PROJECT ON APPLICATION OF IS IN

RURAL MANAGEMENT

Submitted by:

Meera T Muricken (UR14059)

Nirmalya Kanungo(UR14061)

Pratheesh P(UR14066)

Sweta Kejriwal(UR14081)

Debashree Debashrita(UR14094)

Submitted to:

Dr Bhaskar Basu

A PROJECT ON IS APPLICATION IN

OMFED

1. Project Objective

To study the supply chain of OMFED in order to understand the current operations,

challenges faced and make the necessary recommendations.

2. Introduction

The Orissa State Cooperative Milk Producers Federation also known as OMFED Milk

Federation affiliated to the National Dairy Development Board (NDDB), situated at

Bhubaneswar, the state capital of Odisha. It is an apex level Milk Producers' Federation in

Orissa registered under Cooperative Society Act – 1962. OMFED was established based on

AMUL pattern under operation flood programme of National Dairy Development Board

(NDDB), for promoting, production, procurement, processing and marketing of milk & milk

products with a mission to integrate rural milk producer with urban consumer.

OMFED is controlled by a Board Of Directors which consists of Chairman of all affiliated

Dist. Cooperative Milk Producers" Unions, three nominees of Government of Orissa, a

nominee from the National Dairy Development Board and Managing Director of the

OMFED. The Chairman of the BOD is elected amongst the members of the Board. Here our

objective is to study current supply chain scenario of OMFED, identify operations going on,

challenges they face with current supply chain and give feasible suggestions for same.

The Prime activities of OMFED include:

1) Procurement of milk from the milk producers

2) Providing technical input in new and scientific methods to increase productivity of

milk in the state

3) Storing of the milk in their chilling centres

4) Processing, Packaging and Marketing of milk and milk products

3. Business Model of OMFED

OMFED follows a 3-tier structure in its business. The 3 tiers are:

1) The Village Cooperative Society

2) The District Milk Union

3) Milk Federation

1) The Village Cooperative Society:

It is a voluntary association of milk producers in a village who are willing to sell their milk

on a collective basis. Any milk producer can be a member of this society by paying just a

nominal fee of Rs.1 and by purchasing a share of Rs.10. It is managed and controlled by a

committee and headed by a chairman. The committee is selected by its member and they

also select the chairman. There are some more people, who acts as aids to the committee,

like milk tester, secretary, etc.

2) The District Milk Union (DMU):

The collector of the district is the chairman of the District milk union. Its job is also to

provide technical inputs, training and sometimes even to provide cattle feed and fodder,

etc to the village societies. The MU gives various technical inputs to the producers to

enhance their milk productivity. This is done in the hope that excess productivity will

result in excess of surplus milk with the producers which he can then sell to the village

society. Some of the important Technical input programs are Embryo Transfer Technology

(ETT), Artificial Insemination, Feed & Fodder Programs, Training, etc.

3) Milk Federation:

The Federation is managed by a Board of Directors (BOD). The Federation has

representation from various MUs and also from the State Government of Odisha. The

BOD chooses a Chairman amongst its members.

3.1 OMFED Supply Chain

Current Supply Chain of OMFED:

The milk is brought to the cooperative society by the milk producers twice a day, i.e.

early morning and evening.

A sample from each producer is taken and tested using the lactometer by the milk

tester.

The milk is then sold to the Milk Unions. They sell their milk to the nearest milk

unions only.

The MU then carries the milk by using hired transport vehicles to their processing

centers.

Milk is then chilled to 5 degree centigrade in the chilling centers.

The chilled milk is then sent to the nearest Federation Unit for Processing, Packaging

and Marketing.

The milk & milk products are being marketed by authorized retailers of OMFED

throughout the state.

It is supplied to the authorized retail centers in small hired OMFED trucks.

In this way, it reaches to its end users.

One of the important feature of this supply chain is, after the marketing of the

products, the achieved money realization is routed back through this supply chain to

the producers once in 10 days.

3.2 Challenges Faced by OMFED Supply Chain

1) Milk is a perishable item, so it has to be made readily available to the customer at the

right time.

2) As milk is collected from various cooperative societies and Milk Unions, it is difficult

to maintain consistently the product quality throughout the procurement chain.

3) There is an absence of well-furnished and improved ware houses with proper cold

storage facilities and cold chain enabled vehicles for maintain proper supply chain.

DISTRIBUTION

4) One of the most important problems is of reverse supply chain. Any milk or milk

product that fails to get sold at retail outlets within the consumable period of the

product, it has to be brought back to the nearest dairy plants of the co-operative. This

stands for an approx 7-10% loss for the company. So, it becomes highly essential to

effectively forecast the customers’ demands to prevent undesirable losses.

5) It is necessary to have a clear understanding about the expected demand and actual

demand at each retailer’s outlet.

4. Methodology

We followed a different methodology to study the supply chain of OMFED which involves

the following three steps:

1. Step 1

Analysis of the existing operating structure of OMFED-

We analysed the whole existing structure of OMFED through various sources. A detailed

discussion regarding its distribution channels has been carried out starting from procurement,

marketing to finally delivering milk and its products to the customers.

2. Step 2

Identifying the areas of improvement in the supply chain-

After analyzing the present supply chain model we have found out some areas of

improvement of OMFED like more focus on quality and co-ordination of distribution

activities, demands of external and internal customers, developing infrastructure(warehouse,

roads etc),untapped rural market etc.

3. Step 3

Examining the scope of improvement in the operating efficiency after implementing IS-

We have to also look into the feasibility of implementing the Information System as well as

its long term sustainability.

4.1 Tools and techniques

We have used the following tools while data collection.

Primary data collection- We have taken personal interview of Mr. Ashish Mohanty

(Supt of Finance, Berhampur, Odisha). We asked him various things about the supply

chain. It was very useful in studying the supply chain of OMFED.

Secondary data collection- We have also referred to the official website of OMFED

for getting more information. Besides that we have also taken information from

various research articles and journals to enrich our analysis.

Tools Used-We have two types of diagram to analysis the present supply chain of

OMFED. They are

1. Schematic diagram

2. Fish bone diagram

Schematic Diagram

The figure below shows the various stakeholders in the OMFED supply chain extending from

dairy promoted milk suppliers to consumers. Dairy promoted milk suppliers constitute Tier 1

and Tier 2 of the three tier structure and tier 3 is the dairy production unit. The suppliers are

depicted as S1 to Sn. The distributors, D1 to Dn reaches out to retailers R1 to Rn across the

state finally reaching the consumers. The tool was useful to analyse the supply chain of

OMFED in detail.

Fish Bone Diagram:

Fish Bone Diagram

Fish bone diagram was used as a tool to analyse the cause–effect relationship. It helped us to

identify the areas of improvement and examine the scope of improvement if IS is adopted in

the operations. The problem identified by us was the 7-10% loss of profit. The major factors

contributing to this problem are:

1. Suppliers

2. Management

3. Technology

4. Process

5. Environment

The various causes that contributes to the problem are late deliveries, inadequate quantity,

adulterated milk, poor demand forecast, incompetent workforce, outdated technology,

absence of smart IS, poor quality management system, poor process design, Temperature and

humidity.

5. Key Findings

The Key findings of our study are

1. OMFED is not able to maintain a consistent quality of milk throughout the

procurement chain.

2. The demand forecast system is inaccurate.

3. There is a need to improve marketing with agents.

4. There is an absence of Information system for its operations.

6. Suggestions

The key issues identified, .i.e., poor quality of milk, inaccurate demand forecasting could be

addresses by implementation of ERP system. Enterprise resource planning (ERP) is business

process management software that allows an organization to use a system of integrated

applications to manage the business and automate many back office functions related to

technology, services and human resources.

The schematic diagram:

Electronic Miliko-Testers (EMT), PC connected electronic miliko-tester machines (known

as Automatic Milk Collection Systems – AMCS) will help in satisfactory milk collection

methods and facilitated immediate payments to farmers based on the quality and quantity of

milk delivered.

The milk brought by the farmers is weighed using weighing scale and milk samples are

analyzed using the Milk Analyzer. Quality Milk Collection, quick payments and Risk

minimization are some of the benefits of using this technology.

Automatic Milk Collection System units (AMCUS) at village societies installed to

automate milk producers logistics. AMCUS facilitates to capture member information, milk

fat contents, volume collected and amount payable to each member electronically.

Earlier, members had passbooks containing details like identification number, fat percentage

of milk and volume of milk. The volume of the milk was recorded in the passbook and a

small sample was stored in plastic bottles for measurement of the fat content. The testing of

the milk was done at a later date and the entire process used to take more than a week.

On an average, around thousand farmers come to sell milk at their local co-operative milk

collection centre. Each farmer can be given a plastic card for identification. At the milk

collection counter, the farmer drops the card into a box and the identification number is

transmitted to a personal computer attached to the machine. The milk is then weighed and the

fat content of the milk is measured by an electronic fat testing machine. Both these details are

recorded in the PC. The computer then calculates the amount due to farmer on the basis of the

fat content. The value of the milk is then printed out on a slip and handed over to farmer who

collects the payment .Also direct money transfer to the farmers bank account also could be

implemented for better transparency .The local server collects all the information and this

would be helpful in auditing, planning and in easy generation of various reports to check the

performance of the cooperative. The data from various collection centres can be periodically

transmitted to central server at the cooperate office. This will help the higher management in

evaluating the performance at different regions and hence taking effective decisions based on

accurate data.

The PC is connected to the Automatic Milk Collection Systems (AMCS) and has a Dairy

Information Services Kiosk (DISK) which offers an extensive knowledge and service

delivery mechanism through a Dairy Portal. The DISK when used with a Dairy Portal by the

Union enhances the scope of services that would benefit the farmers as well as the dairy

industry. Dairy farmers who are members of the cooperative will visit the milk collection

centre twice a day to deliver the milk. Thus, there exists enormous opportunity to interact

with them on the issues related to cooperative and union activities.

Use of information system will also help in addressing the issue of reverse supply chain. As

per the data from the distributers, the management would be able to forecast the demand

more accurately and reduce the wastage to some extent.

Geographic Information Systems (GIS) can be used for business planning and optimization

of collection processes. Geographical Information System (GIS) can be used at Head Office

and key Marketing Offices. Using the All India Map in GIS. They are in position to plot

zone/depot boundary as well as pointer for zone, depot & distributor locations, which are

superimposed by product-wise sales data. The same is being used for sales & distribution

planning and review. Moreover, GIS is being used for business planning activity at milk

centres & it covers animal census data. This can help in determining the average milk

production and productivity of cows. This ultimately helps in forecasting milk production

according to the region and suggests remedies, if any, for a region that has a lower milk

production rate.

Enterprises are establishing links with suppliers (Business-to-Business: B2B), and with

customers (Business-to-Customer: B2C) through the internet medium to minimize the lead

times and transaction costs. In addition, this medium is also perceived as an opportunity to

understand customers better, enhance the service quality and to introduce the new products

and services.

Annexure

A. References:

1. Dairy Information Services Kiosk and Dairy Portal - Prof. T.P. Rama Rao, Centre for

Electronic Governance, Indian Institute of Management, Ahmedabad

2. Development of Milk Analysis Reliable Embedded System for Dairy Farmers Yadav

S.N1, Kulkarni V.A.2- ( Issue 7, July 2012)

3. Supply Chain Management in OMFED- Creating Values through White Channels: A

Case Study, Adyasha Suvadarshini,Gopal Prasad Roy

4. http://www.wcds.ca/proc/2013/Manuscripts/p%20141%20-%20162%20Bewley.pdf

5. http://www.omfed.com/organisation.asp?lnk=org

B. Questionnaire used for Personal Interview- Mr Ashish Mohanty (Supt. Of Finance)

1. What are the main challenges faced by OMFED in its supply chain?

2. What is the scope for improvement in OMFED w.r.t. supply chain management?

3. What are the major reasons for the 7-10% loss?

4. What are the cold storage facilities in delivery van?

5. What steps are taken for introduction of IS in its operations?

6. What are the types of technology to process milk?