SDM FINAL2003

8/8/2019 SDM FINAL2003

1/30

CHAPTER: 1

INTRODUCTION

Across India, every morning, millions wake up to the taste of Amul, the flagship

brand name for a variety of dairy products marketed by the Gujarat Co-operative

Milk Marketing Federation (GCMMF). One could start the day by boiling (as is the

traditional Indian practice) one of the different varieties of liquid milk supplied in

pouches and making ones morning tea or coffee. If one preferred to use creamer,

one could reach for the Amulya creamer on the shelf. For the breakfast, butter the

toasts with Amul regular butter or, if you are calorie conscious, with Amul Lite

butter. Drink a cup of Amul chocolate milk. Make sandwiches with one of the

different varieties of Amul cheese and take them to the office; add Amul ghee

(clarified butter) to ones dishes for lunch; cook your lunch with a curry containing

Amul paneer or cottage cheese and have a sweet dish made from Amul gulab

jamun mix. If it is a hot day, have an Amul ice cream; and when you return home

after the office; relax with tea or coffee, whitened with Amulya creamer or Amul

milk. If you are a pizza fan, bake a pizza and top it with Amul mozzarella cheese,

and finally retire for the day with a glass of warm Amul milk. In India, Amul was not

merely one of the most well known brands, way ahead of Coca Cola or Pepsi, and

even ahead of age old brands such as Dalda, Lifebuoy and Lux, but a life style range

of products, consumed in some form or other by a large number of Indians of

different income and social strata.

GCMMF was the sole marketing agency for the products produced by the

different milk co-operative member societies of the State of Gujarat and for

those of other States marketing their products under the Amul brand name.

There was no doubt that from the time of its inception in 1973, GCMMF was a

great success story, as indeed was the co-operative movement in the milk

sector initiated and carried to great heights by the milkman of India, Dr.

Verghese Kurien. But as on the year 2000, GCMMF was faced with a question

of whether it should stick to its core business in dairy products, or diversify

Page 1AMUL- SALES AND DISTRIBUTION MANAGEMENT

8/8/2019 SDM FINAL2003

2/30

into other products, in particular into processed foods such as jams, sauces

and fruit juices.

This report is about one such successful model. The Kaira District Milk Cooperative Union or

AMUL in India is an example of how to develop a network of firms in order to overcome the

complexities of a large yet fragmented market like those in emerging economies by creating

value for suppliers as well as the customers.

The central message of the report is that large fragmented markets need a long-term perspective

on profitability. It requires simultaneous development of customers and suppliers. The

requirements of this new business model are capabilities to develop a large network of suppliers,

nurturing the market for long-term growth, focusing on efficiency & quality, developing a

commitment to small stakeholders, strong implementation skills and breakthrough leadership. It

is worth noting that today AMUL competes successfully with the private sector that includes

multinational corporations and domestic players, and provides handsome returns to farmers

without receiving any form of subsidy from the government. In this report we will describe the

breakthrough vision that led to the simultaneous development of the market and supply side

through a process of social development and education at AMUL. Clearly implementation of this

vision in a competitive environment and maintaining sustained growth and profitability requires

development of competitiveness on several dimensions and operational effectiveness. This report

would also provide insights into management of very large supply chains by adapting and

integrating a variety of strategies and techniques. This includes building networks, developing

trust & values in the network, developing fair mechanisms for sharing benefits across the supply

chain, coordination for operational effectiveness, innovation and new technology for gaining

competitiveness. It is noteworthy that these successes were achieved within the framework of a

network of cooperatives organized in a hierarchical manner. This report is organized as follows.

The next section briefly outlines the characteristics of a network that operates as a large firm

within the supply chain and organizational framework.

1.1 Characteristics of a Network Environment:

During late 1980s and 90s network structure emerged as an innovative mechanism for enhancing

competitiveness and providing value to the consumer. Essentially, a network is made up of

various stakeholders ranging from suppliers to retailers, loosely linked by a common interest of


8/8/2019 SDM FINAL2003

3/30

remaining competitive in a demanding environment. This is in contrast to the traditional

mechanism of vertical integration, joint ventures etc. In recent years, much of the interest in the

network structure has been motivated by the increased attention to supply chain management

with the focus shifting from the individual firm to the supply chain. A typical supply chain

network spans several levels of suppliers, manufacturers/assemblers, distributors, wholesalers,

and retailers. It is now quite well recognized and well documented that cooperation among the

members is necessary to manage such chains effectively and efficiently. Further, research on the

subject has highlighted the role of coordination and its importance in supply chain management.\

Proctor & Gamble and Wal-Mart in the grocery industry, Ford and GM in auto industry are

some of the well known examples of firms that have realized substantial benefits by shifting the

focus to supply chain. It is also recognized that such changes are not easy to implement and

require a paradigm shift in the outlook of firms in the chain. Specifically, this requires that

decision making by various players be driven by the objective of optimizing the performance of

the chain (global optimum) rather than by the interests of the individual firms (local optimum).

Further, complexity and dynamics of the supply chain make it very difficult to assess the

interaction effects. Increased cooperation among network members has resulted in a number of

changes at all levels- operational, tactical and strategic, and has led to the emergence of practices

and strategies for improving the chain's performance. Most prominent among these include the

following:

(i) Information sharing, often dynamically, to improve planning and execution. Sharing of POS

data is a classic example for minimizing the distortions due to bull-whip effect and reducing

perceived variability of demand by the partners in the chain. Typically, information sharing

extends to costs as well.

(ii) Focus on core competence of each player in the chain. The objective is to ensure that each

task is performed by the entity best suited for it. As a result, firms have become willing partnersin ceding control to a network partner for improving performance. VMI in many industries is a

direct result of such change in management thinking. Similarly, the role of third parties for

providing specific expertise such as logistics has grown substantially with emphasis on supply

chain.


8/8/2019 SDM FINAL2003

4/30

(iii) Help network partners in improving their capability and making them competitive. Again,

this represents a sea change from the past when such entities were viewed as rivals in a zero sum

game. The new thinking is motivated by the recognition that helping partners become

competitive will make the chain more effective and lead to higher growth in revenues and

profits, thus leading to a win-win situation for all parties. Helping suppliers with process

improvements and implementation of JIT methods are examples of such initiatives leading to

overall improvement.

With many of the above characteristics being embodied in a network, it may start to perform all

the functions of a firm by satisfying the requirements of an organization, i.e., having multiple

agents, having a legal standing, presence of group objective as well as individual objectives

amongst agents, existence of a hierarchy of relationship and pooled interdependence, sharing of

common information and centralized planning (to some extent), sharing of risks, having

centralized marketing function for most products etc. It is interesting to note that AMUL has

adopted the network model in early 1950s in a broader context and more complex environment,

well before the approach was recognized in Western Europe and North America. In the

following sections we describe the AMUL story and elaborate on its practices.

1.2 The Historical background

The Kaira District Cooperative Milk Producers Union Limited was established on December 14,

1946 as a response to exploitation of marginal milk producers in the city of Anand (in Kaira

district of the western state of Gujarat in India) by traders or agents of existing dairies. Producers

had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand often

milk went sour, especially in the summer season, as producers had to physically carry in

individual containers.

These agents decided the prices and the off-take from the farmers by the season. Milk is a

commodity that has to be collected twice a day from each cow/buffalo. In winter, the producer

was either left with surplus unsold milk or had to sell it at very low prices. Moreover, the

government at that time had given monopoly rights to Polson Dairy (around that time Polson was

the most well known butter brand in the country) to collect milk from Anand and supply to


8/8/2019 SDM FINAL2003

5/30

Bombay city in turn (about 400 kilometers away). India ranked nowhere amongst milk producing

countries in the world in 1946.

The producers of Kaira district took advice of the nationalist leaders, Sardar Vallabhbhai Patel

(who later became the first Home Minister of free India) and Morarji Desai (who later become

the Prime Minister of India). They advised the farmers to form a Cooperative and supply directly

to the Bombay Milk Scheme instead of selling it to Polson (who did the same but gave low

prices to the producers). Thus the Kaira District Cooperative was established to collect and

process milk in the district of Kaira.

Milk collection was also decentralized as most producers were marginal farmers who would

deliver 1-2 liters of milk per day. Village level cooperatives were established to organize the

marginal milk producers in each of these villages. The first modern dairy of the Kaira Union was

established at Anand (which popularly came to be known as AMUL dairy after its brand name).

The new plant had the capacity to pasteurize 300,000 pounds of milk per day, manufacture

10,000 pounds of butter per day, 12,500 pounds of milk powder per day and 1,200 pounds of

Casein per day. Indigenous R&D and technology development at the Cooperative had led to the

successful production of skimmed milk powder from buffalo milk the first time on a

commercial scale anywhere in the world. The foundations of a modern dairy industry in India

had just been laid as India had one of the largest buffalo populations in the world.

The dairy industry in India and particularly in the State of Gujarat looks very different. India for

one has emerged as the largest milk producing country in the world. Gujarat has emerged as the

most successful State in terms of milk and milk product production through its cooperative dairy

movement. The Kaira District Cooperative Milk Producers Union Limited, Anand becomes the

focal point of dairy development in the entire region and AMUL emerges as one of the most

recognized brands in India, ahead of many international brands.

Starting with a single shared plant at Anand and two village cooperative societies for milk

procurement, the dairy cooperative movement in State of Gujarat had evolved into a network of

million milk producers (called farmers) who are organized in 10,411 milk collection independent

cooperatives (called Village Societies). These Village Societies (VS) supply milk to thirteen


8/8/2019 SDM FINAL2003

6/30

independent dairy cooperatives (called Unions). AMUL is one such Union. Milk and milk

products from these Unions are marketed by a common marketing organization (called

Federation).

Gujarat Cooperative Milk Marketing Federation or GCMMF is the marketing entity for the State

of Gujarat. GCMMF has 42 regional distribution centers in India, serves over 5, 00, 000 retail

outlets and exports to more than 15 countries. All these organizations are independent legal

entities yet loosely tied together with a common destiny (In a recent survey GCMMF was ranked

amongst the top ten FMCG firms in the country while AMUL was rated the second most

recognized brand in India amongst all Indian and MNC offerings). Interestingly, the Gujarat

movement spread all over India and a similar structure was replicated (all are at different levels

of achievement but their trajectory appears to be quite similar).

Two national organizations, the National Dairy Development Board (NDDB) and the National

Co-operative Dairy Federation of India (NCDFI) were established to coordinate the dairy

activities through cooperatives in all the States of the country. The former provides financing for

development while the latter manages a national milk grid and coordinates the deficit and surplus

milk and milk powder across the states of India. In the early nineties, AMUL was asked by the

Government of Sri Lanka to establish a dairy on similar lines in Sri Lanka. Interestingly, while

Polson folded up sometimes in 1960s, the cooperatives are faced with new competition in

liberalizing India from MNCs who brought in new business paradigms, new and improved

product portfolio, international network and immense financial support. The Cooperatives face

new challenges that test the robustness of their approach and their commitment to the movement

and a new style of management thinking,

Today AMUL is a symbol of many things. Of high-quality products sold at reasonable prices, Of

developing and coordinating a vast co-operative network, Of making a strong business

proposition out of serving a large number of small and marginal suppliers, Of the triumph of

indigenous technology, Of the marketing savvy of a farmers' organisation. We will now try to

address the central issue of how to develop and manage a network of firms in an emerging

market environment.


8/8/2019 SDM FINAL2003

7/30

CHAPTER: 2

INTRODUCTION OF STUDY

India, with her sizable dairy industry growing rapidly and on the path of modernization, would

have a place in the sun of prosperity for many decades to come. The one index to the statement is

the fact that the projected total milk output over the next 15 years (1995-2010) would exceed

1457.6 million tonnes which is twice the total production of the past 15 year.

2.1 OBJECTIVES:

1. To study the sales and distribution of Amul milk by GCMMF

2. To study the supply chain management and logistics of GCMMF

3. To understand sales force management of GCMMF

4. To know the recent trends in milk distribution

2.2 RATIONALE OF THE STUDY:

This study would help us to under stand how GCMMF manages the sales and distribution of

Amul Milk. Since Amul is the Major distributor of milk to many other industries like

confectionery for chocolate, biscuit etc. which requires good control and efficient management.

This study would give us an idea of how such a complex network can be effectively managed.

2.3 SCOPE OF THE STUDY

Last year, the turnover of GCMMF was 6711 crores (Rs 67 billion) and the Federation registered

a quantum growth of 19.3% to reach Rs 8005 crores (Rs 80 billion). This is an extremely

impressive growth of 27.7 percent growth achieved in the year 2008-09. The study will help


8/8/2019 SDM FINAL2003

8/30

understand the changing trends and future growth of this industry. This study would help to

understand the influence of various factors like increase in distribution cost and its effect on the

price of milk.

2.4 LIMITATIONS:

Time Constraint: This study was done in a short period of time which is not enough to

do a detail study of GCMMF.

There are various products marketed by GCMMF but each of its products has a complex

network of distribution, detail study of which was not possible within a stipulated time

period.


8/8/2019 SDM FINAL2003

9/30

CHAPTER: 3

SALES AND DISTRIBUTION MANAGEMENT

3.1 The Network as a Firm: Business Model & Management

The Business Model

The objective of the network was to deliver profitable and equitable returns to a large number offarmers for a long period of time. This follows rather directly from the fact that the member

farmers own essentially the network of cooperatives. As explained later, given the weak

economic status of these members, an additional objective was to develop the supplier over the

long term through social change. Consequently, the business model had to include both the costs

and benefits of services that would be needed to deliver milk with high productivity as well as to

assist farmers in improving their social environment.

The success of the network depended on high collection rate of milk. This required increasing

membership with more VSs, raising the number of members per VSs (Village Societies), and

improving the milk yield (i.e., better cattle management), constant concern about the cost to

farmers in the network and delivering quality to customers at low prices. The cooperative had

decided as part of its value:

To charge for each service provided to the supplier

To purchase all milk, produced by member farmers

To sell liquid milk at affordable prices so as to serve a large number of consumers

To develop and deliver services that will improve lives of people in the network


8/8/2019 SDM FINAL2003

10/30

To hire professional managers, to run the federation and unions, whose values

included upliftment of rural poor.

It is noteworthy that from the very beginning, in the early 1950s, AMUL adopted the network as

the basic model for long-term growth. Two aspects of this network deserve special attention.

First, the network explicitly includes secondary services to the farmer-suppliers. Second, several

of the entities in the network are organized as cooperatives linked in a hierarchical fashion. In

what follows, we describe briefly the environmental characteristics and the rationale for the

underlying business model.

Market / 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.

Even from the cursory description of the environment provided above, it should be clear that the

traditional management practices of the west are not sufficient for success in emerging markets.

Many MNCs that ventured into India following the first phase of liberalization in 1990s found

this at a great cost. The success of GCMMF and AMUL is in glaring contrast to the experience

of these MNCs and thus provides an alternative business model that may be useful for others

considering entry into emerging markets like India. A schematic description of the business


8/8/2019 SDM FINAL2003

11/30

model showing the demand-supply linkages is presented in Figure 4.1 In addition to material

flows, the figure shows major decisions, support services, and planning and coordination

activities. For example, procurement prices set by Unions are a major determinant of milk

supply. Similarly, GCMMFs pricing strategy for dairy products has a strong influence on

consumer demand. As shown in the figure, the Unions and GCMMF share coordination

activities. 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 byGCMMF.

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. Further, given the primitive state of the market and

the suppliers of milk, their development in a synchronous manner was critical for the continued

growth of the industry. The organization also recognized that in view of the poor infrastructure in

India, such development could not be left to market forces and proactive interventions were

required.

Accordingly, AMUL and GCMMF adopted a number of strategies to assure such growth. For

example, at the time AMUL was formed, the vast majority of consumers had limited purchasing

power and was value conscious with very low levels of consumption of milk and other dairy

products. Thus, AMUL adopted a low price strategy to make their products affordable and

guarantee value to the consumer. The success of this strategy is well recognized and remains the

main plank of AMUL's strategy even today. The choice of product mix and the sequence in

which AMUL introduced its products is consistent with this philosophy. Beginning with liquid

milk, the product mix was enhanced slowly by progressive addition of higher value products

while maintaining desired growth in the existing products. Even today, while competing in the


8/8/2019 SDM FINAL2003

12/30

market for high value dairy products, GCMMF ensures that adequate supplies of low value

products are maintained.

On the supply side, as mentioned earlier, 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. A substantial part of this surplus isused for activities that promote growth of milk supply and improve yields. These include

provision of veterinary services, support for cold storage facilities at the village societies etc. In

parallel, the Unions have put in place a number of initiatives to help educate the members.

To summarize, the dual strategy of simultaneous development of the market and member farmers

has resulted in parallel growth of demand and supply at a steady pace and in turn assured the

growth of the industry over an extended period of time.

Managing Third Party Service Providers: Well before the ideas of core competence and the role

of third parties in managing the supply chain were recognized and became fashionable, these

concepts were practiced by GCMMF and AMUL. From the beginning, it was recognized that the

core activity for the Unions lay in processing of milk and production of dairy products.

Unions focused efforts on these activities and related technology development.The 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, 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


8/8/2019 SDM FINAL2003

13/30

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

CHAPTER: 4

SUPPLY CHAIN MANAGEMENT AND MARKET LOGISTICS

Milk is procured from the villages and collected at Village Cooperative Societies (VCS), from

there the milk is taken to manufacturing units where the milk is processed into various products.

The products are then transporters to the company Depots located in various parts of the country.The products are then sent to Wholesale Distributors (WD) and from there to the retailers.

Fig 4.1 Dairy co-operative structure


8/8/2019 SDM FINAL2003

14/30

The Fact Sheet

Milk is procured twice a day from 2 million from Gujarat alone

The payment is made in less than twelve hours of procurement

There are 10000 village cooperative societies

There are 3600 wholesale distributors in the country

45 depots

The C&F agents are not fixed and are decided by the local company offices

There are approximately. 4, 50,000 retailers spread all over India

Total house hold consumers covered are 100,000

The milk procured per day is 5 million liters

Where the total capacity of operation is 7 million liters per day

The peak processing till date has been 6 million liters per day

These co operative societies are bound to supply there produce only to GCMMF.


8/8/2019 SDM FINAL2003

15/30


Farmers

Village

Cooperative

Societies(Without

Chilling

Units

VillageCooperativeSocieties (with

Chilling Units)

Local

Restaurants/Other Milk

Related

Businesses

Milk Sold to

Village &

Local

Residents

GCMMF Warehouses

Milk Processing Union &

Warehouses

Wholesalers/C&S

Retailers

Home

Delivery

Contractors

Network

Services

*VeterinaryServices

* Animal

Husbandry* Animal

Feed

Factory* Milk Can

Producers

*Agriculture

University* Rural

MgmtInstitute

* Trucking

Facilities

Chilling

Plants

8/8/2019 SDM FINAL2003

16/30

CONSUMERS CONSUMERS

Fig. 4.2 Supply Chain of GCMMF

4.1 Supply chain management and Market Logistics:

4.1.1 Enterprise resource planning:

The company at has implemented an ERP program as low as Rs. 3 corers in collaboration with

TCS ltd. The company uses it; the data right from the procurement from the farmers till the

delivery of goods to the retailers is fed into the system. The software enabling the channel

members to use for the synchronized working and best possible utilization of the available

resources maintains details regarding the inventory management. Market logistics deals with the

implementation of the SCM of the company.

4.1.2Up stream Channel

It is the procurement part of the distribution channel, in which milk is procured from the farmers

to the manufacturing units. 1. In the first step, the milk is taken to the VCS by the farmers on

foot or bicycles in small quantities 2. The second step involves the transportation of milk from

the co-operatives to the manufacturing units this is done in special trucks which are equipped

with tankers to carry milk.

4.1.3 Downstream Channel,

It is the distribution part of the supply chain. From the manufacturing units to the retailers. 1)

First leg of transport is from the manufacturing unit to the company depots. This is done using 9

and 18 MT trucks any lesser quantity will be uneconomical to the company there fore is some

time the quantity ordered is lesser then club loading is done which means that the product

ordered is supplied with some other products. a. Frozen food the temperature of these trucks is

kept below -18C b. Dairy wet the temperature of these trucks is kept between 0-4C 2) Second


8/8/2019 SDM FINAL2003

17/30

leg is from the depot to the WDs, this transport is carried out in insulated 3 and 5 MT TATA

407s here a permanent dispatch plan (PDP) is prepared where the distributor plans out the

quantity of various products to be ordered on a particular date. 3) Third leg this is the flow of

good from WDs to retailers, a beat plan is prepared and transportation is done on auto-

rickshaws, rickshaws and bicycles.


8/8/2019 SDM FINAL2003

18/30

4.2 CONFLICTS AND CO-OPERATION AMONG CHANNEL MEMBERS

4.2.1 Conflicts

Ownership of assets: Previously the company used to give the cooling equipment on

lease to the retailers, when the company wanted the stuff back; the retailer disagreed to

comply and created issues of ownership.

Stocking issues: The company doesnt want the retailers to stock the competing brand in

the company leased fridges, which at times s hard to manage as retailers tend to do it often.

Replacement of products: The deterioration in the product calls for fail in replacement

by the company this major issue of vertical conflict. Credit policy: Compared to the market,

the companys credit period is less that specially incase of institutional sales is very

important.

Packaging: The channel members for easy storing demand a better quality of packaging.

Replenishment: The replenishment of the stocks is not prompt in case of amul cheese and

all hard selling items.

Margins: The Company provides least margins to all the channel members. For e.g. the

retailers margin in case of butter is 8% as compared to Britannias 12% 13

4.2.2. Co-operation:

Amul quality circles: The members of the local channel meet together every month to

share issues and the achievements of the channel members. This is an ongoing activity

facilitated by the company offices in different locations; this enables the channel members to

learn together and reduces the horizontal conflicts among the WDs.


8/8/2019 SDM FINAL2003

19/30

Pilot salesmen scheme: To reduce the financial burden of the distributors this scheme is

run whereby half the cost of the salesmen is born by the company and the rest half by the

distributor

Scheduling of sales: The WDs provides Schedule of the distributors sales men to the

retailers so that the retailers can plan out and place the orders in advance.

Agreement defining rights: The company makes the distributors sign an agreement

where the areas of operation for each of the distributors are defined, therefore avoiding any

conflict amongst the distributors regarding their areas of operation.


8/8/2019 SDM FINAL2003

20/30

CHAPTER: 5

SALES FORCE MANAGEMENT

5.1 SELECTION, MOTIVATION & EVALUATION OF CHANNEL MEMBERS

5.1.1 Selection:

The company takes into consideration a host 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 & 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 get 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 delivery vehicle, which includes Light Commercial Vehicles, Matador, 3

Wheeler Van, Tricycle Van & Hand/Push cart. The number & model of each of the vehicle needs

to be furnished to the company.


8/8/2019 SDM FINAL2003

21/30

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 due 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 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

5.1.2. Motivation:

GCMMF strongly believes in maintaining a good relationship with the channel members so that

they are genuinely motivated to work for the company. Also if the channel members are

motivated, they can also initiate advertising & sales promotion schemes on behalf of the

company. However to keep the channel members motivated to work, the company has to incur

certain costs but the benefits of it are felt in the long run. The following are the motivation

programs run by the company:

5.1.2.1 Distributors:

One of the main factors, which keep the distributors motivated, is the margin. Usually the

margins offered by the company are 8% & it is raised to 8.5%. Volume wise this comes out to be

a big figure since Amuls product has a good demand in the market. However compared to the

other companies the margins are still lower since the new players in the market offer a much


8/8/2019 SDM FINAL2003

22/30

higher margin. But the very fact that Amuls products have good demand in the market motivates

the distributors to stock it.

Amul being a cooperative cannot afford to give heavy monetary incentives. Amuls products are

considered to be value for money since the company does not believe in charging high margins.

In fact all monetary incentives are just the short run means to promote the companys product. In

order to keep the Channel members motivated in the long run, Amul builds on the concept of

Trade Marketing which makes the dealers & the distributors believe that the companys

products are worthy of being pushed in the market.

The company is organizing various Total Quality Management initiatives & workshops. Here

various counseling measures are undertaken by the company to improve the overall working of

the distribution network.

Vision and mission statement: the company cascades down the vision to the various channel

members; this is done through various events organized by the company at different locations

where the values of the company are made clear and enforced to the channel members. Also the

fact that Amul being a cooperative society cannot afford to spend exorbitantly on such events

therefore it has a very traditional way of organizing these get together which leaves an impact on

the members.

Amul yatras: this includes taking the channel members on a guided tour of the manufacturing

and procuring facilities in Gujarat. So that the channel members can have an experience of the

working of the company and can pick up some quality measures that can help them to

synchronize and improve their own functioning at various levels. This in turn help the company

to co ordinate the entire value chain, as the channel members understand the various constraints

and liberties the company goes through. The company has already got the Rajiv Gandhi award

for quality.

5.1.2.2 Retailers:

Trade schemes: these are undertaken by the company only for the hard selling items e.g.

Ice creams, flavored milk etc. for these the company raises the margins by 2%, also schemes


8/8/2019 SDM FINAL2003

23/30

like good packaging in case of butter and cheese is undertaken by the company. However this

is only a short-term initiative to push the products of the company.

Glow boards: the company puts up glow boards at the retailer and pays the major portion

of the cost.

Schedule of the salesmen: they provide the retails with this schedule so the retailers can

pre estimate the quantities of the various products needed.

Infrastructure facilitation: the company facilitates the retailers to buy freezers and

fridges by formulating an easy payment program and a commitment to buy back the

equipment at a reasonable price when the value of the equipment has depreciated. Evaluation

of channel members.

Beat plan: this plan is generated for the various product categories i.e. diary dry, diary

wet, Dhara and ice cream. A weekly schedule is prepared for various markets and the

retailers the turnover for each of the product is calculated for the wholesale dealers.

Cumulative performance: the performance of the dealers is averaged out over a period

of three years where a comparison is made of the present performance vis- -vis the previous

ones.

5.1.3. Evaluation

Target versus achievement: the performance and the targets are compared and therefore the gaps

are identified which help in evaluating the WD and planning for the next year as well. This is

done for each of the product category.

Many other criteria are used in evaluation like

1. Details of the bank guaranty

2. Photographs of the offices

3. Details of the WD salesmen and the product lines he deals in

4. The computerization facility available

5. The storage space


8/8/2019 SDM FINAL2003

24/30

6. Refrigeration facility with photograph

7. Details of the delivery vehicle with photograph

8. Summary of the monthly potential sales of markets

9. Summary of the product wise monthly sales potential of institutions


8/8/2019 SDM FINAL2003

25/30

CHAPTER: 6

RECENT TRENDS, COMMENTS AND SUGGESTIONS

6.1 Direct retailing:

Amul has recently entered into direct retailing through "Amul Utterly Delicious" parlours

created in major cities.

Amul has plans to create a large chain of such outlets to be managed by franchisees

throughout the country.

6.2 Suggestions:

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: i. Full range display ii. Easier to promote new products iii. Easy to push impulse

purchase products IV. Brand building will be facilitated


8/8/2019 SDM FINAL2003

26/30

Pushcarts should be increased in 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

additional salesmen on the field since the brand as such commands a high demand in the

market.


8/8/2019 SDM FINAL2003

27/30

CONCLUSION

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 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 push its new products into the market

by hooking them onto the fast moving products like Amul butter; they force the channel

members to carry the new products as well.


8/8/2019 SDM FINAL2003

28/30

BIBLIOGRAPHY

1. Havaldar.K, Caval.V; Sales and Distribution Management; Tata McGraw-Hill

publications; Edition 1.

2. Panda.T, Sahadev.S; Sales and Distribution Management; Oxford University Press

3. www.amul.com; as on date 10/08/2010

4. www.naukrihub.com as on 13/08/2010 and 14/08/2010

5. www.gcmmf.coop as on 15/08/2010 and 16/08/2010

6. www.en.wikipedia.org/wiki/Amul as on 15/08/2010 and 21/08/2010

7. www.nddb.org/partners/gcmmf as on 12/09/2010

8. www.icmrindia.org/casestudies/catalogue as on 12/09/2010 and 15/09/2010

9. www.linkedin.com/companies/gcmmf as 18/09/2010 and 21/08/2010

10.www.economic times.com as on 22/09/210 and23/08/2010

11.www.indianexpress.com as on 24/09/2010 and 29/09/2010

12. findarticles.com/p/news-articles/gcmmf as on 30/09/2010

13.www.potatopro.com as on 01/10/2010

14.www.livemint.com/articles/keywords as on 02/10/2010

15.www.dnaindia.com as on 02/10/2010 and 05/10/2010

16.www.study.ind.in/gcmmf-amul-2010-recruitment-gujarat-co-operative-milk-marketing-

federation-limited as on 10/10/2010 and13/10/2010

17.wikimapia.org/8626786/AMUL-GCMMFas on 24/11/2010 ,25/11/2010 and 27/11/2010

http://www.amul.com/http://www.naukrihub.com/http://www.gcmmf.coop/http://www.en.wikipedia.org/wiki/Amul%20as%20on%2015/08/2010%20and%2021/08/2010http://www.nddb.org/partners/gcmmf%20as%20on%2012/09/2010http://www.icmrindia.org/casestudies/catalogue%20as%20on%2012/09/2010%20and%2015/09/2010http://www.indianexpress.com/http://www.potatopro.com/http://www.livemint.com/articles/keywords%20as%20on%2002/10/2010http://www.dnaindia.com/http://www.study.ind.in/gcmmf-amul-2010-recruitment-gujarat-co-operative-milk-marketing-federation-limited%20as%20on%2010/10/2010%20and13/10/201http://www.study.ind.in/gcmmf-amul-2010-recruitment-gujarat-co-operative-milk-marketing-federation-limited%20as%20on%2010/10/2010%20and13/10/201http://www.study.ind.in/gcmmf-amul-2010-recruitment-gujarat-co-operative-milk-marketing-federation-limited%20as%20on%2010/10/2010%20and13/10/201http://www.amul.com/http://www.naukrihub.com/http://www.gcmmf.coop/http://www.en.wikipedia.org/wiki/Amul%20as%20on%2015/08/2010%20and%2021/08/2010http://www.nddb.org/partners/gcmmf%20as%20on%2012/09/2010http://www.icmrindia.org/casestudies/catalogue%20as%20on%2012/09/2010%20and%2015/09/2010http://www.indianexpress.com/http://www.potatopro.com/http://www.livemint.com/articles/keywords%20as%20on%2002/10/2010http://www.dnaindia.com/http://www.study.ind.in/gcmmf-amul-2010-recruitment-gujarat-co-operative-milk-marketing-federation-limited%20as%20on%2010/10/2010%20and13/10/201http://www.study.ind.in/gcmmf-amul-2010-recruitment-gujarat-co-operative-milk-marketing-federation-limited%20as%20on%2010/10/2010%20and13/10/201

8/8/2019 SDM FINAL2003

29/30

18.www.courses.ind.in/gcmmf-amul-career as on 28/11/2010 and 29/11/2010

Figure: 3.3 Demand and Supply Linkage

Product

Pricing

Strategy

CORDINATION AND PLANNING ACTIVITIES

PRIMARY/MAJOR INFLUENCING FACTORS

SUPPORT SERVICE

MATERIAL FLOW OF MILK AND DAIRY PRODUCTS

3PIL-THIRD PARTY INBOUND LOGISTICS


3P Services

Supplier

s/Farmers

Unions

GCMMF

3 PILVS

Milk

Supply

Distributor

Retailer

3POL

Demand

Customer

8/8/2019 SDM FINAL2003

30/30

3POL- THIRD PARTY OUT BOUND LOGISTICS

30

SDM FINAL2003

Documents

Transcript of SDM FINAL2003