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Mr. Harendra Singh Sir
Hemam Kavita Devi




BBA 3rd Year

Homework Title: - Term Paper Course Code: - MGT 523

Course Instructor: - Mr. Harendra Singh Sir Date of Allotment:-09/09/10

Date of Submission: - 15/11/2010 Section No: - S1804

Student’s Roll No: - RS 1804 B-51


I declare that this assignment is my individual work. I have not copied from any
other student’s work or from any other source except where due acknowledgement
is made explicitly in the text, nor has any part been written for me by another

Student’s Signature: - Hemam Kavita Devi

Evaluator’s Comments:

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Obtained……………………………………..Out of…………………
Content of Homework should start from this page only.

Operation flood (also known as the White revolution of India) was a rural development
programme started by India’s National Dairy Development Board (NDDB) in 1970. One of the
largest of its kind, the programme objective was to create a nationwide milk grid. It resulted in
making India the largest producer of milk & milk products, and hence is also called the white
revolution of India. It also helped reduce malpractices by milk traders and merchants. This
revolution followed the Indian green revolution and helped in alleviating poverty and famine
levels from dangerous proportions in India during the era.

Earlier, Milk was always available in plenty, but the sad truth was that the middleman was in
control of marketing and siphoned away the major share of the farmer's profits. During seasons
of plenty, the farmers were forced to drastically cut down their prices to sell off their surplus
supplies. And during lean periods, milk production fell considerably, resulting in a shortage,
unable to meet the market demand. To deal with this problem, 'Operation Flood' was launched in
1969-70 to initiate and organize cooperatives that would be wholly responsible for the
procurement, storage and marketing of milk, thereby eliminating the need and role of the
middleman completely. These cooperatives would also convert surplus milk into a range of dairy
products so farmers were assured a regular income and fair share of profits, around the year.

'Operation Flood' heralded the beginning of the White Revolution that brought tangible profits to
milk farmers and initiated a dramatic change in their lives .


One man’s resolute faith and efforts have gained a prominent position for India on the Dairy map
of the world - Dr Varghese Kurien created the Operation Flood in the country that has reached
about 250 million and is one of the largest agricultural development programs in the world. Dr.
Varghese Kurien, better known as the “Father of White Revolution” in India is also known as the
Milk man of India. He is the architect of a successful largest dairy development program in the
world called as Operation Flood. Kurien set up the Anand model of cooperative development,
engineered the white revolution in India, and made India the largest milk producer in the world.

Operation Flood:
Operation Flood has helped farmers, direct their own development, placing control of the
resources they create in their own hands. A 'National Milk Grid', links milk producers throughout
India with consumers in over 700 towns and cities, reducing seasonal and regional price
variations while ensuring that the producer gets a major share of the price consumers pay.

The bedrock of Operation Flood has been village milk producers' cooperatives, which procure
milk and provide inputs and services, making modern management and technology available to
members. Operation Flood's objectives included:

 Increase milk production ("a flood of milk")

 Augment rural incomes
 Fair prices for consumers

Matching demand and supply:

The white revolution carried on the extensive dairy development programs on the supply side,
and this coupled with the increasing demand for value added milk products on the consumer side
along with the country’s population growth, increased urbanization and higher income, led to
increased demand for milk. The various other factors contributing to the growth in milk
production are given below:

 In the India diet, milk and milk products play a significant role.
 With a large lacto- vegetarian population, milk and dairy products are an important source of
protein in diet.
 There is a perceptible shift towards the value- added food habits in which milk products form
a large part.
 On the supply side, technological progress in the production and processing sectors,
institutional factors and infrastructure played an important role.

Pricing and Product Mix Choices:

GCMMF pays the same price for each product to all the Unions independent of
their production costs. While there is some variation in pricing by Unions for its farmers, it
forces the Unions to homogenize their cost structures with other Unions as much as possible. By
devising appropriate pricing structures, it ensures that the Unions (which are independent legal
entities) have no reason to produce other than what the Federation desires. Often conflict arises
as the preferred mix of the Union (i.e., one that will get them the most returns) turns out to be
different from what the Federation wants it to produce. GCMMF also manages inter-dairy
movement by setting appropriate pricing of surplus quantity. At the end of the day, any surplus
revenue which is generated is shared between the Unions on the basis of this inter-dairy

The distribution network

Amul products are available in over 500,000 retail outlets across India through its network of
over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of
the entire range of products.

GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the
cheque system adopted by other major FMCG companies. This practice is consistent with
GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it also
minimizes dumping.
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' return
on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated
vehicle operations.

Umbrella brand

The network follows an umbrella branding strategy. Amul is the common brand for most product
categories produced by various unions: liquid milk, milk powders, butter, ghee, cheese, cocoa
products, sweets, ice-cream and condensed milk. Amul's sub-brands include variants such as
Amulspray, Amulspree, Amulya and Nutramul. The edible oil products are grouped around
Dhara and Lokdhara, mineral water is sold under the Jal Dhara brand while fruit drinks bear the
Safal name.

By insisting on an umbrella brand, GCMMF not only skillfully avoided inter-union conflicts but
also created an opportunity for the union members to cooperate in developing products.

Managing the supply chain

Even though the cooperative was formed to bring together farmers, it was recognized that
professional managers and technocrats would be required to manage the network effectively and
make it commercially viable.


Given the large number of organizations and entities in the supply chain and decentralized
responsibility for various activities, effective coordination is critical for efficiency and cost
control. GCMMF and the unions play a major role in this process and jointly achieve the desired
degree of control.

Buy-in from the unions is assured as the plans are approved by GCMMF's board. The board is
drawn from the heads of all the unions, and the boards of the unions comprise of farmers elected
through village societies, thereby creating a situation of interlocking control.

The federation handles the distribution of end products and coordination with retailers and the
dealers. The unions coordinate the supply side activities. These include monitoring milk
collection contractors, the supply of animal feed and other supplies, provision of veterinary
services, and educational activities.

Managing third party service providers

From the beginning, it was recognized that the unions' core activity lay in milk processing and
the production of dairy products. Accordingly, marketing efforts (including brand development)
were assumed by GCMMF. All other activities were entrusted to third parties. These include
logistics of milk collection, distribution of dairy products, sale of products through dealers and
retail stores, provision of animal feed, and veterinary services.

It is worth noting that a number of these third parties are not in the organized sector, and many
are not professionally managed with little regard for quality and service.

This is a particularly critical issue in the logistics and transport of a perishable commodity where
there are already weaknesses in the basic Infrastructure.

Establishing best practices

A key source of competitive advantage has been the enterprise's ability to continuously
implement best practices across all elements of the network: the federation, the unions, the
village societies and the distribution channel.

In developing these practices, the federation and the unions have adapted successful models from
around the world. It could be the implementation of small group activities or quality circles at the
federation. Or a TQM program at the unions. Or housekeeping and good accounting practices at
the village society level.

More important, the network has been able to regularly roll out improvement programs across to
a large number of members and the implementation rate is consistently high.


GCMMF's technology strategy is characterized by four distinct components: new products,
process technology, and complementary assets to enhance milk production and e-commerce.

Few dairies of the world have the wide variety of products produced by the GCMMF network.
Village societies are encouraged through subsidies to install chilling units. Automation in
processing and packaging areas is common, as is HACCP certification. Amul actively pursues
developments in embryo transfer and cattle breeding in order to improve cattle quality and
increases in milk yields.

GCMMF was one of the first FMCG (fast-moving consumer goods) firms in India to employ
Internet technologies to implement B2C commerce.

Today customers can order a variety of products through the Internet and be assured of timely
delivery with cash payment upon receipt.

Another e-initiative underway is to provide farmers access to information relating to markets,

technology and best practices in the dairy industry through net enabled kiosks in the villages.
GCMMF has also implemented a Geographical Information System (GIS) at both ends of the
supply chain, i.e. milk collection as well as the marketing process.

Farmers now have better access to information on the output as well as support services while
providing a better planning tool to marketing personnel.




• Demand profile: Absolutely optimistic.

• Margins: Quite reasonable, even on packed liquid milk.
• Flexibility of product mix: Tremendous. With balancing equipment, you can keep on
adding to your product line.
• Availability of raw material: Abundant. Presently, more than 80 per cent of milk
produced is flowing into the unorganized sector, which requires proper channelization.
• Technical manpower: Professionally-trained, technical human resource pool, built over
last 30 years.


• Perishability: Pasteurization has overcome this weakness partially. UHT gives milk long
life. Surely, many new processes will follow to improve milk quality and extend its shelf
• Lack of control over yield: Theoretically, there is little control over milk yield.
However, increased awareness of developments like embryo transplant, artificial
insemination and properly managed animal husbandry practices, coupled with higher
income to rural milk producers should automatically lead to improvement in milk yields.
• Logistics of procurement: Woes of bad roads and inadequate transportation facility
make milk procurement problematic. But with the overall economic improvement in
India, these problems would also get solved.
• Problematic distribution: Yes, all is not well with distribution. But then if ice creams
can be sold virtually at every nook and corner, why can’t we sell other dairy products
too? Moreover, it is only a matter of time before we see the emergence of a cold chain
linking the producer to the refrigerator at the consumer’s home!
• Competition: With so many newcomers entering this industry, competition is becoming
tougher day by day. But then competition has to be faced as a ground reality. The market
is large enough for many to carve out their niche.


"Failure is never final, and success never ending”. Dr Kurien bears out this statement perfectly.
He entered the industry

when there were only threats. He met failure head-on, and now he clearly is an example of
‘never ending successes! If dairy entrepreneurs are looking for opportunities in India, the
following areas must be tapped:

• Value addition: There is a phenomenal scope for innovations in product development,

packaging and presentation. Given below are potential areas of value addition:

 Steps should be taken to introduce value-added products like shrikhand, ice creams,
paneer, khoa, flavored milk, dairy sweets, etc. This will lead to a greater presence and
flexibility in the market place along with opportunities in the field of brand building.
 Addition of cultured products like yoghurt and cheese lend further strength - both in
terms of utilization of resources and presence in the market place.
 A lateral view opens up opportunities in milk proteins through casein, caseinates and
other dietary proteins, further opening up export opportunities.
 Yet another aspect can be the addition of infant foods, geriatric foods and nutritionals.

• Export potential: Efforts to exploit export potential are already on. Amul is exporting to
Bangladesh, Sri Lanka, Nigeria, and the Middle East. Following the new GATT treaty,
opportunities will increase tremendously for the export of agri-products in general and
dairy products in particular.


Milk vendors, the un-organized sector: Today milk vendors are occupying the pride of place
in the industry. Organized dissemination of information about the harm that they are doing to
producers and consumers should see a steady decline in their importance.

The white revolution gave a major boost to the dairy sector in India in the late 1960s by
producing milk in rural areas through smallholder producer cooperatives and moving
industrially- processed milk from these small holder sources to the urban demand centers, thus,
establishing a much needed linkage between the rural producers and urban consumers. The
United Nations has commended India's "White Revolution," saying a sharp increase in the
production of milk has achieved twin goals of raising incomes of rural poor families and
nutrition status of the people.
India's milk production rose from around 30 million tons in 1980 to an estimated 87 million tons
by 2003 and despite increasing population, availability per person rose from less than 50 kilo
calories per day in 1980 to 80 kilo calories per day in 2000, a report on hunger by the Food and
Agriculture Organization (FAO) said. The report forecasts that India's dairy production will
triple by 2020.

"With government policies that facilitate rural credit and provide essential support services to
promote milk production, the White Revolution will continue to play a significant role in
reducing poverty and hunger."

FAO estimates that increasing milk production has boosted the incomes of 80 to 100 million
families, the vast majority of whom are marginal or small farmers whose plots are often too
small to support their families and landless laborers who depend on common grazing lands and
forests for fodder.


Programme Implementation:
Operation Flood was implemented in three phases.

Phase I
Phase I (1970–1980) was financed by the sale of skimmed milk powder and butter oil donated by
the European Union (then the European Economic Community) through the World Food
Programme. NDDB planned the programme and negotiated the details of EEC assistance.

During its first phase, Operation Flood linked 18 of India's premier milk sheds with consumers in
India's major metropolitan cities: Delhi, Mumbai, Kolkata and Chennai; thus establishing mother
dairies in four metros.

Operation flood, also referred to as “White Revolution” was a gigantic project propounded by
Government of India for developing dairy industry in the country. The Operation Flood – 1
originally meant to be completed in 1975, actually the period of about nine years from 1970-79,
at a total cost of Rs.116 corers.
As start of operation Flood-1 in 1970 certain set of aims were kept in view for the
implementation of the programmers. Improvement by milk marketing was made by organizing
dairy sector in the metropolitan cities including Bombay, Calcutta, Madras, and Delhi. The
objectives of commanding share of milk market and speed up development of dairy animals
respectively hinter lands of rural areas with a view to increase both production and procurement.

Phase II
Operation Flood Phase II (1981–1985) increased the milk sheds from 18 to 136; 290 urban
markets expanded the outlets for milk. By the end of 1985, a self-sustaining system of 43,000
village cooperatives with 42.5 lakh milk producers were covered. Domestic milk powder
production increased from 22,000 tons in the pre-project year to 1, 40,000 tons by 1989, all of
the increase coming from dairies set up under Operation Flood. In this way EEC gifts and World
Bank loan helped promote self-reliance. Direct marketing of milk by producers' cooperatives
increased by several million liters a day.

Phase III
Phase III (1985–1996) enabled dairy cooperatives to expand and strengthen the infrastructure
required to procure and market increasing volumes of milk. Veterinary first-aid health care
services, feed and artificial insemination services for cooperative members were extended, along
with intensified member education.

Operation Flood's Phase III consolidated India's dairy cooperative movement, adding 30,000 new
dairy cooperatives to the 42,000 existing societies organized during Phase II. Milk sheds peaked
to 173 in 1988-89 with the numbers of women members and Women's Dairy Cooperative
Societies increasing significantly.

Phase III gave increased emphasis to research and development in animal health and animal
nutrition. Innovations like vaccine for Theileriosis, bypassing protein feed and urea-
molasses mineral blocks, all contributed to the enhanced productivity of milk animals.


Obstacles: Springboards for success.

Each failure, each obstacle, each stumbling block can be turned into a success story. In the early
years, Amul had to face a number of problems. With every problem came opportunity. A chance
to turn a negative into a positive. Milk by products and supplementary yield which suffered from
the same lack of marketing and distribution facilities became encumbrances. Instead of being
bogged down by their fate they were used as stepping stones for expansion. Backward
integration of the process led the cooperatives to advances in animal husbandry and veterinary
Future growth

The demand for milk and milk products is expected to grow at a very rapid rate due to population
growth, urbanization and increase in income levels and changes in food habits, and is likely to
reach at 181 million tons in 2011-12 and precipitate consumption is expected to rise to about 152
kg per year. The increase in demand for dairy products will increasing pressure on dairy
production systems, traditional breeds and feeding practices are likely to give way to higher
yielding breeds, associated intensification of production systems, increased disease risks,
pollution and animal health issues and a greater reliance on concentrates. Currently, Indian dairy
farming is dependent on crop residues, natural resources, and open grazing as sources of feed.
Expansion of these traditional sources of feeds and fodder to support a large increase in dairy
production is unlikely, as available grazing areas and other common property resources are
shrinking and already degraded. Additional milk output will surely have to come from intensified
systems based on stall-feeding and increasingly using concentrate.

 Should expand the cooperative network,

 Should increase in number and productivity of milch animals;

 Increase milk production in the milk shed area by strengthening milk procurement

 Special emphasis should be given to strengthen the presence in the large market for liquid

 Should plan to expand cattle feed manufacturing capacity, as the milk production is
increasing, it is vital to provide nutritious feed to milch animals