SUPPY CHAIN MANAGEMENT

Report
On
Amul’s Suppy Chain Management

Group 2
Megha Asrani B001
Ketki Chavan B004
Vinay Choudhary B005
Abhishek Ozha B029
Chirag Pandya B030
Nayan Patel B032
Industry and Competitive Analysis

Dairy Industry in India

Business models

Co-operative Forward Integrated Fully Integrated

1 time payment and

Direct collection from No direct dealing with
commission is paid to
farmers and direct farmers and involves
farmers to incentivize
payment private labelling
supply

Market share of milk and milk products

Some recent facts..

• India has been the largest producer of milk in the world for the paste 15 years. It
was worth Rs. 5,000 bn in 2016.
• India outpaced the global milk production with an AGR of 5.53%, as compared to
2.09% achieved globally.
• Produced 163.7 million tonnes in 2016-17, with a growth of 19% over 2013-14.
• Government schemes are helping dairy farmers double their income by helping in
increasing production, higher price for raw milk, new schemes for exports.
• DAHDF is working on a National Action Plan – VISION 2022, to increase the no. of
dairy co-operatives in more villages, building technologically advanced
infrastructure for processing milk and increasing production of value added milk
products for increasing domestic and export demand.
• India’s organised dairy sector has seen a ‘Cream Run’ through 2018, with special
focus on value-added milk products, approx. Capex infusion of Rs. 15000 cr and
capacity augmentation of 1,050 LLPD.
• The industry experienced a growth rate of more than 22% from 2015-18 and nearly
1/3rd of the overall capex was undertaken by GCMMF.
• Dairy industry is attracting more than 6% of total PE investment, amounting to
more than Rs. 900 cr being invested since 2010.
• 7 Indian states contribute to 65% of the total milk production, most of them
produce through dairy co-operatives.
5 forces analysis of Dairy Industry

Inference of Porter Five Forces Model

 Competitive rivalry - High
 Threat of New Entrants- High
 Opportunity Area
o Increasing disposable income, milk’s product profile is changing in urban centres.
You will see more yoghurt, ice cream, butter and cheese being consumed
o Increasing emphasis on health
o Shifting from sugared milk drinks to chhach or yogurt-based beverages, even slim
milk
For eg.
o While Shrirang Sarda, Sarda Dairy Farms, is a third-generation entrepreneur, Rajesh
Singh, of Blissfresh, is a former banker who quit his cushy job to become a milk
entrepreneur
 USP of Bliss Fresh : Protein and fat content of the milk is far higher than other mass
brands
 Murginns, for instance, sells a premium range of yogurts, flavored milk and flavored butter
in Delhi.
Swot Analysis

Below is the Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis of Amul :

Amul SWOT Analysis

1. Amul has a high brand equity and top of the mind brand recall
2. Strong network of over 3 million milk producers are associated with Amul
3. It is the world’s largest manufacturer of pouched milk
4. India’s largest food brand, Amul is trusted for its quality
5. Number of popular milk products are offered like ice cream, ghee, butter,
paneer, dahi, milk, etc.
Strengths 6. Products available at affordable prices
7. In India, It is a market leader in butter segment
8. Amul is responsible for white revolution in India
9. Successful advertising and marketing campaigns has enhanced the brand
presence.
10. Strong network of retail outlets, stalls and parlours
11. A popular mascot in the Amul girl

1. Low market share in chocolates segment for Amul

Weaknesses 2. Strong competition from international & domestic players in the ice cream
segment means limited market share

1. Amul can introduce new products in the chocolate segment

2. To tap the untapped market, It can increase its reach in rural markets
Opportunities
3. Rise in purchasing power of Indian people
4. Amul can tieup with hotels, resorts, restaurants etc

1. Strong competition from international players can reduce the market share
Threats of Amul
Economic slowdown and inflation can affect business
Competitor Analysis

Competition in terms of Price and Availability

 Efficient distribution channel which facilitates effective pricing
 Britannia charges Rs.27 for a 100 gram packet for butter, Amul charges Rs.25
 AMUL’s Institutional Packs have an attractive pricing of Rs 110 compared to retail packs
priced at Rs.122 for a 500 gram pack
 Amul offers (8 grams being the minimum) makes it easier for lower income groups to afford
it.

Conclusion from Competitive Analysis

 Advertising and Promotion’s paucity is the biggest weakness of Amul
 Nutralite - higher awareness in people about it compared to AMUL Lite or Delicious.
 Retail Visibility - less proactive in this regard compared to Britannia.
 Baby Food
 Premium range of yogurts, flavoured milk - Murginns
Company Analysis

Amul – The Taste of India

 Parent company – GCMMF

 Founded in 1946
 Current Chairman : Shri. Ramsinh P. Parmar
 18 member unions, having 36 lakh farmer members, across 18,700 villages in Gujarat,
collecting 211 LLPD
 As per the latest report from IFCN, Amul ranks 9th among the Large milk processors of the
World, and is the fastest growing dairy organization in the world – from 18th position in
2011 to 9th position in 2018.
 Amul crossed a Sales turnover of Rs. 29, 220 cr in FY-18 and targeting Rs. 50,000 cr in FY
20-21.

Amul Product Range

Value Chain

1. Amul has a Co-operative form with a blend of professionalism.

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

Product Nature
• Each Amul products are having their own life cycle.
• The products like packed Milk and flavoured milk are perishable by nature due to short
span life cycle (may be a week).
• Cannot be stored for long period and need to be consumed immediately.
The Amul model
 Under the model, the entire value chain –from procurement, to processing and marketing – is
controlled by the farmer’s cooperative, which is directly linked to the final customer.
 There are no middlemen; the cooperative collects the milk directly at the producers’ doorsteps.
 The model envisages that democratic elections are held every three years, to elect the members
of the management committees who, in turn, elect the chairman.
 This ensures an active participation of farmers in decision-making, as well as transparency and
democratic management.
 Membership is open to anyone who owns at least one cow and is able to provide at least 700
litres of milk per year.
 The final price of Amul products are decided by GCMMF, which conducts market surveys on
aspects including the costs of milk, labour, processing, packaging, advertising, transportation
and taxes.
Operational Strategy

Amul’s Organizational Model

Operating Model
Amul has very effectively aligned its business and operational models to achieve its vision since its
launch.

Supply Chain
Amul has effectively managed both upstream and downstream partners in establishing one of the
most complex supply chains across the globe. The producers bring milk to the village cooperatives
(foot/bicycle), which is then transported to the unions by specialised trucks. From the union’s
production facility, milk is transported to wholesale distributors who then transport the milk to
retailers in specialised trucks.

All of these processes are outsourced to third party logistics and retail partners to ensure efficient
execution. A stringent verification process and guarantees for the safety of the milk products are
required from channel members before they are on-boarded to the network.

To the wholesalers and retailers, Amul offers reasonable margins on a high volume good. It offers
support in demand prediction, reducing the potential bullwhip effects that might arise from
inexperienced sales partners. It also offers easy repayment programs for capital investments in
infrastructure (freezers etc) by the retailers.
Organisational Alignment
The heads of the village cooperatives sit on the management of the union at the district level. The
heads of the unions at the district level comprise the governing board for the federation. This board
appoints the chairman of Amul diary. This strategy has effectively ensured that the management
has “skin in the game”.

The incentive structure is also aligned in that it reward suppliers who generate the most amount of
business, which is judged based on a mix of the quality and quantity of milk supplied.

Increasing the Supply of Milk

As we saw in the e-choupal case, increasing the supply of product leads to better economies of scale
(optimizing sunk costs). To this end, the unions provide various aids to the milk producers (like
cattle-feed, veterinary aid, technical training) obtained at a low cost due to large scale sourcing, to
increase supply. Aids are also aimed at overall community development.

Bridging Gaps in a Fragmented/Unstable Supply Side Market

Given the fragmented nature of the producers, supply tends to vary based on various factors, but
demand remains fairly constant. The unions have invested in cold storage facilities to ensure that
surpluses can be stored and redistributed to village level centers that are facing a shortage of
supply, efficiently reducing supply instabilities.

Technology Initiatives
An automatic Milk Collection System was established that could identify and test the
quality/quantity of milk. This leads to time saving since over 1000 producers enter a village
cooperative each day and increased transparency.

Enterprise-wide Integrated Application Systems were used to align various sub software systems in
place. A Geographic Information System was also established to view supply disparities in real time.
Cyber stores have been recently launched as well.

Marketing/Advertising Campaign
One of the most interesting things about Amul is how a dairy cooperative evolved into a social
commentator through their advertisements. The cartoon is usually has the Amul mascot (Amul Girl)
in a current context with a catchy tagline. These ads have now become an establishment of their
own right, elevating Amul’s brand image from just a diary cooperative to a household name outside
the diary products context.
Growth Strategy

Product Diversification
Amul diversified into various diary products such as milk powders, butter, cheese, yogurt, ice
creams and a number of other variations specific to the Indian market. It has managed to capture
significant market share in others. This move was highly strategic once the brand image (quality at
affordable prices) and distribution chains were established – a clear indication of successful
horizontal integration.

Growth

Gujarat Cooperative Milk Marketing Federation (GCMMF), makers of Amul dairy products, is
drawing up a three-pronged growth strategy that includes a
1. Packaging revamp,
2. Expanding production capacity and
3. Extending distribution network to reach out to smaller towns and villages across the
country.
Comparison of Amul Model With Other Co-Operatives

 In this study a comparison has also been done on the working of other states co-operatives with
that of the AMUL Model.
 It was found that the basic Anand Pattern is the same everywhere, but the professional
management is different from the AMUL model.
 In the case with other dairy cooperatives the managing Director of the federation which is apex
body is an IAS on deputation. As he is not in one federation permanently that does not give him
the feeling of ownership which is very essential for a co-operative to be successful.
 Since in most of the co-operatives the government still has share, so various representatives are
there in the board of directors and they become the decision making authorities.
 The elections of the village society, union and federation are not politicized at GCMMF, whereas
in other states these are influenced by the political parties at the state.
 At AMUL the employees are hired by their own recruitment pattern by the Human Resource
Section whereas at other milk co-operatives there has not been any recruitment since last many
years. The recruitment system is dependent on state government

In Anand Pattern Co-operatives, while the producers themselves determine the policies, the opportunity
is provided to the professionals to implement the policies as well as to manage the operations

Operational Efficiency

Operational Efficiency of an organization is based upon the nature of a firm’s operations

strategy. This comes from the mission of the firm itself and is tied to the notion of achieving
competitive advantage through operations

Quality Management

Quality is very important for any food industry.

Quality implies maintenance of functional values of the product as well as improving the
style of management by keeping customer in focus.
The milk producers of the member unions have a commitment to achieve quality in
basically six priority areas –
 Cleanliness of the dairy cooperative societies,
 Planning and Budgeting of the Dairy Society,
 Artificial Insemination Service,
 Quality Testing and Milk measurement at Dairy co-operative Societies and
 Management Practices and Self-leadership Development.
E-REVOLUTION

AMUL is the first company in the co-operative form to adopt the e-revolution. In this
information communication-Entertainment age, the barriers between the business
organization and consumers, between manufacturers and end-users are all breaking down.
This is what was started fifty years back by AMUL by eliminating the ‘middlemen’ and
bringing the ‘producers’ closer to the ‘consumers’. The organization believes in innovations
in product as well as process. For rapid communication access to Veterinary Health
Assistance they have introduced the GIS facility.

BRAND –A POWER

Brand is the power of any organization. This can be developed only with the marketing
skills and by giving the customers value for money. This was done with the formation of
GCMMF in 1974. It became the marketing unit of the organization helping in the
centralization of the marketing of all products except liquid milk which the unions had to do
on its own.
Logistic Network

FMCG company manufacture Milk related Products. In the Other segment they have Ghee and
Chocolate.
In the milk segment they are having Amul Milk in sachet/pouch, Amul Tazza Toned milk in Tetra
pack.
In the powder milk segment they have Amulya Dairy whitener, Amul Instant Full cream Milk
powder. Amul Butter, Amul Kool café, Flavoured Milk , etc. We will first understand the products
nature, type and distribution pattern.

Each Amul products are having their own life cycle.

 The products like packed Milk and flavoured milk are perishable by nature due to short
span life cycle (may be a week), cannot be stored for long period and need to be consumed
immediately.
 Also these items are needed to be refrigerated during that short product life cycle from the
production stage till distributed to end customer. Packed milk / flavoured milk (30 or 40
units) are kept in plastic crates and stored in cold storage facility and distributed to all
retailers.
 Each plastic crate with packed / flavoured milk weight 20 – 25 Kgs and can be handled by
labourers and it does not require any mechanized equipment for storage, retrieval, loading
 and unloading. Since the stocks can be stored vertically (i.e., 6 to 8 crates on each other) the
area usage is minimized resulting less storage cost.
 One need not require any pallet or steel rack to store products vertically. The plastic crate
can be stored on each other so that maximum height should be reachable by the worker
without difficulty.

 Since milk and butter are consumed by all (basic necessity commodity) they should be made
available to consumer on demand at convenience due to severe competition.
 If a consumer could not find Amul milk packet from nearby retail shop, he can take milk packet
of other brand or ask local milk vendor (doodhwala) to supply the milk to his house.
 Hence it is Amul’s responsibility to arrange these products available at all retailers, in a
particular market with proper storage (refrigeration) facility.
 Due to wide distribution nature, the milk packets are placed in small plastic crates which can be
unloaded by workers with ease at different retailer points.
 The empty crates are returned (termed as Reverse Logistics) to Amul company warehouse for
future milk packet dispatch.
 Hence the warehouse and storage operations are manual and simple which require no modern
equipments in this operation. In case of packed milk and butter, the cost related to cold storage
warehouse and transportation through container having cold storage facility will be on the
higher side.
 Other products like Ghee, Chocolate are having life cycle for a period of one year or so.
 In case of Chocolate and Ghee the health drink products and chocolate which does not required
any cold storage facility. 12 or 24 units of Ghee or Chocolate (according to pack size of 500g or
1Kg) are stored in corrugated carton box and distributed to retailers. Products are also stacked
vertically in the warehouse. The warehouse and distribution operations are similar to packed
milk except the refrigeration or cold storage.
Amul’s Transportation and Logistics

Amul follows a distinctive transportation model as far as its transportation is concerned.

The major production units of Amul are located in Gujarat. Major distribution hubs are located in
and around the periphery of the production units.
Since Amul produces majorly perishable goods, it becomes mandatory to follow a proper and
smooth transportation of goods.
Physical distribution is a very important part of the whole business.
Milk is procured from the villages and collected at the Village Co-operative societies (VCS).From
there the milk is taken to the manufacturing units where the milk is processed into various
products.

The products are then transported to the company depots located in various parts of the country.
The products are then sent to the wholesale distributors (WD) and from there to the retailers.
It is then available in over 1,000,000 retail outlets across India through its network of over 3600
distributors.
While for Amul pouch milk, there are 17 distributors. The wholesale distributors carry inventory
that is just adequate to take care of the transit time from the branch ware house to their premises.
This just-in-time inventory strategy improves the distributors’ ROI.

There are two channels involved in the supply chain of Amul.

1. Upstream channel

i.e. the procurement channel for milk from the farmers to the manufacturing units

a. First the milk is taken to the VCS by the farmers on foot or bicycles in small
quantities.
b. The new VCS in Maharashtra have rapid milk chillers.
c. Then milk is transported from co-operatives to the manufacturing units via special
trucks equipped with tankers to carry milk once a day.
d. A tanker carries three to four societies’ milk together which helps in achieving
economy in transportation of milk. Geo-remote sensing based vehicle tracking
system has been put in use for efficient handling of Road Milk Tankers carrying milk
to Dairy Plant.

2. Downstream channel

i.e. the distribution channel from manufacturing units to retailers

a. First the products are taken from manufacturing units to the depots. This is done by
using 9 to 18 MT trucks. The frozen food is kept at a temperature below -18C, while
milk is kept between the temperatures of 0-4C

b. From depots to the WD’s the transportation is done using insulated 3-5 MT TATA
407’s. A permanent dispatch plan (PDP) is prepared as per the demand of various
products
 c. Finally the goods are to be transported from the WD’s to the retailers. The beat plan
is prepared and the transportation is done by auto-rickshaws, small trucks,
rickshaws and bicycles.

d. The vehicles have a carrying capacity of 750-850 crates and one crate consists of 40
pouches of 500ml each. The vehicles start leaving the plant at 19:00.

e. All the crates which are placed in the vehicles have some ice cubes in them, so as to
increase their shelf life. The truck drivers are responsible for the loading and
unloading of the crates. Aside from using the fleet of trucks,

f. Amul has also integrated their transport system with railway cooling units to
improve transport cost and its supply to Delhi.

g. It has tied up with Adani Logistics to have a dedicated train to transport milk daily
from Dudhsagar Diary of Mehsana to Delhi.

h. This train transport uses 50 wagons with a capacity of 24,000 litres each Amul has
more than 49 depots with dry and cold warehouse for entire storage of products
and the largest cold chain network in India with 18000 refrigerators.

i. Milk is a product which has time band for consumption; hence it needs to reach the
retailers early morning. For up-country distribution, the dispatch time of milk is
between 3-8pm,depending on the location, while for local distribution in
Ahmedabad the dispatch timings is between 8pm to midnight.

j. The location of the trucks are monitored through cell-phones. While distribution, is
the transportation vehicle breaks down, it is the transporters responsibility and he
arranges for a back-up to minimize delay.

From the beginning, it was recognised that the unions' core activity lay in milk processing and the
production of dairy products. Accordingly, marketing efforts (including brand development) 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, provision of
animal feed, and veterinary services.
It is worth noting that a number of these third parties are not in the organized sector, and many are
not professionally managed with little regard for quality and service.
This is a particularly critical issue in the logistics and transport of a perishable commodity where
there are already weaknesses in the basic infrastructure.
Distribution Management –

 Orders are collected from the retailers via phone or visits by the labour employed by the
distributor.
 Transportation cost is borne by Amul
 Orders received are placed online with GCMMF (Dewas Naka).
 Robust IT Mechanism helps to collect orders and places them quickly from the company.
 It takes maximum 1-2 days to get materials from Warehouse to the distributor.
 As there is a large demand for goods, frequents checks need to be performed regarding the
stocks in the shop which is done using calculation on basis of sales.
 Sometimes clashes with other distributors occur for territory.
 If products get expired then claims are refunded within fifteen days. However, this may
sometimes take a bit longer time also.
 The distributor has the DMS (Distributor Management System) facilitated by the company
which is installed in his computer. This system helps the company to keep a track of the
amount of products a particular distributor is selling over the year and this helps in
distribution of incentives and benefits to the distributors at the end of year.
 Each territory has 10-15 APO (Amul Preferred Outlets) i.e. exclusive retailers for Amul
which are managed by the distributors
Recommendation and Implications for Amul and GCMMF

1. Increase in number of warehouses and distributors is required for higher market reach and
better penetration in tier 3 cities and rural regions. They can also increase in tie-ups with
local small players for faster market reach.
2. Amul also needs to focus more on its value added products and come up with flavoured
yogurts, flavoured milk, baby food, kind of categories where the growth is substantial and
where Amul can capitalize on the brand name as also utilize the excess capacity which can
be generated by tie ups with smaller dairies as well as it can partner with brands like
Blissfresh and Murgins to bring their special products like Flavoured yogurts, flavoured
butter and flavoured milk in Amul’s product range.
3. Retail visibility and Awareness about Amul value added Butter – Amul Lite (healthier option
than normal butter) is lesser compared to Nutralite. Initiatives in this direction need to be
taken, one of the options, being increasing product margins and incentives for the dealers
and retailers, as well as advertising efforts to Reposition its Health-beneficial product range.
4. Amul had also seen stock out issues being raised in locations away from Gujarat region. To
tackle this situation, along with the Online Ordering system, Vendor Managed Inventory
(VMI) systems can be used to have better control on the sale and inventory of its
distributors and dealers in locations away from its control. VMI can incorporate the possible
lead times and FTL capacities to optimize logistics as well as keep replenishment on time.
5. Amul has captured the milk market in India well, and so it should now also focus on the
exporting of milk, milk products and value added products. To implement this initiative, it
can source the milk needed to be exported, from regions of Gujarat and Maharashtra which
are closer to ports, so to save on Logistics cost. To manage the supply in domestic regions, it
can tie up with smaller local / regional dairies in various states to make Amul branded
products, to satisfy demands in those regions.
6. In regions like South India and Kolkatta, where Amul milk has lesser presence, the above
said, tie ups can help to develop market potential.
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