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Table of Contents
Indian Dairy Industry........................................................................................................ 2
Govt. Schemes/ Programs.................................................................................................. 3
Challenges Faced By The Indian Dairy Supply Chain..................................................4
Procurement (collection)......................................................................................... 4
Price negotiation by milk producers based on:........................................................4
Advent of organized retail channels........................................................................4
Distribution.............................................................................................................. 4
Lack of supporting information systems..................................................................4
Technology solutions............................................................................................... 4
Introduction - Amul.......................................................................................................... 5
Objective & Scope of Amul............................................................................................. 6
The Amul Model............................................................................................................. 6
Heres how it works:...................................................................................................... 7
Dynamic Logistics System At Amul................................................................................... 8
The IT angle........................................................................................................... 10
Role of Computer application........................................................................................ 10
Automatic Milk Collection Systems............................................................................. 12
Automating the Weighing Scales.................................................................................13
Geographic Information Systems (Gis)..................................................................13
Dependence on 3PL.................................................................................................. 14
Conclusion:.................................................................................................................. 14
References................................................................................................................ 15
to a professionally managed industry - the Indian dairy industry. With these positive signals, there is hope
that the sector may eventually march towards another white revolution.
IMARC Group, one of the worlds leading research and advisory firms, has come up with its new report
entitled Dairy Industry in India: Market Size, Growth, Prices, Segments, Cooperatives, Private Dairies,
Procurement and Distribution, which is the fourth edition of our highly acclaimed publication. The study
is an outcome of an intensive research of the Indian dairy industry that draws upon a comprehensive
analysis of every major dairy segment in India. The study, which is based both on desk research and four
waves of qualitative primary research, has delved deeply into the following aspects of the Indian dairy
market:
Warehousing, Automation, Supply-Chain Management & Technologies to provide more opportunities for
our valuable business and consumer community.
Distribution
Technology solutions
Introduction - Amul
The Birth of Amul Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), is India's largest food
product marketing organization with annual turnover (2010-11) US$ 2.2 billion. Its daily milk
procurement is approx 12 million lit (peak period) per day from 15,712 village milk cooperative societies,
17 member unions covering 24 districts, and 3 million milk producer members. It is the Apex
organization of the Dairy Cooperatives of Gujarat, popularly known as 'AMUL', which aims to provide
remunerative returns to the farmers and also serve the interest of consumers by providing quality products
which are good value for money. Its success has not only been emulated in India but serves as a model for
rest of the World. It is exclusive marketing organization of 'Amul' and 'Sagar' branded products. It
operates through 47 Sales Offices and has a dealer network of 5000 dealers and 10 lakh retailers, one of
the largest such networks in India. GCMMF is India's largest exporter of Dairy Products. It has been
accorded a "Trading House" status. Many of our products are available in USA, Gulf Countries,
Singapore, The Philippines, Japan, China and Australia. GCMMF has received the APEDA Award from
Government of India for Excellence in Dairy Product Exports for the last 13 years. For the year 2009-10,
GCMMF has been awarded "Golden Trophy' for its outstanding export performance and contribution in
dairy products sector by APEDA. For its consistent adherence to quality, customer focus and
dependability, GCMMF has received numerous awards and accolades over the years. It received the Rajiv
Gandhi National Quality Award in1999 in Best of All Category. In 2002 GCMMF bagged India's Most
Respected Company Award instituted by Business World. In 2003, it was awarded the The IMC
Ramkrishna Bajaj National Quality Award - 2003 for adopting noteworthy quality management practices
for logistics and procurement. GCMMF is the first and only Indian organisation to win topmost
International Dairy Federation Marketing Award for probiotic ice cream launch in 2007. The Amul brand
is not only a product, but also a movement. It is in one way, the representation of the economic freedom
of farmers. It has given farmers the courage to dream. To hope. To live. Amul has reported its slowest
growth in the past eight years for 2014-15 due to a fall in global milk prices that impacted the rate of
revenue increase at India's largest dairy brand for bulk commodities such as skimmed milk powder, whole
milk powder and ghee.
Gujarat Cooperative Milk Marketing Federation ended the fiscal with revenue of Rs 20,730 crore, an
increase of 14.2% over the previous year while it achieved a compounded growth rate of 20% over the
past five years in marketing its Amul brand of milk and milk products. "We have achieved volume sales
growth in all product categories. The cooperative dairy, which processes 154 lakh litres of milk procured
from Gujarat and other states daily, is focusing on expanding its plant capacity by 14% to process 175
lakh litres of milk per day.
members will be successful. Organizational design involves the creation of roles, processes and formal
reporting relationships in an organization.
Machines to design and manufacture insulated stainless steel tankers of the required capacity. These
ultimately helped realize the dream of setting up the National Milk Grid (NMG). The carriage and tanker
were so designed as to prevent the milk from churning while in motion, and maintaining its temperature.
The tankers were normally loaded with pasteurised milk cooled to 2 degrees Celsius. At the end of the 40hour journey from Anand to Calcutta (now Kolkata), the temperature of the milk would be 4 degrees
Celsius. It was this efficiency that helped move milk from surplus areas like Gujarat to deficit areas like
Delhi and Kolkata, where Mother Dairy then took the milk to consumers. As milk procurement picked up,
the movement from hinterland feeder and feeder-balancing dairies included other large metros such as
Bangalore, Madras (now Chennai) and Bombay (Mumbai). Supplying centres such as Anand and
Mehsana (in Gujarat), some receiving centres such as Madhavaram (in Madras) and dairies such as the
Delhi Milk Scheme had excellent railway siding facilities that eased the incantation and decantation of
milk. the NMG successfully linked milk producers in far-flung villages of various states and consumers in
the metros. The NMG became the most significant tool of Operation Flood; it has made India the number
one milk producer in the world. Gowdas announcement further boosts the NMG. From carrying milk in a
few tankers, India is now mature enough to run full-fledged milk trains. They will comprise tankers
carrying liquid milk, wagons carrying dry dairy products, and specially designed refrigerated wagons to
carry ice cream, butter, cheese, paneer, dahi, chhachh and other dairy products that need to be kept cool
for longer distances and periods.
These trains will run from Amuls supply stations in Anand to various destinations across India.
services, for better breeding of the cattle they have artificial insemination. It has been found that all these
inputs haeve helped in the production of milk. The procurement at Amul has increased from 41.42 lakh kg
to 64.38 lakh kg resulting a growth of 55.42% in last 10yrs . In Gujrat, the village societies have got so
much profit that they have a fund from which they are able to contribute some money for the upliftment
of their village like opening a school, building a hospital etc. This gives a good impact on the villagers
and encourages them to become a part of the co- operative. These village societies are a link between the
members and the union. The co-operative helps the farmers to get remunerative price as well as
continuous market for the milk. In addition to the price of the milk they also get a bonus at the end of the
year from the profit of the organization. The professionals utilize it by diversifying the products and
finding suitable market. To further improve the efficiency of the procurement the organization has used
the technology for this. Every society has its own computerized system where the testing of milk is done
and payment is made according to the quantity and quality. Milk being a perishable commodity it is
necessary to preserve it properly. To maintain its quality the society maintains a Bulk Milk Cooling
system which preserves the milk below 40oC. This also reduces the expenses of the transportation as the
society which has this unit the van goes only once a day to collect the milk. Further to prevent the scourge
of the milk the union has its own chilling centers which help in preserving the milk procured from the far
off societies.
The IT angle
With three million farmers making at least two transactions a day at thousands of collection facilities, you
can imagine how complex things get. SAPs Enterprise Resource Planning technology has been
implemented at the higher levels of GCMMF to improve the efficiency of transporting milk from
thousands of collection points to a central facility as well as product manufacturing and distribution
including general monitoring of the enterprise. The successful utilization of IT and computer application
in Amul has aptly been described by Dr V Kurien, chairman, GCMMF and the man credited for
revolutionizing the co-operative movement. Computers were not created to solve the problems of
poverty; hence it is futile to expect that the world will be a better place if we all had access to computers
and the Internet. But information is power and it stands to reason that if this power is shared equitably, all
will benefit. There is no better example than Amul to prove this fact.
Computer application has played a critical role in the development of the Amul brand. The logistics
behind the co-ordination of approximately six million litres of milk per day from about 10,675 separate
village co-operative societies throughout Gujarat, and storing, processing and producing of milk products
at the 12 district dairy societies, is carried out with military-like precision. Its in these operations that
Computer application plays a critical role. The installation of over 3,000 Automatic Milk Collection
System Units (AMCUS) at village societies to capture member information, milk fat content, volume
collected, and amount payable to each member, has proved invaluable in ensuring fairness and
transparency throughout the entire organisation. The role of Computer application in Amul is best
summed up by B M Vyas, chief executive officer, Amul (GCMMF) when he says, Amul is not a food
company, it is an IT company in the food business. GCMMF is an apex co-operative organisation that
comprises 12 affiliated member dairies/district milk unions, with each having its own manufacturing unit.
These member dairies in turn have collectively about 2.1 million milk-producing members who supply
milk twice a day to the respective village co-operative societies. As the collection and co-ordination of
milk was a complex task, the organisation needed a methodology to streamline operations. Further,
following the relaxation on food imports by the government of India, the Indian dairy sector Page 110
faced a strong challenge from large organised dairies. To meet this challenge, the Indian dairy sector
needed a strategy to make its operations competitive. Accordingly, IT was decided as the thrust area that
would streamline the production and collection process and the processing of milk products. This is where
the installation of AMCUS made the entire operation look simple. For example, on an average, around
thousand farmers come to sell milk at their local co-operative milk collection center. Each farmer is 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 measured by an electronic fat testing machine. Both these details
are recorded in the PC. The computer then calculates the amount due to the farmer on the basis of the fat
content. The value of the milk is then printed out on a slip and handed over to the farmer, who collects the
payment at the adjacent window. 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. In the current scenario,
with the help of IT, the farmers receive their payments within a matter of minutes. Also, as the method is
transparent, the likelihood of fraud has also decreased to a large extent. But all these initiatives have not
come without challenges. For example, in Page 111 the initial phases, to convince skeptical farmers, the
AMCUS were installed free of cost and the co-operative was requested to pay up only if they found the
unit satisfactory. However, the experiment paid off and these initiatives made farmers aware to the
benefits of the new system. Today, the application is being used in over 3,000 rural locations. Subbarao
Hegde, Chief Information Officer, Amul - GCMMF says, As milk is a highly perishable commodity, the
AMCUS initiative is vital for our operations. Due to this automation, we are in a position to collect six
million litres of milk per day from around two million members. More importantly, this initiative has
increased the trust and transparency for IT in rural areas. There are around 10,755 organized village cooperative societies in Gujarat, which are affiliated to the respective district union or member dairies. Each
member preserves the milk in the cold storage, processing it and producing several products, which are
then sold under the Amul brand name. As all products have a limited shelf life, the organizations ability
to conduct its operations in a smooth way is much more praiseworthyespecially when one considers the
scale of the operations. Amul makes about 10 million payments daily amounting to transactions worth Rs
170 million in cash. More than 5,000 trucks move the milk from the villages to 200 dairy processing
plants twice a day, according to a carefully planned schedule. In modern day lingo, it can be described as
Just-in-Time supply chain management with Six Sigma accuracy. While Amul has always been at the
forefront of Computerization initiatives, the major thrust came only in 1994, when the organization
decided on Computerization as the key component needed to sharpen its competitive advantage. Amul
studied its existing functions and operations and formulated an IT plan for spearheading its growth in the
21st century. The guiding principle behind the exercise was to align the information strategy with the
business strategy of the organisation, and derive maximum benefits from computerization. During the
implementation of the plan, Amul took a strategic decision to redesign and re-organize the existing
software applications. While implementing the new software, care was taken to integrate the applications
in such a manner that once the information was captured at source, it could be leveraged for the
enterprises decision making process. The main focus was to ensure that the output of one system could
become input of another system and vice-versa and thus providing a seamless flow of information.
process is susceptible to fraud, both in the initial recording of the milk quality and quantity and at the time
of payment, because most of the farmers are illiterate and hence cannot read what was entered on their
membership card. Automation of the measurements eliminates the potential for milk purchasers to
misrepresent the quality of the milk and cheat farmers out of a fair price.
In
the
product
development
process,
Dependence on 3PL
Mini dairy owners depends on 3PLs for their logistics needs including milk collection, distribution of
dairy product and sale of product through dealer and through retails store. Growth in semi urban areas and
tier 2 & tier 3 cities has given rise to super market and department stores, which have fueled the
consumption levels of dairy product. The issue lies in the smooth transportation from places of origin to
actual shelf. Trying to overcome this issue, major part of this function is performed by 3PLs. However,
dairy owners need to retain control and assure quality and timely delivery, especially for perishable
products such as fresh milk.
Conclusion:
Amul has implemented TQM very successfully, but this concept has grown old. In order to succeed in this
competitive environment Amul must use the concept of Six Sigma, which means putting the customer
first and using facts and data to drive better solutions. Six Sigma generally focuses on three key areas:
Improving customer satisfaction, reducing cycle time, reducing defects. Improvements in these areas
usually represent dramatic cost savings to businesses, as well as opportunities to retain customers capture
new markets. In a cooperative organization the farmers are more important than the professionals, as the
latter are the employees of the former. It is the prime duty of every employer to see that their employees
are satisfied. Although Amul has a good system of induction and training of the employees as well as the
wholesalers, but they do not have a continuous development program for the executives like any other
organization. It is always recommended that organization should have a centralized training center for the
training of the farmers as well as the employees. This will enable them to organize continuous workshops
for them. This will also enable the farmers and the members to be well aware of the latest technological
development in the field of dairying. To develop the people and to increase the effectiveness of the
working, Amul should have a training center where they can have a regular training programs for the
employees as well as for the wholesalers and retailers. Even though growing with time and on scale, it
has remained with the smallest producer members. AMUL is an example par excellence, of an
intervention for rural change. Today AMUL is a symbol of the triumph of indigenous technology and also
of making a strong business proposition out of serving a large number of small and marginal suppliers by
developing and coordinating a vast co-operative network.
References
www.amul.com/
www.amuldairy.com
http://www.sciencedirect.com/science/article/pii/S1877042815020170
Patil, A.P., Gawande, S.H., Nande, M.P. and Gobade, M.R. (2009). Constraints by the
dairy farmers in Nagpur district while adopting animal management practices,
Veterinary World, Vol.2, No.3, pp.111-112
Subburaj, M., Ramesh Babu, T., Gladstone, E. and Suresh Subramonian, B.(2011).
Factors influencing Dairy Supply Chains Sourcing in Tamilnadu, India, ICASCMM,
IIT-Kharagpur.
Kulandaiawamy, V. (1982). Cooperative Dairying in India, Rainbow Publication, First
Edition, Chapter IV, pp.125-145.