amul's supply chain management project

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A Project Report on

AMULS SUPPLY CHAIN MANAGEMENT

In Partial Fulfillment of the Requirements of

Production and Operations Management Course in PGDM Programme

Submitted To: Prof. Praneti Shah

Submitted By :

GITANJALI AULUCK P1001

MEHUL BHATT P1002

CHINMAY GANDHI P1010

AFTAB HATHI P1012

DARSHITA THAKKAR P1053

PIYUSH VADOLIYA P1058

VISHAL DADHICH P1006

VEDANGI JOSHI P1017

SOHAM PATEL P1033

PARTH SHUKLA P1047

Batch: 2010-12

Submitted on: 18th April 2011

N. R. INSTITUTEOF BUSINESS MANAGEMENT , AHMEDABAD

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INDEX

1) INTRODUCTION TO AMUL . . . . . . . . . . . . . . . . . . . . . .

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2) STRATEGIES OF AMUL . . . . . . . . . . . . . . . . . . . . . . . . .

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3) AMULS SUPPLY CHAIN MANAGEMENT . . . . . . . . . . 6

4) GCMMFS SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

5) E- SUPPLY CHAIN MANAGEMENT OF AMUL . . . . . . . . . . .13

6) AMUL CYBER STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

7) BENEFITS OF E-SCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

8) FUTURE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

9) BIBLIGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

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Introduction

The Kaira District Co-operative Milk Producers Union Limited, popularly known as

Amul Dairy is a US $ 500 million turnover institution.

It is a institution built up with a network of over 10000 Village Co-operative Societies

and 500,000 plus members.

Formed in the year 1946 Amul is the leading food brand in India.

Amul initiated the dairy co-operative movement in India and formed an apex co-

operative organization called Gujarat co-operative Milk Marketing Federation (GCMMF)

and today 70,000 villages and 200 districts in India are part of it.

GCMMF markets its products through 50 sales offices throughout India and distribution

is done through a network of 4,000 stockiest who in turn supply 500,000 retail outlets.

Managed by an apex cooperative organization, Gujarat Co-operative Milk Marketing

Federation Ltd. (GCMMF), which today is jointly owned by some 2.41 million milk

producers in Gujarat, India

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Amul is the largest food brand in India with an annual turnover of US $1068 million

(2007-08)

Currently Amul has 3.11 million producer members with milk collection average of 6.04

million litres/day.

Amul is the largest producer of milk and milk products in the world.

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Strategy of Amul

Amuls strategy is broadly divided into two components:

The first one is the collection chain and the second one is the Supply chain. The collection chain

starts from weighing the milk to determination of the fat content in the milk to finally calculation

of the purchase price. While the supply chain starts from storing the milk to processing the milk

to finally distributing the milk.

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Amuls Supply Chain Management

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AMUL SUPPLY CHAIN MANAGEMENT PRACTICES

AMUL is a dairy cooperative in the western India that has been primarily responsible, through itsinnovative 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 million farmers , converts the milk into

branded, packaged 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 number of third party players (distributors,retailers and logistics support providers) playing large roles. Managing this supply chain

efficiently is critical as GCMMF's competitive position is driven by low consumer prices

supported by a low cost system of providing milk at a basic, affordable price.

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The distribution network

Amul products are available in over 500,000 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

GCMMF's 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.

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THE BUSINESS MODEL

From the very beginning, 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 realize 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 financial institutions. Again,

traditional market mechanisms are not adequate to assure sustenance and growth of thesesuppliers.

Third Party 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, coordinate 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.

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Simultaneous Development of Suppliers and Customers: From the very early stages of the

formation 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 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 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 minimum of delay. This practice continues today with many 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

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extensive 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 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

strengthen 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: 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 prices

Supplier 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, monitor truck movement and prevent stealing of milk while it is being

transported

GCMMFS SUPPLY CHAIN

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E- Supply Chain Management Of Amul

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Amul uses E- SUPPLY CHAIN MANAGEMENT

E-SCM may be described as the integrated management approach for planning and

controlling the flow of materials from suppliers to the end users using internet

technologies.

E-SCM refers to the complex network of relationship that organizations maintain with

trading partner to source, manufacture and deliver the products.

Components of E-SCM

E-SCM Diagram of Amul

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Working of E-SCM

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Amul has installed over 3000 automatic milk collection system units (AMCUS) at village

societies to capture member information, milk fat content and amount payable to each

member.

Each member is given plastic card for indentification

Computer calculate amount due to the farmer on the basis of the fat content

The value of the milk is printed out on the slip and handed over to the farmer ,who

collects the payment from the adjacent window

Thus with the help of it farmer gets the payment within the minutes

On the logistic more than 5000 trucks move milk from the villages to 200 dairy

processing plants twice a day according to a carefully planned scheduled

Every day Amul collects 7 million liters of milk from 2.6 million farmers (many

illiterate), converts the milk into branded, packaged products, and delivers goods to over

500,000 retail outlets across the country

ERP software named as enterprise wide integrated application system covers a operation

like planning advertisement and promotion and distribution network planning.

Each Amul office are connected via internet and all of them send daily reports on sales

and inventory to the main system at Anand,

Supply & Distribution

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At the supply end a computerized database has been setup of all suppliers & their cattle.

Computer equipment measures & records qualities & quantities collected.

At the distribution end stockists have been provided with basic computer skills. Amul

experts assist them

in building promotional web pages.

Amul Cyber stores have been setup in

India, USA, Singapore and Dubai

Amul Cyber Store

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Strong Initiatives in E-commerce

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Amul has linked distributors to the network & also incorporated web pages of top

retailers on their website

Distributors can place their order on website amulb2b.com

Automated supply & delivery chain

Practices just in time supply chain management with six sigma accuracy

Benefits of E-SCM

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Supports exchange of real time information

Platform independent

Web visibility & processing capability 24/7

Return on investment

It has open internet application architecture which allows for Rapid deployment &

scalability combining unlimited users in real time environment

Incorporates broadcast & active messaging

Future Plans

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Introduce Internet Banking Services & ATMs which will enable Milk societies to credit

payments directly to sellers bank account

Officials at amul are looking at upgrading the plastic cards which are being currently

used only for identification purposes, to smart cards which can be used to withdraw cash

from ATMs.

Expansion of distribution network, creative marketing, consumer education and product

innovation, we will leverage effectively on rising income levels and growing affluence

among Indian consumers.

Tapping the rising demand for new value-added products.

Bibliography

1. Extracted from www.Wikipedia.com for supply chain management theory.

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2. Extracted from Operation Management (6th Edition) by Russell & Taylor.

3. Extracted from www.www.amul.com for information about products and supply chain

management.

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http://www.amul.com/http://www.amul.com/http://www.amul.com/http://www.amul.com/http://www.amul.com/

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