Business plan on mechanization service

Topic: Business Plan on Mechanization Service

Team:BAU Dream WeaverMembers:Md Shakil Mondal(ID:1305004)

Md.Abdul Ahad(1305009)

Md.Zane Alam(1106072)

Bangladesh Agricultural University,Mymensingh

Points to be Discussed

• Mechanization overview• Farmers need• Custom hiring service & its sectors• Benefits• Business goals• Environment analysis• Business analysis• Profit analysis• Break-even use for recovering capital investment• Business projection & Resource requirement• Strategies & Action plan• Conclusion

Mechanization at a glance

• Devise used in Agriculture: power tiller, tractor,ricetransplanter, weeder,harvestor,thresher,winnower

• 1.5 million pumps used for irrigatiom

• 80% land is prepared by using tractor & power tiller

• Maize shelling accomplished almost 100% by maize shellers

• 80% paddy & wheat are threshing by thresher

• 100% farmers are using sprayer for pesticide application

Source: International Fertilizer Development Centre, Asia Division, Bangladesh

Problems facing farmers

• High purchase value of machineries

• Lack of technological knowledge

• Inadequate expert manpower to service the implements and machines

• Difficulties for repairing & maintaining of farm implements and equipment

• scarcity of labour

What can we do ?

Custom Hiring Service

• Is an important mechanism through which most small holders can access services of agricultural machinery.

• Ensure the use of improved farm machinery even to small and marginal farmers.

• Offers prospects for facilitating rapid mechanization of agricultural systems in the region.

Customer Hire Service ScenarioActivities Machinery & Countries

Transportation 4WT & 2WT trailer: in all countriesAnimal carts: Nepal, Cambodia, Laos

Milling Engine & Motor: all countries

Water pumping Engine,Motor,2WT pump: most countries

Threshing(wheat) 4WT thresher: India, Pakistan, Nepal, China

Threshing(Rice) 4WT & 2WT thresher: most countriesDiesel engine: Thailand

Harvesting(Wheat) Combine harvester: China, India, Pakistan

Harvesting(Rice) Combine harvester: China, Malaysia, India, Thailand , Sri Lanka

Tillage(Dry) 4WT: most countries

Tillage(Wet) 2WT: most countries

Land levelling 4WT laser leveler: India, Pakistan, Cambodia

Seeding 4WT seed drill: China, India, Pakistan

Transplanting(Rice) China, India

Maize shelling India, Bangladesh

Harvesting(Sugarcane) Thailand, India

Source: Indian Agricultural Research Institute (IARI)

Service sector

Input supply Growing Post-harvest Distribution Retailing

Land preparation,Planting

Intercultural operations,Harvesting

Threshing,Shelling,Winnowing,Milling

Spraying & Transport

Types of Custom Hire Services Used to Support Agri-Food Value Chain Activities

Benefits of Custom Hire Services

• Reduce drudgery

• Expand or intensify production.

• Reduce production, post-harvest and

marketing costs

• Increase smallholder incomes

Population of Different Farm Machinery

Name of machine Units

Power tiller >7,00,000

Tractor 35,000

Weeder >2,00,000

Seed-cum-fertilizer distributor About 1,000

Sprayer 14,50,000

Combine harvester 160

Reaper 200

Open drum thresher 1,80,000

Close drum thresher 40,000

Winnower 1,200

Dryer 500

Hand maize sheller 12,000

Power maize sheller 2,000

Deep tube well 30,000

Shallow tube well 12,00,000

Low lift pump 1,20,000

Source: Statistical Yearbook of Bangladesh,2012.

Business Goals

Mission Vision Positioning

• To provide all modern facilities to the farmers who can not afford them as a owner

• To facilitates rapid mechanization

• To ensure low production cost

• To increase small holders income

• To be country’s most customer centric company

• Build a platform to introduce with modern technologies

• To discover rapid solution regarding agricultural operations

• Low hire cost

• Low production cost than manual operations

• Ensure brand quality than others

• Through advertisements “Expect more, Pay less”

• Through extension services

Environment AnalysisCUSTOM HIRING

FARMER-USERS CUSTOM SERVICE PROVIDER

TECHNICAL

SOCIO-CULTURAL

ECONOMICS

SOCIO-POLITICAL (GOVERNMENT POLICY SUPPORT & OTHER SUPPORT SERVICES)Availability of support services (credit facilities, infrastructures-e.g. farm to market roads, etc.)

• Technical suitability of AMTs to the environmentalconditions, i.e. matching of available technologies to thefield conditions

• Capability of local agricultural manufacturing to provide machinery for custom hiring

• Skilled operators for the custom hiring machines

• Farmers’ willingness to mechanize / avail of custom services

• Farmers’ traditional practices• Labor availability

• Social arrangements for scheduling of custom services for farm operations in adjacent farm areas

• Capability of the custom service provider for operation and management of the enterprise

• Cost of traditional practices vs. cost of custom hiring (mechanized systems)• Economic benefits of custom hiring

• Availability of capitalization to operate custom hiring enterprise• Availability of credit facilities• Service areas for profitable operation of custom services

Support Services for Operational Continuity & Integrity of Custom Hire Services

Equipment Supply Outlets

Repair and Maintenance services

Custom Hire ServiceSkilled Field Staff Finance and Credit

ExtensionInputsTechnical and Business

Skill Training

Spare parts

Business analysis

Strength• Precision and quality operation

with farm equipment ensure higher production

• Low hire cost • Higher business growth• Ensure good quality machinery • Long lasting business• Good leadership*• Skilled & professional

recruitment*• Favorable business environment*• Well planned strategy*

*key success factors

Weakness• Lack of trust between

agribusiness and farmers• Not familiar in this region• Lack of extension activities• Insufficient resource

Business Analysis

Opportunity

• High initial cost of individual ownership

• Farmers lack of knowledge in the aspects of operation, maintenance and repair of equipment

• Less time consumption

• More profit in agri-business

Threats

• Poor rural infrastructure regarding road quality

• Fragmented land

• lack of an appropriate governmental strategy on agricultural mechanization

• Insufficient repair and maintenance services.

• Farmers are reluctant to use machines because they think that using the tractors on their land can damage the soil

Profit AnalysisImplements Operating Cost Hiring Charge Profit Pay back Period

Power Tiller 1030 Tk/ha 1150 Tk/ha 120 Tk 2.25 yrs

Tractor 781 Tk/ha 1107 Tk/ha 326 Tk 2.03 yrs

Rice Transplanter 998 Tk/ha 1754 Tk/ha 756 Tk 1.61 yrs

Maize Sheller 110.28 Tk/ton 250 Tk/ton 139.72 Tk 226 hrs

Closed Drum Thresher

427.28 Tk/ton 692.30 Tk/ton 265.02 Tk 307 hrs

Recommended implements: Reaper Combine Harvester Urea Super Granular injector Rotavator Sugarcane planter Sugarcane stripper Sunflower thresher High clearance sprayer

Source: MS Thesis in BAU Central Library

Break-even Use for Recovering Capital Investment

0

50000

100000

150000

200000

250000

50 150 250 350 450

Co

st &

Be

nef

it,T

k.

Maize Sheller

Cost

Benefit

Optimum Time

Hours

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

Co

st &

Be

ne

fit,

Tk.

Rice Transplanter

Cost

Benefit

OptimumTime

Hours



0

200000

400000

600000

800000

1000000

1200000

1400000

10

0

70

0

13

00

19

00

25

00

31

00

Co

st &

Be

ne

fit,

Tk.

Tractor

Cost

Benefit

OptimumTime

Hours

0

20000

40000

60000

80000

100000

120000

140000

0

40

0

80

0

12

00

16

00

20

00

Co

st &

Be

ne

fit,

Tk.

Power Tiller

Cost

Benefit

Optimum Time

Hours



0

20000

40000

60000

80000

100000

120000

0 100 200 300 400 500 600

Co

st &

Be

nef

it,T

k

Closed Drum Thresher

Cost

BenefitOptimum Time

Hours


Business ProjectionFigure in Amount(BDT Mio.)

Particulars *2016 Gr % 2017 Gr % Y2018

Sales 190.23 10 209.25 20 250.98

Opt. Cost 130.55 9.99 143.60 19.99 172.31

Gross Profit 59.68 10.10 65.71 19.72 78.67

GP% 31.37 31.4 31.47

Others Exp. 5 5 5.25 5 5.51

Others Exp.% 2.62 2.51 2.19

Net Profit 54.68 10.57 60.46 21 73.16

Net Profit% 28.74 28.89 29.14

*In 2016 No. of Tractor-40,Power Tiller-120,Rice Transplanter-60,Maize Sheller-60,Closed Drum Thresher-150 *Target Area 15 Upazilla in 2 District

Business Projection cont.Figure in Amount (BDT. Mio.)

190.23209.25

250.98

59.68 65.7178.67

54.68 60.4673.16

2016 2017 2018

Sales Gross Profit Net Profit

Business & Resource Requirement

Y2016 Y2018Y2017

Projected Revenue:

BDT: 209.25 Mio

Resources/Investment:

a) Fixed asset: BDT: 200 Mio

b) Office Space: 222060 sq.ft

c) Partner/Supplier: 3

d) HR Requirement: 500

e) Working Capital:

BDT: 154 Mio

Projected Revenue:

BDT: 190 Mio


a) Fixed asset: BDT: 200 Mio.

b) Office Space: 222060 sq.ft.

c) Partner/Supplier: 3

d) HR Requirement: 500

e) Working Capital:

BDT: 140 Mio

Projected Revenue:

BDT: 250.98 Mio


a) Fixed asset: BDT: 200 Mio

b)Office Space:296340 sq.ft.

c)Partner/Supplier: 3

d)HR Requirement: 600

e)Working Capital:

BDT: 184.8 Mio

Strategies The service: Customers are aware of what the hire

enterprise can offer in terms of services and the flexibility and quality of such services.

The price: The price of the service is clearly defined and based on the needs of the customers and the price is competitive.

Demonstration: Customers have seen the service being conducted on other farms and/ or demonstrations have been provided.

Promotion: Potential customers (importantly others involved in the input supply chain, for example input dealers, and others in the local area, for example farmer cooperatives) are aware of the service enterprise and the services being offered.

Action Plan

2. Map the gap : Financial , Non-financial and personal goals like number of customers , revenues , profits etc.

3.Select the focus area : Small farmers of firstly two divisions then country wide

4.Know the customer point of view : Low hire cost and lower production cost than

manual operations , more profit

5.Show uniqueness in market : New commercially available , best machinery

product , quality service

6.Know the sets we apart : Least hire charge , free repair and maintenance

service

7.Build a strong belief on customer mind :Through extension activities like workshop,

seminar, fair etc.

8.Select a distribution channel : Direct service ,Via retailers, phone service ,agents

etc.

9.Select right strategies : Advertising , tele- marketing , extension service, local

entrepreneurship

10.A 90 day sells and marketing schedule :It will help to plan the strategies ,tactics,

timing and to take immediate action

• 1.Create a revenue plan : Amount of product and fix the hire charge

Conclusion

• Hire service have the potential of providing improved livelihood to small scale farmers the world over.

• This service is available in our country in very small scale rather than large one.

• Large scale custom hire service is not only highly profitable but also have a great opportunity in future.

• But the crying need is the government & private organization to come forward for the development entrepreneurship of custom hire service in Bangladesh.

The End