However, not many in the industry have thought of the cost effectiveness measures that should be inculcated in running of the rubber estates.While presenting a paper at the recent Upasi session on rubber, the vice-president, of the Rs 400-crore plus AV Thomas Group, OT Jayachandran, called for a complete `business process re-engineering', starting from scratch to all inputs that go into the production of rubber.

According to him the commodity has to be changed into a value-added product for overcoming the existing crisis in rubber industry. Themanagement of plantations over the years, has grown into a tradition, where the styles are more a continuity of doing things the same way with very little improvements. However, if this continues, the end will not be very far off, emphasised Jayachandran.

The natural rubber industry has over the years become small growers dominated as more than 85 per cent of the rubber is procured from this sector. However, the cost of the small growers are very much lower and the question which arises here is whether the large rubber growers would be able to compete with this sector especially under the existing circumstances when the rubber plantations industry is going through a serious crisis. This is where, the importance of cost effectiveness in running the estates comes into being.

However, says Jayachandran, cost effectiveness should not be thought of as mere cost reduction. Whereas, cost reduction is basically cutting down of the costs, which is all right in the short run, but could cause damages in the longrun.

On the other hand, cost effectiveness is to ensure that every paise is well spent and returns are at the best levels. The approach would be to have a re-look at all the operations on the estate and carry out a re-engineering of all of these. This will include rationalising the administrative set up, manpower requirements and update technology.

Rubber has all along been a protected commodity and prices had been somewhat steady due to which the industry became complacent. Most of the problems, he says, are an outcome of this.

"In order to become globally competitive, we have to overcome these problems faced by the industry. The main issue is that our costs are too high and in order to become cost effective, we have to rationalise, starting with the set up on the estate, apart from the overheads and operations. The productivity and worker outurn will have to be improved through technological and dynamic style of management," added Jayachandran.

Giving an example of the cost of production (COP) inthe plantation industry, Jayachandran said that whereas the small growers undergoes a production cost of Rs 15 per kg, the cost of production of large growers is around Rs 33 per kg, as this not only includes the operations costs but also the fixed cost (overheads) and cost going towards value-addition.

Therefore in order to survive, a re-engineering in management of estates is called for. Towards this, he suggests that the manpower requirement on the estate in all respects must be rationalised besides ensuring efficiency and reducing the number of divisions.

One of the most important aspect, as per Jayachandran is that the estate must be well-balanced which means that the mature to immature ratio should be 3:1. The immaturity period, as per him, must be down below 5« years, because if the immaturity is lower then exploitation can be further intensified and harvest improved.

Tapping being the most important and the most expensive operation on the estate, the best and hi-tech systems should beimplemented and updated from time to time. In general, the management of the plantation is rather based on traditions, custom and usage-this style has to be changed, he adds.

"To bring about a total change around, we will have to be more cost efficient, improve productivity and outurn and bring in a style of innovative management. Sale average will have to be improved through better understanding of the market and offering consistent quality rubber", he added.

Jayachandran said that the overall profit can be lifted through a combination of improvement in the productivity, cost reduction through better resources utilisation and improvement in the sale average.