6 - University of Georgia

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BUSINESS
MANAGEMENT

Business Management

Definitions


Management:


Directing of labor resources


utilization of resources/materials


production decisions


Labor:


implementation
of management
decisions

Departmentalization Example

Owner(s)
or board of directors

General Manager

Engineering
Manager

Production
Manager

Marketing
Manager

Business
affairs
Manager

Source:

Nelson, P.V. 1998. Greenhouse operations and management. 5th ed.
Prentice
-
Hall Inc.


Production manager


crop production/scheduling/records


production materials ordering/storing


production labor scheduling


Marketing manager


sales/promotions/records


order “pulling”, packaging, and delivery


Engineering manager


maintains physical plant, structures and equipment


may include shop for custom
-
building
equipment/building


Business administration manager


financial recordings


purchasing, billing, and payroll

Greenhouse “Evolution”


Up to about 60,000 ft
2


owner/manager


laborers


secretary/bookkeeper


Above 60,000 ft
2


owner/marketing manager?
engineering manager?


production manager


growers


business office


Business Management

Business Management

Business Structure


Survival tenets:


each employee answers to
one person only


ownership =
full responsibility


departmentalize logically
and as needed


delegate responsibility


comply


records rule

Business Management

Labor Management


Have clearly defined job descriptions and goals for
labor force


Establish effective evaluation
and rewards system


Create positive working conditions
(physically and mentally)


COMMUNICATIONS

Business Management

Records


Cultural records include timing (or treatments)
and schedules


Plant environment records include
temperature/light records, plant/substrate test
results, insect & disease scouting


Production records are
“timing notes” and visual
assessments (digital photographs!)


Pesticide application records/
WPS/govt. compliances

A Typical
Cultural
Schedule
Record Placed
at the End of a
Bench in the
Greenhouse

Greenhouse section


Benches


Crop


Cultivar


Date

scheduled


Date

accomp
lished




Operation




Employee


3
-
7





Plant 7” x 8”





3
-
7





Fertilize, half strength





3
-
7





Start lighting at night





3
-
14





Fertilize and spray





3
-
21





Fertilize and spray





3
-
28





Pinch





3
-
28





Fertilize and spray





4
-
4





Fertilize and spray





4
-
11





Fertilize and spray





4
-
18





Fertilize and spray





4
-
18





Start shading





4
-
19





Prune plants back to 2 or 3 shoots





4
-
25





Fertilize and spray





5
-
2





Fertilize and spray





5
-
9





Fertilize and spray





5
-
16





Fertilize and spray





5
-
23





Fertilize and spray





5
-
30





Fertilize and spray





5
-
30





Disbud





6
-
6





Fertilize and spray





6
-
13





Spray





6
-
20





Spray





6
-
24





Harvest





Business Management

Financial Records


Income


Expenses:


variable costs (fertilizer, pesticides, substrate,
containers, labels, boxes/packaging, seed/cuttings,
labor)


fixed costs (depreciation of equipment and buildings,
interest, repairs/maintenance, taxes, insurance,
office expenses, telephone, accounting/legal fees,
travel and dues, management salaries, fuel,
electricity)



Labor


Potting, Watering, Spraying, Pinching, Harvesting

Cost Analysis
Sheet for an
Individual Crop
Listing Expenses,
Revenues, Profits
or Loss

Source:

Nelson, P.V.
1998. Greenhouse
operations and
management. 5th ed.
Prentice
-
Hall Inc.

Property Tax 3.03%
Miscellaneous 2.71%
Interest Expense 2.5%
Truck Operation 2.01%
Electricity 1.5%
Office Expense 1.46%
Insurance 1.44%
Water 0.96%
Telephone 0.43%
Labor

34.8%

Selling

17.8%

Cultural Products

14.5%

Heat

8%

Depreciation

5.5%

Upkeep & Repair

3%

Property Tax

3%

The relationship of each production and marketing expense
to the total expense

(based on fresh
-
flower and pot
-
plant growers from Wisconsin and Michigan)

Source: Grimmer, 1975.
Greenhouse cost accounting.

Business Management

Cost Analysis


Statement of cash flow (monthly)


day
-
to
-
day ability to pay debts


Balance sheet (annually)


assets (cash, equipment, stock, etc.)


liabilities (outstanding loans, interest, etc.)


Income statement


revenues


expenses

Planning for Profit Increase


Profit depends on management of expenses and
the production of revenue


revenue can be increased by:


higher productivity


higher quality product (if not currently
meeting market standards)


more profitable market channels


rising prices (small increases and only if
justified)


lower expenses

What Is the Economic Impact of
Rising Expenses on Profits?


Enterprise budgets


determine profits


analysis of breakeven


If a factor of production was increased
one
-
percent, what is the anticipated percentage
change effect on profit?

Study by Stegelin, F. 2001.
Southeastern Floriculture 11(2)


A “1%” Increase in …

Results in a ...

% Change in
Planned Profit

Price received per flat

+16

Yield or % of crop sold as marketable

+25

Production materials expense

-
8

Production labor (man
-
hours in greenhouse)

-
11

Labor wage rate

-
5

Equipment investment

-
4

Management cost

-
4

Cost of cuttings for rooting

-
4

Marketing costs

-
2

Interest rate on operating loans

-
2

Utility rate for heating (natural gas)

-
2

Crop: bedding plant flats

Shrinkage: 10%

Greenhouse Size: 30’x 90’

Labor wage: $7.00/hr (including benefits)

Space utilization: 85%

Management Fee: $15,000


Bodie Pennisi

Paul Thomas

Forrest Stegelin

Copyright

Ⱐ2003

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Department of Agricultural and Applied Economics