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Performance Evaluation of the Dairy Husbandry Cooperative "Setia Kawan" in Pasuruan, East Java, Indonesia
Thesis Abstract:
The dairy industry is one of dependable industries upon which people count on, providing delicious, nutritious products while helping develop other related industries. As years pass by, technologies have been developed to improve the quality of product produce and to make new dairy products.
The consumption of Indonesian people as stated in the National Census data of 1990 was only 4.2 liters of fresh milk per year. The milk consumption came in different forms such as: curdled milk (46%), powdered milk (26%), butter and cheeses (12%), baby’s food (11%), and pasteurized milk (5%). The Directorate General of Livestock Service noted that consumption per capita in milk was 4.19 kg/year (1994), 6.99 kg/year (1995), 7.63 kg/year (1996), and 7.87 kg/year (1997). For the national milk consumption, domestic product only contributed 48.6 percent while 51.5 percent was still imported. Hence, the market segment for milk is still open and has a high market potential in the future.
Koperasi Pternakan Sapi Perah/KPSP (Dairy Husband Cooperative “Setia Kawan”) was established and ratified by a Decree by the Minister of Cooperative Small and Middle Businessman no. 02/PAD/KDK.13.14/XI/1998 on 13 November 1998. Change of Koperasi Unit/KUD (Rural Dairy Cooperative) became KPSP (Dairy Husbandry Cooperative) after the BOD and cooperative members conducted a special general assembly meeting in July 1998. Even legal law was still using no. 4077.B/BH/II/78 dated 26 December 1995.
The core business of KPSP “Setia Kawan” is milk. Milk production is related with population of dairy cows in this area. The number of dairy cows increased before 1996 but after that there was a gradual decline. Based on the amount of milking stage cows, the cooperative could reach a level of productivity. Other factors which affected milk productivity and efficiency were the following: good maintenance of dairy cows, availability of calves, animal health service, level of success of artificial insemination, and availability of animal feed, which includes concentrate and ruminage.
Total production gradually decreased in 1998 with only 19.1M liters while more than 97 percent of total production was sold to PT. FSI (Nestle). The local selling tendency increased in 1998 with 34,033 liters without damage (zero damage) of raw milk, which indicated that good quality control was done.
Channel of distribution of KPSP was firstly, farmers to KPSP to PT. FSI (Nestle); and secondly, farmers to KPSP to end consumers.
The bigger contribution to KPSP business was Division/SBU Milk, although in 1998, there was a decrease in rupiah. Amount earned was bigger in 1997. Furthermore, in 1996 and 1997, Division/SBU Trading and Service showed a negative cash flow or negative contribution, which means less revenue than cost and a positive cash flow in 1998. The decreasing contribution in percentage of Division/SBU Credit-Saving may be due to many non-active members in KPSP who did not comply with the requirements in 1998.
Business risk was uncertainty of cash flows caused in the industry, which the company was involved. Uncertainty was due to variability of sales caused by the product, consumer and cost of goods sold. KPSP “Setia Kawan” did not have company risk since the cooperative did not have losses due to operating cost structure and cost of capital.
Financial risk was uncertainty return to equity, which was caused by the owner using long-term debt. Capital structure was related with dividend for stockholder/cooperative members. In the case of KPSP, data in 1998 and 1997 were compared as follows: (1) short-term borrowing increased IDR1.1B or 22.5 percent, (2) longterm borrowing decreased IDR390.8M or 12.6 percent, (3) current assets increased IDR755.2M or 13.6 percent, (4) fixed assets increased IDR643.1M or 46.5 percent, (5) equity increased IDR744.6M or 15.5 percent, (6) retained earnings decreased IDR30.3M or 10.5 percent, (7) dividend increased IDR27.09M or 35.5 percent, and (8) savings (miscellaneous assets) decreased IDR756.6M or 13.8 percent.
From the business risk and financial risk, KPSP performed fairly well although they should consider their liquidity. Focusing on milk production as their core business appeared satisfactory.
KPSP “Setia Kawan” provided benefits for the community. The existence of KPSP and its operations benefitted not only the community but also the surrounding areas (Tutur sub-district). The cooperative regularly supplied the Nestle plant and others with milk, fruit, vegetables, and so on. Raw milk provided had a reasonable price. Adequate quality of milk can contribute to the growth of the milk industry and economic activities in the surrounding areas.
As a whole, the sustainability of KPSP must be supported by the key factors. The factors that contributed to the success of KPSP were the following: (a) entrepreneurship and innovative attitude of the management staff, (b) support by respected leaders in the cooperative movements, (c) trained farmers, staff, and workers, (d) innovative programs to improve milk quality, (e) hired skill persons who took care of the technical aspects of their business, and (f) strict application of careful quality control system.