E-Supply Chain Management

Course: Supply Chain ManagementE-Supply Chain ManagementAn Overview

1] Introduction

About Amul

Amulis an Indian dairy cooperative, based atAnandin the state ofGujarat, India. The wordAmulis derived from the Sanskritwordamulya, meaning priceless. The co-operative was initially referred to asAnand Milk Federation Union Limited hence the name AMUL.

Formed in 1946, it is a brand managed by acooperative body, the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3 million milk producers in Gujarat. Amul spurredIndia's White Revolution, which made the country the world's largest producer of milk and milk products. In the process Amul became the largest food brand in India and has ventured into markets overseas.

Dr. Varghese Kurien, founder-chairman of the GCMMF for more than 30 years (19732006), is credited with the success of Amul.

GCMMF

The GCMMF is the largest food products marketing organisation of India. It is the apex organisation of the dairy cooperatives of Gujarat. It is the exclusive marketing organisation for products under the brand name of Amul and Sagar.Over the last five and a half decades, dairy cooperatives in Gujarat have created an economic network that links more than 3.1million village milk products with millions of consumers in India. The daily milk procurement of GCMMF is around 13 million liters per day. It collects milk from about 16914 village milk cooperative societies, 17 member unions and 24 districts covering about 3.18 million milk producer members. More than 70% of the members are small or marginal farmers and landless labourers including a sizeable population of tribal folk and people belonging to the scheduledcastes.

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 federated into a milk federation at the state level. Milk collection is done at the village dairy society, milk procurement and processing at the District Milk Union and milk and milk products marketing at the state milk federation. The structure was 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.

The main functions of the VDCS are: Collection of surplus milk from the producers of the village and payment based on quality and quantity, Providing support services to the members like veterinary first aid, artificial insemination services, cattle-feed sales, mineral mixture sales, fodder and fodder seed sales, conducting training on animal husbandry and dairying, Selling liquid milk for local consumers of the village, Supplying milk to the District Milk Union.

The effects of Operation Flood Programme are appraised by the World Bank in an evaluation report. It has been proved that an investment of Rs. 20billion over 20years under Operation Flood in the 1970s and 80s has contributed an increase of Indias milk production by 40million metric tonnes (MMT), i.e., from about 20MMT pre-Operation Flood to more than 60MMT at the end of Operation Flood.

Thus, an incremental return of Rs. 400billion annually have been generated by an investment of Rs. 20billion over 20years. Indias milk production continues to increase and now stands at 90MMT (as of 2012). Despite this fourfold increase in production, there has not been a drop in the prices of milk during the period while production has continued to grow.Due to this movement, the countrys milk production tripled between the years 1971 and 1996. Similarly, the per capita milk consumption doubled from 111gm per day in 1973 to 222gm per day in 2000.

THE AMUL MODEL

Amul has a Co-operative form with a blend of professionalism. In the corporate form of an organization the shareholders are non-participative members whereas in this form the members are the participative owners of the organization. There are basically three tiers a dairy cooperative viz., the village society- procurement unit, the union- which is the processing unit and the federation which is the marketing unit all being an institution in itself. The institutions at each tier have the bond of organic and inter-institutional linkages and obligations which provide sense of purpose and directions in their activities. To manage these units efficiently the leaders felt a need of the professionals. These professionals have a hierarchy similar to that of the corporate structure with the managing director as their head. The Managing Director of all these units is appointed by the board of directors. The board of directors comprises of the farmers members who come from the respective societies. So, at each level the decision making lies in the hands of the producers only, which give them a feeling of ownership to them.

COMPARISON OF AMUL MODEL WITH OTHER CO-OPERATIVES

In this study a comparison has also been done on the working of other states co-operatives with that of the AMUL Model. It was found that the basic Anand Pattern is the same everywhere, but the professional management is different from the AMUL model. In the case with other dairy cooperatives the managing Director of the federation which is apex body is an IAS on deputation. As he is not in one federation permanently that does not give him the feeling of ownership which is very essential for a co-operative to be successful. Since in most of the co-operatives the government still has share, so various representatives are there in the board of directors and they become the decision making authorities. The elections of the village society, union and federation are not politicized at GCMMF, whereas in other states these are influenced by the political parties at the state. At AMUL the employees are hired by their ownRecruitment pattern by the Human Resource Section whereas at other milk co-operatives there has not been any recruitment since last many years. The recruitment system is dependent on state government. Cooperatives works for the same purpose i.e. maximizing return for milk producers by adding value in different ways in the whole value chain. The organisation design is done taking into consideration the mission of the organization. That is why the design is done in such a way so that there is maximum participation of its members and the benefits can reach the members in a proper way. Even at the profit-sharing level, the distribution is made in proportion to the volume of business contributed by each member; therefore, bonuses etc. are determined from the value of the commodity supplied by the members. This in turn ensures that while the co-operative does business, it also makes its members quality conscious.In Anand Pattern Co-operatives, while the producers themselves determine the policies, the opportunity is provided to the professionals to implement the policies as well as to manage the operations.

Introduction

Enhanced competitiveness requires that companies ceaselessly integrate within a network of organizations. Firms ignoring this challenge are destined to fall behind their rivals. This integration of companies within a network has led to put more emphasis on Supply ChainManagement. SCM is the management of upstream and downstream relationships in order to deliver superior customer value at less cost to the supply chain as a whole. The integral value of the SCM philosophy is that total performance of the entire supply chain is enhanced when we simultaneously optimize all the links in the chain as compared to the resulting total performance when each individual link is separately optimized. In order to achieve this coordination/integration of all the links in the supply chain, information is critical. Recent technological developments in information systems and information technologies have the potential to facilitate this coordination, and this, in turn allows the virtual integration of the entire supply chain. The focus of this integration in the context of Internet-enabled activities is generally referred to as e-SCM. Merging these two fields (SCM and the Internet) is a key area of concern for contemporary managers. Managers have realized that the Internet can enhance SCM decision making by providing real-time information and enabling collaboration between trading partners. Many companies have implemented point-of-sales scanners, which read, on real time, what is being sold. These companies do not only collect information on real-time to make decisions about what to order or how to replenish the stores; they also send this information, through the Internet, to their suppliers in order to make them able to synchronize their production to actual sales.The Internet can have three main impacts on the supply chain:1) One of the most covered topics in the literature is the impact of e-commerce, which refers mainly to how companies can respond to the challenges posed by the Internet on the fulfilment of goods sold through the net.2) Another impact refers to information sharing, how the Internet can be used as a medium to access and transmit information among supply chain partners. However, the Internet not only enables supply chain partners to access and share information, but also to access data analysis and modelling to jointly make a better planning and decision making. 3) This jointly planning and decision making is the third type of impact of the Internet on SCM and we refer to it as knowledge sharing.

2] Impact of e-SCM

The SCM processes that have been impacted because of advent of the internet are:1) Supply Chain Relationships2) Information Flow and IS integration3) Planning and Optimization4) Industry Structure and Competitive challenges

Here is a diagram representing the framework of our study

Figure 1: Framework for e-SCM

2.1 Supply Chain RelationshipsSMC is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole. Companies strategically segment their relationships and establish arms length relationships with some supply chain members and strategic partnerships and alliances with others. The Internet has an impact on how companies manage all type of relationships. For the strategic partnership approach, the Internet enables companies to share information and knowledge, leading to higher levels of coordination and collaboration. And, for the arms length approach, firms can benefit from the use of dynamic pricing structures that are web-enabled. Further research should try to conduct more empirically-based studies in order to analyze which has been the real impact of the Internet on the management of supply chain relationships. Some lines of future research are: (1) To examine in a greater depth (by extending the sample to a larger number of firms) the impact of e-commerce on relationships(2) To study it from a dyadic or a supply chain perspective examined it from a single-firm point of view and(3) To empirically test the relationship established between type of relationship (relational or transactional) and the Internet efficiency.

2.2 Information Flow and IS integrationAlthough business-to-business electronic trading has been around for more than 20 years, thanks to EDI, the complexity of early EDI packages, rival standards and its relatively high costs have traditionally excluded many companies, especially small firms. The relatively easy access to the Internet (most organizations have a telephone and a PC) makes this technology have a bigger impact on information flows than EDI. The impact of the Internet on the information flows of a supply chain consists mainly on enabling companies to share information on real time. For years, ERP systems provided the ability to access information from various parts of the organization. However, their potential could not be explored and expanded due to a lack of common standards and cost of access. The growth of e-business enabled to share information, made available from ERP systems, with other supply chain members. This sharing of information affects all supply chain processes and some of its effects are:1) Inventory can be reduced due to better forecasts2) Inventory allocation in different retail3) Outlets can be done more effectively4) Advanced planning and optimization tools can be used because there is more information available5) Collaborative planning and design can be implemented, etc.

Most of the existing research describes the impact of the Internet on information flows or develop support systems to enable the sharing of information through the Internet. None are empirically-based, and the existing ones are case studies, which aim is to explore this impact on the real world. One line of further research should be to conduct surveys in order to generalize the findings of these case studies.

2.3 Planning and OptimizationPlanning and optimization are key elements in SCM. Firms can use these techniques to anticipate problems and issues and, therefore, better respond to the needs of the customer. The availability of information and communication technologies, together with the last developments in the fields related to planning and optimization (Operations Research and Statistics), have led to improvements in performance and the achievement of competitive advantages.In this topic we have included the papers that describe and develop web-based planning and optimization tools for SCM. The impact of planning and optimization web-based techniques on supporting decisions and give insights for better describe web-based applications to support planning and optimization. These web applications include:1) Decision technologies such as data management2) Statistical analysis3) Forecasting4) Data mining5) Optimization models6) Exact and heuristic solution methods7) Simulation, economic models, game theory etc.Nowadays many of these applications reside or are available through Application Service Providers (ASP). ASPs are firms who host specific applications to be used by other companies on a fee basis. These services will be critical for small players, who cannot afford the major investments in the infrastructure needed to participate in the collaborative supply chain.The Internet has had and will have a great impact on the development of decision technology. Firstly, it helps to improve the planning and optimization within the supply chain by providing access to decision support systems. And, secondly, the decision technology can take advantage of the ability to access an enormous quantity of data and information available through the Internet. 2.4 Industry structure and competitive challengesThis topic comprises the impact of the Internet on the industry structure and how companies are responding to competitive challenges using the Internet. Under this heading are conceptual, although some of them use existing case studies to analyze their framework. Only two industries have been analyzed: the PC and the music. Further research should consider other industries. A cross-industry study would be very valuable. It would also be very interesting to investigate which characteristics of the product/service offered determine the impact of the Internet on theIndustry structure (value chain, distribution channel, etc.)

3] E-Supply Chain Management at AmulWhat differentiates Amul from other supply chains is the application of technology based supply chain system even at the grass root level. At the supply end, a computerized database has been setup for details of the farmers and their cattle, and the quality and quantity of milk collected. Amul has installed over 3,000 automatic milk collection system units at village societies to store farmer information, milk fat content and amount payable to each farmer. Each farmer is given an ID card. The amount payable to the farmer is calculated on the basis of the fat content. The value of the milk is printed out on a slip, so that the farmer can collect the payment from the adjacent window. Thus, the farmer gets the payment instantly. More than 5,000 trucks transport milk from the source to 200 dairy plants twice a day. Each Amul office sends daily reports on sales and inventory to the main system at Anand. Distributors are connected to Amul's network, so that they can place their orders through the system. This is an apt example of Just-in-Time system.

The establishment has come a long way: innovating, winning accolades and even transitioning into the use of technology. Amul is the largest producer of milk and milk products in the world. It has set world best practices for dairy producers. Amuls wide success can be attributed to its robust supply chain network, low cost policies, strong distribution network, and service availability. Every day, Amul collects 447,000 litres of milk from 2.12 million farmers, converts the milk into branded, packaged products, and delivers goods worth US$ 1 million to over 500,000 retail outlets across the country.3.1 How AMCUS workAmul has installed over 3000 Automatic milk collection system units (AMCUS) at village societies to capture member information, milk fat content, volume collected and amount payable to each member. Each farmer is given a plastic card for identification Computer calculates amount due to farmer on the basis of fat content The value of the milk is then printed out on slip & handed over to the farmer, who collects the payment from adjacent window With the help of IT farmers receive their payment within minutes.

3.2 Supply management through internet Amul makes over 10 million payment transactions daily. On the logistics more than 5000 trucks move milk from the villages to 200 dairy processing plants twice a day according to a carefully planned schedule. Its ERP software named as Enterprise Wide Integrated Application System(EIAS) covers a plethora of operations like market planning advertising and promotion, distribution network planning. Each of Amul offices are connected via internet and all of them send daily reports on sales and inventory to the main system at Anand. The organization has also connected all zonal, regional & member dairies through.

3.3 Supply & distribution At the supply end a computerized database has been setup of all suppliers & their cattle. Computer equipment measures & records qualities & quantities collected. At the distribution end stockists have been provided with basic computer skills. Amul experts assist them in building promotional web pages. As an expansion strategy, Amul Cyber stores have been setup in India, USA, Singapore and Dubai

Figure: Amul Cyber store Snapshot

3.4 Strong initiatives in e-commerce Amul has linked distributors to the network & also incorporated web pages of top retailers on their website. Distributors can place their order on website amulb2b.com and the supply & delivery chain are completely automated. Further, the organization practices just in time supply chain management with six sigma accuracy.

3.5 Accolades receivedAmuls e-supply chain initiative is truly world class and has been greatly appreciated; it has received the following accolades from various bodies The CIO 100 AWARD which recognizes organizations around the world that excel in positive business performance through internet & IT management The prestigious Ramakrishna Bajaj National Quality award in 2003 for adopting noteworthy quality management practices for logistics and procurement

3.6 Future PlansAmul plans on introducing Internet Banking Services & ATMs which will enable Milk societies to credit payments directly to sellers bank account and hence increasing the ease of doing business. Officials at Amul are also looking at upgrading the plastic cards which are being currently used only for identification purposes, to smart cards which can be used to withdraw cash from ATMs. This initiative would greatly help the farmers and also improve their livelihood.