Business performance analysis in the sugar industry - A new approach

Traditional benchmarking (or comparative analysis) in the sugar industry has been confined to cost of production, generally stopping at gross margin analysis. An innovative approach to 'whole of business' analysis has resulted from an eight year partnership between the Bureau of Sugar Experiment Stations (BSES) and Resource Consulting Services Pty Ltd (RCS), a commercial agribusiness consulting company. This approach puts considerable emphasis on the identification of constraints within a sugar business and development of actions to overcome these constraints. It has proven to be a valuable tool in enabling growers to identify their true costs of production and establish where the business sits relative to other sugar businesses. A major finding of the study is that focus on yield alone is less important in improving profitability than attention to three ratios: gross margin, overheads and expenses. For example, yield differences varied from negative 8% to positive 11% between the Top 20% of economic performers and the group average, whereas gross margin differences ranged from 12-25% higher for the Top 20%. Perhaps more importantly, benchmarking challenges participants to identify ways of improving overall business performance and to implement actions to meet established targets.