Management Processing In Contract Farming

Daft (2008) gave a definition of management as “the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading and controlling organizational resources.” Thus, management in organizations or business is the function that coordinates and decides the efforts of people on tasks and use available resources efficiently and effectively to accomplish goals and objectives.

Stonner et al. (2005) explained that planning means defining goals that managers desired to be achieved for their organizations in the future. Plans give direction for organization to reach its goals and set up the best ways for reaching them. The second step of management is organizing, i.e., the process of arranging and distributing

This also applies to a contract farming in dairy industry between milk processors and dairy farmers. Contract farming in dairy industry can be seen as business cooperation to achieve profit, increase milk production and efficiency, as well as farmers’ income. Poor management of contract farming can cause potential conflicts and failure. The milk processing industry must be able to coordinate all the dairy production partnership activities which involve planning, organizing, staffing, leading and controlling. The company needs to carry out all activities in a transparent and participatory fashion so that the contracted party fully understand their rights and obligations and those of management. For this to be achieved, the maintenance of harmonious relations between the company, contracted party (cooperatives and dairy farmers) is essential. A number of specific organizational and administrative activities have to be carried out before production commences in dairy contract farming. Eaton and Shepperd (2001) stated that there are several key issues that companies/managers must address in advance, namely, 1) identifying suitable production areas, 2) selecting contracted party, 3) forming working groups, 4) providing material inputs, 5) providing technical support and 6) purchasing the

This involves controlling quality and yields, monitoring human resources, and protecting the environment. A manager should carry out a routine analysis to ensure that current and future milk production remains within the quality and quantity parameters required. Quality controls may start as specifications in a written contract or as verbal explanations of quality standards given in contract arrangement and company-contracted party meetings. Some contracts contain clauses which specify that milk processing companies may carry out certain activities if the contracted party fails to meet milk specifications. Where problems regarding quality are encountered, a detailed investigation is necessary. On the other side, monitoring human resources involves the recruiting, training and deployment of contracted party as well as an appraisal of their work. The production performance of each contracted party also needs to be recorded and assessed so as to determine the need for quota changes and, on occasion, the cancellation of contracts. Lastly, ecological considerations should have an important role in contract farming. Environmental degradation as a result of any form of farming can become a major problem if it is not