A STUDY ON

SUPPLY CHAIN MANAGEMENT

OF
AMUL INDIA Ltd.

Assignment of
SUPPLY CHAIN MANAGEMENT

Submitted to: - Submitted by:-

Prof. Sushmita Paul Abhishek Srivastava
(Faculty) PGFB0902
 Jaipuria Institute of Management, Noida

TABLE OF CONTENT

S.No. Topic P.No.

1. Company background 3

2. Conceptual framework-SCM at Amul 5

3. Problems & issues in context to SCM faced by Co. 8

4. Analysis and findings 10

5. Recommendations 12

6 Conclusion 14

7. Bibliography 15

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Company background:
Amul means priceless in Sanskrit. The company has been comes into the picture in
year 1946. A range of products such as butter, milk powder, cheese, chocolates etc.
have made Amul a leading food brand in India. Amul or Gujarat Co-operative Milk
Marketing Federation (GCMMF) is probably one of the best cases where the raw
material as well as finished product is perishable. As many as 2.2 million farmers’
supply the raw material i.e. milk. The advantages are probably that the raw material
supply is assured, come what may but on the flip side whatever happens to the
finished goods market, raw material has to be procured and used up in the in the
stipulated period.
Inspired by Sardar Vallabhbhai Patel and executed by Morarji Desai a handful
of farmers formed the Kaira District milk co-operative (KDMC) in 1946. About 250 l
of milk collected daily from the farmers of two village co-operative societies was
pasteurized and sent tot the Bombay milk scheme.
In 1973, a need was felt to professionally market the products being packed at
several dairy plants in the state and GCMMF was born. The growth process continued
and the Anand pattern become a benchmark.
In 1994, when all over India, quality and TQM philosophy was being
implemented, GCMMF was being one of the frontrunners.
Kaizen Programme was implemented in May 1995 to improve employee
participation and increase a feeling of belonging. This was followed by ‘Hoshin
kanry’, which means a methodology for strategic direction setting. It provides a step
by step planning, implementation and review process for managed changed.

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AMUL fact file:-

Type: Cooperative
Founded: 1946
Headquarters: Anand (Gujarat), India
Key people: Chairman, Gujarat cooperative milk marketing
federation Ltd. (GCMMF)
Industry: Dairy
Milk Production: 100 million ton (2008-09)
Revenue: Template: Revenues $1billion USD (In 2008-09)
Employees: 2.41 million milk producers
Slogan: Taste of India
Website: www.amul.com

AMUL logo and its importance:-

Symbol of Amul (anand milk union ltd.) is ring of four hands, which are coordinated
each other. The actual meaning of this symbol is coordination of hands of different
people by whom this union is at top. The first hand is of farmer, second hand of
processor, third hand of marketer, and the fourth hand of customer. It’s the joint effort
& productive team work that has enabled its success.

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 Conceptual framework

SCM at AMUL (GCMMF):-

The supply chain of Amul can be described in the following steps:-
• Some 2.2 million farmers from 12 districts of Kaira (kheda), Sabar Kantha,
Baroda, Panchmahal, Rajkot, Bharuch, Mehsana, Banas Kantha, Surat,
Ahmedabad, Valsad and Gandhi nagar reach the milk collection centers every
day in the morning and afternoon to sell the milk their buffaloes have given in
the morning and in the noon
• The total milk procurement in the last year 2002 was an average 47.32 l per
day where the peak the peak procurement touched a high of 62 l. All the milk
procurement centers are equipped with computers and electronic milk testers
(EMTs). EMTs ensure efficient testing and measurement of milk constituents.
The computers run the automatic milk collection system, which ensures
immediate preparation of milk payment bills, transparency of operations and
greater efficiency of milk collection.
• The milk is then sent to chilling depots in each village of the member unions.
There are 10852 villages under GCMMF and each one has a village
Cooperative society. VDC also runs the automatic milk collection system.
• The milk is then sent to the 12 member unions. All of them run an ultra
modern dairy that processes this raw material, which has traveled from
faraway villages to the district headquarters.
• The various products made under the flagship of AMUL such as butter, milk
powder, cheese, dahi, ready made foods such as gulab jamun, pizza etc. Are
manufactured at these various plants and distributed through the various
distributors across the country and abroad through GCMMF.

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 FARMERS VCS MEMBER UNIONS
2.2 million 10675
12 units

GCMMF
700 Emp

DISTRIBUTORS RETAILERS END USERS

3000+ 500000+

Fig: - The flow of materials and information at AMUL

One reason that Amul is the giant it is because it’s built on the back of a co-operative
movement. It encourages women and farmers to collect milk from their cows and pass
it on to them for a price. By managing milk supplies from the cattle farmer and
sending it straight to the factory, it’s been able to eliminate the middleman.
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.

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(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 partners in 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.
(iii) Capacity improvement: It helps network partners in improving their capability
and making them competitive.

Milk procurement
Total milk procurement by our Member Unions during the year 2009-10 averaged
93.02 lakhs kilograms (9.30 million kgs) per day representing a growth of 6.68% over
87.19 lakhs kgs (8.7 million kgs) per day achieved during the year 2008-09. The
highest procurement as usual was recorded during January, 2010 at 122.5 lakhs kgs
per day

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.

Managing third party service providers

Its core activity lay in milk processing and the production of dairy products and all
other activities such as logistics of milk collection, distribution of dairy products, sale
of products through dealers and retail stores, provision of animal feed, and veterinary
services were entrusted to third parties.

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Problems and issues with respect to supply chain faced by the AMUL

Managing this supply chain efficiently is critical as GCMMF's competitive position is

driven by low consumer prices supported by a low cost system.
In the past years the concept of just-in-time was not introduced, all GCMMF branches
were engaged in route scheduling and have dedicated vehicle operations.
Even though the cooperative was formed to bring together farmers, professional
managers and technocrats would be still required to manage the network effectively
and make it commercially viable.
It is worth noting that a number of third parties are not in the organized sector, and
many are not professionally managed with little regard for quality and service. This is
a particularly critical issue in the logistics and transport of a perishable commodity
where there are already weaknesses in the basic infrastructure.
Its network which consists of large number of members requires regular roll out
improvement programs and high implementation rate of these programs.
Having a strong supply chain is only the beginning, the remaining part includes
making consumer products that sell well and that the same consumers are able to be
impacted by marketing and advertising movements.
The organization was also suffering from the high middleman cost which was tackled
by managing milk supplies from the cattle farmer and sending it straight to the
factory.
Due to the perishable nature of the product, it has to invest in cold storage which is an
extra burden in distribution and warehousing.
At the time Amul was formed; consumers had limited purchasing power, and modest
consumption levels of milk and other dairy products. Thus Amul adopted a low-cost
price strategy to make its products affordable and attractive to consumers by
guaranteeing them value for money.
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.
GCMMF was one of the first FMCG (fast-moving consumer goods) firms in India to
employ Internet technologies to implement B2C commerce.
Today customers can order a variety of products through the Internet and be assured

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of timely delivery with cash payment upon receipt.
Another e-initiative underway is to provide farmers access to information relating to
markets, technology and best practices in the dairy industry through net enabled
kiosks in the villages. GCMMF has also implemented a Geographical Information
System (GIS) at both ends of the supply chain, i.e. milk collection as well as the
marketing process.

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 ANALYSIS and FINDINGS
Following are the major issues analyzed with respect to the SCM of Amul:
Larger lead time:-
A number of third parties are not in the organized sector, and many are not
professionally managed with little regard for quality and service. Due to the old and
obsolete means of transportation, failure of machinery etc. leads the delay in reaching
to retailers and end users. In the past years the concept of just-in-time was not
introduced, all GCMMF branches were engaged in route scheduling and have
dedicated vehicle operations. Due to the perishable nature of the product, it has to
invest in cold storage which is an extra burden in distribution and warehousing. As a
result need of JIT were felt and the concept has introduced to avoid any kind of delay
and destruction of products. Introduction of just-in-time inventory strategy improves
dealers' return on investment (ROI).
Gap between demand and supply:-
Due to the unprofessional and inexperienced 3PL providers there is vast gap between
demand and supply. In the peak season, the company fails to satisfy the retailers’
demand on certain products. Since the lead time was high so company were unable to
get raw material on time and also were unable to produce final product to match with
the quantity demanded by retailers and consumers. Amul decided to focus on farmers
facing business processes such as supply, distribution and its own internal operations.
The main goals of the supply chain initiative were improving forecast accuracy to
match supply with demand, delivery performance to avoid stock-outs thereby creating
a dependable and reliable brand image without excessive spend. These steps were
taken to reduce dependency on cold storage.
SUPPLIERS:-
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.

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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.
Accordingly, the 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.
Some other issues found in its supply chain are as follows:-
• It has excellent ability to anticipate the right type of product at the right time
through the years.
• Amul is a cooperative where the milk suppliers are the shareholders. The owners
decide what they should pay themselves for the raw material they supply. A
unique situation where the owners of the company are also its largest vendors!
• To implement their vision while retaining their focus on farmers, a hierarchical
network of cooperatives was developed, which today forms the robust supply
chain behind GCMMF's endeavors.
• Introduction of just-in-time inventory strategy improves dealers' return on
investment (ROI).
• In order to manage the network effectively and make it commercially viable
professional managers and technocrats were introduced.
• The company has core competency in milk processing and the production of dairy
products and all other activities were entrusted to 3PLs
• Infreight logistics solutions limited, Transport Corporation of India, Gammon
India ltd. are some of its main 3PL providers.
• Amul was one of the first FMCG firms in India to employ Internet technologies to
implement B2C commerce. Today customers can order a variety of products
through the Internet and be assured of timely delivery with cash payment upon
receipt. It has also implemented a Geographical Information System (GIS) at both
ends of the supply chain, i.e. milk collection as well as the marketing process.

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 Recommendations & suggestions

• Amul should improve its distribution system, as it has already implemented on

ERP in the company, still due to in disciplined behavior of its distributors,
retailers suffers which ultimately affect the consumers.
• We know that the time schedule of the distributors & their transportation system
cannot be capsuled, but they can reduce their errors. E.g. drive carefully to
prevent accidents.
• Manpower should be more than 18 years of age. (in some of the areas, we have
observed small children engaged in loading & unloading the trays from the truck)
• Before offering any extra benefits or schemes to their retailers, Amul should
aware them in advance, so that the incentives can be reached in the right hands at
right time. otherwise distributors enjoy the benefits of retailers.
• Codification of raw material should be done in an easily understand manner.
• Reduce the solving time of the consumer/retailers’ complaints.
• Payment to the milk suppliers should be made on time to ensure the proper inflow
of milk.
• Amul should also launch certain schemes for households. It has schemes for
retailers but not for households. This section being the major user of milk and in
order to enter into a new area such starting schemes can be very helpful.
• For refrigerated and frozen food distribution, a world class cold chain would help
in providing quality assurance to the consumers around the region.
• Logistics and transportation services should be professionally managed to avoid
wastes.
• Use of internet for exploring the unknown terrain.
• Active customer feedback should be taken regularly for increasing product line.
• Employees of GCMMF should involved actively in all activities of the member
unions.
• Relationship with business associates like wholesaler should be made closer and
deeper.

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• The company should take initiative to reduce transportation time from the depots
to the wholesale dealers, improvement in ROI of wholesale dealers,
implementation of Zero Stock Out through improved availability of products at
depots and also the implementation of Just-in-Time in finance to reduce the float.
• Completely in tune with the ground reality an enquiry is initiated on the
organizational climate. This gave detail about the core competencies and most
importantly gave details about the handicaps and inadequacies.
• Have recognized “change” as an essential factor governing business needs and
hence incorporates changes in every form at every stage.
employees, suppliers and distributors also “change ready” always

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 Conclusion

Amul has established itself as a uniquely appropriate model for rural development.
Amul has spurred the white revolution of India, which has made India the largest
producer of milk and milk products in the world. Amul products have been in use in
millions of homes since 1946. Today Amul is a symbol of many things like of high-
quality products sold at reasonable prices & the genesis of a vast co-operative
network. Its supply chain is easily one of the most complicated in the world. The
supply chain linking farmer-suppliers of milk with the millions of consumers. Amul
encourages women and farmers to collect milk from their cows and pass it on to them
for a price directly eliminating cost of middleman. Introduction of just-in-time
inventory strategy improves dealers' return on investment (ROI).Amul was one of the
first FMCG firms in India to employ Internet technologies to implement B2C
commerce. Today customers can order a variety of products through the Internet and
be assured of timely delivery with cash payment upon receipt. It has also implemented
a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk
collection as well as the marketing process.

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 BIBLIOGRAPHY

websites

• http://www.scribd.com/doc/26263301/Amul-Project
• http://www.scribd.com/doc/10260519/Amul
• http://www.authorstream.com/Presentation/anjusha786-138867-amul-
entertainment-ppt-powerpoint/
• http://www.docstoc.com/docs/30663883/Amul-dairy-report
• citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.104.9685...
• http://streamlinesupplychain.wordpress.com/2009/11/15/what-walmart-can-learn-
from-amul/
• www.amul2b.com

Books

• Kulkarni S & Sharma A.(2002),supply chain management, Gujarat cooperative

milk marketing federation (Amul),TMH publishing co.ltd.95-109
• Chidambaram S., Whitman L., & cheraghi S.H. (1999) a supply chain
transformation methodology, San Antonio, T X USA:
http//156.26.35.52/papers/70SC&W&SC.pdf

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