CHAPTER - VI

MODELS AND SWOT ANALYSIS OF MRCMPU

INTRODUCTION

Functions of logistics are customer service, demand forecasting,

planning, inventory management, logistics communication, material handling,

order processing, packing, parts, service supports, procurement, reverse

logistics, transportation, ware-housing and storage. As far as dairy industry is

concerned, forecasting demand, procurement of raw milk, processing of raw

milk and transportation of processed milk are the important components of

this system.1

As the fourth secondary objective of this study was to assess

operational efficiency of MRCMPU and recommend measures to enhance

efficiency of operations, this chapter takes up these things. The chapter

focuses on developing various models such as forecasting model, processing

model, inventory model, location planning (Figure 6.1) and SWOT Analysis

of MRCMPU.

46
 Figure: 6.1: Conceptual Model of Operational Efficiency

Forecasting of Sales

Inventory Control Efficiency Location Planning

Enhancement in Production and Efficient

Capacity Utilisation

FORECASTING OF SALES

Logistical forecasting requires the selection of appropriate

mathematical or statistical techniques to generate periodic forecasts. There are

many different forecasting techniques available and it is important to select the

most appropriate technique. Moving average method and least square method

are commonly used to forecast demand etc. Another more complicated

technique is known as exponential smoothing. Forecasting methods such as

exponential smoothing give a much faster response to any change in demand

trends than other methods. It is a refined version of moving average.

Exponential smoothing bases the estimate of future demands on the weighted

average of the previous demand and forecast levels. The new forecast is a

function of the old forecast incremented by some fraction of the differential

between the old forecast and actual sales realised. The increment of

adjustment is called ‘alpha factor’. The basic format of the model is.2

47
 Ft = alpha (Dt - 1) + (1 - alpha) Ft - 1

Ft = forecasted demand for a time period t

Ft -1 = forecast for time period t - 1

Dt - 1 = actual demand for time period t - 1

Alpha = alpha factor or smoothing constant (0 < alpha < 1.0)

When alpha factor is one, forecasted demand is equal to actual demand.

This is because alpha -1 (1-1) = 0. Hence (1 - alpha) Ft -1 becomes also zero.

In such a situation alpha (Dt - 1) i.e., 1 x actual demand remains in the

formula. But alpha factor less than one means actual demand and the

forecasted demand for a time period ‘t’ are different. Hence the major decision

when using exponential smoothing is the determination of the alpha factor. A

very low value of alpha reduces the forecast to almost a simple moving

average, whereas large alpha factors make the forecast very sensitive to

change and therefore highly reactive.

In Table 6.1, daily average sales of milk of Kannur dairy for the period

1991-92 to 2005-06 are presented in the second column. Estimated sales of

milk for various years are calculated under least square method and taken in

the third column. Forecasted milk sales (When alpha = 0.9 & 0.1) for a time

period ‘t’ under exponential smoothing are taken in the fourth column.

Forecasted milk sales (when alpha = 0.9) for the period 1992-93under

exponential smoothing is calculated as follows.

48
 Ft = alpha (Dt - 1) + (1 - alpha) Ft - 1

Alpha = 0.9

Dt -1 = 28.4 (Actual sales 1991-92)

1- alpha = 0.1

Ft -1 = 29.6 (Estimated sales 1991-92)

Ft = (0.9 × 28.4) + (0.1 × 29.6)

= 25.5 + 3 =28.5

In the next period 1993-94 Ft-1 = 28.5 (last years forecast when alpha =

0.9). In this way various years forecasted sales (when alpha = 0.9 & 0.1) are

calculated. Instead of taking estimated sales under least square, any method

can be adopted. Hence the estimation of demand in the initial period and

deciding the alpha factor depend upon personal judgment, experience,

observation, etc.

In the figure 6.2, Trend of actual milk sales, forecasted milk sales under

exponential smoothing (when alpha = 0.9 & 0.1) and forecasted milk sales

under least square method of Kannur Dairy is shown. In this chart forecasted

milk sales under exponential smoothing have faster response to the changes in

actual milk sales rather than forecasted milk sales under least square method.

Moreover, forecasted milk sales figure under exponential smoothing (when

Alpha = 0.9) is very sensitive to the changes in actual milk sales. Whereas

forecasted milk sales under exponential smoothing (when alpha = 0.1) has a

49
slower response to the changes in actual milk sales. Hence this model for

forecasting demand is suggested to delineate the reliability of the forecasting

techniques. The task of the forecaster is to judge the alpha factor which is

based on experience, business environment etc. When the forecasted demand

of milk and milk products is correct, necessary production planning can be

done on the basis of accurate forecasting.

Table 6.1: Forecasted Milk Sales of Kannur Dairy (in ’000 LPD)

Forecasted Forecasted
Estimated Sales
Year Actual Sales Sales (when Sales (when
(Least Square)
alpha = 0.9 alpha = 0.1)

1991-92 28.4 29.6 0.0 0.0

1992-93 32.3 34.9 28.5 29.4

1993-94 39.6 40.3 32.0 29.8

1994-95 45.3 45.7 39.1 35.4

1995-96 55.3 51.1 44.8 40.8

1996-97 59.9 56.4 54.3 46.6

1997-98 64.3 61.8 59.0 51.9

1998-99 68.1 67.2 63.5 57.2

1999-2000 71.6 72.6 67.5 62.4

2000-01 76.8 78.0 71.2 67.6

2001-02 79.4 83.3 76.4 73.0

2002-03 84.1 88.7 79.3 78.1

2003-04 95.6 94.1 84.0 83.4

2004-05 101.1 99.5 94.9 89.4

50
2005-06 106.2 104.9 100.4 94.8
Source: Compiled from Annual Reports of MRCMPU

51
 Figure 6.2: Actual and Forecasted Milk Sales – Kannur Dairy
120

100

80
Values

60

40

20

0
1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2k 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Years

Actual Sales Estimated Sales (Least Square) Forecasted Sales (w hen alpha = 0.9 Forecasted Sales (w hen alpha = 0.1)

52
PROCESSING MODEL

Forrester (1961)3 describes one interesting effect of a fragmented

supply chain. Imagine a retailer who notices that the demand for a product

rises by certain units in a day, week, or month. When it is time to place the

next order, the retailer assumes that demand is rising, and orders extra units to

make sure he has enough. Hence the local wholesaler sees demand rise by

additional units, so he orders an extra unit to meet the growth. Again the

regional wholesaler sees demand rise by extra units, so he also orders extra

units, to the manufacturer. As this movement travels through the supply chain,

a relatively small change in final demand is amplified into a major variation

for early suppliers.4

Assumptions: This model is based on the following assumptions.

1. The average daily sales of various milk and milk products are taken as

retailers buy (i.e., retailers order) for ascertaining the estimated

production (Dairy makes) of different varieties of milk and milk

products.

2. Cent percent daily sales of milk and milk products are kept as closing stock

of a day to meet the demand of the next day.

3. The main varieties of milk such as Toned, STD, and White Milk are

considered. The other varieties of milk such as Milma Smart,

53
 Homogeneous Toned Milk, etc are included in the average daily sales of

Toned Milk.

4. Only the main milk products such as ghee, curd and sambharam are

considered. The other value added milk products such as ice cream, peda

etc are not included.

5. The initial period 1990-91 is taken as base year in the case of Toned Milk

and the period 1992-93 in the case of STD milk and so on. The

assumption is that there are no differences in retailers buy dairy demand,

opening stock, closing stock and dairy makes in the initial period.

6. All estimates are done on average basis and hence seasonal variations in

the production of milk and milk products are not taken into account.

Estimated Production of Milk and Milk Products

The average daily sales of milk and milk products are taken as retailers

buy which is equivalent to the demand of dairy for milk and milk products.

Dairy assumes that demand is rising; hence it keeps the same units of demand

as closing stock in order to meet the existing demand in future. The closing

stock of a day will be the opening stock of the next day. When the demand,

opening stock and closing stock are considered the average production (Dairy

makes) can be ascertained with the following formula.

Dairy makes = Demand + closing stock - opening stock or

Dairy makes = Demand + Changes in stock

54
 As per Table 6.2, the average daily sales of Toned Milk of Kannur

dairy for the period 1990-91 to 2005-06 are taken as retailers buy that which

are equivalent to the demand of dairy. As an average daily sale of a particular

year is taken as base, the retailer notices the rise in demand in the average

daily sale of next year and so on. During the initial period 1990-91, on an

average, retailers buy 19,500 litres of Toned Milk per day which is equivalent

to the demand of dairy. As the retailer notices the rise in demand in the next

period, dairy keeps the same units of demand as opening and closing stock i.e.

no change in stock in the initial period. The average estimated production of

Toned Milk of Kannur dairy during the period 1990-91 is calculated by the

formula as:-

Dairy makes = Demand + Closing stock - Opening stock

i.e., Dairy Makes = 19,500 LPD + 19,500 LPD - 19,500 LPD = 19,500 LPD

During the next year 1991-92, the average demand of Toned Milk is

28,400 LPD which is equivalent to the demand of dairy. The closing stock of

19,500 LPD of the last year is the opening stock of the year 1991-92. The

closing stock of 1991-92 is equivalent to the demand of 28,400 LPD, and

hence the average daily production of Toned Milk during the period 1991-92

is 37,300 LPD (Table 6.2). In this way the daily average production of Toned

Milk for the subsequent periods is ascertained. The same method is adopted to

ascertain the daily average production of different varieties of milk such as

55
STD milk, white milk, and milk products such as ghee, curd and, sambharam

of Kannur, Kozhikode and Palakkad dairies.

Table 6.2: Estimated Production of Toned Milk – Kannur dairy (’000 LPD)

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97

Retailers Buy 19.5 28.4 24.5 25.8 29.2 37.5 49.2
Dairy Demand 19.5 28.4 24.5 25.8 29.2 37.5 49.2
O. Stock 19.5 19.5 28.4 24.5 25.8 29.2 37.5
CI. Stock 19.5 28.4 24.5 25.8 29.2 37.5 49.2
Makes 19.5 37.3 20.6 27.1 32.6 45.8 60.9
1997-98 1998-99 1999-2k 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
54.0 58.4 62.0 65.4 68.0 72.2 82.4 83.9 88.2
54.0 58.4 62.0 65.4 68.0 72.2 82.4 83.9 88.2
49.2 54.0 58.4 62.0 65.4 68.0 72.2 82.4 83.9
54.0 58.4 62.0 65.4 68.0 72.2 82.4 83.9 88.2
58.8 62.8 65.6 68.8 70.6 76.4 92.6 85.4 92.5
Source: Annual Records of MRCMPU

Estimated Processing of Milk

The standard requirement of fat in cow milk is 4.2 percent and SNF is

8.5 percent. But the cow milk in Kerala, especially the milk collected from

various APCOS by MRCMPU has only 3.5 percent Fat and 8.3 Percent SNF.

Moreover dairy makes different varieties of milk with varied Fat and SNF. For

example, dairy makes Toned Milk (Fat 3.0 percent and SNF 8.5 Percent),

Standardised milk - STD - (Fat 4.5 Percent and SNF 9.0 Percent). Double

Toned Milk - white - (Fat 2.0 percent and SNF 9.0 Percent). Hence total

56
quantity of milk required for processing the above varieties of milk is

ascertained. Estimated average production of various varieties of milk for the

period 1990-91 to 2005-06 of Kannur dairy mentioned in the previous

paragraph is taken first. Then the actual milk required for processing Toned,

STD and White Milk is ascertained by considering the required Fat and SNF

contents.

As per Table 6.3, the actual quantity of milk required for processing

Toned, STD and White Milk of Kannur dairy for the period 1990-91 to 2005-

06 is ascertained. Actual quantity of milk required for processing is calculated

by using the following formula.∗

Actual milk required for processing = Estimated average production of

milk × fats required / fats in cow milk.

In this study, Kannur dairy makes 19,500 LPD of Toned Milk during

the period 1990-91. The actual quantity of milk required for processing of

Toned Milk by using the above formula

= 9,500 × 3.0 / 3.5

In a similar way, the actual quantity of milk required for processing

STD and white milk is ascertained by taking the required fats. Kannur dairy

started the production of STD milk during the period 1992-93 and the

production of White milk during the period 2000-01. The total quantity of

milk required for processing Toned, STD and White Milk for the period 1990-


Source: Quality Control Department, Mother Dairy, Ambattur, Tamil Nadu.

57
 91 to 2005-06 is ascertained and compared with actual procurement of milk in

order to ascertain the shortage or surplus of milk. In the same way, the

shortage or surplus milk of Kozhikode and Palakkad dairies is also

ascertained.

Table 6.3: Processing of Milk – Kannur Dairy (‘000 LPD)

1990-91 1991-92 1992-93 1993-94 1994-95 1995-96

Toned 19.5 37.3 20.6 27.1 32.6 45.8
STD 0.0 0.0 7.8 19.8 18.4 19.5
Dairy - Makes
White 0.0 0.0 0.0 0.0 0.0 0.0
Total 19.5 37.3 28.4 46.9 51.0 65.3
Actual milk required
for processing
(Makes × 3 / 3.5) Toned 16.7 32.0 17.7 23.2 27.9 39.3
(Makes × 4.5 / 3.5) STD 0.0 0.0 10.0 25.5 23.7 25.1
(Makes × 2 / 3.5) White 0.0 0.0 0.0 0.0 0.0 0.0
Total 16.7 32.0 27.7 48.7 51.6 64.3
Total qty of SNF
required
(Makes × 8.5 / 90) Toned 1.8 3.5 1.9 2.6 3.1 4.3
(Makes × 9.0 / 90) STD 0.0 0.0 0.8 2.0 1.8 2.0
(Makes × 9.0 / 90) White 0.0 0.0 0.0 0.0 0.0 0.0

Total 1.8 3.5 2.7 4.5 4.9 6.3

Toned 1.5 2.9 1.6 2.1 2.6 3.6
Total qty of SNF STD 0.0 0.0 0.9 2.3 2.2 2.3
available (Processing
× 8.3 / 90) White 0.0 0.0 0.0 0.0 0.0 0.0
Total 1.5 2.9 2.6 4.5 4.8 5.9
Extra SMP required Toned 0.3 0.6 0.3 0.4 0.5 0.7
at 90% soluble (T. STD 0.0 0.0 - 0.1 - 0.4 - 0.3 - 0.4
SNF required - T.
SNF available) -’000 White 0.0 0.0 0.0 0.0 0.0 0.0
kgs. Total 0.3 0.6 0.2 0.0 0.2 0.3

58
Qty of milk to be
processed to meet
3.3 6.2 1.9 0.5 1.7 3.7
extra SMP (qty × 90
/ 8.3)
Qty of water Toned 2.8 5.3 2.9 3.9 4.7 6.5
required (Makes -
STD* 0.0 0.0 0.0 0.0 0.0 0.0
Milk for processing)
- Lakh litres White 0.0 0.0 0.0 0.0 0.0 0.0
Total 2.8 5.3 2.9 3.9 4.7 6.5
Continued
1996-97 1997-98 1998-99 1999-2k 2000-01 2001-02
Toned 60.9 58.8 62.8 65.6 68.8 70.6
STD 3.6 9.9 9.1 9.5 10.4 12.8
Dairy - Makes
White 0.0 0.0 0.0 0.0 1.4 0.0
Total 64.5 68.7 71.9 75.1 80.6 83.4
Actual milk required
for processing
(Makes × 3 / 3.5) Toned 52.2 50.4 53.8 56.2 59.0 60.5
(Makes × 4.5 / 3.5) STD 4.6 12.7 11.7 12.2 13.4 16.5
(Makes × 2 / 3.5) White 0.0 0.0 0.0 0.0 0.8 0.0
Total 56.8 63.1 65.5 68.4 73.1 77.0
Total qty of SNF
required
(Makes × 8.5 / 90) Toned 5.8 5.6 5.9 6.2 6.5 6.7
(Makes × 9.0 / 90) STD 0.4 1.0 0.9 1.0 1.0 1.3
(Makes × 9.0 / 90) White 0.0 0.0 0.0 0.0 0.1 0.0
Total 6.1 6.5 6.8 7.1 7.7 7.9
Toned 4.8 4.6 5.0 5.2 5.4 5.6
Total qty of SNF STD 0.4 1.2 1.1 1.1 1.2 1.5
available (Processing
× 8.3 / 90) White 0.0 0.0 0.0 0.0 0.1 0.0
Total 5.2 5.8 6.0 6.3 6.7 7.1
Extra SMP required Toned 0.9 0.9 1.0 1.0 1.1 1.1
at 90% soluble (T. STD -0.1 -0.2 - 0.2 -0.2 -0.2 -0.2
SNF required - T.
SNF available) White 0.0 0.0 0.0 0.0 0.1 0.0
-’000 kgs.
Total 0.9 0.7 0.8 0.8 0.9 0.8

59
Qty of milk to be
processed to meet
9.4 7.8 8.7 9.0 10.1 9.2
extra SMP (qty ×
90/8.3)
Toned 8.7 8.4 9.0 9.4 9.8 10. 1
Qty of water
required (Makes - STD* 0.0 0.0 0.0 0.0 0.0 0.0
Milk for processing) White 0.0 0.0 0.0 0.0 0.6 0.0
- Lakh litres
Total 8.7 8.4 9.0 9.4 10.4 10.1
Continued
2002-03 2003-04 2004-05 2005-06
Toned 76.4 92.6 85.4 92.5
STD 12.4 13.5 12.3 13.1
Dairy - Makes
White 0.0 1.0 8.9 5.7
Total 88.8 107.1 106.6 111.3
Actual milk required
for processing
(Makes × 3 / 3.5) Toned 65.5 79.4 73.2 79.3
(Makes × 4.5 / 3.5) STD 15.9 17.4 15.8 16.8
(Makes × 2 / 3.5) White 0.0 0.6 5.1 3.3
Total 81.4 97.3 94.1 99.4
Total qty of SNF
required
(Makes × 8.5 / 90) Toned 7.2 8.7 8.1 8.7
(Makes × 9.0 / 90) STD 1.2 1.4 1.2 1.3
(Makes × 9.0 / 90) White 0.0 0.1 0.9 0.6
Total 8.5 10.2 10.2 10.6
Toned 6.0 7.3 6.8 7.3
Total qty of SNF
available STD 1.5 1.6 1.5 1.6
(Processing × White 0.0 0.1 0.5 0.3
8.3 / 90)
Total 7.5 9.0 8.7 9.2
Extra SMP required Toned 1.2 1.4 1.3 1.4
at 90% soluble STD -0.2 -0.3 -0.2 -0.2
(T. SNF required -
White 0.0 0.0 0.4 0.3
T. SNF available)
-’000 kgs. Total 0.9 1.2 1.5 1.5

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Qty of milk to be
processed to meet
10.3 13.3 16.3 15.7
extra SMP (qty ×
90/8.3)
Qty of water Toned 10.9 13.2 12.2 13.2
required (Makes - STD* 0.0 0.0 0.0 0.0
Milk for
processing) - Lakh White 0.0 0.4 3.8 2.4
litres Total 10.9 13.7 16.0 15.7

Estimated Quantity of Milk Required for Making Curd

As Kannur dairy started production of curd during the period 1994-95,

the average estimated production of curd from 1994-95 to 2005-06 is

ascertained. As per Table 6.4, the average estimated production of curd of

Kannur dairy during the period 1994-95 is 700 LPD. As one litre of curd is

equivalent to 1 litre of skimmed milk, the total quantity of skimmed milk

required during this period is 700 LPD. Skimmed milk is produced after

extracting whole fats from the milk. Hence one litre of skimmed milk is

equivalent to 1-3.5% fat = 96.5 percent. Total quantity of milk required to

produce 700 LPD of curd is equivalent to 700/96.5 percent = 725.4 LPD. In

the similar way estimated quantity of milk required for processing curd of

three dairies for the period 1994-95 to 2005-06 is ascertained.

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 Table 6.4: Estimated Quantity of Milk Required for
Making Curd - Dairywise (’000 LPD)

Year Kannur Kozhikode Palakkad

ProductionEstimated

ProductionEstimated

ProductionEstimated
Qty of milk to be

Qty of milk to be

Qty of milk to be
processed

processed

processed
1994-95 0.7 0.7 0.0 0.0 0.0 0.0

1995-96 4.2 4.4 1.1 1.1 0.4 0.4

1996-97 4.0 4.2 2.9 3.0 2.2 2.3

1997-98 3.9 4.0 3.6 3.7 1.9 2.0

1998-99 5.2 5.4 4.4 4.6 2.8 2.9

1999-2000 4.5 4.6 5.2 5.4 2.8 2.9

2000-01 5.1 5.3 6.2 6.4 3.5 3.6

2001-02 6.0 6.2 7.3 7.6 3.0 3.1

2002-03 7.0 7.3 9.1 9.4 4.0 4.1

2003-04 8.6 8.9 9.1 9.4 4.1 4.2

2004-05 8.8 9.1 10.4 10.8 5.0 5.1

2005-06 9.5 9.8 11.2 11.6 5.2 5.3

Source: Annual Records of MRCMPU

Estimated Quantity of Milk Required for Making Sambharam

As sambharam production is started from 1995-96, the average

estimated production of sambharam of dairies is ascertained. On an average,

the estimated production of Sambharam, of Kannur dairy during the period

1995 - 96 is 400 LPD. One litre of sambharam is equivalent to one half litre of

62
skimmed milk plus one half litre of water. Hence the total quantity of

skimmed milk to produce 400 litres of sambharam during this period is 400

litres / 2 = 200 LPD. The total quantity of milk required to produce 200 litres

of skimmed milk (in the case of sambharam) = 200/96.5 = 207.3 LPD (Table

6.5). In this way the estimated quantity of milk required for processing

sambharam of three dairies for the period from 1995-96 to 2005-06 is

ascertained.

Table 6.5: Estimated quantity of Milk Required for

Making Sambharam - Dairywise (’000 LPD)

Year Kannur Kozhikode Palakkad

Production Estimated

Production Estimated
Production Estimated
Qty of milk to be

Qty of milk to be

Qty of milk to be
processed

processed

processed
1995-96 0.4 0.2 0.2 0.1 0.4 0.2

1996-97 0.8 0.4 1.0 0.5 1.2 0.6

1997-98 0.8 0.4 1.0 0.5 1.0 0.5

1998-99 1.1 0.6 1.6 0.8 1.1 0.6

1999-2000 0.7 0.4 0.2 0.1 0.2 0.1

2000-01 1.0 0.5 0.7 0.4 1.0 0.5

2001-02 0.9 0.5 0.5 0.3 0.6 0.3

2002-03 0.7 0.4 1.0 0.5 0.7 0.4

2003-04 1.0 0.5 0.6 0.3 0.9 0.5

63
 2004-05 0.9 0.5 0.7 0.4 0.6 0.3

2005-06 1.5 0.8 0.9 0.5 0.9 0.5

Source: Compiled from Annual Reports of MRCMPU

Surplus/Shortage of Milk at Dairies

As per Table 6.6, the total quantity of milk (estimated) required for

processing milk, curd and sambharam of Kannur dairy during the period 1990

-91 is 16,700 LPD whereas its actual procurement of milk is 11,900 LPD

(average). Hence the shortage of milk during this period is 4,800 LPD. In the

next year, the shortage of milk went up to 11,100 LPD. But, during the period

1992-93 and 1993-94, it has a surplus milk of 8,600 LPD and 700 LPD

respectively. From the period 1994- 95 to 1998-99 it has shortage of milk. In

the year 1999-2000 it has a surplus milk of 4,200 LPD. But during the period

2000-01 and 2001-02 it has again shortage of 400 LPD and 100 LPD

respectively. In the next year it has surplus milk of 4,100 LPD. In the year

2003-04, the dairy has a shortage of milk 3,500 LPD. But in the last two years

it has a surplus milk of 14,900 LPD and 31,000 LPD respectively (Table 6.7).

Table 6.6: Estimated quantity of Milk Required for Making Milk

and Milk Products- Kannur Dairy (’000 LPD)

Year Toned STD White Curd Sambharam Total

1990-91 16.7 0.0 0.0 0.0 0.0 16.7
1991-92 32.0 0.0 0.0 0.0 0.0 32.0
1992-93 17.7 10.0 0.0 0.0 0.0 27.7
1993-94 23.2 25.5 0.0 0.0 0.0 48.7
1994-95 27.9 23.7 0.0 0.7 0.0 52.3

64
 Year Toned STD White Curd Sambharam Total
1995-96 39.3 25.1 0.0 4.4 0.2 68.9
1996-97 52.2 4.6 0.0 4.2 0.4 61.4
1997-98 50.4 12.7 0.0 4.0 0.4 67.6
1998-99 53.8 11.7 0.0 5.4 0.6 71.5
1999-2000 56.2 12.2 0.0 4.6 0.4 73.4
2000-01 59.0 13.4 0.8 5.3 0.5 79.0
2001-02 60.5 16.5 0.0 6.2 0.5 83.7
2002-03 65.5 15.9 0.0 7.3 0.4 89.1
2003-04 79.4 17.4 0.6 8.9 0.5 106.8
2004-05 73.2 15.8 5.1 9.1 0.5 103.7

2005-06 79.3 16.8 3.3 9.8 0.8 110.0

Source: Compiled from Annual Reports of MRCMPU

Table 6.7: Surplus/Shortage of Milk - Kannur Dairy (’000 LPD)

Total Milk Actual Surplus of Shortage of
Year
required procurement milk milk
1990-91 16.7 11.9 0.0 4.8
1991-92 32.0 20.9 0.0 11.1
1992-93 27.7 36.3 8.6 0.0
1993-94 48.7 49.4 0.7 0.0
1994-95 52.3 51.4 0.0 0.9
1995-96 68.9 52.0 0.0 16.9
1996-97 61.4 48.0 0.0 13.4
1997-98 67.6 57.5 0.0 10.1
1998-99 71.5 66.0 0.0 5.5
1999-2000 73.4 77.6 4.2 0.0
2000-01 79.0 78.6 0.0 0.4
2001-02 83.7 83.6 0.0 0.1
2002-03 89.1 93.2 4.1 0.0

65
 2003-04 106.8 103.3 0.0 3.5
2004-05 103.7 118.6 14.9 0.0
2005-06 110.0 141.0 31.0 0.0
Source: Compiled from Annual Reports of MRCMPU
In the case of Kozhikode dairy, it has shortage of milk in all the years,

whereas Palakkad dairy has surplus of milk in all the years (Table 6.8).

Table 6.8: Surplus / Shortage of Milk - Kannur, Kozhikode

and Palakkad Dairies (’000 LPD)

Kannur Kozhikode Palakkad

Year Net Shortage
Surplus Shortage Shortage Surplus
1990-91 0.0 4.8 3.5 8.3 6.4
1991-92 0.0 11.1 15.6 26.7 4.1
1992-93 8.6 0.0 10.6 2.0 11.6
1993-94 0.7 0.0 29.4 28.7 13.7
1994-95 0.0 0.9 34.4 35.3 30.2
1995-96 0.0 16.9 41.2 58.1 28.5
1996-97 0.0 13.4 50.7 64.1 36.3
1997-98 0.0 10.1 41.3 51.4 52.6
1998-99 0.0 5.5 35.7 41.2 35.5
1999-2000 4.2 0.0 14.8 10.6 47.8
2000-01 0.0 0.4 7.3 6.9 48.5
2001-02 0.0 0.1 25.2 25.1 56.4
2002-03 4.1 0.0 39.9 35.8 48.4
2003-04 0.0 3.5 39.9 43.4 49.2
2004-05 14.9 0.0 37.2 12.3 53.4
2005-06 31.0 0.0 34.6 3.6 55.3
Source: Compiled from Annual Reports of MRCMPU

Net surplus / Net shortage of Milk of MRCMPU

66
 As far as Kannur and Kozhikode dairies are considered, MRCMPU has

clear shortage of milk in all the years (Table 6.8). When the surplus milk of

Palakkad dairy is taken into account, MRCMPU has surplus milk in majority

years (Table 6.9). It means surplus milk of Palakkad dairy is the problem of

MRCMPU. As mentioned in Chapter III, the highest procurement of milk is

recorded from Palakkad district, but it can sell milk in less quantity through

Palakkad dairy. Moreover, Palakkad dairy makes only a single variety of milk

called Toned milk. Hence MRCMPU has to concentrate on the processing of

other varieties of milk in Palakkad dairy.

Table 6.9: Net Surplus/Net Shortage of Milk – MRCMPU (’000 LPD)

Year Net surplus Net shortage

1990-91 0.0 1.9
1991-92 0.0 22.6
1992-93 9.6 0.0
1993-94 0.0 15.0
1994-95 0.0 5.1
1995-96 0.0 29.6
1996-97 0.0 27.8
1997-98 1.2 0.0
1998-99 0.0 5.7
1999-2000 37.2 0.0
2000-01 41.6 0.0
2001-02 31.3 0.0
2002-03 12.6 0.0
2003-04 5.8 0.0
2004-05 31.1 0.0

67
 2005-06 51.7 0.0
Source: Compiled from Annual Reports of MRCMPU

In this model, only the retailers are considered. The dairy can enhance

its production when wholesalers are kept in the distribution channel. When

wholesalers keep the daily sale of milk and milk products as closing stock to

meet the next days demand, production of milk and milk products can also be

enhanced to meet the additional demand from wholesalers. A small change in

the demand from wholesalers will amplify in the total demand of the dairy. In

order to increase production, capacity of milk and milk products equipment

must be utilised in most efficient way. In other words capacity utilisation of

milk and milk products equipment is ascertained to identify idle time and

bottlenecks.

CAPACITY UTILISATION

The capacity of an operation is its maximum throughput in a specified

time. All operations have some limit in their capacity. Capacity is an important

concept as it defines the maximum flow through the production process in a

given time. The capacity of a production process sets the maximum amount of

product that can be delivered to the warehouse in a given time. Designed

capacity and effective capacity are the two sides of capacity. Designed

capacity is the maximum possible throughput in ideal conditions whereas

effective capacity means the maximum realistic throughput in normal

conditions. Each part of the production process has a different capacity, and

68
the overall capacity is set by the bottlenecks. Capacity of production process

can only be increased by adding more capacity at the bottleneck.

Capacity Utilisation (in %) = Amount of capacity used × 100 / designed capacity

Capacity Utilisation (in hours) = Amount of capacity used /designed capacity

Estimated Production of Milk and Milk Products of Kannur Dairy

Opening stock, sales and closing stock of various varieties of milk and

milk products of Kannur dairy for the period 2000-01 are given in Appendices

6.1 and 6.2. The opening stock is the quantity of stock as on 1 st April 2000, the

sales means the equivalent total quantity of sales made during the period 2000-

01, and the closing stock means the quantity of stock as on 31 st March 2001.

Production of milk and milk products is equivalent to sales + closing stock-

opening stock i.e. sales + changes in stock (closing stock-opening stock). Milk

processed for different varieties of milk and milk products is calculated as per

the formula explained in the processing model and the total quantity of milk

required to process different varieties of milk and milk products per day is

ascertained as total quantity of milk processed during this period is divided by

365. Similarly the average production of different varieties of milk per day is

ascertained as total production of different varieties of milk is divided by 365.

Capacity Utilisation of Milk Processing Plant

In the Table 6.10, various milk processing machineries such as

pasteurizer, cream separator, chiller, milk filling with their capacity are given.

69
Suppose the dairy is running for 8 hours, the designed capacity of pasteurizer

is equal to 80,000 (10000 × 8) litres per day. The average milk required for
processing of Toned Milk (throughput) is 56,100 litres per day. Hence the

utilisation of pasteurizer for processing Toned Milk is 70 percent (56,100 ×

100/80,000). In the same way utilisation of different milk equipment for

processing various varieties of milk is ascertained. Utilisation of pasteurizer

for processing milk is 87.3 percent. Similarly utilisation of cream separator,

chiller and milk filling machines is 71.1 percent, 124.6 percent and 128.0

respectively. In the calculation of the utilisation of milk filling machines, the

average milk production per day is taken as the amount of capacity used. It

can be concluded that bottleneck (limiting capacity) is found in cream

separator first and pasteurizer in second while producing milk. But chiller and

milk filling machines are over utilised.

Table 6.10: Capacity Utilisation of Milk Equipments of

Kannur Dairy – 2000-01 (in Percentage)

Equipment & Capacity Toned STD White Total milk

1. Pasteurizer (10,000 litres

70.0 16.3 10.0 87.3
per hour)

2. Cream separator (10,000

70.0 0.0 10.0 71.1
litres per hour)

3. Chiller (7,000 litres per

100.0 22.5 13.8 124.6
hour)

4. Milk filling (7,500 litres per

109.0 16.7 2.3 128.0
hour)
Source: Compiled from the Records of Kannur Dairy

70
 The estimated working hours of pasteurizer for producing Toned, STD,

and White milk are 5.6 hours, 1.3 hours and 0.8 hours respectively. Similarly,

the estimated working hours of cream separator for producing Toned Milk and

White Milk are 5.6 hours, and 0.8 hours respectively. As cream is not

separated while processing STD milk, hence the utilisation of cream separator

is not considered in this case. Estimated working hours of chiller for

producing Toned, STD, and Milma White are 8.0 hours, 1.8 hours and 1.1

hours respectively. Estimated working hours of milk filling machines for

filling Toned, STD, and Milma White are 8.7 hours, 1.3 hours and 0.2 hours

respectively. Total working hours of pasteurizer, cream separator, chiller and

milk filling machines for processing Toned, STD, and white milk are 7.0

hours, 5.7 hours, 10.0 hours, and 10.2 hours respectively (Table 6.11). When

the dairy functions for about 8 hours, bottleneck (limiting capacity) while

processing milk is found in the cases of pasteurizer and cream separator,

whereas chiller and milk filling machines require more time.

Table 6.11: Capacity Utilisation of Milk Equipment of

Kannur Dairy - 2000 - 01 (in Hours)

Equipment & Capacity Toned STD White Total milk

1. Pasteurizer (10,000 litres 5.6 1.3 0.8 7.0

per hour)

2. Cream separator (10,000 5.6 - 0.8 5.7

litres per hour)

3. Chiller (7,000 litres per 8.0 1.8 1.1 10.0

hour)

71
 4. Milk filling (7,500 litres 8.7 1.3 0.2 10.2
per hour)
Source: Compiled from the Records of Kannur Dairy

Capacity Utilisation of Milk Products Equipment

In Table 6.12 various milk products equipment such as cream separator,

chiller, curd making, sambharam making, curd filling and sambharam filling

with their capacity are given. Like utilisation of milk equipment, utilisation of

milk products equipment can also be ascertained. In this case also, the

utilisation of equipment in percentage is calculated on the basis of the

assumption that the dairy runs for eight hours. In the case of curd, utilisation

of cream separator, chiller, curd making machine and curd filling machine is

6.3 percent, 8.8 percent, 12.0 percent, and 12.5 percent respectively. But in the

case of sambharam utilisation of cream separator, chiller, sambharam making

machine, and sambharam filling machine is 3.1 percent, 0.9 percent, 2.1

percent, and 2.5 percent respectively.

As curd and sambharam are processed in the same equipment, their

total utilisation can be considered. Hence combined utilisation of cream

separator, chiller, curd & sambharam making, and curd & sambharam filling is

6.9 percent, 9.8 percent, 14.6 percent, and 14.5 percent respectively. It can be

concluded that about 7.0 percent to 15.0 percent of capacity is utilised while

producing curd and sambharam.

72
 Table 6.12: Capacity Utilisation of Milk Products Equipment
of Kannur Dairy - 2000-01 (in Percentage)

Equipment & Capacity Curd Sambharam Total

1. Cream separator 6.3 0.6 6.9

(10,000 litres per hour)

2. Chiller (7,000 litres per 8.8 0.9 9.8

hour)

3. Curd making (5,000 12.5 0.0 12.5

litres per hour)

4. Sambharam making 0.0 2.1 2.1

(3,000 litres per hour)

5. Curd filling (5000 litres 12.0 0.0 12.0

per hour)

6. Sambaram filling 0.0 2.5 2.5

(5000 litres per hour)
Source: Compiled from the Records of Kannur Dairy

Similarly, the utilisation of these equipments (in hours) for processing

various milk products such as curd, and sambharam can also be calculated.

The estimated working hours of cream separator for producing curd and

sambharam are 0.5 hours, and 0.25 hours respectively. Estimated working

hours of chiller for producing curd and sambharam are 0.7 hours, and 0.07

hours respectively. The estimated working hours of curd making machine and

sambharam making machine are 1.0 hour and 0.3 hour respectively. The

estimated working hours of curd filling machines and sambharam filling

machines are 1.0 hour and 0.2 hour respectively. As the same equipment are

used for producing curd and sambharam, the total working hours of cream

73
separator, chiller, curd & sambharam making, and curd & sambharam filling

machines for processing curd and sambharam, are 0.8 hour, 0.8 hour, 1.3

hours, and 1.2 hours respectively (Table 6.13). It means that the above

mentioned equipment work more or less for one hour for producing curd and

sambharam.

Table 6.13: Capacity Utilisation of Milk Products Equipment of

Kannur Dairy - 2000-01 (in Hours)

Equipment & Capacity Curd Sambharam Total

1. Cream separator 0.5 0.25 0.8

(10,000 litres per hour)

2. Chiller (7,000 litres 0.7 0.07 0.8

per hour)

3. Curd making (5,000 1.0 - 1.0

litres per hour)

4. Sambharam making - 0.3 0.3

(3,000 litres per hour)

5. Curd filling (5000 1.0 - 1.0

litres per hour)

6. Sambharam filling - 0.2 0.2

(5000 litres per hour)
Source: Compiled from the Records of Kannur Dairy

Capacity Utilisation of Common Equipment

Cream separator and chiller are commonly used for processing milk

and milk products. Hence its combined utilisation can be ascertained. The

combined utilisation of cream separator is 78.0 percent, whereas the chiller is

134.4 percent (Table 6.14). In this case bottleneck is found in cream separator,

74
but chiller over runs. Similarly, the combined utilisation of cream separator is

6.5 hours, whereas the chiller is 10.8 hours (Table 6.15). When the dairy

works for eight hours, the cream separator is idle for 1.5 hours, but the chiller

requires additional 2.8 hours.

Table 6.14: Capacity Utilisation of Common Equipment of Milk &

Milk Products Kannur Dairy – 2000-01 (in Percentage)

Equipment & Capacity Milk Milk products Total

1. Cream separator 71.1 6.9 78.0

(10,000 litres per hour)

2. Chiller (7,000 litres 124.6 9.8 134.4

per hour)
Source: Compiled from the Records of Kannur Dairy

Table 6.15: Capacity Utilisation of Common Equipment of Milk &

Milk Products Kannur dairy – 2000-01 (in Hours)

Equipment & Capacity Milk Milk products Total

1. Cream separator 5.7 0.8 6.5

(10,000 litres per hour)

2. Chiller (7,000 litres 10.0 0.8 10.8

per hour)
Source: Compiled from the Records of Kannur Dairy

While enhancing the production, one of the problems from the part of

dairy is the problem of inventory. In this situation, dairy has to concentrate

over regular stock out, performance cycle time, location of depot. Necessary

inventory control techniques must be adopted to ascertain average inventory

and safety stock level to meet the demand from the wholesalers and retailers.

75
In this case combined probability of demand and performance cycle time

should be considered. For this purpose inventory model is developed.

INVENTORY MODEL

Sales forecasting projects unit demand during the inventory

performance cycle. However, demand during replenishment cycle often

exceeds or falls short of what is anticipated. To provide protection against a

stock out when demand exceeds forecast, safety stock is added to base

inventory. Under the conditions of demand uncertainty, the average inventory

is defined as one half of the order quantity plus safety stock. The task of

planning safety stock consists of three steps. First, the likelihood of stock out

must be determined. Second, the demand potential during periods of stock out

must be estimated. Finally, a policy decision is required concerning the design

of stock out protection to introduce into the system.5

Logistical Performance Cycles

The primary unit of analysis for integrated logistics is the performance

cycle. At a basic level, suppliers, the firm, and its customers are linked

together by communications and transportation. The facility locations that

performance cycles link together are referred to as nodes. In addition to nodes

and links, a logistical performance cycle requires inventory. Inventory

committed to a system consists of base stock and safety stock positioned to

protect against variance. It is at the facility nodes that work related to logistics

occurs. Within nodes, inventory is stocked or flows through the node,

76
necessitating a variety of different types of material handling and at least

limited storage. While a degree of handling and in-transit storage takes place

within transportation, such activity is minor in comparison to that typically

performed within a logistical facility, such as a warehouse. The efficiency and

effectiveness of performance cycles are key concerns in logistical

management.6

The amount of safety stock necessary to satisfy a given level of demand

can be determined with the use of statistical technique. In calculating safety

stock levels it is necessary to consider the joint impact of demand and

replenishment cycle (performance cycle) variability. Safety stock requirement

can be determined by using the following formula.7

σc = R (σS 2 ) +S (σ R ) 2
2

Where:

 c = Units of safety stock needed to protect 68.27 percent of all

performance cycle (one standard deviation)

R = Average performance cycle

σ R = Standard deviation of the performance cycle

S = Average daily sales

σ S = Standard deviation of daily sales

Average inventory = (Mean sales + Mean performance cycle time) / 2

77
 Units of closing stock to be kept (68.27 percent of all performance

cycle time, i.e., one STD deviation) = Average inventory + safety stock

It means that stock out would occur 31.73 percent of all performance

cycle time.

Units of closing stock to be kept (95.45 percent of all performance

cycle time, i.e. two STD deviation) = Average inventory + (2 × safety stock)

It means that stock out would occur 4.55 percent of all performance

cycle time.

Units of closing stock to be kept (99.73 percent of all performance

cycle time, i.e., three STD deviation) = Average inventory + (3 × safety

stock)

It means that stock out would occur 0.27 percent of all performance

cycle time.

In this analysis performance cycle time is calculated on trial and error

method when the sale is one (Appendix 6.3).

Generally the dairies of MRCMPU distribute milk in the morning and

in the evening. Hence the frequency of distribution of milk in the morning and

in the evening is one. The average daily sale of Toned Milk of Kannur dairy

during the period 1990-91 is 19, 500 LPD. When the daily sales are in 50:50

(percent) i.e., half of the daily sale in the morning and half of the daily sale in

the evening (morning and evening sales of Toned Milk are 9,750 litres each)

78
and, the average performance cycle time is in 4:4 (4 hours in the morning and

4 hours in the evening), to protect 99.73 percent, 95.45 percent and 68.27

percent of performance cycle time, the units of closing stock needed by the

dairy can be calculated by adopting the above mentioned formula.

Table 6.16: Mean and Standard Deviation of Toned

Milk Sales of Kannur Dairy

Deviation from mean Deviation squared

Sales (’000 LPD)
(d) d2
9.75 0 0
9.75 0 0

S 9.75 Σ d2 0

σS = ∑d 2

=
0
=0
n 2

Table 6.17: Mean and Standard Deviation of Performance Cycle Time

Performance cycle Deviation from mean Deviation squared

time (Hours) (d) d2
4 0 0
4 0 0
R 4 Σ d2 0

σR = ∑d 2

=
0
=0
n 2

4 (0) + 9.75 2 ( 0 )
2 2
σC =

Safety stock = 0

79
 Sx R 9.75 x 4
Average Inventory = = =19.5
2 2

Units of Closing stock needed to protect 68.27 percent of all

performance cycle (1 stand deviation) is equivalent to average inventory +

safety stock.

= 19,500 litres + 0 = 19,500 litres

Units of Closing stock needed to protect 95.45 percent of all

performance cycle (2 stand deviation) is equivalent to average inventory + (2

× safety stock)

= 19,500 litres + (2 × 0)

= 19,500 litres

Units of closing stock needed to protect 99.73 percent of all

performance cycle (3 standard deviation) is equivalent to average inventory +

(3 × safety stock)

= 19,500 litres (3 × 0)

= 19,500 litres

Similarly the units of closing stock needed by the dairy at various levels

of sales at different performance cycle time are calculated.

When the daily sales are in 50:50 (percent) and, the average

performance cycle time is in 3:3 (hours), to protect 99.73 percent, 95.45

percent and 68.27 percent of performance cycle time, the dairy has to keep

80
14,600 litres (approximately 75.0 percent of sales) of Toned Milk as closing

stock (Table 6.18).

When the daily sales are in 50:50 (percent) and, the average

performance cycle time is in 2:2 (hours), to protect 99.73 percent, 95.45

percent and 68.27 percent of performance cycle time, the dairy has to keep

9,750 litres (50.0 percent of sales) of Toned Milk as closing stock (Table

6.18).

Table 6.18 Safety stock, Average Inventory and Closing Stock (in 50:50)

Performance Average Closing stock (’ 000 LPD)

Sales Safety stock
cycle time Inventory
(’000 LPD) (’000 LPD)
(Hours) (’ 000 LPD) 1 sigma 2 sigma 3 sigma

9.75: 9.75 4:4 0 19.5 19.5 19.5 19.5

9.75: 9.75 3:3 0 14.6 14.6 14.6 14.6

9.75:9.75 2:2 0 9.75 9.75 9.75 9.75

When the daily sales is in 60:40 (percent) and, the average performance

cycle time is in 2.2:2.2 (hours), to protect 99.73 percent of performance cycle

time, the dairy has to keep 19,400 litres (approximately cent percent of sales)

of Toned Milk as closing stock. To protect 95.45 percent of the performance

cycle time, the dairy has to keep 16,500 litres of Toned Milk (approximately

83.0 percent of sales) as closing stock. Similarly, to protect 68.27 percent of

the performance cycle time, the dairy has to keep 13,600 litres of Toned Milk

(approximately 69.0 percent of sales) as closing stock (Table 6.19). It also

supports that daily sales would be the closing stock to protect 99.73 percent of

81
the performance cycle time, otherwise stock out would be high with a

corresponding decrease in closing stock (Appendix 6.3).

When the daily sales are in 60:40 (percent) and, the average

performance cycle time is in 2.7:2.7 (hours), to protect 99.73 percent of

performance cycle time, the dairy has to keep 22,800 litres, (approximately

119.0 percent of sales) of Toned Milk as closing stock. To protect 95.45

percent of performance cycle time, the dairy has to keep 19,600 litres of

Toned Milk (approximately 102.0 percent of sales) as closing stock. Similarly

to protect 68.27 percent of performance cycle time the dairy has to keep

16,400 litres of Toned Milk (approximately 85.0 percent of sales) as closing

stock (Table 6.19). It supports that the closing stock would be 120.0 percent of

the daily sales to protect 99.73 percent of the performance cycle time,

otherwise stock out would be high with a corresponding decrease in closing

stock (Appendix 6.3).

When the daily sales are in 60:40 (percent) and, the average

performance cycle time is in 3.3:3.3 (hours), to protect 99.73 percent of

performance cycle time, the dairy has to keep 26,700 litres, (approximately

134.0 percent of sales) of Toned Milk as closing stock. To protect 95.45

percent of performance cycle time, the dairy has to keep 23,200 litres of

Toned Milk (approximately 117.0 percent of sales) as closing stock. Similarly

to protect 68.27 percent of performance cycle time the dairy has to keep

19,600 litres of Toned Milk (approximately cent percent of sales) as closing

82
stock (Table 6.19). It supports that closing stock would be 130.0 percent of the

daily sales to protect 99.73 percent of the performance cycle time, otherwise

stock out would be high with a corresponding decrease in closing stock

(Appendix 6.3).

Table 6.19: Safety stock, Average Inventory and Closing Stock (in 60:40)

Performance Average Closing stock (’ 000 LPD)

Sales (’000 Safety stock
cycle time Inventory
LPD) (’000 LPD)
(Hours) (’ 000 LPD) 1 sigma 2 sigma 3 sigma

11.7:7.8 2.2:2.2 2.9 10.7 13.6 16.5 19.4

11.7:7.8 2.7: 2.7 3.2 13.2 16.4 19.6 22.8

11.7:7.8 3.3:3.3 3.5 16.1 19.6 23.2 26.7

When the daily sales are in 70:30 (percent) and, the average

performance cycle time is in 1.3.:1.3 (hours), to protect 99.73 percent of

performance cycle time, the dairy has to keep 19,700 litres, (approximately

cent percent of sales) of Toned Milk as closing stock. To protect 95.45 percent

of performance cycle time, the dairy has tokeep15, 200 litres of Toned Milk

(approximately 77.0 percent of sales) as closing stock (Table 6.20). Similarly

to protect 68.27 percent of performance cycle time the dairy has to keep

10,800 litres of Toned Milk (approximately 55.0 percent of sales) as closing

stock. It also supports that daily sales would be the closing stock to protect

99.73 percent of the performance cycle time, otherwise stock out would be

high in corresponding decrease in closing stock (Appendix 6.3).

83
 When the daily sales are in 70:30 (percent) and, the average

performance cycle time is in 1.85:1.85 (hours), to protect 99.73 percent of

performance cycle time, the dairy has to keep 24,900 litres, (approximately

124.0 percent of sales) of Toned Milk as closing stock. To protect 95.45

percent of performance cycle time, the dairy has tokeep19, 600 litres of Toned

Milk (approximately cent percent of sales) as closing stock. Similarly to

protect 68.27 percent of performance cycle time the dairy has to keep 14,300

litres of Toned Milk (approximately 72.0 percent of sales) as closing stock

(Table6.20). It supports that 120.0 percent of daily sales would be the closing

stock to protect 99.73 percent of the performance cycle time, otherwise stock

out would be high with a corresponding decrease in closing stock (Appendix

6.3).

When the daily sales are in 70:30 (percent) and, the average

performance cycle time is in 2.7:2.7 (hours), to protect 99.73 percent of

performance cycle time, the dairy has to keep 32,400 litres, (approximately

167.0 percent of sales) of Toned Milk as closing stock. To protect 95.45

percent of performance cycle time, the dairy has to keep 26,000 litres of

Toned Milk (approximately 134.0percent of sales) as closing stock. Similarly

to protect 68.27 percent of performance cycle time the dairy has to keep

19,600 litres of Toned Milk (approximately cent percent of sales) as closing

stock (Table 6.20). It supports that 170.0 percent of daily sales would be the

closing stock to protect 99.73 percent of the performance cycle time,

84
otherwise stock out would be high in corresponding decrease in closing stock

(Appendix 6.3).

Table 6.20: Safety stock, Average Inventory and Closing Stock (in 70:30)

Performance Average Closing stock (’ 000 LPD)

Sales (’000 Safety stock
cycle time Inventory
LPD) (’000 LPD)
(Hours) (’000 LPD) 1 sigma 2 sigma 3 sigma

13.7:5.8 1.3 : 1.3 4.5 6.3 10.8 15.2 19.7

13.7:5.8 1.85 : 1.85 5.3 9.0 14.3 19.6 24.9

13.7:5.8 2.7 : 2.7 6.4 13.2 19.6 26.0 32.4

From the above analysis following conclusions are drawn.

1. At all levels of sales, units of closing stock to be kept are directly

related to the performance cycle time. Units of closing stock are

increased when the performance cycle time is increased and vice versa

(Appendix 6.3).

2. Suppose the sales are in 50:50 (percent), units of closing stock can be

reduced by about one-fourth of sales when the performance cycle time is

reduced by one hour. It means every one hour reduction in the

performance cycle time would enable the dairy to reduce the units of

closing stock to one-fourth of its sales (Appendix 6.3).

3. When sales are in 60:40 (percent), and the performance cycle time is in

2.2:2.2, the dairy has to keep about cent percent of sales as closing stock

to protect 99.73 percent of the performance cycle. When sales are in

85
 60:40 (percent) and, the average performance cycle time is in 2.7:2.7

(hours), the dairy has to keep 119.0 percent of sales as closing stock to

protect 99.73 percent of performance cycle time. When sales are in 60:40

(percent) and, the average performance cycle time is in 3.3:3.3 (hours),

the dairy has to keep 134.0 percent of sales as closing stock to protect

99.73 percent of performance cycle time (Appendix 6.3).

4. When sales are in 70:30 (percent), and the performance cycle time is

1.3: 1.3, the dairy has to keep about cent percent of sales as closing stock

to protect 99.73 percent of the performance cycle. When sales are in

70:30 (percent) and, the average performance cycle time is in 1.85:1.85

(hours), the dairy has to keep 124.0 percent of sales as closing stock to

protect 99.73 percent of performance cycle time. When sales are in 70:30

(percent) and, the average performance cycle time is in 2.7:2.7 (hours),

the dairy has to keep 167.0 percent of sales as closing stock to protect

99.73 percent of performance cycle time (Appendix 6.3).

5. When the performance cycle time is increased, the volume of safety

stock, average inventory and closing stock would also be increased. In

this case the dairy has to keep the increased volume of closing stock.

Otherwise, the dairy cannot protect stock out at 99.73 percent of

performance cycle.

6. A small increase in the performance cycle time would amplify the

increase in the volume of closing stock.

86
7. When the volume of closing stock is not kept by the dairy in

correspondence with the increase in the performance cycle time, the

stock out would occur earlier than 99.73 percent of the performance cycle

time.

From the above, we can conclude that the change in the performance

cycle time is directly related to the volume of safety stock and closing

inventory. In this case capacity of warehouse is the main problem from the

part of dairy. Frequent stock out must be done to avoid bottlenecks in the

warehouse capacity. Location planning is another problem from the part of

MRCMPU. For this purpose location of logistics centres in the various

distribution routes must be determined.

LOCATION PLANNING

Location decisions are needed wherever an organisation opens new

facilities. If an organisation makes a mistake and opens facilities in poor

location, it cannot simply close down and move to a better place. Working at

the wrong location can give very poor performance, but moving can be

equally difficult. The only solution is to choose the right location in the first

place. The right location does not guarantee success but the wrong location

will certainly guarantee failure. Location decisions are invariably difficult;

hence organisations have to consider many factors. Some of these factors are

operating costs, distance from current locations, demand for the product etc.

Facility location involves a hierarchy of decisions. Alternative areas within

87
this region come next. Then alternative towns and cities within this area are

considered. Finally different sites within a preformed town are considered.

The broad decisions about geographical regions come from the business

strategy. Two standard models, single median problem and covering problems

are taken to locate the logistic centers.

In this model, a particular distribution route of Kannur dairy for the

year 2004-05 called ‘Alakode a.m.’ is taken as sample. This route consists of

thirteen logistics centers (including the dairy). These logistics centers are

given in the Table 6.21 vertically and horizontally. In the second column

minimum distance from the dairy to different logistics centers is given

vertically. Similarly in the third to last columns minimum distance between

two logistics centers are taken vertically. In Table 6.22, units of Toned Milk

distributed in packets per day (morning) to different logistics centers are taken

as weight in the second column. Next the minimum distance of each logistics

centre is multiplied by the corresponding weight of each logistics centre so as

to ascertain weight distance for each logistics centre. These weight distances

of each logistics centre are given vertically in the third to last columns. Then

adding these down the column gives the total weight distance for each

logistics centre. By comparing the total weight distances of each logistics

centre, Pulimparamba has the lowest total cost and is the single median. Hence

Kannur dairy should start looking for a location at this logistics centre so as to

minimise the weight distance in the case of Toned Milk distribution of this

88
route in the morning. In a similar way, this model can be used to locate depot

for different routes for other varieties of milk and milk products of various

dairies under MRCMPU.

Table 6.21: Maximum Distance between Each Logistics Centre (Alakode

Route a.m.) - Kannur Dairy – 2004 – 05 (in K.M.)

Keecherr Kolathu- Achan - SI

Dairy Ozhakram Kuttikkol
y vayal peedika Mukku

Dairy 0 7 8 16 17 18 22

Keecherry 7 0 1 9 10 11 15

Kolathuvayal 8 1 0 8 9 10 14

Achanpeedik 16 9 8 0 1 2 6
a

S I Mukku 17 10 9 1 0 1 5

Ozhakram 18 11 10 2 1 0 4

Kuttikkol 22 15 14 6 5 4 0

Ezham mile 24 17 16 8 7 6 2

Palayad 26 19 18 10 9 8 4

Puliparamba 27 20 19 11 10 9 5

Mukola 29 22 21 13 12 11 7

Karuvanchal 51 44 43 35 34 33 29

Alakkode 54 47 46 38 37 36 32

Maximum 54 47 46 38 37 36 32
Continued

89
 Ezham mile Palayad Puliparamba Mukola Karuvanchal Alakkode

Dairy 24 26 27 29 51 54

Keecherry 17 19 20 22 44 47

Kolathu vayal 16 18 19 21 43 46

Achanpeedik 8 10 11 13 35 38
a

S I Mukku 7 9 10 12 34 37

Ozhakram 6 8 9 11 33 36

Kuttikkol 2 4 5 7 29 32

Ezham mile 0 2 3 5 27 30

Palayad 2 0 1 3 25 28

Puliparamba 3 1 0 2 24 27

Mukola 5 3 2 0 22 25

Karuvanchal 27 25 24 22 0 3

Alakkode 30 28 27 25 3 0

Maximum 30 28 27 29 51 54
Source: Compiled from the Records of Kannur Dairy

Table 6.22: Total Weight Distances Between Each Logistics Centre

(Alakode Route a.m.) – Kannur Dairy - 2004-05 (in Units)

1 2 3 4 5 6 7 8

Weigh Kolathuv Achanpee S I-

Dairy Keecherry Ozhakram
t -ayal dika Mukku

Dairy 0 0 0 0 0 0 0

Keecherry 100 700 0 100 900 1000 1100

90
Kolathuvayal 50 400 50 0 400 450 500

Achanpeedika 80 1280 720 640 0 80 160

S I Mukku 80 1360 800 720 80 0 80

Ozhakram 70 1260 770 700 140 70 0

Kuttikkol 25 550 375 350 150 125 100

Ezham mile 100 2400 1700 1600 800 700 600

Palayad 60 1560 1140 1080 600 540 480

Puliparamba 144 3888 2880 2736 1584 1440 1296

Mukola 302 8758 6644 6342 3926 3624 3322

Karuvanchal 80 4080 3520 3440 2800 2720 2640

Alakkode 120 6480 5640 5500 4560 4440 4320

Total 32716 24239 23228 15940 15189 14598

continued

9 10 11 12 13 14 15

Kuttik- Ezham Palayad Puli Mukola Karuvan Alakkode

kol mile -paramb -chal
a

Dairy 0 0 0 0 0 0 0

Keecherry 1500 1700 1900 2000 2200 4400 4700

Kolathuvayal 700 800 900 950 1050 2150 2300

Achanpeedika 480 640 800 880 1040 2800 3040

S I Mukku 400 560 720 800 960 2720 2960

Ozhakram 280 420 560 630 770 2310 2520

Kuttikkol 0 50 100 125 175 725 800

91
Ezham mile 200 0 200 300 500 2700 3000

Palayad 240 120 0 60 180 1500 1680

Puliparamba 720 432 144 0 288 3456 3888

Mukola 2114 1510 906 604 0 6644 7550

Karuvanchal 2320 2160 2000 1920 1760 0 240

Alakkode 3840 3600 3360 3240 3000 360 0

Total 12794 11992 11590 11509 11923 29765 32678

Source: Compiled from the Records of Kannur Dairy

However, the standard findings are that the best location is always in

one of the logistical centers. As per Table 6.21, the logistics centre

Pulimparamba gives maximum distance of 27 kilometers. This is an example

for single location. But two or more locations may be identified to give best

customer service. As per Table 6.21 maximum travel distances varies from 0

to 54 kilometers; the average travel distance of 27 kilometers is taken as

maximum journey distance. In this table, the combination of logistics centers

that gives service distance of 27 kilometers or less than 27 kilometers is taken.

Out of these logistics centers, five logistics centers such as the dairy itself,

Ezham mile, Pulimparamba, Karuvanchal and Alakode have given maximum

travel distance (Table 6.23). When Kannur dairy considers to locate two or

more depots of this route, any of the above five logistics centers can be

considered to give best customer service. In this way the location of two or

more logistics centers of other distribution routes of different varieties of milk

and milk products of dairies under MRCMPU can be decided.

92
 Table 6.23 - Location of Logistics Centre (Alakode Route a.m.)
– Kannur dairy 2004 – 05 (in Km)
1 2 3 4 5 6 7 8
Dairy Keecherr Kolathu- Achan - S I Ozhakram Kuttikkol
y vayal peedika Mukku

Dairy 0 7 8 16 17 18 22

Keecherry 7 0 1 9 10 11 15

Kolathuvayal 8 1 0 8 9 10 14

Achanpeedika 16 9 8 0 1 2 6

S I Mukku 17 10 9 1 0 1 5

Ozhakram 18 11 10 2 1 0 4

Kuttikkol 22 15 14 6 5 4 0

Ezham mile 24 17 16 8 7 6 2

Palayad 26 19 18 10 9 8 4

Puliparamba 27 20 19 11 10 9 5

Mukola 22 21 13 12 11 7

Karuvanchal

Alakkode

Maximum time 27 22 21 16 17 18 22

continued
9 10 11 12 13 14
Ezham Palayad Puli Mukola Karuvanchal Alakkode
mile paramba

Dairy 24 26 27 0

Keecherry 17 19 20 22

Kolathuvayal 16 18 19 21

93
Achanpeedika 8 10 11 13

S I Mukku 7 9 10 12

Ozhakram 6 8 9 11

Kuttikkol 2 4 5 7

Ezham mile 0 2 3 5 27

Palayad 2 0 1 3 25

Puliparamba 3 1 0 2 24 27

Mukola 5 3 2 0 22 25

Karuvanchal 27 25 24 22 0 3

Alakkode 27 25 3 0

Maximum time 27 26 27 25 27 27
Source: Compiled from the Records of Kannur Dairy

Assumptions

The following assumptions are made for this modeling.

1. Operating costs in nearby logistics centre remain same.

2. Transport cost is proportional to the distance moved.

3. Type of vehicles, frequency of journeys, ways of combining

customer orders, order patterns etc are the same.

4. Speed of vehicle from one logistics centre to the nearby logistics

centre is same and hence the time taken to cover one kilometer is same

for all logistics centers.

94
SWOT ANALYSIS

In the following part of this chapter, SWOT Analysis of MRCMPU is

given. An effective strategy can be formulated with the help of SWOT

Analysis. The strengths and weaknesses existing within the firm can be

matched with the opportunities and threats operating in the environment.

Hence the strategy of a firm is to capitalise the opportunities through the use

of strengths and to neutralise the threats by minimising the impact of

weaknesses. The following part of this chapter discusses the strengths, the

weaknesses, opportunities and threats of MRCMPU.

Strengths

1. The average annual growth rates of functional APCOS of MRCMPU

and MCDMU were 12.8 percent and 2.9 percent respectively. As

functional APCOS were the well support to procure milk, MRCMPU

gains operational strength.

2. The average annual growth rates of procurement of milk by MRCMPU

and MCDMU were 15.2 percent and 8.0 percent respectively. It showed

that MRCMPU need not depend upon the milk of other unions or nearby

states. Hence it is an operational strength.

3. The average growth rates of milk sales of MRCMPU and MCDMU

were 11.5 percent and 2.3 percent respectively. On an average,

MRCMPU sold 151 thousand litres of milk per day. On the other hand,

MCDMU sold 89 thousand litres of milk per day. The average annual

95
 growth rate of ghee sales of MRCMPU was 19.8 percent, whereas it was

7.1 percent in the case of MCDMU. Similarly the average annual growth

rate of curd sales of MRCMPU was 23.1 percent, whereas it is 21.5

percent in the case of MCDMU. MRCMPU could gain marketing

strengths in the case of milk, ghee and curd sales.

4. The average market share of milk of MRCMPU and MCDMU were

81.3 percent and 78.6 percent respectively. Similarly the average market

share of butter milk (sambharam) of MRCMPU and MCDMU were 0.6

percent and 0.3 percent respectively. It showed that MRCMPU gains

marketing strengths in milk and butter milk sales.

5. The average market growth rate of milk (value) of MRCMPU and

MCDMU were 9.1 percent and 7.6 per cent respectively. The average

market growth rate of curd (value) of MRCMPU and MCDMU were

16.0 percent and 15.5 percent respectively. Similarly the average market

growth rate of peda (value) of MRCMPU and MCDMU were 65.9

percent and 28.9 percent respectively. Hence MRCMPU could gain

marketing strengths in the case of milk and peda sales.

6. About 98.0 percent of the retailers were satisfied with the present

delivery time of milk products. MRCMPU could gain marketing strength

in distributing milk products to the retail outlets.

96
7. 75.5 percent of the retailers were of the opinion that Toned Milk was

the fast moving milk. It meant that MRCMPU could gain marketing

strength in the case of Toned milk sales.

8. About 39.5 percent of total sales of Toned Milk, 41.0 percent of total

sales of Milma Rich, 40.8 percent of total sales of Milma Smart, 38.3

percent of total sales of Homogenous Toned Milk and 40.0 percent of

total sales of all varieties of milk per year were made in summer. It

showed that MRCMPU could sell all varieties of milk in large scale in

summer season than in winter and monsoon seasons. Hence it was the

marketing strength of MRCMPU.

9. About 67.5 percent of the retailers in monsoon, 82.5 percent of the

retailers in winter, 67.5 percent of the retailers in summer were of the

opinion that ghee sale was average and above average. When ghee sale in

quantity was considered, about 12.6 kgs. per month could be sold in

monsoon, which increased to 22.0 kgs. in winter and decreased to 14.2

kgs. in summer. MRCMPU could sell ghee in large scale in winter

season than in summer and monsoon seasons. Hence it is the marketing

strength of MRCMPU.

10. About 62.5 percent of the retailers in monsoon, 77.7 percent of the

retailers in winter, 95.9 percent of the retailers in summer were of the

opinion that curd sale was average and above average. When curd sale in

quantity was considered about 25 packets (500 ml) per day could be sold

97
 in monsoon. This increased to 36 packets in winter and again increased to

59 packets in summer. 13.3 percent of the retailers in monsoon, 40.5

percent of the retailers in winter, 91.9 percent of the retailers in summer

were of the opinion that sambharam sale was average and above average.

When sambharam sale in quantity was considered, about 9 packets (200

ml) per day could be sold in monsoon. Cent percent of the retailers in

summer were of the opinion that ice cream sale was average and above

average. When ice cream sale in quantity was considered, about 1.7 litres

per week could be sold in winter and this increased to 16.3 litres in

summer. It showed that MRCMPU could sell curd, sambaram and ice

cream in large scale in summer season than in winter and monsoon

seasons. Hence it was the marketing strength of MRCMPU.

11. About 93.8 percent of the retailers in monsoon and summer, and 90.7

percent of the retailers in winter, were of the opinion that peda sale was

average and above average. When peda sale in quantity was considered

in numbers, one hundred and thirty three could be sold per day in

monsoon. This decreased to one hundred and six in winter and increased

tone hundred and thirty-four in summer. It showed that MRCMPU could

sell peda almost in same numbers in all seasons. Hence a steady peda sale

in all seasons was the marketing strength of MRCMPU.

12. About 95.7 percent of the consumers of Milma milk were of the

opinion that Milma Rich was always available in all seasons. But cent

98
 percent of the consumers of Milma Smart and Homogenous Toned Milk

were of the opinion that Milma Smart and Homogenous Toned Milk

were always available in all seasons. Availability of Milma Rich Milma

Smart and Homogenous Toned Milk in all seasons was the marketing

strength of MRCMPU.

13. As per the opinion of consumers of Milma milk and milk products, the

mean score of various factors such as price of Milma milk and milk

products, quality of Milma milk and milk products, packing of Milma

milk and milk products, handling of consumers’ complaints, innovation

in marketing, scheduling of delivery time, granting of agencies were

ascertained. The mean score of price of Milma milk and milk products,

and packing of Milma milk products were above the score of 4.0. Hence

these factors were considered as marketing strengths of MRCMPU.

Weaknesses

1. The average share of defunct APCOS on registered APCOS of

MRCMPU was 11.5 percent whereas it was 9.1 percent in the case of

MCDMU. It showed that the share of defunct APCOS on registered

APCOS of MRCMPU was higher than that of MCDMU. It was an

operational weakness of MRCMPU.

2. On an average, the annual growth rate of procurement of milk was

15.2 percent as against 11.5 percent growth of milk sales. This imbalance

between procurement and selling of milk was an operational weakness.

99
3. Milk procurement price of MRCMPU was higher than that of

MCDMU. About 80.0 percent of the selling price of the milk was given

by way of procurement price to the farmers. Hence high procurement

cost is the operational weakness of MRCMPU.

4. The average operating ratio of MRCMPU was 103.2 percent. It

meant that MRCMPU sustained operating loss. It was also an operational

weakness of MRCMPU.

5. Milk sales per agency of MRCMPU showed a steady decrease. It

might be either the overcrowding of agencies or inefficiencies of

agencies to sell milk. This is the marketing weakness of MRCMPU.

6. The average market growth rate of sambaram of MRCMPU was

0.4 percent. In the case of MCDMU it was 13.6 percent. The low market

growth rate of sambaram of MRCMPU was a marketing weakness.

7. The average market share of ghee and curd of MRCMPU were 7.8

percent and 5.4 percent respectively. Whereas the average market share

of ghee and curd of MCDMU were 12.1 percent and 7.4 percent

respectively. The market share of ghee and curd of MRCMPU was low;

hence it was a marketing weakness of MRCMPU.

8. Majority of the retailers (54.0 percent) had not taken up selling milk

and milk products of Milma as their main business. It showed that

majority of retailers was doing other business. This was the marketing

weakness.

100
9. 93.3 percent of the consumers of Milma milk were of the opinion

that Toned Milk was always available in summer, 96.7 percent of the

consumers of Milma milk were of the opinion that Toned Milk was

always available in monsoon and winter. It showed that there was the

possibility of shortage of Toned Milk in summer season. This was the

marketing weakness.

10. About 24.0 percent of the consumers were aware of the quality of

Milma milk through advertisement. Similarly 28.0 percent of the

consumers of the consumers were aware of the price of Milma milk

through advertisement. Low awareness of quality and price of Milma

milk was a marketing weakness.

11. About 32.0 percent of the retailers supported under ordering of

milk. It might result shortage of milk sales. This was a marketing

weakness.

12. In the case of Milma Rich, 48.6 percent of the retailers supported

that this variety of milk was average moving and slow moving. In the

cases of Milma Smart and Homogenous Toned Milk, majority of the

retailers were of the opinion that these varieties of milk were average

moving. Average or slow movement of Milma Rich, Milma Smart and

Homogenous Toned Milk was the marketing weakness.

13. Milma would lose about one fourth of its consumers within fifteen

minutes of delivery time, again one fourth of its consumers within the

101
 next fifteen minutes, and one fourth of its consumers in the next thirty

minutes. It showed that Milma would lose more than 78.0 percent of its

customers if Milma did not arrive in time. Loss of buyers due to non

arrival of Milma milk in time was the marketing weakness.

Opportunities

1. 50.0 percent, of the consumers of Milma milk were of the opinion that

fresh milk other than Milma was not available during normal business

hours. The lack of alternative sources of milk other than Milma milk was

the marketing opportunity.

2. About 44.0 percent of the retailers were of the opinion that competition

was very low. But 30.0 percent of the retailers were of the opinion that

competition was moderate and above moderate. Moreover, 68.0 percent

of the retailers were of the opinion that competition had rarely or rather

never affected Milma sales. It showed that the intensity of competition

was not high. The low or moderate competition from other firms was the

marketing opportunity.

3. 89.2 percent of the consumers of Milma milk were of the opinion that

the same grade of milk at lower price was not available other than Milma

milk. Non availability of quality milk at lower price from other source

was the marketing opportunity.

4. 1.7 percent of the respondents used milk of other firms. Similarly 4.1

percent of the respondents used milk products of other firms. The low

102
 purchase of milk and milk products of other firms was the marketing

opportunity.

5. 55.8 percent of the consumers and 66.7 percent of the non users were of

the opinion that they purchase Milma milk on special occasions like

marriage etc. This was the marketing opportunity.

6. 82.5 percent of the consumers of Milma milk (for the last five yeas)

were the regular consumers of Milma milk, and it increased to 90.0

percent. Again 3.3 percent of the consumers of Milma milk (for the last

five years) who were the non users of Milma milk became regular

consumer of Milma milk. Similarly, 59.2 percent of the consumers of

Milma milk products (for the last five years) were regular consumers of

Milma milk products, and this had increased to 60.8 percent. The

existing rate of regular consumers of Milma milk and milk products was

most likely to increase in future. Increase in the number of consumers of

Milma milk and milk products was the marketing opportunity.

Threats

1. About 40.0 percent of milk sale was made in summer, which decreased

to 28.0 percent in monsoon, and 32.0 percent in winter. All varieties of

milk sales were high in summer and low in monsoon. Seasonal variation

in the selling of all varieties of milk was the marketing threat.

3. 95.0 percent of the retailers in monsoon, 55.0 percent of the retailers in

winter, 82.5 percent of the retailers in summer were of the opinion ghee

103
 sale was on average and below average. The average or below average

ghee sales in summer and monsoon was the marketing threat.

4. Cent percent of the retailers in monsoon, 66.7 percent of the retailers in

winter, and 31.2 percent of the retailers in summer were of the opinion

that curd sale was average and below average. The average or below

average curd sales in monsoon was the marketing threat.

5. Cent percent of the retailers in monsoon, 95.1 percent of the retailers in

winter, 31.1 percent of the retailers in summer were of the opinion that

sambharam sale was average and below average The average or below

average butter milk (sambharam) sales in winter and monsoon was the

marketing threat.

6. Cent percent of the retailers in monsoon and winter were of the opinion

that ice cream sale was average and below average The average or below

average ice cream sales in winter and monsoon was the marketing threat.

7. About 58.0 percent of the retailers had net profit less than Rs. 2500 per

month from Milma business. Low profitability of dealers from Milma

business was the marketing threat.

8. Private firms ensured more commission to the retailers than that given by

Milma. They provided credit facility to the retailers. Almost all retailers

can settle their accounts after the sale of milk and milk products. They

were taking back the unsold milk and milk products and encouraged

104
 hotels, restaurants etc to buy their milk by advertising more fat content in

their milk. Hence these were the marketing threats.

9. 86.3 percent of the consumers of Milma milk used milk powder and the

remaining 13.7 percent used condensed milk. About 53.3 percent of the

non users of Milma milk purchased milk substitute for domestic use.

Purchase of milk substitute by consumers and non consumers for

domestic use is the marketing threat.

Generally MRCMPU focuses its strategy over the quality of milk and

milk products. As the consumers of Milma milk place much importance on

hygiene factor, quality based strategy of MRCMPU was effective. But a very

important factor like keeping (shelf) life got the lowest score. It supported that

the quality based strategy was not effective. Mainly, MRCMPU must focus its

strategy on the main factors such as availability, quality, price, and packing of

milk and milk products. From the analysis of consumers' survey, availability

of all varieties of milk products, competitive price of Milma milk and milk

products, and packing of Milma milk products are the strengths of MRCMPU.

But the quality of Milma milk and milk products, packing of Milma milk, are

not considered as strengths of MRCMPU. Moreover, the other factors such as

handling of consumer’s complaints, innovation in marketing, scheduling of

delivery time, granting of agencies are also not considered as strengths of

MRCMPU. In this situation MRCMPU must focus its strategy on these factors

to gain strengths and capitalise on its opportunities.

105
SUMMARY

To enhance the efficiency of MRCMPU, an attempt is made to develop

forecasting model, milk and milk products processing model and capacity

utilisation to suggest ways and means to increase the volume of production; to

suggest an inventory model to ascertain the safety stock level required to

satisfy consumers at all levels; to indicate location planning to fix two or more

locations in a particular route of distribution. The strengths, weaknesses,

opportunities and threats of MRCMPU are identified with the help of SWOT

Analysis in order to evaluate the strategy of MRCMPU. The next chapter is

the concluding chapter which focuses the summary and findings of this study.

106
REFERENCES

107
1
Kulkarni Sunil (2004). “Role of Logistics in Dairy Industry”, Indian Journal of

Marketing, Vol. XXXIV, No. 3, p17.

2
Bowersox (2000). “Logistical Management”, p.234.

3
Forrester J (1961). “Industrial Dynamics”. MIT Press, Boston, M. A.

4
Waters Donald (2004). “Logistics, An Introduction to Supply Chain Management”,

Pal grave Macmillan, New York, pp 40-41.

5
Bowersox Donald J. & David J. Closs, (1996). “Logistical Management: The Integrated

Supply Chain Process”, New York: Mc Graw-Hill, p 267.

6
Ibid., pp 46 - 47

7
Lambert M. Douglas and James R. Stock (1993). “Strategic Logistics Management”,

Irwin/Mc Graw - Hill, INC, p.415.