
chain management has come to the forefront as a key management function for the
agribusiness manager.
Operations management focuses on the direction and the control of the processes
used to produce the goods and services that we buy and use each day. It involves several
interrelated, interacting systems. Operations management involves the strategic use and
movement of resources. For instance, a snack food factory begins its process with corn
from a food-grade corn producer and ends with tortilla chips, corn chips, crackers, etc.
managers must worry about issues of scheduling, controlling, storing, and shipping as
the corn moves from the producer’s truck to the supermarket.
Logistic management involves the set of activities around storing and transporting
goods and services. Shipping and inventory costs are huge costs of doing business for
many food and agribusiness firms. The logistics management function is focused on new
ways to lower these costs, by finding better ways to ship and store product. Given
advances in information technology, the analytical tools of supply chain management,
and improved shipping technologies, this has been a dynamic area for food and
agribusiness firms. In addition, the growth of global markets depends upon the
performance of well managed supply chains.
Successful agribusiness is those who consistently produce faster, better, and
cheaper. The management of logistics in food and agricultural supply chains will become
increasingly focused on building such time-based advantage. Quicker response to
consumer needs, faster delivery times, shorter product development cycles and more
rapid recovery after service problems are all components of time-based advantage in
supply chain management. At the same time, there is an incredible push for quality,
safety, and integrity in food system production processes. Effective supply chain
management will continue to be crucial in the successful execution of any strategic plan
for agribusiness firms.
