SCM Study on Amul

7/31/2019 SCM Study on Amul

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! Type - Cooperative! Industry - Dairy! Founded - 1946! Key people - Dr. Verghese Kurien! Revenue - INR 97.74 billion (2010-2011)! Employee - Marketing arm: 735

Milk producers: 2.8 million


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!AMUL means priceless in Sanskrit Amoolya

! Brand name managed by an apex cooperation organization GCMMF! Worlds biggest vegetarian cheese brand! Worlds largest pouched milk brand! Largest food brand in India! Spurred the white revolution in India! Accreditation with 9001 and HACCP certification by QAS, Australia.


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Year of Establishment 1973Members 17 District Cooperative Milk Producers' Unions

(16 Members & 1 Nominal Members)No. of Producer Members 3.18 MillionNo. of Village Societies 16,117

Total Milk handling capacity per day 13.67 Million litres per dayMilk Collection (Total - 2011-12) 3.88 billion litresMilk collection (Daily Average 2011-12) 10.6 million litres (peak 13 million)Milk Drying Capacity 647 Mts. per dayCattlefeed manufacturing Capacity 3690 Mts. per daySales Turnover -(2011-12) Rs. 11668 Crores (US $2.5 Billion)


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Dairy

Cheese Products Bread Spreads Milk Drinks & Desserts Fresh Milk

Non-Dairy

Instant Food Snacks Veg. Oils


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! Bread Spreads! Milk Drinks! Powder Milk! Fresh Milk! Cheese! For Cooking! Chocolate


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A three tier cooperative structure:

! Dairy cooperative society at village level

! Milk union at district level

! Milk federation at state level


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! Collection of surplus milk & payment based on quality& quantity.

! Providing support services to the members.! Selling liquid milk for local consumers of the village.

! Supplying milk to the District Milk Union


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! Procurement of milk from the Village Dairy Societies ofthe District.

!Arranging transportation of raw milk from the VDCS tothe Milk Union.

! Providing input services to the producers.! Conducting training on Cooperative development


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! Marketing of milk & milk products! Establish distribution network!Arranging transportation from the Milk Unions to the market.! Creating & maintaining a brand! Providing Technical Inputs, management support & advisory

services.

! Decide on the products to be manufactured at various MilkUnions (product-mix)

! Conduct long-term Milk Production, Procurement, Processing& Marketing Planning

! Conflict Resolution & keeping the entire structure intact


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! Procurement channel- upstream flow

! Distribution channel- downstream flow


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!Activities at the village level comprised developing andservicing the VCSs.

! Increasing milk collection, procuring milk, andtransporting it to the chilling and processing units twicea day.

! The VCSs provided the farmers with good qualityanimal feed, fodder, and other services like veterinaryfirst aid.


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! On an average around thousand farmers come to sellmilk at their local co-operative milk collection center.! Each farmer has been given a plastic card for

identification.!At the milk collection counter, the farmer drops the card

into a box and the identification number is transmitted toa personal computer attached to the machine.! The milk is then weighed and the fat content of the milk

is measured by an electronic fat testing machine.! Both these details are recorded in the PC. The computer

then calculates the amount due to farmer on the basis of

the fat content.! The value of the milk is then printed out on a slip and

handed over to farmer who collects the payment atadjacent window.


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! Chillers in proximity of villages! Prompt transport to district facilities for further dispatch to

consumers/ processing units.

! Chilled trucks to transport processed products

! Delivery to local chillers by insulated rail tankers and chilledtrucks.

! Refrigerators and freezers with retailers and departmentalstores to retain freshness.


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! GCMMF coordinated with various unions to get aregular supply of milk and dairy products.! The processed milk and dairy products were

procured from district dairy unions and distributedthrough third party distributors.

! To ensure quality and timely deliveries, GCMMF andthe district unions had several mechanisms in place.

! The unions monitored the supplies of milk and thedistribution of finished products.


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! First leg" Manufacturing units to company depots using 9 and 18 MT trucks" Frozen food-below 18C" Dairy wet-0-4C

! Second leg" Depots to WDs" Transport through insulated 3 and 5 MT TATA 407s

! Third leg" WDs to retailers" Transport through rickshaws according to the beat plan


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MILK CHURN!from dairy to VCSPOUCH MILK TRAY

!from retailer to dairyBOTTLE!from retailer to dairyDAMAGED PRODUCTS!from customer to retailer then to dairy


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! Managing this supply chain efficiently is critical as GCMMF's competitive position is drivenby low consumer prices supported by a low cost system.

! In the past years the concept of just-in-time was not introduced, all GCMMF brancheswere engaged in route scheduling and have dedicated vehicle operations.

! Even though the cooperative was formed to bring together farmers, professionalmanagers and technocrats would be still required to manage the network effectively andmake it commercially viable.

! It is worth noting that a number of third parties are not in the organized sector, and manyare not professionally managed with little regard for quality and service. This is aparticularly critical issue in the logistics and transport of a perishable commodity wherethere are already weaknesses in the basic infrastructure.

! Its network which consists of large number of members requires regular roll outimprovement programs and high implementation rate of these programs.

! Having a strong supply chain is only the beginning, the remaining part includes makingconsumer products that sell well and that the same consumers are able to be impacted bymarketing and advertising movements.

! The organization was also suffering from the high middleman cost which was tackled bymanaging milk supplies from the cattle farmer and sending it straight to the factory.

! Due to the perishable nature of the product, it has to invest in cold storage which is anextra burden in distribution and warehousing.


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! At the time Amul was formed; consumers had limited purchasing power, and modestconsumption levels of milk and other dairy products. Thus Amul adopted a low-costprice strategy to make its products affordable and attractive to consumers byguaranteeing them value for money.

! In addition to the weaknesses in the basic infrastructure, logistics andtransportation services are typically not professionally managed, with little regardfor quality and service.

! GCMMF was one of the first FMCG (fast-moving consumer goods) firms in India toemploy Internet technologies to implement B2C commerce. Today customers canorder a variety of products through the Internet and be assured of timely deliverywith cash payment upon recipt.


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!Larger lead time

!Gap between demand and Supply

!Suppliers

!Managing third part providers


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! Amul should improve its distribution system, as it has already implementedon ERP in the company, still due to in disciplined behavior of its distributors,retailers suffers which ultimately affect the consumers.

! We know that the time schedule of the distributors & their transportationsystem cannot be capsuled, but they can reduce their errors. E.g. drivecarefully to prevent accidents.

! Manpower should be more than 18 years of age. (in some of the areas, wehave observed small children engaged in loading & unloading the trays fromthe truck)

! Before offering any extra benefits or schemes to their retailers, Amul shouldaware them in advance, so that the incentives can be reached in the righthands at right time, otherwise distributors enjoy the benefits of retailers.

! Codification of raw material should be done in an easily understand manner.! Reduce the solving time of the consumer/retailers complaints.! Payment to the milk suppliers should be made on time to ensure the proper

inflow of milk.


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! Amul should also launch certain schemes for households. It has schemes forretailers but not for households. This section being the major user of milkand in order to enter into a new area such starting schemes can be veryhelpful.

! For refrigerated and frozen food distribution, a world class cold chain wouldhelp in providing quality assurance to the consumers around the region.

! Logistics and transportation services should be professionally managed toavoid wastes.

! Use of internet for exploring the unknown terrain.! Active customer feedback should be taken regularly for increasing product

line.

! Employees of GCMMF should involved actively in all activities of the memberunions.

! Relationship with business associates like wholesaler should be made closerand deeper.

! The company should take initiative to reduce transportation time from thedepots to the wholesale dealers, improvement in ROI of wholesale dealers,implementation of Zero Stock Out through improved availability of productsat depots and also the implementation of Just-in-Time in finance to reducethe float.


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! Completely in tune with the ground reality an enquiry is initiated on theorganizational climate. This gave detail about the core competencies and mostimportantly gave details about the handicaps and inadequacies.

! Have recognized change as an essential factor governing business needs andhence incorporates changes in every form at every stage.

employees, suppliers and distributors also change ready always


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! Radical changes in business processes - eliminatingmiddlemen .

! Improved delivery mechanisms and transparency ofbusiness operations.

! Due to this process, AMUL is able to collect six millionlitres of milk per day.! Huge reduction in processing time for effecting

payments to the farmers from a week to couple ofminute.

! Processing of 10 Million payments daily, amounting totransactions worth USD 3.78 million in cash.


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!Movement of 5000 trucks to 200 dairy processingplants twice a day in a most optimum manner.!Practicing just in time supply chain management

with six sigma accuracy.

!Online order placements of Amuls products on theweb.

!Distributors can place their orders on the website.!Amul exports products worth around US$ 25 million

to countries in West Asia, Africa and USA.


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! Long term perspective! Simultaneous development of markets and suppliers.

! Network partnership Vs. ownership

! Cost leadership and value for money

! Technology and Information Sharing


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SCM Study on Amul

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