Supply Chain of Amul

ARAVALI INSTITUE OF steering (An institution of Marwar Education Foundation) Term Paper on come out compass of AMUL Submitted toSubmitted by Dr. Parikshit CharanSunil Kansara PGP II PGDM (S) Section A Roll No. 30 HISTORY Amul was form solelyy registered on December 14, 1946. The brand name Amul, sourced from the Sanskrit intelligence information Amoolya, means priceless. It was suggested by a feeling control expert in Anand and it was chosen because it was a meliorate acronym for Anand draw Union bourneed.The Amul revolution was started as aw arness among the farmers. It grew and matured into a protest straw man that was passageed towards economic prosperity Over five decades ago, the life of an average farmer in Kheda regularise was precise much wish healthy that of his/her counterpart everywhere else in India. His/her income was derived more or less entirely from seasonal crops. The income from draw buffaloes was un cypherable. draw manu situationurers had to t ravel long distances to award draw to the just forthwith dairy, the Polson Dairy in Anand a great deal milk went sour, especially in the summer season, as makers had to physically carry milk in individual containers. Private traders and middlemen controlled the marting and statistical statistical dispersal establishment for the milk. These middlemen decided the prices and the off- charter from the farmers by the season. As milk is perishable, farmers were compelled to interchange it for whatever they were offered. Often, they had to sell cream and ghee at throw-away prices.In this situation, the private trader made a killing. more(prenominal)over, the government at that beat had given monopoly rights to Polson Dairy, which was stretch out by a person of Parsi descent, (around that snip Polson was the most well kn hold butter brand in the country) to receive milk from Anand and try to Mumbai city in turn (ab step up 400 kilometers away). some other problem farmers faced was that in winter the milk forbiddenput of buffaloes three-fold which caused prices to fall d avow tied(p) further. India ranked nowhere amongst milk producing countries in the conception in 1946.Gradually, the realization dawned on the farmers with inspiration from accordingly jingoistic leaders Sardar Vallabhbhai Patel (who later(prenominal) became the first Home Minister of promiscuous India) and Morarji Desai (who later become the Prime Minister of India) and local farmer, freedom fighter and neighborly determineer Tribhovandas Patel, that the result by the trader could be checked only if they securities industryed their milk themselves. Amul was the result of the realization that they could pool up their milk and work as a conjunct scene up of Kaira dominion Co-operative Milk Producers UnionIn the advance(prenominal) 40s, the chief(prenominal) sources of earning for the farmers of Kaira district were market-gardening and selling of milk. That duration there was proudschool regard for milk in Bombay. The main supplier of the milk was Polson dairy limited, which was a privately give birthed corporation and held monopoly over the supply of milk at Bombay from the Kaira district. This constitution 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 tackle it without uttering a single word.However, when the exploitation became intolerable, the farmers were frustrated. They takeively appealed to Sardar Vallabhbhai Patel, who was a leading active in the freedom movement. Sardar Patel advised the farmers to sell the milk on their own by establishing a co-operative union, Instead of supplying milk to private traders. Sardar Patel send the farmers to Shri Morarji Desai in browse to gain his co-operation and help. Shri Desai held a sateing at Samarkha hamlet near Anand, on 4th January 1946. He advised the farmers to form a so ciety for foolion 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 in addition form to collect the milk from such(prenominal) village co-operative societies and to sell them. It was overly tryd that the organization should be asked to buy milk from the union. However, the govt. did non seem to help farmers by any means. It gave the negative 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 sold to the traders.As a result the Bombay milk scheme was staidly affected. The milk commissioner of Bombay then visited Anand to assess the situation. Having seemed the condition, he decided to fulfill the farmers demand. and so their cooperative unions were forced at the village and district level to collect and sell milk on a cooperative basis, w ithout the intervention of Government. Mr. Verghese Kurien showed main interest in establishing union who was hold watered by Shri Tribhuvandas Patel who lead the farmers in forming the Co-operative unions at the village level.The Kaira district milk maintainrs union was thus reconciled in ANAND and was registered formally on 14th December 1946. Since farmers sold all the milk in Anand by dint of with(predicate) a co-operative union, it was commonly resolved to sell the milk under the brand name AMUL. At the initial re-create only 250 liters of milk was pile up eitherday. But with the growing aw beness of the benefits of the cooperativeness, the assemblage of milk maturationd. Today Amul collect 11 lakhs liters of milk anyday. Since milk was a perishable commodity it becomes difficult to preserve milk flora protracted period.Besides when the milk was to be collected from the far maculations, there was a fear of spoiling of milk. To overcome this problem the union tho ught out to develop the chilling unit at unlike junctions, which would collect the milk and could chill it, so as to preserve it for a longer period. Thus, right away Amul has more than 150 chilling centers in various villages. Milk is collected from almost 1073 societies. With the financial help from UNICEF, assistance from the govt. of New Zealand under the capital of Sri Lanka plan, of Rs. 50 millions for factory to manufacture milk powder and butter was planned.Setting Up of Gujarat Cooperative Milk Marketing confederation In 1954, Kaira District Co-operative Milk Producers Union built a plant to convert unornamented milk produced in the frigorific seasons into milk powder and butter. In 1958, a plant to manufacture cheese and one to produce baby nutrition were added. Subsequent years saw the addition of more plants to produce antithetical products. In 1973, the milk societies/district level unions decided to set up a marketing agency to market their products. This agency was the Gujarat Cooperative Milk Marketing federation (GCMMF).It was registered as a co-operative society on 9 July 1973 COMPANY PROFILE THE TASTE OF INDIA, AMUL comes from the Sanskrit word Amoolya, means priceless. It was suggested by a theatrical role 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 unequivocally appropriate specimen for rural victimisation. Amul has spurred the White Revolution of India, which has made India the largest producer of milk and milk products in the world.It is likewise the worlds biggest vegetarian cheese brand . The system succeeded mainly because it admits an assured market at remunerative prices for producers milk alike acting as a delight to market the production sweetening package. Whats more, it does not disturb the agro-system of the farmers. It also enables the co nsumer an access to high bore milk and milk products. Contrary to the traditional system, when the profit of the furrow was cornered by the middlemen, the system stop upd that the profit goes to the participants for their socio-economic upliftment and common pricey.Looking back on the rails traversed by Amul, the following features make it a pattern and model for opposition elsewhere. Amul has been able to ? Produce an appropriate blend of the policy makers farmers board of heed and the professionals each group appreciating its rotes and limitations, ? Bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment. ? Provide a support system to the milk producers without disturbing their agro-economic systems, ?Plough back the profits, by judicious use of men, material and machines, in the rural sector for the common good and betterment of the portion producers and ? Even though, growing with time and on scale, it has remai ned with the smallest producer members. In that sense. Amul is an example par excellence, of an intervention for rural change. Organization social organization It 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 jockeyn as Amul) expanded exponentially. It joined hands with other milk cooperatives, and the Gujarat interlocking now covers 2. 12 million farmers, 10,411 village level milk collection centers and xiv 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 move would instanter benefit and transform small farmers and contribute to the development of society.Markets, then and even today, are primitive and poor in infrastructure. Amul and GC MMF acknowledged that development and growth could not be left to market forces and that proactive intervention was maked. Two key requirements were identified. The first, that sustained growth for the long term would depend on matching supply and demand. It would need heavy investment in the simultaneous development of suppliers and consumers. Second, that effective management of the entanglement and commercial viability would require professional managers and technocrats.To hold their vision while retaining their focus on farmers, a hierarchical web of cooperatives was developed, which today forms the robust supply strand fag end GCMMFs endeavors. The abundant and complex supply train stretches from small suppliers to large fragmentize markets. counseling of this communicate is made more complex by the fact that GCMMF is directly responsible only for a small part of the chain, with a issue forth of third party players (distributors, retailers and logistics support prov iders) playing large roles.Managing this supply chain efficiently is critical as GCMMFs competitive position is driven by low consumer prices supported by a low represent system. The Union looks after policy formulation, processing and marketing of milk, provision of good inputs to call down milk yield of animals, the artificial insemination service, veterinary care, better feeds and the like all through the village societies. DISTRIBUTION CHANNEL Amul products are for sale in over 500,000 accession retail outlets crossways India through its internet of over 3,500 distributors.There are 47 entrepots with dry and cold warehouses to modify stock-take of the entire regularize of products. GCMMF transacts on an advance demand draft basis from its wholesale head teachers kind of of the cheque system adopted by other major FMCG companies. This drill is consistent with GCMMFs philosophy of maintaining cash proceedings throughout the supply chain and it also minimizes dump ing. Wholesale dealers carry inventory that is just adequate to take care of the transit time from the showtime warehouse to their premises.This just-in-time inventory system improves dealers return on investment (ROI). every(prenominal) GCMMF branches engage in driveway scheduling and befool dedicated fomite operations Establishing best performs A key source of competitive service has been the enterprises ability to continuously weapon best practices across all elements of the network the federation, the unions, the village societies and the dissemination point. In developing these practices, the federation and the unions stool competent successful models from around the world.It could be the executing of small group activities or quality circles at the federation. Or a TQM program at the unions. Or housekeeping and good chronicle practices at the village society level. More important, the network has been able to regularly roll out feeler programs across to a large numeral 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 coming upon has its pre-set format in equipment casualty of Purpose, Agenda and Limit (PAL) with a process check at the end to record how the meeting was conducted. Similar processes are in place at the village societies, the unions and even at the wholesaler and C federal agent levels as well. Examples of benefits from in the buff initiatives include reduction in transportation time from the depots to the wholesale dealers, improvement in ROI of wholesale dealers, implementation of Zero short letter Out through improved availableness 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 mil k in terms of acidity and sour milk. (Undertaken by multi-disciplined teams, Kaizens are highly focussed projects, reliant on a structured shape up 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 receive at the union. The most impressive aspect 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-spot Distribution Highways of Fresh, Chilled, Frozen and Ambient products were already made by introducing foresee 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 just to the highest degree 3000 Di stributors ensure availability of our products across India, whether it is in Leh or Lakshadweep, in cutch or Arunachal.Simultaneously, to augment fresh milk distribution 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 smart set. 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 read 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 blood right from the producer to the consumer is well organized.It will be surprising to know that AMUL makes even the Sarpanch to eat pizza i. e. it supplies pizzas even to rural market. ? Last year, theye divided up the retail market into 14 specific segments to achieve further distri bution aptitude. 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 lay out. ? The role of distributors in our business process has never been more diverse or more important, as it is today.As a subject of fact, we consider our Distributor to be the real Marketing Manager of our organization. To enhance business performance of our Distributors, a workshop on Marketing and gross sales Management was designed in collaboration with a premier business school. The object lens 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. refrigerant Storage is an extremely essential component n th e Federations distribution process. Unfortunately, availability of efficient cold storage facilities is grossly wretched in our country. To cope up with the increasing need of suitable cold stores closer to our markets, we have continued our endeavour 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 image 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 infixd in this Amul Yatra. ? Over recent years, the Federation has successfully introduced new 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 l ean, think and productive, the Federation mingle its different distribution networks. Today, they operate an efficient distribution infrastructure consisting of 46 sales offices, catering to 3,000 distributors and five lac retailers.Almost 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 deconcentrate 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 million farmers , converts the milk into branded, box products, and delivers goods worth 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 telephone 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 embody system of providing milk at a introductory, 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 secondary services 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 value 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 work the market potential and alternative approaches are necessary to tap this market. Suppliers A majority of the suppliers are small or marginal farmers who are often illiterate, poor, and with liquidity problems as they lack direct access to fi nancial institutions. Again, traditional market mechanisms are not adequate to assure sustenance and growth of these suppliers.Third Party Logistics Services In addition to the weaknesses in the basic infrastructure, logistics and transportation services are typically not professionally managed, with itty-bitty regard for quality and service. In addition to outbound logistics, GCMMF takes responsibility for coordinate 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, coordinate collection logistics and support services to the member-farmers.In what follows we clear up on these aspects in more percentage point and provide a rule for the model and strategies adopted by GCMMF. Simultaneous Development of Suppliers and Customers From the very early stages of the formation of AMUL, the cooperative realized that sustain ed growth for the long-term was contingent on(p) on matching supply and demand. The member-suppliers were typically small and marginal farmers with strong liquidity 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 procural prices were set so as to provide fair and reasonable return. Second, assured of the liquidity problems, cash payments for the milk supply was made with minimum of delay. This practice continues today with umteen village societies making payments upon the receipt of milk. For the long-term, the Unions followed a multi-pronged dodge 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 associate technology development .The marketing efforts were assumed by GCMM F. 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 extensive network of producers and distributors at GCMMF. Some interesting mechanisms come through 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 always kept at the top of the agenda through its representatives who constitute the Boards of different entities that comprise the supply chain.This form of direct representation also ensures that professional managers and farmers work together as a team to assure the cooperative. This helps in coordinating decisions across different entities as well as speeding both the flow of information to the respective constituents and decisions. Coordination Agency comical 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 progressively large sections of the society at affordable pricesSupplier Enhancement and net profit 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 an nual contracts with truckers, ensure availability of trucks for procurement, establish truck routes, monitor truck movement and proceed stealing of milk while it is being transported. GCMMFS SUPPLY chemical 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 rou te scheduling and have 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 rail line. 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 conducted. 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, need & EVALUATION OF CHANNEL MEMBERS Selection The high society takes into consideration a innkeeper of factors while selecting the channel members.This 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 & reportage 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. ? elaborate of the auction pitch vehicle, which includes Light Commercial Vehicles, Matador, 3 Wheeler train, Tricycle Van & Hand/Push cart. The number & model of each of the vehicle inevitably to be rendered 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 similarly are divided into various categories like the Field salesmen & Counter salesmen. also the details of Clerical Staff & Mazdoors are to be provided. The technical competency 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. as well as details of complementary products & product lines need to be mentioned. ? Dealers of the company moldiness carry a good disposition.This is due to the fact that th e company believes reputation of the dealer affects the clientele. ? Market coverage by the distributors needs to be outlined which includes details of Geographic coverage & Outlets per market area. ? The company also requires the dealers to furnish any Advertising & Sales initiative undertaken by them on behalf of the company. ceremonial ? The companys strength is in its procurement and not the distribution even they know this, as this is the industrys main problem. new(prenominal) 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, lowering the costs. ? The company believes that there is an ongoing demand in the market and therefore no promotions are needed to increase the sales, also the fact this would affect the cost of the product the company doesnt undertake many promotion schemes. The not being 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 shake up its new products into the market by hooking them onto the card-playing 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 i n number in order to increase the market reach this can provide with e very effective channel for ice creams and flavored milks. ? Trade promotion should be formulated for newly launched products instead of 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 excess 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