How to Make Sugar Production More Effective: A Case of Ukraine

Zusammenfassung

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The article is devoted to the analysis of efficiency of sugar companies of Ukraine and the ways of its improving. The decreasing return to scale and scale inefficiency for the majority of sugar companies are determined. The main factors of sugar plants inefficiency are defined. Developed benchmarking has revealed significant reserves of reduction of the basic inputs and potential growth of efficiency. In comparison with foreign companies the Ukrainian sugar plants have smaller material capacity of production and stuff cost, considerably lower labour and capital productivities. The recommendations for proprietors and managers of sugar companies for making of decisions on improving of efficiency are made.

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How to Make Sugar Production More Effective: A Case of Ukraine

1. Introduction

Entering of Ukraine in the World Trade Organization (WTO) makes us think about the perspectives of those industries, which activity was traditionally limited to various tools of a state regulation, including external economic. Sugar production industry is one of such industries. The research presented below is devoted to the estimation of current efficiency of sugar production in Ukraine, its major factors and to the determination of the ways of efficiency improvement of sugar plants with use of various analytical tools, including benchmarking.

Sugar production concerns to the continuous-line mechanized manufacture with a high level of automation of basic processes. The distinctive feature of territorial allocation of sugar plants in Ukraine is their rigid binding to the areas under crops of sugar beet, as beet transportation on great distances is economically inefficient. Vinnitsa, Poltava, Kyiv and Cherkasy areas are the basic regions of beet sowing. In some cases, sugar plants have own areas under crops located directly near the enterprise. By-products of sugar industry (beet pulp, molasses) are used as fertilizers and animal feed.

According to the National Association of Ukrainian Sugar Manufacturers "UkrTsukor" in 2006 119 sugar plants produced sugar in Ukraine. Last decade dynamics of sugar production in the country had no steady tendency and changed within the limits of 1,6-2,6 million tons a year (Figure 1), at established capacities near 5 million tons. The major part of sugar produced is consumed in domestic market, two thirds of which is people consumption and one third includes the various branches of food-processing industry: confectionery (24%); beverages - beer, wine, vodka and non-alcoholic (5%); dairy (2%), bakery (1%), etc.

50% non-utilized capacity is explained by the following reasons:

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