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INDEX
CHAPTER TOPIC PAGE NO
1 Introduction to logistics
Definition and meaning
Types of logistics
alue c!ain acti"ities
Impact of logistics
Acti"ities
# Introduction to supply c!ainmanagement
$eaning% definition and
o&'ecti"es
Decision p!ase
Process "ie( of supply c!ain
)unctions
* Dri"ers of supply c!ain management
+ Introduction to A$,-
. /upply c!ain of A$,-0 /upply c!ain management and mar1et
logistics of A$,-
2 Issues and recommendation for
A$,- supply c!ain
34 )inancial implications of
recommendations
5 Anne6ure
78 )indings and conclusion
77 -imitation
7# 9i&liograp!y
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:E--;;;;;;;;;;;;<<;;I/ THI/ -OGI/TIC/=
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ACT,A--> THI/ I/ -OGI/TIC/
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CHAPTER 7?INTROD,CTION
Logistics is concerned with getting the products and services where they are needed
when they are desired. It is difficult to accomplish any marketing or manufacturing
without logistical support. It involves the integration of information, transportation,
inventory, warehousing, material handling, and packaging. The operating responsibility
of logistics is the geographical repositioning of raw materials, work in process, and
finished inventories where required at the lowest cost possible. Within the firm the
challenge is to coordinate individual ob e!pertise into an integrated competency
focused on servicing customers. In most situations the desired scope of suchcoordination transcends the individual enterprise, reaching out to include customers as
well as material and service suppliers. Ina strategic sense, the senior logistics officer
leads a boundary spanning initiative to facilitate effective supply chain relationships.
The e!citement of contemporary logistics is found in making the combined results of
internal and e!ternal integration one of the core competencies of an enterprise.
Throughout the history of mankind wars have been won and lost through logistical
strengths and capabilities or the lack of them. "ven though the generals of the past have
understood the critical role of logistics it only in the recent past that the big
organi#ations have reali#ed its role in the achievement of competitive advantage. $rth
%haw in 1&1' pointed out that( the relations between the activities of demand creation
and physical supply) illustrate the e!istence of the * principles of interdependence and
balance. +ailure to coordinate any one of these activities with its groupfellows and also
with those in the other group, or undue emphasis or outlay put upon any one of these
activities, it is certain to upset the equilibrium of forces which mean efficient
distribution. The physical distribution of the goods is a problem distinct from the
creation of demand. There are many ways of defining logistics but the underlying
concept might be defined as follows( -Logistics is the process of strategically managing
the procurement, movement and storage of materials, parts and finished inventory
through the organi#ation and its marketing channels in such a way that current and
future profitability are ma!imi#ed through the costeffective fulfillment of orders.
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7<7 DE)INITION
The word logistic has originated from reek word -Logistikos/ and the Latin word
-Logisticus/ which means science of computing 0 calculating
In ancient times it was used more in connection with moving armies, the supplies of food
0 armaments to the war front.
uring World War II logistics gained importance in army operations covering the
movement of supplies , men 0 equipment across the border
Today
It has acquired the wider meaning and is used in the business for the movement of
material from suppliers to the manufacturer and finally the finished goods to the
consumers
L2I%TI3%
7<#T>PE/ O) -OGI/TIC/
1 ) Inbound logistics
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*4 2utbound logistics
54 Third party logistics
64 +ourth party logistics
'4 7everse logistics
In&ound logistics?
$ctivities associated with receiving, storing and disseminating inputs to the product such
as inputs to the product such as material handling, warehousing, inventory control, vehicle
scheduling and returns to suppliers.
7
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Out&ound logistics?
$ctivities associated with collecting, storing and physically distributing the product to the
buyers. It includes distribution of finished goods, order processing, warehousing, material
handling, delivery vehicle operations, scheduling, shipping, etc.
T!ird Party -ogistics(
Third party logistics is the activity of outsourcing activities related to Logistics and
istribution. $ third party logistics firm may be defined as an e!ternal supplier which
performs all or part of the company/s logistics functions.
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)ourt! Party -ogistics?
+ourth party logistics provider is a supply chain integrator that assembles and manages the
resources, capabilities and technology of its own organi#ations with those of
complementary service providers to deliver a comprehensive supply chain solution to the
client.
Re"erse -ogistics?
7everse logistic deals with product that flow to the opposite direction as against standard
logistic channels. It include backward flow of ha#ardous and non ha#ardous waste,
recycling materials, reuse of product, damaged product etc.
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Integrated -ogistics?
The management 0 technical process through which supportability 0 logistic supportconsideration are integrated into the design 0 taken into account throughout The life cycle
of system8equipment 0 by which all element of logistic support are planned, acquired,
tested, 0 provided in a timely 0 cost effective manner.
7<* A-,E CHAIN ACTIITIE/
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9 :rimary activities represent the functional areas like arranging inputs for
transforming them into output, and managing distribution, marketing, sales, and
services.
9 The secondary activities facilitate the integration of all the functions across the
entire organi#ation.
9 The companies can achieve competitive advantage and create differentiation by
organi#ing and performing these activities more efficiently or in a unique manner
than their competitors.
Ho( do (e define logistics management=
$ process of satisfying customer needs through coordination of materials and
information flows that e!tend from the market through the firm/s operation and
beyond that to the suppliers.$ shift to an integrated orientation from the
conventional manufacturing or marketing orientation.Traditionally, manufacturing11
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and marketing have been considered as separate activities each having different
priorities.;anufacturing priorities and obectives are concerned with achieving
operating efficiencies based on long production runs, minimi#ed set ups and
changeovers, and product standardi#ation.;arketing priorities and obectives areconcerned with achieving competitive advantage based on varieties, high service
levels, and frequent product changes.3ustomer orientation and cost
competitiveness has been integrated by introducing fle!ible manufacturing
systems, practicing inventory management policies based on manufacturing
requirement planning and ustintime inventory policy, laying sustained emphasis
on quality and integrating supply side issues in strategic plans.
7<+I$PACT O) -OGI/TIC/ ON $AR@ETING
Traditionally, marketing has focused on endcustomer or consumer, seeking to
promote brand values and to generate a -demand pull/ in the market place for
company/s products.ue to shift in power in marketing channels, companies are
reali#ing to develop strong relations with such intermediaries like large retail
outlets to create a customer franchise as well as consumer franchise.The impact of
both strong consumer franchise and customer franchise can be enhanced or
diminished by effectiveness of suppliers/ logistics system.
7<.ACTIITIE/ INC-,DED IN -OGI/TIC/
Logistics competency is achieved by coordinating the following functional areas.
Net(or1 design
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Information
Transportation
In"entory
:are!ousing% material !andling and pac1aging<
Net(or1 Design?
<etwork design is the prime responsibility of logistics managers since a firm/facilities and structure is used to provide products and materials to the customers.
Logistics facilities typically include manufacturing plants, warehouses, crossdock
operations, and retail stores. etermining the number and type of facility required,
their geographic locations, and the work to be performed at each is an important
part of network design. In certain situations, some of the facility operations may be
outsourced to service specialists. <etwork design determines the type of the
inventory and the quantity to be stocked at each facility, and the assigning of
customer orders for shipment. <etwork of facilities also includes information and
transportation as a part of entire structure from where logistical operations such as
processing of customer orders, maintaining inventory and material handling are
performed. The network design must consider geographical variations.
The factors influencing modifications of network design are(
9 3hange in demand and supply
9 :roduct assortments
9 3hanges in suppliers/ source of supplies.
9 ;anufacturing requirements.
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The first step towards achieving competitive advantage lies in superior network
design, as the real competition is not between two companies but between
efficiency and effectiveness in managing their supply chain.
Information?
+orecasting and order management are the two areas of logistical work that
depend on information. +orecasting enables to decide on positioning of inventory
to satisfy anticipated customer requirements. 2rder management involves handling
of specific customer/s requirements, both e!ternal as well internal. "!ternal
customers are those that consume the product or service, or trading partners that
purchase the products or services for resale. Internal customers are organi#ational
units within a firm that require logistical support to perform their designated work.
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The process of order management involves
9 7eceipt of an initial order
9 Invoicing
9 elivery, and
9 3ollection.
Incorrect information and delays in order processing can cripple the logistics
performance= thus quality and timeliness are the key issues in logistical
operations.
Transportation?
Transportation is the operational area of logistics that geographically positions the
inventory i.e. provides for place utility. 3ompanies accomplish transportation in three
different ways( $ private fleet of vehicles may be operated. 3ontracts may be entered into
with transport companies. The service of different transport companies may be engaged
on an individual shipment basis.
+actors affecting transportation performance(
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$. 3ost of transportation
The payment for movement between two geographical locations and e!penses
related to administration and maintaining intransit inventory.
>. %peed of transportation
The time required to complete a specific movement. Transport firms capable of
providing faster services normally charge higher rate. The faster the transportation
services, shorter is the time interval during which the inventory is in transit and
unavailable.
3. 3onsistency of transportation
7efers to variations in time required to perform a specific movement over a
number of shipments. 3onsistency is a measure of dependability of transportation.
Inconsistency in transportation leads to inventory safety stocks required to protect
against unpredictable service breakdowns. %peed and consistency combine to
create quality aspect of transportation.
In"entory?
The obective is to achieve the desired customer service with minimum inventory
commitment, consistent with lowest total cost. "!cessive inventories may be16
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helpful in compensating for deficiencies in network design but ultimately result
into higher total logistics cost. The best practice of inventory management is to
achieve ma!imum turnover while satisfying customer commitments.
:are!ousing% $aterial Handling% And Pac1aging(
;erchandise needs to be warehoused at selected times, transport vehicles material
handling for efficient loading and unloading and goods are most efficiently
handled when packaged together into shipping cartons or other type of containers.
The logistical activities carried out in warehouse are sorting, sequencing, order
selection, transport consolidation and sometimes product modification and
assembly. Within the warehouse, products must be received, moved, sorted, and
assembled to meet customer order requirements and for these activities material
handling becomes significant. :roducts packed in cans, bottles or bo!es are
handled more efficiently when combined into larger units such as ;aster 3artons.
;aster units can further be consolidated into large units such as pallets, containers
etc.
CHAPTER #?INTROD,CTION TO /,PP-> CHAIN
$ANAGE$ENT
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$ supply chain is the system of organi#ations, people, activities, information and
resources involved in moving a product or service from supplier to customer. $n
integrated group of processes to ?source,@ ?make,@ and ?deliver@ products .%upply
chain activities transform raw materials and components into a finished product
that is delivered to the end customer.
It consists of all parties involved directly or indirectly in fulfilling a customerAs
request
#<7 $EANING O) /,PP-> CHAIN $ANAGE$ENT
It is the process of planning, implementing and controlling the operations of the
supply chain with the purpose to satisfy customer requirements as efficiently as
possible. %upply chain management manages all movement and storage of rawmaterials, workinprocess inventory, and finished goods from pointof origin to
pointofconsumption.
#<# DE)INITION O) /,PP-> CHAIN
1!
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Manufacture
& Raw Materials
Export &
ImportActivities
Primary
Movement
Distribution
Centres
Secondary
Movement
! & !C
Distribution
After"Sales
Services
Reverse Logistics
After SalesLogistics
SuppliersProductionDistributionSales ChannelValue-Added
ServicesEnd UserDistribution
DistributionLogistics
ManufacturingLogistics
nboundLogistics
Suppl!Logistics
?a supply chain is a network of facilities 0 distribution options that performs the
functions of procurement of materials transformation of these materials into
intermediate 0 finished products 0 distribution of these finished products to
customers )
B
#<# DE)INITION O) /,PP-> CHAIN $ANAGE$ENT
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It is the management of a network of all business processes and activities
involving procurement of raw materials, manufacturing and distribution
management of +inished oods.
%3; is also called the art of management of providing the 7ight :roduct, $t the
7ight Time, 7ight :lace and at the 7ight 3ost to the 3ustomer.
#<* O9BECTIE/ O) /,PP-> CHAIN $ANAGE$ENT
9 ;a!imi#e the overall value generated is the difference between what the final product
is worth to the customer and the effort the supply chains e!pends in filling the request of
the customer
9 %upply chain profitability is the difference between the revenue generated from the
customer and the overall cost across the supply chain
9 It is the total profit to be shared across all supply chain stages
9 %upply chain success is measured in terms of supply chain profitability and not in
terms of the profits at an individual stage
9 7evenue is from customer positive cash flow9 $ll other cash flows are simply fund e!changes that occur within the supply chain
given that different stages have different owners
9 $ll flows of information, product or funds generates costs within the supply chain
9 %upply chain management involves the management of flows between and among
stages in a supply chain to ma!imi#e total supply chain profitability.
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#<+ DECI/ION PHA/E IN /,PP-> CHAIN $ANAGE$ENT
%uccessful supply chain management requires many decisions relating to the flow of
information, product,0 funds
These decision falls into 5 categories8phases depending on the frequency of each
decisions 0 timeframe
9 %upply chain strategy or design
9 %upply chain planning
9 %upply chain operation
/upply c!ain strategy or design?
uring this phase ,$ company decides how to structure the supply chain over the ne!t
several years it decides the supply chain configuration will be, how resources will be allocated
ecision includes whether to perform or outsource functions ecisions regards to warehousing
facilities 0 modes of the transportation 0 types of information utili#ed. ecision regarding
products to be manufactured or stored at various location.
/upply c!ain planning?
In this phase decision includes
9 efinition of a set of policies that govern shortterm operations
9 %tarts with a forecast of demand in the coming year
9 The inventory policies to be followed
9 Timing 0 si#e of marketing promotion
9 The subcontracting of manufacturing
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9 The goal of planning to ma!imi#e supply chain surplus
9 In this phase, companies must include uncertainty in demands, e!change rate 0
competition
/upply c!ain operation?
9 Time hori#on is weekly or daily
9 ecisions regarding individual customer orders
9 %upply chain configuration is fi!ed and operating policies are determined
9 oal is to implement the operating policies as effectively as possible
9 $llocate orders to inventory or production, set order due dates, generate pick lists at a
warehouse, allocate an order to a particular shipment, set delivery schedules, place
replenishment orders ;uch less uncertainty Cshort time hori#on4
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#<* PROCE// IE: O) /,PP-> CHAIN
Cycle "ie( processes in a supply chain are divided into a series of cycles, each
performed at the interfaces between two successive supply chain stages
Pus!pull "ie( processes in a supply chain are divided into two categories depending on
whether they are e!ecuted in response to a customer order Cpull4 or in anticipation of a
customer order Cpush4.
Cycle ie( of a /upply C!ain
"ach cycle occurs at the interface between two successive stages
3ustomer order cycle Ccustomerretailer4
7eplenishment cycle Cretailerdistributor4
;anufacturing cycle Cdistributormanufacturer4
:rocurement cycle Cmanufacturersupplier4
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Supplier
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3ycle view clearly defines processes involved and the owners of each process. %pecifies
the roles and responsibilities of each member and the desired outcome of each process.
Pus!Pull ie( of /upply C!ains
Pus!Pull ie( of /upply C!ain Processes
%upply chain processes fall into one of two categories depending on the timing of their
e!ecution relative to customer demand
Pull?
In this e!ecution is initiated in response to a customer order Creactive4
It operate in an environment in which customer demand is known. Therefore, at time of
e!ecution of a pull process ,demand is known with certainty
Pus!?
In this e!ecution is initiated in anticipation of customer orders Cspeculative or forecast4
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PULL PROCESSES
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In this e!ecution process ,customer demand is not yet known 0 must be forecast
:ush8pull boundary separates push processes from pull processes. The relative proportion
of push and pull processes can have an impact on supply chain performance
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#<+ ),NCTION/ O) /,PP-> CHAIN $ANAGE$ENT
/trategic
Tactical
Operational
/trategic
%trategic network optimi#ation, including the number, location, and si#e of warehouses
.distribution centers and facilities.
%trategic partnership with suppliers, distributors, and customers
:roduct design coordination so that new and e!isting products can be optimally integrated into
the supply chain, load management
Information Technology infrastructure to support supply chain operations.
WhereDtoDmake and whatDtoDmakeDorDbuy decisions
$ligning overall organi#ational strategy with supply strategy.
Tactical
%ourcing contracts and other purchasing
decisions .:roduction decisions including contracting, locations, scheduling, and planning
process
definition. Inventory decisions including quantity, location, and quality of inventory
Transportation strategy including frequency routes, and contracting.
>enchmarking of all operations ;ilestone payments
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Operational
aily production and distribution planning :roduction scheduling for each manufacturing
facility in the supply chain Cminute by minute4.
emand planning and forecasting coordinating the demand forecast of all customers and
sharing the forecast with all suppliers.
%ourcing planning including current inventory and forecast demand, in collaboration with all
suppliers.
Inbound operations transportation from suppliers and receiving inventory.
:roduction operations 2utbound operations fulfillment activities and transportation to
customers.
2rder promising, accounting for all constraints in the supply chain, including all suppliers,
manufacturing facilities, distribution centers, and other customers.
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CHAPTER *?DRIER/ O) /,PP-> CHAIN
$ANAGE$ENT
7 In"entory
# $aterial !andling
* Information
+ Transportation
$odes of transportation
. :are!ousing
E4 Pac1aging
7 In"entory?
Inventory encompasses all the raw materials, work in process, and finished goods within
a supply chain. 3hanging inventory policies can dramatically alter the supply chain/s
efficiency 0 responsiveness.
There are three basic decisions to make regarding the creation and holding of inventory(
1. 3ycle Inventory( This is the amount of inventory needed to satisfy demand for the
product in the period between purchases of the product.
*. %afety Inventory( inventory that is held as a buffer against uncertainty. If demand
forecasting could be done with perfect accuracy, then the only inventory that would be
needed would be cycle inventory.
5. %easonal Inventory( This is inventory that is built up in anticipation of predictable
increases in demand that occur at certain times of the year.
# $aterial Handling?
9 The primary material handling obective is to efficiently move large quantities of
inventory into and specific customers orders out of the warehouse.2!
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9 The functions performed in a warehouse are classified as movement or Fandling and
storage.
9 Fandling is divided into
7eceiving
In storage handling , and
%hipping
$n e!tremely important aspect of logistics is the productivity potential that can be
reali#ed from capital investment in materialhandling equipment.
%peciali#ed handling equipment is required for unloading bulk materials such as for
solids, fluids, or gaseous materials.
The guidelines suggested in designing the material handling systems are(
"quipment for handling and storage should be as standardi#ed as possible.
When in motion, the system should provide ma!imum continuous flow.
Investment should be made in handling rather than stationery equipment.
Cd4 Fandling equipment should be utili#ed to the ma!imum e!tent possible.
Ce4 In selecting handling equipment, the ratio of deadweight to payload should be minimi#ed.
Cf4 Whenever possible, gravity flow should be incorporated in the system design.
Time>ased 7equirement(
Ca4 Timebased arrangements reduce the overall inventories by developing the capability to
respond rapidly to e!act to e!act manufacturing or retail customers.
Cb4 If the products8materials can be delivered quickly, it may not be necessary to maintain
inventories at manufacturing plants8 retail stores.
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Cc4 If replenishment can be achieved rapidly less safety stock will be required and instead of
stockpiling and holding safety stock the requirement will be to receive the e!act quantity
of inventory at the time required.
Cd4 Timebased programs tend to reduce shipment si#es, which in turn increases the number,
frequency, cost of shipments and hence higher transportation cost.
Ce4 $n effective logistical arrangement will be to achieve a tradeoff resulting into desired
customer service at the lowest total cost.
* Information?
Information serves as the connection between various stages of a supply chain, allowing
them to coordinate 0 ma!imi#e total supply chain profitability. It is also crucial to the
daily operations of each stage in a supply chain for e.g a production scheduling system.
Information is used for the following purpose in a supply chain(
1. 3oordinating daily activities related to the functioning of other supply chain drivers(
facility, inventory 0 transportation.
*. +orecasting 0 planning to anticipate0 meet future demands. $vailable information is
used to make tactical forecasts to guide the setting of monthly 0 quarterly production
schedules 0 time table
5. "nabling technologies( many technologies e!ist to share 0 analy#e information in the
supply chain. ;anagers must decide which technologies to use 0 how to integrate these
technologies into their companies like internet, "7:, 7+I.
+ Transportation?
Transportation decisions are more strategic ones closely linked with inventory decisions.
ecisions are based on tradeoff between the cost of using a particular mode of transport
with the cost of inventory associated with that mode.
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+or instance, air shipments may be fast, reliable , and warrant less safety stocks= they are
e!pensive whereas shipping by sea or rail may be much cheaper but they necessitate
holding relatively large amount of inventory to protect against the inherent uncertainty
associated with them. 3ustomer service levels and geographic locations are important
aspects in transportation decisions. Transportation accounts for roughly 5GH of the
logistics costs and therefore operating efficiencies become important aspects .%hipment
si#es i.e. consolidated bulk shipments versus smaller lot si#es= routing and scheduling of
vehicles become important part of company/s transport strategy. Transportation is one of
the most visible elements in the logistics operation.
$. Product $o"ement
:rimary function is the movement up and down the value chain. $s transportation uses
temporal, financial and environmental resources, the movement of materials should take
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place only when it enhances the product value. ses temporal resources because the
product is inaccessible while in transit. ue to JIT strategies transit inventories are
becoming more significant thereby reducing manufacturing and distribution centre
inventories.
Cb4"!penses incurred internally for private fleet of vehicles or e!ternally for commercial or
public transportation constitute financial resources.
Cc4 Transportation consumes fuel and oil and also creates environmental e!penses through
congestion, air pollution and noise pollution.
>< Product /torage
Temporary storage through vehicles becomes e!pensive as intransit storage is required to
be moved again in a short duration of time. %ometimes temporary storage becomes
advantageous as the cost of unloading and reloading the product in a warehouse may
e!ceed the daily charge of storage in transportation vehicles. ;any times where the
warehouse space is limited, utili#ing transportation vehicles becomes a viable option.
The options available to a transporter in case of warehouse space constraints are Instruct
driver to take a circuitous or indirect route to its destination, as the transit time would be
greater as compared to direct route. Thus transport vehicle is used as temporary storage
option. 3hange the shipment destination i.e. temporary storage is achieved through
diversion.
+or instance, product that is, say, scheduled initially from ;umbai to Fyderabad gets
diverted mid way to Kishakhapatnam CKisage4 as Kisage warehouse may be in greater
need of product and has the storage capacity. Traditionally, the telephone was used to
direct diversion but nowadays satellite communications between headquarters and
vehicle handle such tasks more efficiently.
Though product storage in vehicles can be costly, it can be ustified from a total cost
perspective when loading, unloading costs, or capacity constraints are considered.
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$odes of Transportation(
A< Rail
3apability to transport large shipments economically with more frequency .Figh fi!edcosts because of e!pensive equipment, right of way, switching yards, and terminals.
Kariable cost per kg8km has been considerably reduced by electrification. >ulk industries
and heavy manufacturing use railways more frequently.
3an improve effectiveness of transportation by having alliances with other modes.
>. Hig!(ay
rowth of motor carrier industry has resulted into doortodoor operating fle!ibility andspeed of intercity movement. 3ompared to railways, motor carriers have relatively small
fi!ed investments in terminal facilities and operate on publicly maintained highways.
Kariable cost per kilometer is high because a separate driver and cleaner are required for
each vehicle. Labour cost is also high because of the need for substantial dock labour .
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;otor carriers are best suited to handle small shipments moving short distances. +avour
light manufacturing and distributive traders, short distances and high value products.Fave
captured significant market share of railways in medium and light manufacturing
industries.>ecause of delivery fle!ibility, motor transport has captured almost all freight
moving from wholesalers or warehouses to retail stores.Figher cost in replacing
equipment, higher wages to driver and other dock labour .
C< :ater
3apacity to move e!tremely large shipments.+i!ed costs are somewhere between rail and
motor carriers.Though water carriers have to develop and operate their own terminals, the
rightofway is developed and maintained by the government, resulting into moderate
fi!ed costs compared to rail and highways.Low variable cost makes this an attractive
mode when low freight rates are desired and speed is secondary consideration.Typically
bulk commodities such as mining , chemicals, cement, and certain selected agricultural
products are transported by ocean going vessel.nless the point of origin and point of
destination are adacent to a waterway, it needs to be supplemented by rail or trucks.
< Pipelines
sed for transporting natural gas, manufactured chemicals, pulveri#ed dry bulk materials
such as cement and flour via hydraulic suspensions, sewage and water within the cities and
municipalities.2perate on *6! basis are limited only by commodity changeover and
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Kariable costssuch as driver,fuel, tyres and
repairs arehigh relativeTo railways.
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maintenance.<o empty container or vehicle that must be returned.Fighest fi!ed cost an
lowest variable cost.
Figh fi!ed costs due to rightofway, construction and requirements for control station
and pumping capacity.
$s pipelines are not labour intensive, variable operating cost is e!tremely low once the
pipeline is constructed.
Infle!ible and limited to products in the form of gas, liquid or slurry.
"< Air
%ignificant advantage lies in the speed with which a shipment can be transported.Though
the freight cost is very high, the same may be tradeoff with reduced warehousing or
inventory.3haracteri#ed by load si#e constraints and aircraft availability. +i!ed cost
associated with aircraft purchase and requirements for speciali#ed handling systems is
low as compared to rail, water and pipeline.$irways and airports are generally developed
and maintained with public funds.$irfreight variable cost is e!tremely high as a result of
fuel,maintenance and intensity of inflight and ground crew.
$irfreight is ustified in following situations(
$. Figh value products
>. :erishables
3. Limited marketing period.
. "mergency.
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ContaineriFation?
3ontainer is large rectangular bo! into which a firm places commodities to be
shipped.$fter initial loading, the commodities themselves are not rehandled until they
are unloaded at their final destinations.Throughout the movement, the carrier handles the
container, not the commodities.The shipper can transfer the container from one mode to
another, eliminating the need to handle the commodities each time thus reducing handling
costs, damage costs, theft, pilferage and the time required to complete the modal transfer.
;any firms that modify their material handling systems to include cranes, forklift trucks,
and other equipment capable of handling large, heavy containers have found
containeri#ation to be desirable avenues for increasing productivity and controlling
material handling costs, especially in periods of continually increasing labour costs.$s
the obective of intermodal transport system is to provide virtually seamless ourney, the
best way to achieve same is to use modular or uniti#ed loads.
Piggy&ac1 Trailer on )lat Car?
T2+3 is a speciali#ed form of containeri#ation in which rail and motor transport coordinate.
3arrier places motor carrier trailer on a rail flatcar, which moves the trailer by rail for long
distance.$ motor carrier then moves the trailer for short distance pickups and deliveries.This
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C"#$ S$%&'$&%(
"% E*'+ M",(" T%*-#."%$*$/"-
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service combines the longhaul, low cost advantage of rail with accessibility of motor.:iggyback
services mostly move under contract.
. Pac1aging?
:ackaging can be categori#ed into two types vi#.
Ca4 3onsumer packaging, which has a marketing emphasis, and
Cb4 Industrial packaging, which has more of logistics emphasis.
9 3onsumer :ackaging C;arketing "mphasis4
9 3onsumer packaging design focuses on customer convenience, market appeal, retail shelf
utili#ation, and product protection.
9 Large containers and odd si#es may increase the consumer visibility but make poor
logistical packaging.
9 +or e!ample, shipping products fully assembled such as motorcycles results in substantial
reduction in density.
9 $ low density package would mean higher transportation costs and greater warehousing
requirements.
>. Industrial :ackaging CIndustrial emphasis4
Individual products or parts are normally grouped into cartons, bags, bins, or barrels for
handling efficiency. These containers are used to group individual products and are
referred to as master cartons. When master cartons are grouped into larger units for
handling, the combination is referred to as containeri#ation or uniti#ation.The master
carton and the uniti#ed load provide the basic handling unit in the logistics channel.The
weight, volume, and fragility of the master carton in an overall product line determines
transportation and material handing requirements.If the package is not designed for
efficient logistical processing, overall performance of the system would suffer.
%tandardi#ation of master carton facilitates material handling and
transportation.%tandardi#ation of master carton is beneficial even in conte!t of retail
backend operations.
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Ca4 +or instance, in case of shoe store as the contents of each master carton are known, it is
not necessary to search through many cartons for a particular style or si#e of shoe.
$llows master cartons to be more efficiently stacked, resulting in to less backroom
congestion.
Cb4 3omplete identification of master carton contents facilitates completion of retail
inventory and merchandise reorder.%tandardi#ed cartons are selected to achieve
ma!imum conformity in increasing the density in the trailer thereby eliminating dead
space in stacking.The end result of standardi#ed master carton usage is substantial
reduction in total cost combined with an effective material handling system at both
warehouse and the retail store .In situations, when master cartons of more than one si#e
are required, e!treme care should be taken to arrive at an assortment of compatible
units.These different si#es of master cartons should result into modular compatibility.
/crap:aste Disposal?
3!
isposal
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/crap
%crap is a waste created while processing the materials.The process scrap is unavoidable
e!tra material removed from the stock of material while generating a component.+or
e!ample, while making a machined component some material has to be removed in the
form of chips.Muite often, while manufacturing any component some dimensions are not
maintained and the lot is scrapped as these cannot be used in the assembly of the
product.
/urplus
When the proect or product needs a specific quantity of the item, e!tra leftover cannot be
used and this quantity is called surplus.The surplus quantity has to be disposed off.
< O&solete
When the item cannot be used in the product8 proect due to changes that might have
taken place in respect of dimensions, shape, colour etc, these are called obsolete
items.3hanges may occur due to defect in product design, or shelf life etc.These
components have to be scrapped8 disposed off.
0 :are!ousing
The primary purpose of a warehouse management is to control the movement and storage
of materials within an operation.Warehousing can be viewed as a place to store inventory
as well as a facility for switching the inventory.
Warehousing is becoming significant to achieve the following obectives(
To reduce inventory
To reduced costs
To increase storage capacity
To increase customer service
To increase inventory accuracy.
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Typically, the warehouses received merchandise by rail or road and the materials were
moved manually to a storage area within the warehouse and piled up on the floor in
stacks manually.ue to above, though different products were stored in the same
warehouse it was difficult to identify the merchandise with respect to a particular order.
2n the receipt of the customer orders, products were handpicked and placed on the
wagons and these wagons were pushed out of shipping area. $s the was ine!pensive,
human resources were used e!tensively and no consideration was given to efficiency
utili#ation, work methods, or material handling.Inspite of poor efficiency, warehouses
continued to provide a necessary bridge between production and marketing. With the
improved techniques of forecasting and production scheduling the need to build up
inventory was considerably reduced.$lso, delays during manufacturing process reduced
as the production became more coordinated.%easonal products continue to require
warehousing.The overall need to store materials to support manufacturing has been
reduced. In conte!t of retailing, the department stores face the necessity of stocking an
increased variety of products and are unable to order in sufficient quantities from a single
supplier to enoy the benefits of consolidated shipment.irect ordering from
manufacturers becomes prohibitively e!pensive due to high cost of transporting small
shipments.This necessitates the need for warehousing to provide timely and economical
inventory assortments.$t wholesale level, the warehouse becomes a support unit for
retailing. In conte!t of manufacturing, companies producing products at multiple
locations, efficient warehousing becomes a method for reducing material and partsstorage and handling costs while optimi#ing production.
+or implementing JIT and stockless production strategies warehousing becomes an
integral part of entire value chain.$s the basic obective of JIT is to reduce workin
process inventory, manufacturing needs to supported by highly dependable delivery. In a
country as large as India, this is possible only by having strategically located warehouses.
The stocks can be held at a central warehouse thereby reducing the need to maintain
inventory at each assembly plant.sing consolidated shipments, materials are purchasedand transported to the supply warehouse and then distributed to manufacturing plants as
and when needed.$ fully integrated warehouse is a vital e!tension of manufacturing. In
conte!t of outbound logistics, warehouses have made possible the direct shipment of
mi!ed8 assorted products to the customers thereby enhancing the service capabilities.The
direct assorted shipments have two advantages, namely,7educed logistical cost because
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the full product assortment can be delivered while taking the advantage of benefits
obtained through consolidated transportation.;ore competitive advantage for the
manufacturers due to speedier shipments and mi!ed lots.7ecently, warehouses have been
able to increase productivity due to effective use of Information Technology.
:are!ouse strategies?
:rivate Warehouses
2perated by the firm owning the product i.e. facility may either be owned or leased.Muite often
the warehouses requiring specific material handling activities designed to fit e!act needs of the
firm may not be available on hire.enerally efficient warehouse should be planned around a
material handling system in order to encourage ma!imum efficiency of product flow. +irms with
speciali#ed customers or products often develop their own warehouse.
:ublic Warehouses(
3lassified on the basis of range of speciali#ed operations performed, as under eneral
merchandise e.g. paper, small home appliances and household maintenance goods.7efrigeration
facilities to preserve food products, pharmaceutical medicines and certain chemicals requiring
specific ambient temperature.>ulk commodities requiring speciali#ed material handling systems
such as liquid chemicals, tress, and te!tile fabrics. >onded, licensed by the government to store
goods prior to payment of custom duties, ta!es etc.+urniture requiring special handling systems.
:rovide greater fle!ibility in operations since warehousing becomes the core business. ue to
high volume operations., fi!ed costs get spread over and ustify more efficient handling
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3ontract
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operations. Transportation economies are leveraged by delivery of loads representing various
customers. :ublic warehouses charge a client a basic fee for handling and storage based on
number of cases or the weight handled. When economies of scale are not possible in a private
warehouse, public warehousing may be a low cost alternative.
3ontract Warehouses(
9 3ontract warehouses provide all logistics activities such as
9 Transportation
9 Inventory control
9 2rder processing
9 3ustomer services, and
9 7eturns
$ssume total responsibility for enterprises that desire only to manufacture and market.
Fow firm utili#e warehousing facilitiesN
$ private or contract facility may be used to cover regular year round requirements.:ublic
facilities are used to handle peak season.In many cases central warehouse may be private,
while market or field warehouse are public warehouse.Where the warehouse space is
fully utili#ed at least 'OGH of the time, private facility may be more efficient.$ firm
may find private warehousing to be more ustified at certain locations on the basis of
distribution volume, while in other cases public warehousing may be the least cost
option. %ome customer groups may be served better from a private warehouse, while a
public warehouse may be appropriate for others.Where the customers can be served
better by local presence of the products, private or contract facility may be useful.:ublic
and contract warehousing increases the potential for industry synergy.
♦+or e!ample, firms in grocery business share public warehousing facilities with other suppliers
serving the same industry.
♦The benefit is the reduced transportation cost due to oint use of same public warehouse
allowing for frequent delivery of consolidated loads from multiple suppliers.
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Ca4 :ublic and contract warehouses demonstrate more responsiveness as they offer location
fle!ibility. +or e!ample, inseason demand for agricultural chemicals require warehouses
to be located near markets to serve customers better. $fter growing season, local
warehouse become unnecessary.
Cb4 :ublic and contract warehouses generally offer better economies of scale, as they are able
to design operations and facilities to meet higher volumes of multiple clients.
Cc4 3ontract warehousing facilities can provide complete logistical support such as
transportation, order processing, inventory control, storage and other administrative
assistance in an integrated manner.
:are!ouse functions
:are!ouse functions
C$4;ovement(
7eceiving, Instorage handling and shipping.
Ca4 7eceiving
$ctivities involved ares nloading the transportation vehicle, which in most cases is done
manually.In Indian conte!t, limited automated and mechani#ed methods have been developed
that are suitable to varying product characteristics.The product is handstacked on pallets to
form unit load for movement efficiency.
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"!tendedstorage
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Cb4 Instorage handling
2n receipt of the product, the merchandise is transferred within the warehouse to position for
storage or order selection. 2n receipt of order, the required products are accumulated and
transported to a shipping area. The entire operation helps in selection process for grouping
materials, parts, and products into customers/ orders.
Cc4 %hipping
Involves checking and loading orders onto transportation vehicles.%hipping in unit loads leads to
considerable saving of time in loading the vehicle.3hecking is important at a point when
merchandise changes ownership as a result of shipment.
>P%torage( can be either planned or e!tended.
Ca4 :lanned storage
%torage for basic inventory replenishment is referred to as a planned storage.uration varies
depending on the performance cycle length.
Cb4 "!tended storage
%ometimes storage may be required for several months prior to customer shipment.%easonal
items require storage to wait for demand or to spread supply across time."rratic demand, product
conditioning, speculative purchases and discounts call for e!tended storage.
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CHAPTER +?INTROD,CTION TO A$,-
In the year 1&6E, the first milk union was established. This union was started with *'G litres
of milk per day. In the year 1&'', $;L was established. In the year 1&6E, the union was known
as Q$I7$ I%T7I3T 322:"7$TIK" ;ILQ :723"7%/ <I2<. This union selected the
brand name $;L in 1&''.
The brand name $mul means ?$;LR$@. This word derived from the %anskrit word
?$;LR$@. $ quality control e!pert in $nand had suggested the brand name ?$;L@. $mul
products have been in use in millions of homes since 1&6E. $mul >utter, $mul ;ilk :owder,
$mul hee, $mul spray, $mul 3heese, $mul ;unch Times, $mul %hrikhand, $mul Ice 3ream,
<uramul, $mul ;ilk, $mul ;ilk rinks and $mulya have made $mul a leading food brand inIndia. Today $mul is a symbol of many things like of the high quality products sold at
reasonable prices, of the genesis of a vast cooperative network, of the triumph of indigenous
technology of the marketing savvy of a farmers organi#ation. $nd have a proven moldel for dairy
development.
T$ LI<"(T$%T" 2+ I<I$
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Professional management
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GC$$)
uarat 3ooperative ;ilk ;arketing +ederation C3;;+4 is IndiaAs largest food products
marketing
organisation. It is a state level ape! body of milk cooperatives in uarat which aims to provide
remunerative returns to the farmers and also serve the interest of consumers by providing quality
products which are good value for money.
;embers( 15 district cooperative milk producersAnion
<o. of :roducer ;embers( *.E million
<o. of Killage %ocieties( 1*,&*
Total ;ilk handling capacity( 1G.1E million litres per day;ilk collection CTotal *GGEG4( *.5O billion litres
;ilk collection Caily $verage *GGEG4 E.' million litres
;ilk rying 3apacity( '&6 ;ts. per day
3attlefeed manufacturing 3apacity( *E6G ;ts per day
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%ales Turnover 7sCmillion4 % S Cin millions4
1&&6&' 1116G 5''
1&&'&E 15&G 6GG
1&&E& 1''6G 6'G
1&&&O 1OO6G 6''
1&&O&& **1&* 6&5
1&&&GG **1O' 6&5
*GGGG1 **'OO 'GG
*GG1G* *55E' 'GG
*GG*G5 *6' ''
*GG5G6 *O&61 E1E
*GG6G' *&**' E*
4!
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Product Portfolio($mul has got a diverse portfolio and thus follows umbrella branding strategy
through this vast network. The range of products is similar in production by the various unions it
handles. Thus with umbrella branding, $mul avoided interunion conflicts and increased co
operation in developing products) +ollowing are the varieties of products(
7 )res! $il1
This is the most basic product by $mul. There are around & further subproducts available in
various flavors.
# $il1 Products
This segment is the largest and most selling product for $mul. The company has added further
variety by providing them in various flavors and packaging.
* Po(der $il1
This includes varieties like Tea83offee whitener and milk for infants. There are around ' sub
brands including $mul %pray, $mul +ull 3ream ;ilk and $mulya.
+ C!eese
It has various subproducts and caters mostly to TierI cities.
. 9read /preads
$mul butter is the most famous subbrand in this category and has almost O'H market share.
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Ad"ertising Tec!niues of Amul
The advertising techniques of $mul are very eyecatching. Without depending on any celebrity
for promotion, $mul took the help of an imaginary cartoon character, popularly known as the
$mul irl.
In the year 1&EE, $mul hired %ylvester da3unha, then managing director of the advertising
agency $%: to design an ad campaign for $mul >utter. da3unha designed a campaign as series
of hoardings with topical ads, relating to daytoday issues. The campaign turned out to be so
famous that it grabbed a uinness World 7ecord. It earned the record for being the longest
running ad campaign ever.
The $mul irl has turned into an iconic character who dresses herself in polka dotted attire.
+or $mul irl, no subect is taboo and she ovially comments on various current affairs topics
with her tongueincheek. To sum up from catchy billboards to being an ecommerce success
story, $mul is indeed rural Indias flag bearer in the IT revolution.
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$ar1et s!are of amul
CHAPTER .?/,PP-> CHAIN O) A$,-
T!e distri&ution net(or1
$mul products are available in over 'GG,GGG retail outlets across India through its network of
5,'GG distributors. There are 6 depots with dry and cold warehouses to buffer inventory of the
entire range of products.
3;;+ transacts on an advance demand draft basis from its wholesale dealers instead of the
cheque system adopted by other +;3 companies. This practice is consistent with 3;;+/s
philosophy of maintaining cash transactions throughout the supply chain and it also minimi#es
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3ategory ;arket share ;arket position>utter O'H 1
;ilk powder 6GH 1
3heese 'GH 1
Ice cream *6.' *
%weets 'GH 1
3hocolate drinks &GH 1
3hocolates 1GH 5
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dumping. Wholesale dealers carry inventory that is ust adequate to take care of the transit time
from the branch warehouse to their premises. This ust in time inventory strategy improves
dealer/s 72I. $ll the branches of 3;;+ are engaged in route scheduling and have dedicated
vehicle operations.
-argest Cold C!ain?
$;L has the largest cold chain network in India C1OGGG refrigerators4 as compared to any
other company. The chemical components of milk are water, %<+ and solids. It is a perishable
product so it has to be consumed within *6 hours. In order to avoid wastage $;L converts the
milk into %<+ C%olids not fats4 and milk solids by evaporating the water, which comprises of EG
GH of the milk contents.
Customers?
India is still in the evolutionary stage with tremendous potential for high value products such as
variants of milk. The distribution network is quite reasonable with access to metros as well as
rural areas.
/uppliers?
$ maority of suppliers are small or marginal farmers who are illiterate, poor and with liquidity
problems.
T!ird party logistics ser"ice?
There are ample deficiencies in the current infrastructure and the outbound logistics is taken care
by 3;;+ coordinating with distributors. It also connects with unions for product mi!, product
allocations and in developing production plans.
The key lies in matching supply and demand as the demand outstrips supply by a big margin.
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Interloc1ing control?
The obective of interlocking mechanism is to ensure that the interest of the farmer is always
kept at the top of the agenda through representatives who constitute the >oards of different
entities that compromise the supply chain. :rofessional managers and farmers work together as a
team to strengthen the cooperative.
Coordination agency(
2bective of such an agency is to ensure the milk produced by the farmer is sold in the market
either as milk or as value added product.
E6isting /upply C!ain of Amul?
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CHAPTER 0?/C$ AND $AR@ET -OGI/TIC/
T!e net(or1
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;ilk is procured from the villages and collected at Killage 3ooperative %ocieties CK3%4= 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 epots located in various parts of the country.
The products are then sent to Wholesale istributors CW4 and from there to the retailers.
The fact sheet
;ilk is procured twice a day from * million from uarat alone
The payment is made under twelve hours of procurement
There are 1GGGG village cooperative societies
There are 5EGG wholesale distributors in the country
6' depots
The 30+ agents are not fi!ed and are decided by the local company offices
There are appro!imately 6,'G,GGG retailers spread all over India
Total house hold consumers covered are 1GG,GGG
The milk procured per day is ' million liters
Where the total capacity of operation is million liters per day
The peak processing till date has been E million liters per day
These co operative societies are bound to supply there produce only to 3;;+.
/C$ and $ar1et -ogistics
"nterprise resource planning( the company at has implemented an "7: program as low as 7s. 5
corers in collaboration with T3% ltd. The company uses it= the data right from the procurement
from the farmers till the delivery of goods to the retailers is fed into the system. The software
enabling the channel members to use for the synchroni#ed working and best possible utili#ation
of the available resources maintains details regarding the inventory management.
;arket logistics deals with the implementation of the %3; of the company. pstream 3hannel
in which milk is procured from the farmers to the manufacturing units.
1. In the first step, the milk is taken to the K3% by the farmers on foot or bicycles in small
quantities
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*. The second step involves the transportation of milk from the cooperatives to the
manufacturing units this is done in special trucks which are equipped with tankers to carry milk.
Do(nstream C!annel
It is the distribution part of the supply chain. +rom the manufacturing units to the retailers. +irst
leg of transport is from the manufacturing unit to the company depots. This is done using & and
1O ;T 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.
+ro#en food the temperature of these trucks is kept below 1OU3
airy wet the temperature of these trucks is kept between G6U3
%econd leg is from the depot to the W/s, this transport is carried out in insulated 5 and ' ;T
T$T$ 6G/s here a permanent dispatch plan C::4 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 W/s to retailers, a beat plan is prepared and
transportation is done on autorickshaws, rickshaws and bicycles.
/E-ECTION $OTIATION O) CHANNE- $E$9ER/
/election?
The company takes into consideration a host of factors while selecting the channel members.
This is because 3;;+ believes that selection of channel members is a long run decision 0 the
rest of the decision regarding the supply chain depends upon the efficiency 0 coverage by the
channel members. The following are the host of factors considered by the company in selecting
the channel members(
$uthentication is required by the regarding the identity of the channel members, which
includes the name 0 address, photograph of the location.
:roof of solvency which requires name 0 address of the channel member/s bankers.
%afety of the inventory, which means that the distributor8 dealer should get the stock of the
company insured.
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Inventory or the perishable goods kept by the distributor8 dealer should be in good condition
which means a detail of storage space 0 7efrigeration facility is to be provided. 7efrigeration
system should have deep free#ers, cold room 0 walk in coolers.
etails of the delivery vehicle, which includes Light 3ommercial Kehicles, ;atador, 5
Wheeler Kan, Tricycle Kan 0 Fand8:ush cart. The number 0 model of each of the vehicle needs
to be furnished to the company.
3;;+ acknowledges the fact that it needs to be sensitive to the market demands. +or 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 +ield salesmen 0 3ounter salesmen. $lso the details of 3lerical
%taff 0 ;a#doors are to be provided. The technical competence of the salesmen needs to be
mentioned
etails of the product kept of other companies have to be provided. The annual sales of these
products too have to be mentioned. $lso details of complementary products 0 product lines need
to be mentioned.
ealers 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.
;arket coverage by the distributors needs to be defined which includes details of eographic
coverage 0 2utlets per market area.
The company also requires the dealers to furnish any $dvertising 0 %ales initiative
undertaken by them on behalf of the company.
$oti"ation of C!annel $em&ers
3;;+ strongly believes in maintaining a good relationship with the channel members so that
they are genuinely motivated to work for the company. $lso if the channel members are
motivated, they can also initiate advertising 0 sales promotion schemes on behalf of the
company. Fowever 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(
Distri&utors
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2ne of the main factors, which keep the distributors motivated, is the margin. sually the
margins offered by the company are OH 0 it is raised to O.'H. Kolume wise this comes out to be
a big figure since $mul/s product has a good demand in the market. Fowever compared to the
other companies the margins are still lower since the new players in the market offer a much
higher margin. >ut the very fact that $mul/s products have good demand in the market motivates
the distributors to stock it.
$mul being a cooperative cannot afford to give heavy monetary incentives. $mul/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 ust the short run means to promote the company/s
product. In order to keep the 3hannel members motivated in the long run, $mul builds on the
concept of ?Trade ;arketing@ which makes the dealers 0 the distributors believe that the
company/s products are worthy of being pushed in the market.
The company is organi#ing various Total Muality ;anagement initiatives 0 workshops. Fere
various counseling measures are undertaken by the company to improve the overall working of
the distribution network.
Kision and mission statement( the company cascades down the vision to the various channel
members= this is done through various events organi#ed by the company at different locations
where the values of the company are made clear and enforced to the channel members. $lso the
fact that $mul being a cooperative society cannot afford to spend e!orbitantly on such events
therefore it has a very traditional way of organi#ing these get together which leaves an impact on
the members.
$mul yatras( this includes taking the channel members on a guided tour of the manufacturing
and procuring facilities in uarat. %o that the channel members can have an e!perience of the
working of the company and can pick up some quality measures that can help them to
synchroni#e 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.
T!e Retailers
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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 *H, also schemes like
good packaging incase of butter and cheese is undertaken by the company. Fowever this is only
a shortterm initiative to push the products of the company.
low boards( the company puts up glow boards at the retailer and pays the maor portion of
the cost
.
%chedule 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 free#ers 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.
TJ$ in Amul?
$mul has benefitted at all levels due to TM;, to develop leadership, operational and strategic
capabilities in entire network.
+riday epartmental meetings( "very +riday the network organi#es departmental meetings to
discuss issues related to quality and policy.
Training for transformational leadership so that individuals are able to coordinate in a better
way a carry out their responsibilities in one/s life and surrounding environment
7etail 3ensus( 3;;+ undertakes a census of all retail outlets Cover 'GG,GGG4 to evaluate
customer perceptions and distribution efficacy of their network. Interestingly, this is being done
by wholesalers in their respective territories at their own cost. This information is used for policy
deployment e!ercise.
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Einitiati"e(
The 3;;+ V $mul has taken the initiative of installing the $;3% V $utomatic ;ilk
3ollection nit %ystems at village societies to enhance the transparency of transaction between
the farmer and the 3o2perative %ociety. These systems not only ensured the transparency but
also gave 3o2perative societies a unique advantage by reducing the processing time to 1G
percent of what it used to be prior to this.
The success of $;3% prompted the 3;;+ to aggressively go on using Information
Technology to capture the endtoend data. 3;;+ planned to cover all aspects of the value
chain. The airy Information and %ervices Qiosk CI%Q4 is another initiative that is started with
the help of II; C$4 by 3;;+L.
Karious things like "nterprise wide Integrated $pplication %ystems C"I$%4 to integrate the
istribution side of the %upply chain, I%Q V to upgrade the application at the ;ilk 3ollection
3enters and to connect them to the Internet to access a speciali#ed dairy portal with content
delivered in the local language have already started giving the fruits to the rural poor, which has
persuaded the rural folks to actively participate in IT 7evolution of the dairy industry.
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CHAPTER 0?I//,E/ AND RECO$$ENDATION A$,-
/,PP-> CHAIN
1. %tock outs and huge gap in %upply emand of pouched milk(
$s we have seen over the past decade that the demand for +I certified pouched milk has
increased significantly in India due to adulteration and mi!ing of harmful agents in locally
supplied open milk, there is an increasing gap between the supply and demand of milk in bigger
cities of India. :eople tend to buy more pouched milk in large cities due to time constraints,
convenience and lack of local dairy operators.
$;L has been unable to achieve a #ero stock out strategy for its pouched milk retailers. 2ne of
the reasons for this is its high brand equity as it is the topmost brand on consumers mind when
you talk about Muality and healthy milk. +or e!ample, in <ational capital region people buy
$;L and other pouched milk like ;other dairy from retail stores. ;other airy has captured
maor share in <37/s market due to large number of franchised retail outlets as compared to
$;L which helps them proect the demand and improvise on their supply accordingly. $lso
this has to do with the ease of local procurement of ;other dairy over $;L. The consequence
is that customers who are willing to buy $;L milk are unable to make the purchase since it
goes out of stock by (GG pm in the evening. While ;other dairy retailers keep the adequate
stock to be last till late in night.
+orward integration by twin model approach for increasing distribution(
We recommend that $;L should aggressively open more retail stores inside big residential
societies and also more outlets per locality8area to cater to increasing demand. $lso, they need to
understand the importance of <37 market as it is the largest consumer of pouched milk in India
due to its population strength. $;L also needs to tie up with other retail stores, multi stores
and superstores like >ig >a#aar, "asy day, etc. to improve demand proection and volume
selling.
*. Increasing the production and local procurement of milk to provide an adequate supply(
The above issue of a significant gap between supply and demand is very much related to the
limitations $;L faces in terms of procuring milk from areas surrounding <37 due to which it
has to depend heavily on supply from uarat milk unions of 3;;+. This comes with huge
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transportation costs and wastage of milk due to reduced shelf life. We recommend $;L to
work on the backward integration for this problem.
Initially we thought to recommend $;L to tie up with local suppliers8farmers and implement a
similar model as 3;;+ in elhi region. The issue with this approach is that it defeats the
purpose of local cooperatives of uarat and they have to start sharing their profit with other
unions too for which the stakeholder/s approval is hard to achieve. $lso, ;other dairy has
already developed strong ties with the local milk producers and farmers in this region= and
$;L has to offer an incentive premium for acquiring these producer/s milk. This will result in
significant increase in prices of $;L milk. Looking at a different perspective we would
recommend $;L to set up its self funded Cowned by 3;;+4 dairy in <37 region to boost
the supply in the high demand region and target achieving a #ero stock out supply.
%ome of the issues with this approach are vested interest of uarat farmers who are heavily
dependent on daily income and would not encourage and agree to the returns to come after sales
of elhi dairy products and thus it would be very hard for 3;;+ to cohesively coordinate the
sentiments of its various incorporated unions.
Looking at the positive side of this move, $;L will be able to cater to EG H more demand and
also reduce wastage due to souring of milk as a result of longer transportation route from
uarat.
5. Investing in high yield cows8buffalos for e!isting farmers using a ;icro finance model(
$nother issue which $;L has faced over decades and which is also inherent in dairy farming
in India is the yield per cow. The yield per buffalo for Indian cows is almost 185 times lower than
that of any Fybrid or $merican cows like Jersey. +ocusing on another backward integration
technique, we will suggest improving the quality of buffalos by either introducing hybrid or pure
breed, speciali#ed technological equipment. +actors such as fodder, environment, space
available8head of cattle etc. you need to mention that too as it may be less e!pensive for the
farmers or for the $;L owned dairy to keep. We suggest use of another option too by the
farmers who cannot afford to go commercial dairy farming instead of the present village dairy
farming for milking higher yields. %ince a maority of sourcing is done by marginal farmers who
lack the capital for acquiring the costlier Fybrid breeds, $;L could look at provision of micro
financing to these farmers. We keep in mind that the farmers will resist to any such move and
think that as a cannibali#ation effort of their current supply and burden on themselves, but with
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$;L/s highly competent training centers and $nand Institute of ;anagement set up by
$;L, educating these farmers and unions would not be a difficult task.
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CHAPTER 3?)INANCIA- I$P-ICATION/ ON
RECO$$ENDATION/
1. Improve Logistics in Transportation through Integration with the 7ailway %ystem
$side from having its own dedicated fleet of trucks in transporting milk, $mulhas already
considered integrating their transport system with railway cooling units to improve transport cost
and its supply to elhi. It has tied up with $dani Logistics to have a dedicated train to transport
milk daily from udhsagar airy of ;ehsana to the city. The annual transport cost of
;ehsanaairy is 7s. 6G crore via road tankers for 1*G,GGG liters of milk daily from
udhmansagar plant in ;anesarto elhi. $ccording to ;ehsana airyAs chairman Kipul
3haudhary, with the milk train transport system which would use 'G wagons with a capacity of
*6,GGG liters each to cater to the same volume, 'GH would be saved on transport
cost.13omputing for the cost savings would give us 7s. G.6E per liter.
Liters of milk per day 1,*GG,GGG
C;anesar to elhi4
<umber of elivery
per year
5E'
$nnual Transport cost
via 7oad C7s.4
6GG,GGG,GGG
Transport 3ost via
7oad C7s.4 per liter
G.&1
%avings via 7ailway 'GH3ost %avings C7s.4 per
liter
G.6E
$ssuming milk train system is applicable throughout $mul supply chain and ratio of
transportation cost to liters is the same, then the company could save 7s. 1,GGG,GGG,GGG per year
which is .H of its e!pected revenue of 7s. 1'G bn for *G1**G15.
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Total liters of milk
collected per day
E,GGG,GGG
Total $nnual
Transportation cost
savings C7s.4
1,GGG,GGG,GGG
In addition, if we consider 3;;+ e!pansion plans to set up two milk processing plants in
elhi, one each in Qolkata and ;umbai, and four in uarat, to boost milk processing capacity
from 16.' to *G million liters per dayii and apply the milk train system, then total transportation
cost savings assuming $mul can utili#e ma!imum capacity would be as follows(
;a! liters of milk
processing per day
*G,GGG,GGG
Total $nnual
Transportation cost
savings C7s.4
5,555,555,555
Therefore, if $mul can implement this transport system throughout applicable dairy plants in
India, then the company/s billion savings in 7upees may be used to invest in their e!pansion to
increase the supply and their distribution network, or to lessen the 7s. 1* price hikes by *''GH
due to
transportation cost. With either of these moves, $mul would benefit inrevenue and increase in
market share over other competitors especially in elhi and <37 region.
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$side from the above mentioned, using the railway cooling units can prevent the risk of
accidents on the road. Therefore, this can reduce wastage, vehicle maintenance cost, and
hospitali#ation e!pense. This alternative can also avoid delays in transportation due to traffic on
roads which is very crucial for $mul/s business since goods are perishable. *. 7educe
transportation time by choosing nearer dairy sites in their e!pansion plans 3urrently, $mul/s
plant in ;anesar is around 6& kilometers Cor 6& minutes drive4 away from elhi. $mul/s maor
competitor which is leading in the region, ;other airy, also sources nearby but from more than
one plant. airy plants they source from are <oida, ha#iabad, and ;eerut which are 5G, 6E,
and &1 minutes away respectively. Therefore, $mul/s plan in opening * more plants in elhi
would be best since it could be more responsive because it would have more lead time in
catering to the demand in the region. $lso, if we have our source of raw milk nearby, then
transportation from the source would decrease drastically because in their current setup, tankers
would have to travel GG kilometers from uarat. Therefore, $mul should consider creating
farmer cooperatives near elhi. This will make 3;;+/s daily procurement of 1*1' lac kilo
liters outside uaratiii to increase to an additional of 1* lac liters per day if thinking of
increasing current market share in elhi to EGH.Faving this plan, #ero stockout in stores can be
maintained because delivery of goods can be done immediately. With its pro!imity to the dairy
plant, the distributors will be able to maintain ustintime practices with their inventory thereby
reducing costs and improving return on investment.
5. Improve istribution <etwork in 7etail 2utlets, %upermarkets to Increase 7each
3urrently, out of the demand of 11' lac liters of milk per day in India/s national capital and
adoining areas, $mul supplies *G lac liters of milk per day, Muality airy about 1.*' lac liters
per dayiv, and ;other airy supplies around 5G lac liters per day.vIn order to take the lead over
;other airy, $mul has to increase its distribution network after increasing its supply by more
than 'GH. If $mul increases its reach now to elhi and <37, say by EGH to ensure lead in
market share, then a portion of ;other airy/s current market share may be eaten up since the
brand is said to be top of mind in India and probably also eat up a large chunk in the other dairy
brands.
With the e!pansion plan of $mul for the ne!t ' years, the two plants which it will add in elhi
could increase their supply by an additional of 6G lacs per day. Fence, $mul should already start
increasing its retail outlets, and supermarkets to increase reach and utili#e their plants/ capacity
increase and dominate the market.
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CHAPTER 5?ANNEX,RE
M"%TI2<<$I7"
32<%;"7 <$;"(
1. o you know about ?+lavoured ;ilkN
C$4 Res P
C>4 <o P
*. o you know about ?$mul Qool +lavor ;ilk@NB
C$4 Res P
C>4 <o P
5. Fow did you come to know about ?$mul Qool +lavoured ;ilk@N
C$4 >y friends P
C>4 >y relatives P
C34 >y shopkeepers
P C4 >y advertisement
C"4 2thers P
6. >y which media of advertisement you knew about ?$mul Qool +lavored
;ilk@N
C$4 <ewspaper PC>4 Television PC34 ;aga#ine PC4 2thers P
'. o you buy ?$mul Qool +lavoured ;ilk@N
C$4 Res P
C>4 <o P
E. Why do you buy ?$mul Qool +lavoured ;ilk@N
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C$4 ood quality P
C>4 ood taste P
C34 3heaper than other products P
C4 >randed company P
C"4 2ther reasons P
. Which flavor do you like most in the ?$mul Qool +lavoured ;ilk@N
C$4 7ose P
C>4 ;ango P
C34 "laichi P
C4 Qesar P
O. Why do you not buy ?$mul Qool +lavoured ;ilk@N
C$4 nawareness P
C>4 on/t like taste P
C34 Figher price P
C4 2ther reasons P
&. id you buy ?$mul Qool +lavoured ;ilk@N
C$4 Res PC>4 <o P
1G. Which other brands do you buyN
C$4 $mul Qool P
C>4 $mul Qool Thandai P
C34 $mul Qool 3hocolate ;ilk P
C4 2ther product P
11. Which brand do you like mostN
C$4 $mul Qool 3hocolate ;ilk P
C>4 $mul Qool +lavoured ;ilk P
C34 $mul Qool P
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CHAPTER78?)INDING/ AND CONC-,/ION
uring the survey, it was found that still there 1GH ofretailers are unaware about the ?$mul
Qool +lavor ;ilk.@
+rom the survey it was found that mostly people come to know about amul cool favor milk by
advertisement
The price of the product is very high as compare to its quantity of the product.
7ose is the most popular flavor in the ?$mul Qool +lavor ;ilk.@
enerally people buy the product because of better quality and brand name.
$dvertisement should be given to increase the level of awareness and sale of the product.
+rom the awareness level, more than &GH people buy this product.
+rom the consumers view, more than GH people buy this product because of good taste.
CONC-,/ION
Fereby, I conclude my proect that logistic management is related to types of transportation and
supply chain management is related to modes of transportation and is world wide.
ue to constraints of time and resources, the study is likely to suffer from certain limitations.%ome of these are mentioned here under so that the findings of the study may be understood in a
proper prospective.
The study is based on the secondary data and the limitation of using secondary data may affect
the results and also :rimary data has been collected in form of questionnaire.
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CHAPTER 77?-I$ITATION/
• Limited time available for interviewing the respondents. $s a result of this it was not
possible
• To gather full information about the respondents.
• The respondents were not very comfortable while revealing their correct usage pattern, no
3ause they may feel that they would be called or visited again and again.
• <oncooperative approach and rude behaviour of the respondents.
• If the respondents answer does not falls between amongst the options given then it will turn
upto be a biased answer.
CHAPTER 7#?9I9-IOGRAPH>
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• Tybms "lements of logistics and supply chain management
• www.amul.com
• www.google.com
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