Supply Chain of Amul

ARAVALI INSTITUE OF MANAGEMENT (An institution of Marwar Education Foundation) Term Paper on write out Chain of AMUL Submitted toSubmitted by Dr. Parikshit CharanSunil Kansara PGP II PGDM (S) Section A Roll No. 30 muniment Amul was mildew every last(predicate)(prenominal)y registered on December 14, 1946. The brand shout out Amul, pertinaciousced from the Sanskrit word Amoolya, means priceless. It was suggested by a caliber control expert in Anand and it was elect because it was a perfect acronym for Anand draw kernel Limited.The Amul revolution was started as awargonness among the farmers. It grew and matured into a protest movement that was channeled towards economic prosperity Over five decades ago, the feel of an average farmer in Kheda District was very much like that of his/her counterpart anywhere else in India. His/her income was derived almost stainlessly from seasonal crops. The income from draw buffaloes was undependable. draw producers had to travel long dist ances to deliver take out to the precisely dairy farm, the Polson Dairy in Anand often milk went sour, especi anyy in the summer season, as producers had to physically track d experience milk in individual containers. Private traders and middlemen controlled the marketing and scattering arranging for the milk. These middlemen decided the prices and the off-take from the farmers by the season. As milk is perishable, farmers were compelled to sell it for whatever they were offered. Often, they had to sell cream and ghee at throw-away prices.In this situation, the private trader do a killing. More all over, the government at that clipping had given monopoly rights to Polson Dairy, which was run by a person of Parsi descent, ( some that condemnation Polson was the most substantially known butter brand in the field) to pull in milk from Anand and supply to Mumbai urban center in turn (about 400 kilometers away). Another problem farmers faced was that in winter the milk rai lroad siding of buffaloes doubled which caused prices to fall down even out further. India ranked nowhere amongst milk producing countries in the world in 1946.Gradually, the realization dawned on the farmers with inspiration from then nationalist leaders Sardar Vallabhbhai Patel (who later became the first Home diplomatic minister of free India) and Morarji Desai (who later become the Prime Minister of India) and local farmer, freedom fighter and social histrion Tribhovandas Patel, that the exploitation by the trader could be reserveed all if they marketed their milk themselves. Amul was the result of the realization that they could kitty up their milk and work as a cooperative Setting up of Kaira District Co-operative Milk Producers UnionIn the early 40s, the main sources of earning for the farmers of Kaira regulate were farming and change of milk. That time there was high need for milk in Bombay. The main supplier of the milk was Polson dairy limited, which was a privat ely owned smart set and held monopoly over the supply of milk at Bombay from the Kaira soil. This administration leads to exploitation of poor and illiterates farmers by the private traders. The traders used to beside the prices of milk and the farmers were forced to accept it without uttering a single word.However, when the exploitation became intolerable, the farmers were frustrated. They collectively appealed to Sardar Vallabhbhai Patel, who was a leading activist in the freedom movement. Sardar Patel advised the farmers to sell the milk on their own by establishing a co-operative northern, Instead of supplying milk to private traders. Sardar Patel sent the farmers to Shri Morarji Desai in order to gain his co-operation and help. Shri Desai held a meeting at Samarkha crossroads near Anand, on 4th January 1946. He advised the farmers to form a society for collection of the milk.These village societies would collect the milk themselves and would decide the prices at which they can sell the milk. The district union was to a fault form to collect the milk from such village co-operative societies and to sell them. It was also inflexible that the Government should be asked to buy milk from the union. However, the govt. did not seem to help farmers by any means. It gave the detrimental response by turning down the demand for the milk. To respond to this action of govt. , the farmers of Kaira district went on a milk strike. For 15 whole days not a single drop of milk was exchange to the traders.As a result the Bombay milk scheme was severely affected. The milk commissioner of Bombay then visited Anand to assess the situation. Having seemed the condition, he decided to fulfill the farmers demand. Thus their cooperative unions were forced at the village and district level to collect and sell milk on a cooperative basis, without the intervention of Government. Mr. Verghese Kurien showed main inte respite in establishing union who was supported by Shri Tribhuv andas Patel who lead the farmers in forming the Co-operative unions at the village level.The Kaira district milk producers union was then established in ANAND and was registered formally on 14th December 1946. Since farmers sold all the milk in Anand by dint of a co-operative union, it was commonly resolved to sell the milk under the brand name AMUL. At the initial stage only 250 liters of milk was collected everyday. But with the growing aw atomic number 18ness of the benefits of the cooperativeness, the collection of milk increased. Today Amul collect 11 lakhs liters of milk everyday. Since milk was a perishable commodity it becomes difficult to cover milk flora prolonged period.Besides when the milk was to be collected from the far places, there was a fear of spoiling of milk. To overcome this problem the union thought out to develop the chilling unit at various junctions, which would collect the milk and could chill it, so as to preserve it for a longer period. Thus, today Amul has more(prenominal) than 150 chilling centers in various villages. Milk is collected from almost 1073 societies. With the fiscal help from UNICEF, assistance from the govt. of New Zealand under the Colombo plan, of Rs. 50 millions for factory to manufacture milk disintegrate and butter was planned.Setting Up of Gujarat cooperative Milk merchandise partnership In 1954, Kaira District Co-operative Milk Producers Union built a plant to convert surplus milk produced in the cold seasons into milk powder and butter. In 1958, a plant to manufacture cheese and one to produce baby diet were added. Subsequent years saw the addition of more plants to produce antithetic harvestings. In 1973, the milk societies/district level unions decided to set up a marketing agency to market their intersection points. This agency was the Gujarat Cooperative Milk Marketing Federation (GCMMF).It was registered as a co-operative society on 9 July 1973 COMPANY compose THE TASTE OF INDIA, AMUL com es from the Sanskrit word Amoolya, means priceless. It was suggested by a select control expert in Anand and it was chosen because it was a perfect acronym for Anand Milk Union Limited. AMUL was formed under the dairy cooperative movement in India in 1946 The Amul Pattern has established itself as a uniquely appropriate model for rural development. Amul has spurred the exsanguine Revolution of India, which has made India the largest producer of milk and milk harvest-times in the world.It is also the worlds biggest vegetarian cheese brand . The system succeeded mainly because it pass ons an assured market at remunerative prices for producers milk besides acting as a channel to market the production enhancement package. Whats more, it does not disturb the agro-system of the farmers. It also enables the consumer an approach to high feel milk and milk products. Contrary to the traditional system, when the acquire of the business was cornered by the middlemen, the system ensured t hat the profit goes to the participants for their socio-economic upliftment and common good.Looking back on the path traversed by Amul, the fol slumping features make it a conventionalism and model for emulation elsewhere. Amul has been able to ? Produce an appropriate blend of the policy makers farmers board of management and the professionals distributively group appreciating its rotes and limitations, ? Bring at the command of the rural milk producers the best of the technology and harness its produce for betterment. ? Provide a support system to the milk producers without disturbing their agro-economic systems, ?Plough back the profits, by wise use of men, material and machines, in the rural sector for the common good and betterment of the member producers and ? all the same though, growing with time and on scale, it has remained with the smallest producer members. In that sense. Amul is an example par excellence, of an intervention for rural change. judicature structure I t all started in December 1946 with a group of farmers keen to free themselves from intermediaries, gain access to markets and thereby ensure maximum returns for their efforts.Based in the village of Anand, the Kaira District Milk Cooperative Union (better known as Amul) expanded exponentially. It joined hands with other milk cooperatives, and the Gujarat earnings now covers 2. 12 million farmers, 10,411 village level milk collection centers and fourteen district level plants (unions) under the overall supervision of GCMMF. There argon similar federations in other states. Right from the beginning, there was recognition that this opening night would directly benefit and transform small farmers and contribute to the development of society.Markets, then and even today, are unmannered and poor in infrastructure. Amul and GCMMF acknowledged that development and growth could not be left to market forces and that proactive intervention was required. Two key requirements were identified . The first, that sustained growth for the long term would depend on unified supply and demand. It would need heavy investment in the simultaneous development of suppliers and consumers. Second, that effective management of the network and commercial vi competency would require professional managers and technocrats.To implement their vision while retaining their concentrate on farmers, a vertical network of cooperatives was developed, which today forms the robust supply bowed stringed instrument behind GCMMFs endeavors. The big and complex supply chain str and so ones from small suppliers to large fragmented markets. Management of this network is made more complex by the fact that GCMMF is directly responsible only for a small part of the chain, with a second of trio ships bon ton players ( electrical distributors, retailers and logistics support providers) playing large roles.Managing this supply chain economicly is critical as GCMMFs competitive gravel is driven by lo w consumer prices supported by a low cost system. The Union looks later policy formulation, processing and marketing of milk, provision of technical inputs to enhance milk yield of animals, the artificial insemination service, veterinarian address, better feeds and the like all through and through the village societies. DISTRIBUTION CHANNEL Amul products are available in over 500,000 PLUS retail outlets across India through its network of over 3,500 distributors.There are 47 depots with dry and cold warehouses to buffer enrolment of the entire eye socket of products. GCMMF transacts on an advance demand lottery basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This habituate is consistent with GCMMFs philosophy of maintaining cash transactions passim the supply chain and it also minimizes dumping. Wholesale dealers take on inventory that is just enough to take care of the transit time from the branch warehouse to their pr emises.This just-in-time inventory strategy improves dealers return on investment (ROI). only GCMMF branches engage in route scheduling and give dedicated vehicle operations Establishing best practices A key source of competitive advantage has been the enterprises ability to continuously implement best practices across all elements of the network the federation, the unions, the village societies and the distribution channel. In develop these practices, the federation and the unions permit adapted successful models from around the world.It could be the instruction execution of small group activities or quality circles at the federation. Or a TQM political program at the unions. Or housekeeping and good accountancy practices at the village society level. More important, the network has been able to regularly roll out receipts programs across to a large function of members and the implementation rate is consistently high. For example, every Friday, without fail, between 10. 0 0 a. m. and 11. 00 a. m. , all employees of GCMMF meet at the closest office, be it a department or a branch or a depot to discuss their various quality concerns.Each meeting has its pre-set format in term of Purpose, Agenda and Limit (PAL) with a process check at the end to record how the meeting was conducted. akin(predicate) processes are in place at the village societies, the unions and even at the wholesaler and C means levels as well. Examples of benefits from recent maidens include simplification in transportation time from the depots to the wholesale dealers, improvement in ROI of wholesale dealers, implementation of Zero line of business Out through improved availability of products at depots and also the implementation of Just-in-Time in finance to trim the float.Kaizens at the unions have helped improve the quality of milk in terms of acidity and sour milk. (Undertaken by multi-disciplined teams, Kaizens are highly focussed projects, reliant on a structured approa ch based on data gathering and analysis. ) For example, Sabar Unions records show a reduction from 2. 0% to 0. 5% in the amount of sour milk/curd received at the union. The most impressive medical prognosis of this large-scale roll out is that improvement processes are turning the village societies into individual improvement centers. Supply Chain of AmulConsumers expect marketers to deliver products in the locations and forms they require. To meet expectations of such demanding consumers, alignments of our four Distribution Highways of Fresh, Chilled, Frozen and ambient products were already made by introducing Project DIL. Subsequently, a major initiative was taken to enhance distribution network to smaller towns. About 1200 distributors in small towns across India were added during this initiative. Today about 3000 Distributors ensure availability of our products across India, whether it is in Leh or Lakshadweep, in Kutch or Arunachal.Simultaneously, to augment fresh milk distri bution in various markets of India, approximately 1400 exclusive Milk Distributors have been inducted. ? AMUL has the largest cold chain network in India (i. e. 18000 refrigerators) as compared to any other company. The chemical components of milk are water, SNF and solids. Milk is very perishable product so it has to be consumed within 24 hours. In order to avoid wastage AMUL converts the milk in to SNF and milk solids by evaporating the water, which comprises up to 60-70% of milk contents. This is possible only if the distribution channel right from the producer to the consumer is well organized.It get out be surprising to know that AMUL makes even the Sarpanch to eat pizza i. e. it supplies pizzas even to rural market. ? delay year, theye divided the retail market into 14 specific segments to pass further distribution efficiency. This year our focus was on inducting distributors having expertise in servicing such specific market segments. This initiative is yielding results by way of ensuring wider availability of our product range. ? The role of distributors in our business process has never been more various(a) or more important, as it is today.As a matter of fact, we consider our Distributor to be the real Marketing Manager of our organization. To enhance business causeance of our Distributors, a whole caboodlehop on Marketing and gross revenue Management was designed in collaboration with a premier business school. The objective of the entire initiative was to upgrade the knowledge of our Distributors in terms of contemporary Business Management Practices, so that they can perform well not only as our business partner but also as Marketing Managers. During the year, 659 Distributors have undergone this programme in 39 locations. Cold Storage is an extremely essential component n the Federations distribution process. Unfortunately, availability of efficient cold storage facilities is grossly inadequate in our country. To cope up with the increasing need of suitable cold stores closer to our markets, we have continued our try of creating the Federations own cold stores this year in various locations across the country. We now own 24 state-of- the art cold rooms of different sizes. ? To get an exposure to our cooperative structure, our culture as well as operational systems and processes, every year we invite our distributors, major retailers and other business partners to Anand, for Amul Yatra.So far, about 7000 Distributors and other business partners have participated in this Amul Yatra. ? Over recent years, the Federation has successfully introduced unexampled product lines. This year, in order to leverage their distribution network strengths, to optimize market supervision expenditures, to achieve increasing efficiency while keeping the distribution infrastructure lean, focussed and productive, the Federation amalgamated its different distribution networks. Today, they operate an efficient distribution infrastructure con sisting of 46 sales offices, catering to 3,000 distributors and five lac retailers. approximately every Federation stockist has visited Anand to participate in a unique programme called Amul Yatra. During this programme, stockists are exposed to the Federation Philosophy, the culture of Cooperation, as well as operational Systems and Processes. The Federation has also invited distributors salesmen from all over the country to Anand for a training program focused on the Federations philosophy and developing their selling skills. AMUL is a dairy cooperative in the western India that has been primarily responsible, through its innovative practices, for India to become the worlds largest milk producer.The distinctive features of this paradigm involves managing a large decentralized network of suppliers and producers, simultaneous development of markets and suppliers, lean and efficient supply chain, and breakthrough leadership. Every day Amul collects 447,000 litres of milk from 2. 12 m illion farmers , converts the milk into branded, packaged products, and delivers goods worth(predicate) Rs 6 crore (Rs 60 million) to over 500,000 retail outlets across the country. To implement their vision while retaining their focus on farmers, a hierarchical network of cooperatives was developed, this today forms the robust supply chain behind GCMMFs endeavors.The vast and complex supply chain stretches from small suppliers to large fragmented markets. Management of this network is made more complex by the fact that GCMMF is directly responsible only for a small part of the chain, with a number of third party players (distributors, retailers and logistics support providers) playing large roles. Managing this supply chain efficiently is critical as GCMMFs competitive position is driven by low consumer prices supported by a low cost system of providing milk at a sanctioned, affordable price.THE BUSINESS MODEL From the very beginnFng, in the early 1950s, AMUL adopted the network as the basic model for long-term growth. The network explicitly includes tributary service to the farmer-suppliers. Several of the entities in the network are organized as cooperatives linked in a hierarchical fashion. Customers In comparison with developed economies, the market for dairy products in India is still in an evolutionary stage with tremendous potential for high cling to products such as ice cream, cheese etc.The distribution network, on the other hand, is quite reasonable with access to rural areas of the country. Traditional methods practiced in western economies are not adequate to realize the market potential and alternative approaches are unavoidable to tap this market. suppliers A majority of the suppliers are small or marginal farmers who are often illiterate, poor, and with fluidity problems as they lack direct access to financial institutions. Again, traditional market mechanisms are not adequate to assure sustenance and growth of these suppliers.Third Par ty Logistics Services In addition to the weaknesses in the basic infrastructure, logistics and transportation services are typically not professionally managed, with little regard for quality and service. In addition to outbound logistics, GCMMF takes responsibility for coordinating with the distributors to assure adequate and timely supply of products. It also works with the Unions in determining product mix, product allocations and in developing production plans. The Unions, on the other hand, arrange collection logistics and support services to the member-farmers.In what follows we elaborate on these aspects in more detail and provide a rationale for the model and strategies adopted by GCMMF. Simultaneous Development of Suppliers and Customers From the very early stages of the makeup of AMUL, the cooperative realized that sustained growth for the long-term was contingent on matching supply and demand. The member-suppliers were typically small and marginal farmers with severe li quidity problems, illiterate and untrained. AMUL and other cooperative Unions adopted a number of strategies to develop the supply of milk and assure steady growth.First, for the short term, the procurement prices were set so as to provide fair and reasonable return. Second, aware of the liquidity problems, cash payments for the milk supply was made with token(prenominal) of delay. This practice continues today with more village societies making payments upon the receipt of milk. For the long-term, the Unions followed a multi-pronged strategy of education and support. For example, only part of the surplus generated by the Unions is paid to the members in the form of dividends Managing Third Party Service Providers Unions focused efforts on these activities and related technology development .The marketing efforts were assumed by GCMMF. All other activities were entrusted to third parties. These include logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, some veterinary services etc. It is worth noting that a number of these third parties are not in the organized sector, and many are not professionally managed. Hence, while third parties perform the activities, the Unions and GCMMF have developed a number of mechanisms to retain control and assure quality and timely deliveries. This is particularly critical for a perishable product such as liquid milk.Coordination for Competitiveness Coordination is one of the key reasons for the success of operations involving such an commodious network of producers and distributors at GCMMF. Some interesting mechanisms exist for coordinating the supply chain at GCMMF. These mechanisms are Inter-locking Control The objective for developing such an inter-locking control mechanism is to ensure that the interest of the farmer is perpetually kept at the top of the agenda through its representatives who constitute the Boards of different entities that comprise the su pply chain.This form of direct representation also ensures that professional managers and farmers work together as a team to ratify the cooperative. This helps in coordinating decisions across different entities as well as speeding both the carry of information to the respective constituents and decisions. Coordination Agency Unique Role of Federation Its objective is to ensure that all milk that the farmers produce gets sold in the market either as milk or as value added products and to ensure that milk is made available to an increasingly large sections of the society at affordable pricesSupplier Enhancement and Network servicing Their objective is to ensure that producers get maximum benefit and to resolve all their problems. They manage the procurement of milk that comes via trucks & tankers from the VSs. They negotiate annual contracts with truckers, ensure availability of trucks for procurement, establish truck routes, observe truck movement and prevent stealing of milk whi le it is being transported. GCMMFS SUPPLY mountain chain DISTRIBUTION CHANNEL Amul products are available in over 500,000 PLUS retail outlets across India through its network of over 3,500 distributors.There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products. GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This practice is consistent with GCMMFs philosophy of maintaining cash transactions throughout the supply chain and it also minimizes dumping. Wholesale dealers carry inventory that is just adequate to take care of the transit time from the branch warehouse to their premises.This just-in-time inventory strategy improves dealers return on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated vehicle operations Establishing best practices A key source of competitive advantage has been the enterprises ability to cont inuously implement best practices across all elements of the network the federation, the unions, the village societies and the distribution channel. In developing these practices, the federation and the unions have adapted successful models from around the world.It could be the implementation of small group activities or quality circles at the federation. Or a TQM program at the unions. Or housekeeping and good accounting practices at the village society level. More important, the network has been able to regularly roll out improvement programs across to a large number of members and the implementation rate is consistently high. For example, every Friday, without fail, between 10. 00 a. m. and 11. 00 a. m. , all employees of GCMMF meet at the closest office, be it a department or a branch or a depot to discuss their various quality concerns.Each meeting has its pre-set format in terms of Purpose, Agenda and Limit (PAL) with a process check at the end to record how the meeting was co nducted. Similar processes are in place at the village societies, the unions and even at the wholesaler and C&F agent levels as well. Examples of benefits from recent initiatives include reduction in transportation time from the depots to the wholesale dealers, improvement in ROI of wholesale dealers, implementation of Zero Stock Out through improved availability of products at depots and also the implementation of Just-in-Time in finance to reduce the float.Kaizens at the unions have helped improve the quality of milk in terms of acidity and sour milk. (Undertaken by multi-disciplined teams, Kaizens are highly focussed projects, reliant on a structured approach based on data gathering and analysis. ) For example, Sabar Unions records show a reduction from 2. 0% to 0. 5% in the amount of sour milk/curd received at the union. SELECTION, MOTIVATION & EVALUATION OF CHANNEL MEMBERS Selection The company takes into consideration a legions of factors while selecting the channel members.T his is because GCMMF believes that selection of channel members is a long run decision & the rest of the decision regarding the supply chain depends upon the efficiency & coverage by the channel members. The following are the host of factors considered by the company in selecting the channel members ? Authentication is required by the regarding the identity of the channel members, which includes the name & address, photograph of the location. ? Proof of solvency which requires name & address of the channel members bankers ? Safety of the inventory, which means that the distributor/ dealer should et the stock of the company insured. ? Inventory or the perishable goods kept by the distributor/ dealer should be in good condition which means a detail of storage space & refrigeration facility is to be provided. Refrigeration system should have deep freezers, cold room & walk in coolers. ? Details of the lecture vehicle, which includes Light Commercial Vehicles, Matador, 3 Wheeler Van, T ricycle Van & Hand/ zip cart. The number & model of each of the vehicle needs to be furnished to the company. ? GCMMF acknowledges the fact that it needs to be sensitive to the market demands.For this it requires that a number of salesmen needs to be present on the field. The salesmen too are divided into various categories like the Field salesmen & Counter salesmen. Also the details of Clerical Staff & Mazdoors are to be provided. The technical competence of the salesmen needs to be mentioned ? Details of the product kept of other companies have to be provided. The annual sales of these products too have to be mentioned. Also details of complementary products & product lines need to be mentioned. ? Dealers of the company must carry a good reputation.This is ascribable to the fact that the company believes reputation of the dealer affects the clientele. ? Market coverage by the distributors needs to be defined which includes details of geographical coverage & Outlets per market ar ea. ? The company also requires the dealers to furnish any Advertising & Sales initiative undertaken by them on behalf of the company. Observation ? The companys strength is in its procurement and not the distribution even they know this, as this is the industrys main problem. Other companies fail to replenish demand due to lack in procurement of raw milk. Amul has loyal cooperatives that provide milk only to them, over time the relationship of trust has built up with these people that amul leverages now. ? Transport channel is another strength as the transporters have grown with the company overtime the bonding with them enables the company to give least margins when it comes to the distributors in the industry, take down the costs. ? The company believes that there is an ongoing demand in the market and therefore no promotions are mandatory to increase the sales, also the fact this would affect the cost of the product the company doesnt undertake many promotion schemes. The not b eing a profit driven organization, is able to provide products at the least price in the industry, and is able to give least channel margins as the channel members earn through volumes and not through high margins. ? The company is enabled to push its new products into the market by hooking them onto the degraded moving products like Amul butter they force the channel members to carry the new products as well. Comments and Suggestion ? Amul should go in for exclusive outlets in at least all the shopping malls coming up these days and any location where footfalls are large in number.The advantages of this channel will be Full range display Easier to promote new products Easy to push impulse purchase products Brand building will be facilitated ? Pushcarts should be increased in number in order to increase the market distribute this can provide with e very effective channel for ice creams and flavored milks. ? Trade promotion should be formulated for newly launched products instead o f just tagging them onto best sellers. ? The company should start a home delivery where a particular household will order full range of products required by it over a period of time.For this the company could provide a deliveryman with cycle to reach the different houses. ? In order to motivate the channel members it is also very essential for the company to increase the margins for the hard selling items e. g. Amul dahi where it faces competition from Nestle & Mother dairy. ? In order to remain sensitive to market demand, it is essential for the company to place additional salesmen on the field since the brand as such commands a high demand in the market but fails to match it with the supply. picpicpic