Robust Supply Chain a key parameter for the

success of the Dairy Industry

Like other fields in the consumer products (CP) arena, the Dairy Industry is facing shifting
market dynamics, new channel challenges and renewed pressures for business model renovation.
The need for change stems partially from explosive population growth, increased urbanization,
global climate and natural resources issuesas well as increased demand and consumption from
a new class of empowered consumers. With growing competition from private labels, CP
companies now must execute flawlessly to connect with consumers, manage supply chain
efficiencies and collaborate with channel partners.
The Dairy Industry is of great significance to India. The country is the worlds largest milk
producer, accounting for more than 13 percent of the worlds total milk production. The Dairy
Industry plays an important role in the socioeconomic development of India. It is instrumental in
providing cheap, nutritional food to Indias vast population. Plus, the Dairy Industry helps
alleviate poverty and unemployment, especially in rural areas prone to either excessive rain or
drought.
Yet in spite of having the worlds largest milk production, India is a very minor player in the
international Dairy market. Multiple limitations restrict competitiveness in world markets. In the
domestic market itself, the Indian Dairy Industry faces tremendous challenges at every stage.
Challenges across the entire value chain: Procurement, Production, Sales and
Marketing, Budgeting
At the Procurement stage, challenges include meeting seasonal spikes in demand and ability
to measure the quality of procured milk at the source. Companies need to manage the complex
logic of payments to producers based on fat, solid nonfat (SNF) and quality of milk received.
Keeping track of truck and tanker routes, as well as capabilities for viewing, monitoring and
payment based on route or distance. Plus, the industry needs visibility into the shelf life and
stock-outs of raw material.
At the Production and Standardization stage, challenges can be found in manual and time-
consuming processes for milk standardization calculation, handling production planning based
on nonstandard raw material, addressing growing food concerns from consumersas well as.
Plus FAT accounting and effective tracking of FAT loss in the production process.
At the Sales and Marketing stage, challenges can be found in managing variable pricing
conditions, particularly when processes must be capable of working backward from the
maximum retail price (MRP), Inventory Management across multiple depots around the country,
shelf-life management of finished products in the distribution chain, along with Crate
Management and Reconciliation.
Where Budgeting and Financials are concerned, there are challenges around arriving at
accurate milk valuation, determining batch-wise cost analysis and analyzing product
profitability. Additional challenges here include meeting local, legal and fiscal requirements
while improving operational efficiency of administrative activities.
In each of these areas, IT adoption and integration enabled via an ERP solution are critical to
getting business benefits. Until recently, the Dairy Industry found it difficult to find and use
industry-specific IT solutions to boost overall efficiency and provide insight into the mechanisms
that manage cash-flow cycles in operations. Additionally, the industry has found it difficult to
attract and retain the right IT talent.