Agroindustrial project analysi

THE PROCESSING FACTOR 121tion that the shift from hand pounding to small, mechanized millsmight cause. Yet the shift away from in-house hand pounding mayreflect the response of Indonesian mills to a strong consumer preferencefor convenience and time saving. The data in table 4-2 showthat in-house hand pounding is uncommon in rice and maize processingin other countries.One means of redesigning a project to increase its use of low-costlabor is to disaggregate the technology. This requires the plant toidentify each step in the production process and to assess the use ofmanual labor for each activity. Frequently, the handling and sortingof materials can be carried out manually more cheaply than bymechanization. Packaging, in some instances, can also use laborrather than automation. Activities that require high precision orchemical transformation, however, can often only be done mechanically(that is, the process requirements limit factor substitution).The disaggregation process also relates to economies of scale.The economics of capital-intensive investment rests in part oneconomies of scale. Large production units are essential to achievinghigh volume and low unit costs. Least-cost production for the totalset of agroindustrial processes within an industry does not, however,necessarily exclude small-scale industries (ss:'s). The firmshould examine the agroindustrial system to identify the functionsthat are better performed by small-scale production units than bylarger, capital-intensive units. For example, the leather and footwearindustry in India comprises the processes of skinning, curing,tanning, finishing, and making. Skinning and curing are small-scalefunctions because of the nature of the procurement of the raw material:dead animals are found and skinned by numerous, individualentrepreneurs (the killing of cows being forbidden by religiousbeliefs). The tanning process requires large equipment and, therefore,high volume. The shoe- and leather-goods-making stage ofthe process, however, can be efficiently conducted on a small scalewith a modest amount of equipment. The successful Italian shoeexportindustry and Brazil's expanding shoe industry rely heavilyon ssi's at the making stages. (These countries have an advantageover India in that cattle are slaughtered for meat and the raw materialhides are of superior quality.)Although some authors have asserted that labor-intensive technologiesin practice are frequently inferior to capital-intensive onesbecause they use both more labor and more capital to produce the