A Project Report o

nAMUL’S SUPPLY CHAIN MANAGEMENT

In Partial Fulfillment of the Requirements of Production and Operations Management Course in

PGDM Programme
Submitted To: Prof. Praneti Shah

Submitted By :
G I T A N J A L I A U L U C K P 1 0 0 1 MEHUL BHATT P1002C H I N M A Y G A N
D H I P 1 0 1 0 A F T A B H A T H I P 1 0
1 2 DARSHITA THAKKAR P1053P I Y U S H V A D O L
I Y A P 1 0 5 8 V I S H A L D A D H
I C H P 1 0 0 6 V E D A N G I
J O S H I P 1 0 1 7 S O H A
M P A T E L P 1 0 3 3
P A R T H S H U K L A P 1
0 4 7
Batch: 2010-12Submitted on: 18
th
April 2011
N . R . I
N S T I T U T E

OF
B
U S I N E S S
M
A N A G E M E N T
,A
H M E D A B A D
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I N D E X
1 ) I N T R O D U C T I O N T O A M U L . . . . . . . . . . .
. . . . . . . . . . . 32 ) S T R A T E G I E S O F A M U L . . .
. . . . . . . . . . . . . . . . . . . . . . 53 ) A M U L ’ S
S U P P L Y C H A I N M A N A G E M E N T . . . . . . . . .
. 6 4)GCMMF’S SUPPLY CHAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125)E- SUPPLY CHAIN
MANAGEMENT OF AMUL . . . . . . . . . . .136) AMUL CYBER STORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187) BENEFITS OF E-SCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198) FUTURE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 209) BIBLIGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Introduction

The Kaira District Co-operative Milk Producers Union Limited, popularly known asAmul Dairy is
a US $ 500 million turnover institution.It is a institution built up with a network of over 10000
Village Co-operative Societiesand 500,000 plus members.

Formed in the year 1946 Amul is the leading food brand in India.

Amul initiated the dairy co-operative movement in India and formed an apex co-operative
organization called Gujarat co-operative Milk Marketing Federation (GCMMF)and today 70,000
villages and 200 districts in India are part of it.

GCMMF markets its products through 50 sales offices throughout India and distributionis done
through a network of 4,000 stockiest who in turn supply 500,000 retail outlets.

Managed by an apex cooperative organization, Gujarat Co-operative Milk MarketingFederation

Ltd. (GCMMF), which today is jointly owned by some 2.41 million milk producers in Gujarat,
India
3
Amul is the largest food brand in India with an annual turnover of US $1068 million(2007-08)

Currently Amul has 3.11 million producer members with milk collection average of 6.04million
litres/day.

Amul is the largest producer of milk and milk products in the world.
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Strategy of Amul
Amul’s strategy is broadly divided into two components:The first one is the collection chain and
the second one is the Supply chain. The collection chainstarts from weighing the milk to
determination of the fat content in the milk to finally calculationof the purchase price. While
the supply chain starts from storing the milk to processing the milk to finally distributing the
milk.
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Amul’s Supply Chain Management
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AMUL SUPPLY CHAIN MANAGEMENT PRACTICES
AMUL is a dairy cooperative in the western India that has been primarily responsible, through
itsinnovative practices, for India to become the world’s largest milk producer. The
distinctivefeatures of this paradigm involves managing a large decentralized network of
suppliers and producers, simultaneous development of markets and suppliers, lean and
efficient supply chain,and breakthrough leadership.Every day Amul collects 447,000 litres of
milk from 2.12 million farmers , converts the milk into b r a n d e d , p a c k a g e d p r o d u c t s ,
a n d d e l i v e r s g o o d s w o r t h R s 6 c r o r e ( R s 6 0 m i l l i o n ) t o o v e r 500,000 retail
outlets across the country.To implement their vision while retaining their focus on
farmers, a hierarchical network
of c o o p e r a t i v e s w a s d e v e l o p e d , t h i s t o d a y f o r m s t h e r o b u s t s u p p l y c h a i n
b e h i n d G C M M F ’ s endeavors. The vast and complex supply chain stretches from small
suppliers to large
fragmentedmarkets.M a n a g e m e n t o f t h i s n e t w o r k i s m a d e m o r e c o m p l e x b y t h
e f a c t t h a t G C M M F i s d i r e c t l y responsible only for a small part of the chain, with a
number of third party players
(distributors,r e t a i l e r s a n d l o g i s t i c s s u p p o r t p r o v i d e r s ) p l a y i n g l a r g e r o l e s . M
anaging this supply chainefficiently is critical as GCMMF's competitive po
s i t i o n i s d r i v e n b y l o w c o n s u m e r p r i c e s supported by a low cost system of providing
milk at a basic, affordable price.
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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
thec h e q u e s y s t e m a d o p t e d b y o t h e r m a j o r F M C G c o m p a n i e s . T h i s p r a c t i c e
i s c o n s i s t e n t w i t h GCMMF's philosophy of maintaining
cash transactions throughout the supply chain and it alsominimizes
dumping.Wholesale dealers carry inventory that is just adequate to take care of the
transit time from the branch warehouse to their premises. This just-in-time inventory
strategy improves dealers' returnon investment (ROI). All GCMMF branches engage in
route scheduling and have dedicatedvehicle operations.
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THE BUSINESS MODEL
From the very beginning, in the early 1950s, AMUL adopted the network as the basic model
for long-term growth.
•
The network explicitly includes secondary services to the farmer-suppliers.
•
Several of the entities in the network are organized as cooperatives linked in ahierarchical
fashion.
Customers:

In comparison with developed economies, the market for dairy products inIndia is still in an
evolutionary stage with tremendous potential for high value products such asice cream, cheese
etc. The distribution network, on the other hand, is quite reasonable withaccess to rural areas
of the country. Traditional methods practiced in western economies are notadequate to realize
the market potential and alternative approaches are necessary to tap thismarket.
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 regardfor quality and service. In addition to
outbound logistics, GCMMF takes responsibility for coordinating with the distributors to assure
adequate and timely supply of products. It also workswith 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 themember-farmers. In what follows we
elaborate on these aspects in more detail and provide arationale for the model and strategies
adopted by GCMMF.
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Simultaneous Development of Suppliers and Customers:
From the very early stages of theformation of AMUL, the cooperative realized that sustained
growth for the long-term wascontingent on matching supply and demand. The member-
suppliers were typically small andmarginal 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 assuresteady growth. First, for the short term, the procurement prices were
set so as to provide fair andreasonable return. Second, aware of the liquidity problems, cash
payments for the milk supplywas made with minimum of delay. This practice continues today
with many village societiesmaking 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 bythe Unions is paid to the members in the form of dividends
Managing Third Party Service Providers:

Unions focused efforts on these activities and related technology development . The
marketingefforts were assumed by GCMMF. All other activities were entrusted to third parties.
Theseinclude logistics of milk collection, distribution of dairy products, sale of products
throughdealers and retail stores, some veterinary services etc. It is worth noting that a number
of thesethird parties are not in the organized sector, and many are not professionally managed.
Hence,while third parties perform the activities, the Unions and GCMMF have developed a
number of mechanisms to retain control and assure quality and timely deliveries. This is
particularly criticalfor a perishable product such as liquid milk.
Coordination for Competitiveness
Coordination is one of the key reasons for the success of operations involving such an
10
extensive network of producers and distributors at GCMMF. Some interesting mechanisms
existfor coordinating the supply chain at GCMMF.These mechanisms are:
Inter-locking Control
The objective for developing such an inter-locking control mechanism is to ensure
that theinterest of the farmer is always kept at the top of the agenda through its
representatives whoconstitute the Boards of different entities that comprise the supply chain.
This form of directrepresentation also ensures that professional managers and farmers work
together as a team tostrengthen the cooperative. This helps in coordinating decisions across
different entities as wellas speeding both the flow of information to the respective constituents
and decisions.
Coordination Agency: Unique Role of Federation
Its objective is to ensure that all milk that the farmers produce gets sold in the market either
asmilk or as value added products and to ensure that milk is made available to an increasingly
largesections of the society at affordable prices
Supplier Enhancement and Network servicing
Their objective is to ensure that producers get maximum benefit and to resolve
all their problems. They manage the procurement of milk that comes via trucks & tankers from
the VSs.They negotiate annual contracts with truckers, ensure availability of trucks for
procurement,establish truck routes, monitor truck movement and prevent stealing of milk
while it is beingtransported
GCMMF’S SUPPLY CHAIN
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E- Supply Chain Management Of Amul
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Amul uses E- SUPPLY CHAIN MANAGEMENT

E-SCM may be described as the integrated management approach for

planning andcontrolling the flow of materials from suppliers to the end users using
internettechnologies.

E-SCM refers to the complex network of relationship that organizations maintain withtrading
partner to source, manufacture and deliver the products.
Components of E-SCM
E-SCM Diagram of Amul
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Working of E-SCM
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Amul has installed over 3000 automatic milk collection system units (AMCUS) at villagesocieties
to capture member information, milk fat content and amount payable to eachmember.

Each member is given plastic card for indentification

Computer calculate amount due to the farmer on the basis of the fat content

The value of the milk is printed out on the slip and handed over to the farmer ,whocollects the
payment from the adjacent window

Thus with the help of it farmer gets the payment within the minutes

On the logistic more than 5000 trucks move milk from the villages to 200 dairy processing
plants twice a day according to a carefully planned scheduled

Every day Amul collects 7 million liters of milk from 2.6 million farmers (manyilliterate),
converts the milk into branded, packaged products, and delivers goods to over 500,000 retail
outlets across the country

ERP software named as enterprise wide integrated application system covers a operationlike
planning advertisement and promotion and distribution network planning.

Each Amul office are connected via internet and all of them send daily reports on salesand
inventory to the main system at Anand,
Supply & Distribution
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At the supply end a computerized database has been setup of all suppliers & their cattle.

Computer equipment measures & records qualities & quantities collected.

At the distribution end stockists have been provided with basic computer skills. Amulexperts
assist themin building promotional web pages.

Amul Cyber stores have been setup inIndia, USA, Singapore and Dubai
Amul Cyber Store
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Strong Initiatives in E-commerce
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Amul has linked distributors to the network & also incorporated web pages of topretailers on
their website

Distributors can place their order on website amulb2b.com

Automated supply & delivery chain

Practices just in time supply chain management with six sigma accuracy
Benefits of E-SCM
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Supports exchange of real time information

Platform independent

Web visibility & processing capability 24/7

Return on investment

It has open internet application architecture which allows for Rapid deployment &scalability
combining unlimited users in real time environment

Incorporates broadcast & active messaging

Future Plans
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Introduce Internet Banking Services & ATMs which will enable Milk societies to credit payments
directly to seller’s bank account

Officials at amul are looking at upgrading the plastic cards which are being currentlyused only
for identification purposes, to smart cards which can be used to withdraw cashfrom ATMs.

Expansion of distribution network, creative marketing, consumer education and

productinnovation, we will leverage effectively on rising income levels and growing
affluenceamong Indian consumers.

Tapping the rising demand for new value-added products.

Bibliography
1.
Extracted fromwww.Wikipedia.comfor supply chain management theory.
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2.
Extracted from Operation Management (6
th
Edition) by Russell & Taylor.
3.
Extracted from www.
www.
amul
.comfor information about products and supply chainmanagement.
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Understanding Amul’s Supply Chain Model
Amul is a dairy cooperative based in the Anand district of Gujarat, India.
The word amul is derived from the Sanskrit word amulya, meaning
invaluable. The co-operative was initially referred to as Anand Milk
Federation Union Limited and hence the name AMUL. What interests me to
writing this is article about Amul is that it is an organization that achieves
economies of scale through its simple supply chain while it thrives to
redistribute wealth in the society and creating many opportunities for the
rural and weaker sections of India.

Initially, the 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 milk in individual
containers. These agents decided the prices and the off-take from the
farmers by the season. In winter, the producer was either left with surplus
unsold milk or had to sell it at very low prices.

Thus the Kaira District Cooperative was established to collect and process
milk in the district of Kaira. Milk collection was also decentralized, as mos
producers were marginal farmers who would deliver 1-2 litres 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.
With a turn over of $3.2 billion (2013), Amul is the largest food brand in
India. Also, Amul is the largest producer of milk and milk products in India.
The model of Amul is such that it benefits small producers like farmers,
who together form an integrated approach to form an economically large
scale business. The model eliminates middlemen, bringing producers in
direct contact with the customers.

Every day, Amul collects 447,000 litres of millk from 2.12 million farmers,
converts the milk into branded, packaged products and delivers the goods
which are worth Rs. 60 million to about 500,000 retail outlets across the
country.

Supply Chain of Amul

As shown in the figure, the supply chain of Amul consists of farmers who
produce milk from their cattle. The farmers are organized into cooperatives
called Village Cooperative Societies (VCS). These VCSs supply milk to
thirteen different dairy cooperatives, called Unions, of which Amul is one.
The milk or milk products made at these unions are supplied to the Gujarat
Cooperative Milk Marketing Federation (GCMMF). The GCMMF is the
marketing entity for the products of all the unions in the state of Gujarat.
GCMMF has 42 regional distribution centers in India, serves over 500,000
retail outlets and exports to more than 15 countries. All these organizations
are independent legal entities yet loosely tied together with a common
destiny!

The ultimate goal of the GCMMF is to benefit the farmers through this
hierarchical supply chain that includes different kinds of entities ranging
from small suppliers to large fragmented markets. The success of Amul can
be attributed to the quality of products, the economic pricing and the belief
that it has instilled in its customers.