Amul kee chaal

(The Distribution and Supply Chain Management of Amul

gold)

SUBMITTED TO-Ms. PREETI SINGH SUBMITTED BY-BRIJESH KUMARFACULTY OF MARKETING ROLL NO-DBS/S 09-11/S-198DELHI BUSINESS SCHOOL SECTION - D

BATCH –JULY 09-11

PREFACE

Supply chain management (SCM) is a business practice that aims to improve the way a

business sources its raw materials, and delivers it to end users. For any product or service

offered by any business, there are usually a number of different business entities involved in

the various stages of the supply chain, including manufacturers, wholesalers, distributors and

retailers; the last group supply chain is consumers. SCM is important for

modern businesses because it coordinates and synchronizes activities of partner businesses,

giving efficiency..

ACKNOWLEDGEMENT

Innovation & Research is always a cloud in the air until it green the earth and

guidance is a lentil of strong building. Hence I take this opportunity to express my profound

sense of gratitude to & for providing me the opportunity to work for such an interesting &

knowledgeable project & providing every possible help and guidance. I am immensely

grateful to my project guide Ms. PREETI SINGH for this meticulous guidance, constructive

criticism and valuable suggestions during the entire duration of the project.

I would also like to thank to all those who could not find a separate mention but have

helped me directly/indirectly.

DECLARATION

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I ,Brijesh Kumar, as a student of M.B.A.(marketing

+P.G.P. in retail), Delhi Business School, want to state that work conducted on project was

performed under the supervision of Ms. PREETI SINGH sincerely prepared the project and

reported in the study are genuine and authentic.

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CONTENTS

PREFACE ACKNOWLEDGEMENT DECLARATION COMPANY PROFILE GCMMF PRODUCT MIX OF AMUL THREE TIER MODEL OF AMUL AMUL PARLOURS (DIRECT DISTRIBUTION) MANAGING CHANNEL MEMBERS PRODUCT INFOMATION SALES , VOLUME AND PROFIT DISTRIBUTION CHANNEL OF AMUL GOLD STOCK REPLENISHMENT CYCLE TRANSPORATION METHODS COMPETITOR ANALYSIS OBSERVATION COMMENTS AND SUGGESTION

COMPANY PROFILE

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AMUL means "priceless" in Sanskrit. A quality control expert in Anand suggested the brand name “Amul,” from the Sanskrit “Amoolya,” Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amul spray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 25 billion in 2002). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices, of the genesis of a vast co-operative network, of the triumph of indigenous technology, of the marketing savvy of a farmers' organization and have a proven model for dairy development.

AMUL IN ABROAD

. Besides India, Amul has entered overseas markets such as Mauritius, UAE, USA, Bangladesh, Australia, China, Singapore, Hong Kong and a few South African countries. Its bid to enter Japanese market in 1994 did not succeed, but now it has fresh plans entering the Japanese markets [6]. Other potential markets being considered include Sri Lanka.

GCMMF

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The Gujarat Cooperative Milk Marketing Federation Ltd, Anand (GCMMF) is the largest food products marketing organization of India. It is the apex organization of the Dairy Cooperatives of Gujarat. This State has been a pioneer in organizing dairy cooperatives and our success has not only been emulated in India but serves as a model for rest of the World. Over the last five and a half decades, Dairy Cooperatives in Gujarat have created an economic network that links more than 2.8 million village milk producers with millions of consumers in India and abroad through a cooperative system that includes 13,141 Village Dairy Cooperative Societies (VDCS) at the village level, affiliated to 13 District Cooperative Milk Producers’ Unions at the District level and GCMMF at the State level. These cooperatives collect on an average 7.5 million litres of milk per day from their producer members, more than 70% of whom are small, marginal farmers and landless labourers and include a sizeable population of tribal folk and people belonging to the scheduled castes. The turnover of GCMMF (AMUL) during 2008-09 was Rs. 67.11 billion. It markets the products, produced by the district milk unions in 30 dairy plants, under the renowned AMUL brand name. The combined processing capacity of these plants is 11.6 million litres per day, with four dairy plants having processing capacity in excess of 1 million Litres per day. The farmers of Gujarat own the largest state of the art dairy plant in Asia – Mother Dairy, Gandhinagar, Gujarat – which can handle 2.5 million litres of milk per day and process 100 MTs of milk powder daily. During the last year, 3.1 billion litres of milk was collected by Member Unions of GCMMF. Huge capacities for milk drying, product manufacture and cattle feed. Ever since the movement was launched fifty-five years ago, Gujarat’s Dairy Cooperatives have brought about a significant social and economic change to our rural people. The Dairy Cooperatives have helped in ending the exploitation of farmers and demonstrated that when our rural producers benefit, the community and nation benefits as well.

GCMMF: An overview

Members: 13 district cooperative milk producers' Union

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No. of Producer Members: 2.9 million

No. of Village Societies: 15,322

Total Milk handling capacity: 13.07 million litres per day

Milk collection (Total - 2009-10): 3.32 billion litres

Milk collection (Daily Average 2009-10):

9.10 million litres

Milk Drying Capacity: 647 Mts. per day

Cattlefeed manufacturing Capacity:

3740 Mts per day

BIRTH OF AMUL

The birth of Amul at Anand provided the impetus to the cooperative dairy movement in the country. The Kaira District Cooperative Milk Producers’ Union Limited was registered on December 14, 1946 as a response to exploitation of marginal milk producers by traders or agents of existing dairies in the small town named Anand (in Kaira District of Gujarat). Milk Producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand . Angered by the unfair and manipulative trade practices, the farmers of Kaira District approached Sardar Vallabhbhai Patel (who later became the first Deputy Prime Minister and Home Minister of free India) under the leadership of the local farmer leader Tribhuvandas Patel. Sardar Patel advised the farmers to form a Cooperative and supply milk directly to the Bombay Milk Scheme instead of selling it to Polson (who did the same but gave low prices to the producers). He sent Morarji Desai (who later became Prime Minister of India) to organize the farmers. In 1946, the farmers of the area went on a milk strike refusing to be further oppressed. Thus the Kaira District Cooperative was established to collect and process milk in the District of Kaira in 1946. Milk collection was also decentralized, as most producers . were marginal farmers who were in a position to deliver 1-2 litres of milk per day. Village level cooperatives were established to organize the marginal milk producers in each of these villages. The Cooperative was further developed & managed by Dr. V Kurien along with Shri H M Dalaya . in 1973, the Gujarat Co-operative Milk Marketing Federation was established. The Kaira District Co-operative Milk Producers’ Union Ltd. which had established the brand name AMUL in 1955 decided to hand over the brand name to GCMMF (AMUL). With the creation of GCMMF (AMUL), we[who?] managed to eliminate competition between Gujarat’s cooperatives while competing with the private sector as a combined stronger force. GCMMF (AMUL) has ensured remunerative returns to the farmers while providing consumers with products under the brand name AMUL.

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PRODUCT MIX OF AMUL

Breadspreads:

Amul Butter Amul Lite Low Fat Breadspread

Cheese Range:

Amul Pasteurized Processed Cheddar Cheese Amul Processed Cheese Spread Amul Mozarella Cheese Amul Emmental Cheese Amul Gouda Cheese Amul Malai Paneer (cottage cheese) Utterly Delicious Pizza

Mithaee Range (Ethnic sweets):

Amul Shrikhand (Mango, Saffron, Almond Pistachio, Cardamom) Amul Amrakhand Amul Mithaee Gulabjamuns Amul Mithaee Gulabjamun Mix Amul Mithaee Kulfi Mix

UHT Milk Range:

Amul Taaza 3% fat Milk Amul Gold 4.5% fat Milk Amul Slim-n-Trim 0% fat milk Amul Chocolate Milk Amul Fresh Cream Amul Snowcap Softy Mix

Pure Ghee:

Amul Pure Ghee Sagar Pure Ghee

Infant Milk Range:

Amul Infant Milk Formula 1 (0-6 months)

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Amul Infant Milk Formula 2 ( 6 months above) Amulspray Infant Milk Food

Milk Powders:

Amul Full Cream Milk Powder Amulya Dairy Whitener Sagar Skimmed Milk Powder Sagar Tea and Coffee Whitener

Sweetened Condensed Milk:

Amul Mithaimate Sweetened Condensed Milk

Fresh Milk:

Amul Taaza Toned Milk 3% fat Amul Gold Full Cream Milk 6% fat Amul Shakti Standardised Milk 3% fat Amul Smart Double Toned Milk 1.5% fat

Curd Products:

Amul Masti Dahi (fresh curd) Amul Butter Milk

Amul Icecreams:

Royal Treat Range (Rajbhog, Cappuchino, Chocochips, Butterscotch, Tutti Frutti) Nut-o-mania range (Kaju Drakshi, Kesar Pista, Roasted Almond, Kesar Carnival,

Badshahi Badam Kulfi, Shista Pista Kulfi) Utsav Range (Anjir, Roasted Almond) Simply Delicious Range (Vanilla, Strawberry, Pineapple, Rose, Chocolate) Nature's Treat (Alphanso Mango, Fresh Litchi, Anjir, Fresh Strawberry, Black

Currant) Sundae Range (Mango, Black Currant, Chocolate, Strawberry) Millennium Icecream (Cheese with Almonds, Dates with Honey) Milk Bars (Chocobar, Mango Dolly, Raspberry Dolly, Shahi Badam Kulfi, Shahi

Pista Kulfi, Mawa Malai Kulfi, Green Pista Kulfi) Cool Candies (Orange, Mango) Cassatta Tricone Cones (Butterscotch, Chocolate) Megabite Almond Cone Frostik - 3 layer chocolate Bar Fundoo Range - exclusively for kids SlimScoop Fat Free Frozen Dessert (Vanilla, Banana, Mango, Pineapple)

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Chocolate & Confectionery:

Amul Milk Chocolate Amul Fruit & Nut Chocolate Amul Eclairs

Brown Beverage:

Nutramul Malted Milk Food

AMUL PLANTS

1. First plant is at ANAND, which engaged in the manufacturing of milk, butter, ghee, milk powder, flavored milk and buttermilk.

2. Second plant is at MOGAR, which engaged in manufacturing chocolate, nutramul, Amul Ganthia and Amul lite.

3. Third plant is at Kanjari, which produces cattelfeed.

4. Fourth plant is at Khatraj, which engaged in producing cheese.

THREE TIER MODEL OF AMUL

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The Amul Model is a three-tier cooperative structure. This structure consists of a Dairy Cooperative Society at the village level affiliated to a Milk Union at the District level which in turn is further federated into a Milk Federation at the State level. The above three-tier structure was set-up in order to delegate the various functions, milk collection is done at the Village Dairy Society, Milk Procurement & Processing at the District Milk Union and Milk & Milk Products Marketing at the State Milk Federation. This helps in eliminating not only internal competition but also ensuring that economies of scale is achieved. As the above structure was first evolved at Amul in Gujarat and thereafter replicated all over the country under the Operation Flood Programme, it is known as the ‘Amul Model’ or ‘Anand Pattern’ of Dairy Cooperatives.Responsible for Marketing of Milk & Milk Products Responsible for Procurement & Processing of Milk Responsible for Collection of Milk Responsible for Milk Production.

1. Village Dairy Cooperative Society (VDCS) The milk producers of a village, having surplus milk after own consumption, come

together and form a Village Dairy Cooperative Society (VDCS). The Village Dairy Cooperative is the primary society under the three-tier structure. It has membership of milk producers of the village and is governed by an elected Management Committee consisting of 9 to 12 elected representatives of the milk producers based on the principle of one member, one vote. The village society further appoints a Secretary (a paid employee and member secretary of the Management Committee) for management of the day-to-day functions. It also employs various people for assisting the Secretary in accomplishing his / her daily duties. The main functions of the VDCS are as follows:

Collection of surplus milk from the milk producers of the village & payment based on quality & quantity

Providing support services to the members like Veterinary First Aid, Artificial Insemination services, cattle-feed sales, mineral mixture sales, fodder & fodder seed sales, conducting training on Animal Husbandry & Dairying, etc.

Selling liquid milk for local consumers of the village Supplying milk to the District Milk Union Thus, the VDCS in an independent entity managed locally by the milk producers and

assisted by the District Milk Union.

2. District Cooperative Milk Producers’ Union (Milk Union) The Village Societies of a District (ranging from 75 to 1653 per Milk Union in

Gujarat) having surplus milk after local sales come together and form a District Milk Union. The Milk Union is the second tier under the three-tier structure. It has membership of Village Dairy Societies of the District and is governed by a Board of Directors consisting of 9 to 18 elected representatives of the Village Societies. The Milk Union further appoints a professional Managing Director (paid employee and member secretary of the Board) for management of the day-to-day functions. It also employs various people for assisting the Managing Director in accomplishing his / her daily duties. The main functions of the Milk Union are as follows:

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Procurement of milk from the Village Dairy Societies of the District Arranging transportation of raw milk from the VDCS to the Milk Union. Providing input services to the producers like Veterinary Care, Artificial Insemination

services, cattle-feed sales, mineral mixture sales, fodder & fodder seed sales, etc. Conducting training on Cooperative Development, Animal Husbandry & Dairying for

milk producers and conducting specialised skill development & Leadership Development training for VDCS staff & Management Committee members.

Providing management support to the VDCS along with regular supervision of its activities.

Establish Chilling Centres & Dairy Plants for processing the milk received from the villages.

Selling liquid milk & milk products within the District Process milk into various milk & milk products as per the requirement of State

Marketing Federation. Decide on the prices of milk to be paid to milk producers as well on the prices of

support services provided to members.

3. State Cooperative Milk Federation (Federation)The Milk Unions of a State are federated into a State Cooperative Milk Federation. The Federation is the apex tier under the three-tier structure. It has membership of all the cooperative Milk Unions of the State and is governed by a Board of Directors consisting of one elected representative of each Milk Union. The State Federation further appoints a Managing Director (paid employee and member secretary of the Board) for management of the day-to-day functions. It also employs various people for assisting the Managing Director in accomplishing his daily duties. The main functions of the Federation are as follows:

Marketing of milk & milk products processed / manufactured by Milk Unions. Establish distribution network for marketing of milk & milk products. Arranging transportation of milk & milk products from the Milk Unions to the

market. Creating & maintaining a brand for marketing of milk & milk products (brand

building). Providing support services to the Milk Unions & members like Technical Inputs,

management support & advisory services. Pooling surplus milk from the Milk Unions and supplying it to deficit Milk Unions. Establish feeder-balancing Dairy Plants for processing the surplus milk of the Milk

Unions. Arranging for common purchase of raw materials used in manufacture / packaging of

milk products. Decide on the prices of milk & milk products to be paid to Milk Unions. Decide on the products to be manufactured at various Milk Unions (product-mix) and

capacity required for the same. Conduct long-term Milk Production, Procurement & Processing as well as Marketing

Planning. Arranging Finance for the Milk Unions and providing them technical know-how.

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THE CHANNEL NETWORK

Procurement Channel (Upstream flow)

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Distribution

THE ANAND PATTERN

GCMMFHead office

MU…1 MU...n

VCS…1 VCS…n

Village…1 Village…n

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Distribution channel

GCMMFHead office

Manufacturing

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First leg (from manufacturing units)

Downstream Channel, it is the distribution part of the supply chain, from the manufacturing units to the retailers.

Depot...1 Depot...n

WD…1 WD…n

Retail…1 Retail...n

Second leg

Third leg

Downstream flow

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• First leg of transport is from the manufacturing unit to the company depots. This is done using 9 and 18 MT trucks any lesser quantity will be uneconomical to the company there for is some time the quantity ordered is lesser then club loading is done which means that the product ordered is supplied with some other products.

• Frozen food the temperature of these trucks is kept below -18˚C• Dairy wet the temperature of these trucks is kept between 0-4˚C

• Second leg is from the depot to the WD’s, this transport is carried out in insulated 3 and 5 MT TATA 407’s here a permanent dispatch plan (PDP) is prepared where the distributor plans out the quantity of various products to be ordered on a particular date.

• Third leg this is the flow of good from WD’s to retailers, a beat plan is prepared and transportation is done on auto-rickshaws, rickshaws and bicycles.

Amul products are available in over 500,000 retail outlets across India through its network of over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products.

GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This practice is consistent with GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it also minimizes dumping. All GCMMF branches engage in route scheduling and have dedicated vehicle operations Depots with dry and cold warehouses to buffer inventory of the entire range of products

Wholesale dealers carry inventory that is just adequate to take care of the transit time from the branch warehouse to their premises. This just-in-time inventory strategy improves dealers' return on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated vehicle operations.

Policy regarding unsold/spoilt goods

• If product crosses the shelf life, the retailer bears the costs.

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• If the product gets spoilt during the transportation or if there is any customer complaint, Amul bears costs.

• Unsold goods are not returned to the manufacturer. • No reverse logistics.

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SCM AND MARKET LOGISTICS

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THE BUSINESS MODEL

The strategy, design and practices in AMUL’s network are strongly driven by the objective of establishing and operating an efficient supply chain from milk production and procurement to product delivery to customers. Management of this network is built around two key elements –

1. Coordination of the diverse elements of the network and2. Use of appropriate technology that includes product, process and information

technology and managerial practices and systems.

Simultaneous Development of Suppliers and Customers: From the very early stages of the formation of AMUL, the cooperative realized that sustained growth for the long-term was contingent on matching supply and demand. The member-suppliers were typically small and marginal farmers with severe liquidity problems, illiterate and untrained. AMUL and other cooperative Unions adopted a number of strategies to develop the supply of milk and assure steady growth.

First, for the short term, the procurement prices were set so as to provide fair and reasonable return.

Second, aware of the liquidity problems, cash payments for the milk supply was made with minimum of delay.

For the long-term, the Unions followed a multipronged strategy of education and support. Only part of the surplus generated by the Unions is paid to the members in the form of dividends. A substantial part of this surplus is used for activities that promote growth of milk supply and improve yields. These include provision of veterinary services, support for cold storage facilities at the village societies etc. In parallel, the Unions have put in place a number of initiatives to help educate the members.

Managing Third Party Service Providers:Well before the ideas of core competence and the role of third parties in managing the supply chain were recognized and became fashionable, these concepts were practiced by GCMMF and AMUL. From the beginning, it was recognized that the core activity for the Unions lay in processing of milk and production of dairy products. Accordingly, the Unions focused efforts on these activities and related technology development. Marketing efforts (including brand development) were assumed by GCMMF. All other activities were entrusted to third party service providers. These include logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, some veterinary services etc.

Coordination for CompetitivenessRobust coordination is one of the key reasons for the success of operations involving such an extensive network of producers and distributors at GCMMF. Some interesting mechanisms exist for coordinating the supply chain at GCMMF. These range from ensuring fair share allocation of benefits to various stakeholders in the chain to coordinated planning of production and distribution. More importantly, the reason for setting up of this cooperative is not amiss to anyone in this large network organization. Employees, third part service

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providers, and distributors are constantly reminded that they work for the farmers and the entire network strives to provide the best returns to the farmers, the real owners of the cooperative. It may be remembered that coordination mechanisms have to link the lives and activities of 2.12 million small suppliers and 0.5 million retailers!

There appear to be two critical mechanisms of coordination that ensure that decision making is coherent and that the farmers gain the most from this effort.These mechanisms are:

Inter-locking Control: - The objective for developing such an inter-locking control mechanism is to ensure that the interest of the farmer is always kept at the top of the agenda through its representatives who constitute the Boards of different entities that comprise the supply chain. This form of direct representation also ensures that professional managers and farmers work together as a team to strengthen the cooperative. This helps in coordinating decisions across different entities as well as speeding both the flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of Federation:- In addition to being the marketing and distribution arm of the Unions, GCMMF plays the role of a coordinator to the entire network within the State – coordinating procurement requirements with other Federations (in other states), determining the best production allocation for its product mix from amongst its Unions, managing inter-dairy movements, etc. It works with two very clear objectives:

1. To ensure that all milk that the farmers produce gets sold in the market either as milk or as value added products and

2. To ensure that milk is made available to increasingly large sections of the society at affordable prices.

Supplier Enhancement and Network servicing:- Their objective is to ensure that producers get maximum benefit and to resolve all their problems. They manage the procurement of milk that comes via trucks & tankers from the VS’s. They negotiate annual contracts with truckers, ensure availability of trucks for procurement, establish truck routes, monitor truck movement and prevent stealing of milk while it is being transported.

Technology for Effectiveness:- Technology or knowledge that was embodied in products, processes, and practices became an important factor in delivering effectiveness to the network of cooperatives. One distinguishing feature of AMUL (in comparison with other similar cooperatives globally) is the large variety in their product mix. Most of its plants are state of art and automated.AMUL’s innovations in the areas of energy conservation and recovery have also contributed to reduction in cost of its operations. AMUL also indigenously developed a low cost process for providing long shelf life to many of its perishable products.The extent of IT usage includes a B2C ordering portal, an ERP based supply chain planning system for the flow of material in the network, a net based dairy kiosk at some village societies (for dissemination of dairy related information), automated milk collection stations at village societies and a GIS based data network connecting villages societies to markets. Milk collection information at more than 10,000 villages is available to all dairies (or

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Unions) to enable them make faster decisions in terms of production & distribution planning, and disease control in more than 6,700,000 animals. This is linked with information at all 45 distribution offices and 3900 distributors. This network is being extended to cover all related field offices in the network. The GCMMF cyber store delivers AMUL products at the doorsteps of the consumers in 125 cities across the country.Now, going back to the supply chain of Amul, Amul has gone the e- commerce way. The 1stinitiatives taken for an ERP system was in ’94. Tata Consultancy Services was hired to guide inits implementation. The implementation project was named as Enterprise- wise IntegratedApplication System (EIAS). Automatic Milk Collection System units (AMCUS) at village societieswere installed in the first phase to automate milk producers logistics. Amul also connected its zonaloffices, regional offices and member’s dairies through VSATs for seamless exchange ofinformation. Amul is also using Geographic Information Systems (GIS) for business planning andoptimization of collection processes. Indian Institute of Management – Ahmedabad supplementedAmul’s IT strategy by providing an application software – Dairy Information System Kiosk(DISK)to facilitate data analysis and decision support in improving milk collection. There are plans tointroduce features like Internet banking services and ATMs which will enable the milk societies tocredit payments directly to the seller’s bank account. Distributors can place their orders on thewebsite www.amul2b.com especially meant for accepting orders from stockists and promotingAmul’s products via e-commerce

TQM (Total quality management) at the grassroots has been a strong movement to develop leadership, operational and strategic capabilities in the entire network – farmers, village cooperatives, dairy plants, distributors and wholesalers and retailers. Key elements of this TQM movement have been:

Friday Departmental Meetings : Each Friday, at a prescribed time, everyone in the network (from the farmers to the carry & forwarding agents) joins their respective departmental meeting to discuss quality initiatives and share policy related information.

Training for Transformational Leadership so that individuals are able to control their thoughts, feelings and behavior and take more responsibility in one’s life and surrounding environment.

Application of Hoshin Kanri principles to bring about a bottom-up setting of objectives – aligning policies for effective management of Unions & village societies on hand with those of channel member on the other hand. ISO/HACCP certification

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was obtained for all the Unions and each village society is in the process of obtaining the same.

Training for farmers and their families emphasizing the need for good health care for not only cattle during its pregnancy and feeding but also for expecting and feeding mothers and the whole family. This effort has brought about a significant social change towards such issues in villages that have cooperative milk societies.

Retail Census: GCMMF undertakes a census of all retail outlets (over 500,000) to evaluate customer perceptions and distribution efficacy of their network. This is being done by wholesalers in their respective territories at their own cost. This information is used for policy deployment exercise.

THE NETWORK

Milk is procured from the villages and collected at Village Cooperative Societies (VCS), from there the milk is taken to manufacturing units where the milk is processed into various products.

The products are then transporters to the company Depots located in various parts of the country. The products are then sent to Wholesale Distributors (WD) and from there to the retailers.

The fact sheet

Milk is procured twice a day from 2 million from Gujarat alone The payment is made under twelve hours of procurement There are 10000 village cooperative societies There are 3600 wholesale distributors in the country 45 depots The C&F agents are not fixed and are decided by the local company offices There are aproxx. 4,50,000 retailers spread all over India Total house hold consumers covered are 100,000 The milk procured per day is 5 million liters Where the total capacity of operation is 7 million liters per day The peak processing till date has been 6 million liters per day These co operative societies are bound to supply there produce only to

GCMMF Amul products are available in over 500,000 retail outlets across India through

its of over 3,500 distributors. 47 depots with dry and cold warehouses to buffer inventory of the entire

range of products

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AMUL PARLOURS (DIRECT DISTRIBUTION)

With products being highly perishable, the supply chain ought to have to maintain correct temperature, humidity etc and the chain should move fast.

To reach out its consumers more directly and let them the total brand experience, Amul has come up with Amul parlors. These are called “Utterly delicious parlors”. They have come up in major cities like Ahmadabad, Bangalore, Baroda, Delhi, Mumbai, Hyderabad and Surat already, and many more starting up real soon. Till date there are about 400 Amul parlors across the country. These parlors are set at prominent locations such as campuses of Infosys, Wipro, IIM-A, IIT-B, temples, Metros etc.

Amul has franchisee plans in regards of the Amul parlors. This might start pretty soon, since the talk is almost at the end.

Facts– 2300 Amul Parlors in 2007-08– Goal of setting up 10,000 outlets by March 2010

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Selection, Motivation & Evaluation of Channel Members

Selection:

The company takes into consideration a host of factors while selecting the channel members. This is because GCMMF believes that selection of channel members is a long run decision & the rest of the decision regarding the supply chain depends upon the efficiency & coverage by the channel members. The following are the host of factors considered by the company in selecting the channel members:

Authentication is required by the regarding the identity of the channel members, which includes the name & address, photograph of the location.

Proof of solvency which requires name & address of the channel member’s bankers

Safety of the inventory, which means that the distributor/ dealer should get the stock of the company insured.

Inventory or the perishable goods kept by the distributor/ dealer should be in good condition which means a detail of storage space & Refrigeration facility is to be provided. Refrigeration system should have deep freezers, cold room & walk in coolers.

Details of the delivery vehicle, which includes Light Commercial Vehicles, Matador, 3 Wheeler Van, Tricycle Van & Hand/Push cart. The number & model of each of the vehicle needs to be furnished to the company.

GCMMF acknowledges the fact that it needs to be sensitive to the market demands. For this it requires that a number of salesmen needs to be present on the field. The salesmen too are divided into various categories like the Field salesmen & Counter salesmen. Also the details of Clerical Staff & Mazdoors are to be provided. The technical competence of the salesmen needs to be mentioned

Details of the product kept of other companies have to be provided. The annual sales of these products too have to be mentioned. Also details of complementary products & product lines need to be mentioned.

Dealers of the company must carry a good reputation. This is due to the fact that the company believes reputation of the dealer affects the clientele.

Market coverage by the distributors needs to be defined which includes details of Geographic coverage & Outlets per market area.

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The company also requires the dealers to furnish any Advertising & Sales initiative undertaken by them on behalf of the company.

Motivation of Channel Members

GCMMF strongly believes in maintaining a good relationship with the channel members so that they are genuinely motivated to work for the company. Also if the channel members are motivated, they can also initiate advertising & sales promotion schemes on behalf of the company. However to keep the channel members motivated to work, the company has to incur certain costs but the benefits of it are felt in the long run. The following are the motivation programs run by the company:

Distributors

One of the main factors, which keep the distributors motivated, is the margin. Usually the margins offered by the company are 8% & it is raised to 8.5%. Volume wise this comes out to be a big figure since Amul’s product has a good demand in the market. However compared to the other companies the margins are still lower since the new players in the market offer a much higher margin. But the very fact that Amul’s products have good demand in the market motivates the distributors to stock it.

Amul being a cooperative cannot afford to give heavy monetary incentives. Amul’s products are considered to be value for money since the company does not believe in charging high margins. In fact all monetary incentives are just the short run means to promote the company’s product. In order to keep the Channel members motivated in the long run, Amul builds on the concept of “Trade Marketing” which makes the dealers & the distributors believe that the company’s products are worthy of being pushed in the market.

The company is organizing various Total Quality Management initiatives & workshops. Here various counseling measures are undertaken by the company to improve the overall working of the distribution network.

Vision and mission statement: the company cascades down the vision to the various channel members, this is done through various events organized by the company at different locations where the values of the company are made clear and enforced to the channel members. Also the fact that Amul being a cooperative society cannot afford to spend exorbitantly on such events therefore it has a very traditional way of organizing these get together which leaves an impact on the members.

Amul yatras: this includes taking the channel members on a guided tour of the manufacturing and procuring facilities in Gujarat. So that the channel members can have

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an experience of the working of the company and can pick up some quality measures that can help them to synchronize and improve their own functioning at various levels. This in turn help the company to co ordinate the entire value chain, as the channel members understand the various constraints and liberties the company goes through. The company has already got the Rajiv Gandhi award for quality.

The Retailers

Trade schemes: these are undertaken by the company only for the hard selling items e.g. Ice creams, flavored milk etc. for these the company raises the margins by 2%, also schemes like good packaging incase of butter and cheese is undertaken by the company. However this is only a short-term initiative to push the products of the company.

Glow boards: the company puts up glow boards at the retailer and pays the major portion of the cost.

Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre estimate the quantities of the various products needed.

Infrastructure facilitation: the company facilitates the retailers to buy freezers and fridges by formulating an easy payment program and a commitment to buy back the equipment at a reasonable price when the value of the equipment has depreciated.

Evaluation of channel members

Beat plan: this plan is generated for the various product categories i.e. diary dry, diary wet, Dhara and ice cream. A weekly schedule is prepared for various markets and the retailers the turnover for each of the product is calculated for the wholesale dealers.

Cumulative performance: the performance of the dealers is averaged out over a period of three years where a comparison is made of the present performance vis-à-vis the previous ones.

Target versus achievement: the performance and the targets are compared and therefore the gaps are identified which help in evaluating the WD and planning for the next year as well. This is done for each of the product category.

Other criterion

o Details of the bank guaranty o Photographs of the offices o Details of the WD salesmen and the product lines he deals in

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o The computerization facility available o The storage space o Refrigeration facility with photograph o Details of the delivery vehicle with photographo Summary of the monthly potential sales of marketso Summary of the product wise monthly sales potential of institutions

Conflicts And Co-Operation Among Channel Members

Conflicts

Ownership of assets: Previously the company used to give the cooling equipment on lease to the retailers, when the company wanted the stuff back; the retailer disagreed to comply and created issues of ownership.

Stocking issues: The company doesn’t want the retailers to stock the competing brand in the company leased fridges, which at times s hard to manage as retailers tend to do it often.

Replacement of products: The deterioration in the product calls for fail in replacement by the company this major issue of vertical conflict.

Credit policy: Compared to the market, the company’s credit period is less that specially incase of institutional sales is very important.

Packaging: The channel members for easy storing demand a better quality of packaging.

Replenishment: The replenishment of the stocks is not prompt in case of amul cheese and all hard selling items.

Margins: The Company provides least margins to all the channel members. For e.g. The retailer’s margin in case of butter is 8% as compared to Britannia’s 12%

Co-operation among channel members

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Amul quality circles: The members of the local channel meet together every month to share issues and the achievements of the channel members. This is an ongoing activity facilitated by the company offices in different locations; this enables the channel members to learn together and reduces the horizontal conflicts among the WDs.

Pilot salesmen scheme: To reduce the financial burden of the distributors this scheme is run whereby half the cost of the salesmen is born by the company and the rest half by the distributor

Scheduling of sales: The WD’s provides Schedule of the distributor’s sales men to the retailers so that the retailers can plan out and place the orders in advance.

Agreement defining rights: The company makes the distributors sign an agreement where the areas of operation for each of the distributors are defined, therefore avoiding any conflict amongst the distributors regarding their areas of operation.

PRODUCT INFORMATION

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PRODUCT-AMUL GOLD PASTEURISED FULL CREAM MILK

WEIGHT- 500 ml Nett

PRICE- Rs. 16

FAT-6.0 AND SNF-9.0

NUTRITIONAL INFORMATION

Serving size 200 ml

Amount per 100 ml

Energy 87 kcal

Energy from fat 54 kcal

Total fat : 6 g Phosphorus :130 mg

Saturated fat : 3.7g Sodium :50 mg

Cholesterol :16 mg Thiamine :42 mcg

Total carbohydrate :5.0g Rivoflavin :120mcg

Added sugar :0g Niacin :100mcg

Protein :3.3g Folic acid :7.5 mcg

Calcium :150mg Vita(retinol) :85mcg

AMUL KEE CHAAL

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Manufactured by-Mehsana District Co-operative Milk producers, Union ltd. Mehsana

Packed at- kwality dairy (India), Softa Village, Tehsil- Palwal ,Dist-Faridabad (Hariyana)

Total no of distributiors of Amul gold pasteurized full cream milk in Mohan baba nagar

(Badarpur Boder Delhi)- 1

Distributor name – Mr. Sachin kumar

Contact no- +91 -9911545221

Total no of dealers of Amul gold pasteurized full cream milk in Mohan baba nagar and Molar

Band (Badarpur Boder Delhi)- 5

There are so many retailers to whom product is distributed by 5 dealers

VOLUME PURCHASED

Total volume distributed by distributer to dealers in Badarpur Bodor-800-1000 liter

Total volume purchased by each dealers- 160-180 liters (i.e. total no of packets of amul gold

milk purchased by each dealer)- 320-360

Total volume purchased by each retailers-10-12 liter (20-25 packets)

SALES AND PROFIT

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Sales and profit for Distributer

Total volume of milk distributed by distributer -800-1000 liters(i.e. total no of packets

distributed 400-450 approx)

Profit margin for distributer per liter-60 paise

Total profit for each distributer- 480-600 Rs

Sales and profit for dealers

Total sale done by each dealer- 160-180 liters

Profit margin for each dealer per liter-40paise

Total profit generated by each dealer-64-72 Rs

Sales and profit for retailers

Total sales done by each retailers-10-12 liters

Profit margin for retailers per litre-50paise

Profit generated by each retailers- 5-6 Rs

DISTRIBUTION CHANNEL OF AMUL GOLD

AT BADARPUR BODER

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MANUFACTURED UNIT

PACKING AND LABELLING

DISTRIBUTORS

DEALERS

RETAILERS

CUSTOMERS

STOCK REPLENISHMENT CYCLE

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Since milk is a fast moving consumer goods daily used by each household in India. So Amul

gold pasteurised full cream milk is supplied by distributer everyday to dealers and retailers.

Stock is purchased within 24 hours (early in the morning).

TRANSPORATION METHODS

They manage the procurement of milk that comes via trucks & tankers from the VS’s to manufacturing unit and then to distributers and dealers .They negotiate annual contracts with truckers, ensure availability of trucks for procurement, establish truck routes, monitor truck movement and prevent stealing of milk while it is being transported.

COMPETITOR ANALYSIS

The main competitor of Amul is Mother dairy in Delhi. Most of the market share is captured by mother dairy products (55% (approx) market of pasteurized full cream milk is covered by Mother dairy

product % of market shareAmul 30Mother dairy 55others 15

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5530

15

market share

mother dairyamulothers

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AMUL PESTEURIZED FULL CREAM VS MOTHER DAIRY PASTEURISED FULL CREAM MILK

VS

AMUL MOTHER DAIRYPrice 16Rs 17RsWeight 500 ml 500 mlMargin for distributors’ 60paise/liter 60paise/literMargin for dealers 40paise/liter 40paise/literMargin for retailers 50paise/liter 50paise/liter

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Sales and profit of Mother dairy pasteurized milk

Mother diary full cream milk is purchased in more quantity as compared to Amul full cream pasteurized milk.

For distributor

Total quantity of mother dairy full cream pasteurized milk is distributed by distributor at Badarpur Boder-2300-2500 liters

Profit margin for distributer-60paise/liter

Total profit generated by distributer- 1380Rs-1500

For dealers

Total quantity purchased by each dealer at Badarpur Boder-400-500 liters

Profit margin for dealers-40paise/liter

Total profit generated by dealers-160-200Rs

For retailers

Total quantity purchased by each retailer at Badarpur Boder-25-30 liters

Profit margin for retailers- 50paise/liter

Total profit generated by retailer-12.5-15Rs

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Table of total Sales done each channel member

Channel member Amul (in liters) Mother dairy(in liters)By distributer 800-1000 2300-2500By dealers 160-180 400-500By retailers 12-15 25-30

Table of profit generated by each member per day

Channel member Amul(in Rs) Mother dairy(in Rs)For distributor 480-500 1380-1500For dealers 64-72 160-200For retailers 10-12 12-15

As compared to amul, mother dairy has more market share and more quantity of mother dairy full cream pasteurized milk is distributed and supplied by channel members. Hence more profit is generated by each channel member inspite of having equal margin on each product.

Distribution channel

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As compared to amul mother dairy has more own retail outlets where they can directly place their products.

Amul distribution channel

MANUFACTURED UNIT

PACKING AND LABELLING

DISTRIBUTORS

DEALERS

RETAILERS

CUSTOMERS

Mother dairy distribution channel

MANUFACTURED UNIT

PACKING AND LABBLING

DISTRIBUTOR RETAIL OUTLETS

DEALERS

RETAILERS

CUSTOMERS CUSTOMERS

OBSERVATION, COMMENTS AND SUGGESTION

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Observations

Amul has loyal cooperatives that provide milk only to them, over time the relationship of trust has built up with these people that amul leverages now.

Transport channel is another strength as the transporters have grown with the company overtime the bonding with them enables the company to give least margins when it comes to the distributors in the industry, lowering the costs.

The company believes that there is an ongoing demand in the market and therefore no promotions are needed to increase the sales, also the fact this would affect the cost of the product the company doesn’t undertake many promotion schemes.

The not being a profit driven organization, is able to provide products at the least price in the industry, and is able to give least channel margins as the channel members earn through volumes and not through high margins.

Amul has very few exclusive retail outlets in Delhi. Amul is not able to capture market share in delhi and NCR.

Comments and Suggestion:

Amul should go in for exclusive outlets in at least all the shopping malls coming up these days and any location where footfalls are large in number. The advantages of this channel will be:

i. Full range display ii. Easier to promote new products

iii. Easy to push impulse purchase productsiv. Brand building will be facilitated

Trade promotion should be formulated for newly launched products instead of just tagging them onto best sellers.

The company should start a home delivery where a particular household will order full range of products required by it over a period of time. For this the company could provide a deliveryman with cycle to reach the different houses.

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In order to motivate the channel members it is also very essential for the company to increase the margins for the hard selling items e.g. Amul dahi where it faces competition from Nestle & Mother dairy.

In order to remain sensitive to market demand, it is essential for the company to place additional salesmen on the field since the brand as such commands a high demand in the market but fails to match it with the supply.

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