SUPPLY

CHAIN MANAGEMENT
(ME/MF 421)

A Report
On
AMUL SUPPLY CHAIN MANAGEMENT


Vinay C 2012A4PS233P
Santosh Reddy 2012A4PS279P
Gautham Maheshwaran 2013A1PS515P
Rajeev Raghavendra 2013A4PS077P
Siddhant Ranjan 2012A4PS274P
Akshay Venkatesh 2012B2A4737P
Anirudh Sridhar 2012B3A4590P
Akhil Nemani 2012B5A4667P
Shitij Mahajan 2013ABPS597P





PREFACE

The objective of this report is to analyze the supply chain
workings of the Amul brand under the GCMMF. Our group has
submitted this case study as partial fulfillment of the course Supply
Chain Management. We were assigned to thoroughly explore this
company in terms of supply chain drivers, suppliers, products and
distribution as well.
Amul is considered as one of the brands that define India. Their
wide ranges of products are being consumed all over India all
throughout the year. Running such an organization is not an easy task.
This report summarizes our findings and analysis which we have done
over the semester to complete the case study.
During the entire process, we learnt a lot when it comes to real
time supply chain management. We saw many of the concepts which are
taught in this course, being utilized by big brands like Amul. It gave us a
deeper insight into the back-end workings of such a large organization.
As we proceed further through this report, the reader will be
familiarized with every single function of Amul: supply chain
configuration, product categories and configuration, logistical and cross-
functional drivers followed by coordination within the supply chain.


















 ACKNOWLEDGEMENT





We would like to thank Professor Routroy for the opportunity provided
to us to foster our knowledge in the Supply chain configuration of real
time systems. Through this project we have further understood how
supply chains of companies work in the real world helping us combine
the textual knowledge with experience.




























 TABLE OF CONTENTS

1 INTRODUCTION

2 SUPPLY CHAIN CONFIGURATIONS

3 STRATEGIC FIT OF THE ORGANISATION

4 SUPPLY CHAIN DRIVERS

5 COORDINATION IN THE SUPPLY CHAIN

6 CURRENT ISSUES IN THE AMUL SUPPLY CHAIN

7 DIVERSITY, BRAND VALUE AND TQM

8 SWOT ANALYSIS

9 CONCLUSION

REFERENCES




















 1.1 INTRODUCTION

§ Anand Milk Union Limited popularly known as Amul Dairy is a US $ 500 million
turnover institution. It is a institution built up with a network of over 10000 Village
Co-operative Societies and 500,000 plus members.

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

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

§ AMUL spurred the WHITE REVOLUTION of India, which made India the largest
producer of milk and milk products in the world.

§ Amul is one of the largest food brands in India with a turnover of Rs. 20,733 crores
in 2014-15.
§ Every day Amul collects 17 million liters of milk from 3.5 million farmers , converts
the milk into branded, packaged products, and delivers goods worth Rs 20 crores to
over 500,000 retail outlets across the country.

§ 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

§ Amul has installed over 3000 automatic milk collection system units (AMCUS) at
village societies to capture member information, milk fat content and amount
payable to each member.

§ Amul has started direct retailing through “AMUL utterly delicious parlors” created
in major cities. AMUL has plans to create a large chain of such outlets to be managed
by franchisee throughout the country.
§ The brand name "Amul," from the Sanskrit "Amoolya," (meaning Precious) was
suggested by a quality control expert in Anand.), formed in 1946, is a dairy
cooperative in India. It is a brand name managed by an apex cooperative
organization, Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which
today is jointly owned by some 2.8 million milk producers in Gujarat, India.

§ AMUL is based in Anand, Gujarat and has been an example of a co-operative
organization's success in the long term. It is one of the best examples of co-operative
achievement in the developing economy. "Anyone who has seen the dairy
cooperatives in the state of Gujarat, especially the highly successful one known as
AMUL, will naturally wonder what combination of influences and incentives is
needed to multiply such a model a thousand times over in developing regions
everywhere."The Amul Pattern has established itself as a uniquely appropriate
model for rural development.
§ Amul has spurred the White Revolution of India, which has made India the largest
producer of milk and milk products in the world. It is also the world's biggest
vegetarian cheese brand. Amul is the largest food brand in India and world's Largest
Pouched Milk Brand with an annual turnover of Rs.20,733 crores (2014-15).
Currently Unions making up GCMMF have 2.8 million producer members with milk
collection average of 17 million liters per day. Besides India, Amul has entered
overseas markets such as Mauritius, UAE, USA, Bangladesh, Myanmar, Sri Lanka,
Australia, China, Singapore, Hong Kong and African countries. DrVerghese Kurien,
former chairman of the GCMMF, is recognized as a key person behind the success of
Amul.

1.2 HISTORY
In 1929, Peston Edul Polson established Polson Model Dairy at Anand to
manufacture butter, ghee and casein and in 1944; the Bombay Municipal
Corporation Milk Supply was inaugurated. Monopoly rights were awarded to Polson
for procuring milk from Kaira and supplying it to Bombay.
Amul's genesis is linked to the freedom movement in India. Sardar
Vallabhbhai Patel, an eminent Indian freedom fighter encouraged the dairy farmers
from the Kaira district in Gujarat to form a cooperative to counter the
'exploitatively' low prices offered for their milk by the monopoly milk Supplier of
the area, Polson's Dairy. The dairy farmers met in Samarkha (Kaira district, Gujarat)
on the 4th of January 1946, and decided to set up a milk producers' cooperative that
would deal directly with the Bombay government, the final buyer of their milk. This
was the origin of the Anand model.
Initially, when the Bombay government refused to deal with the cooperative, the
farmers called a strike. The government finally gave up when Bombay went without
milk for a fortnight. The successful union registered itself as the Kaira District
Cooperative Milk Producers' Union Ltd. (KCMPUL), Anand, in Gujarat in December
1946. And so did GCMMF and brand AMUL establish consequently.
Inspired by Sardar Vallabhbhai Patel and executed by Morarjee Desai, a
handful of farmers formed the Kaira District milk co-operative (KMDC) in 1946.
About 250 lit of milk collected daily from the farmers of two village co-operative
societies was pasteurized and sent to the Bombay Milk Scheme. An assured demand
for milk encouraged more and more farmers to join the milk cooperatives. For the
next seven years there was no looking back. The cooperative movement was
growing rapidly and then suddenly in 1953 there was a setback. Bombay Milk
Scheme refused to accept all the milk supplied by KDMC in the winter season when
the milk production is optimum. The surplus milk was then disposed off to
middlemen at the lower prices, product being perishable in nature. But the
legendary leader of the farmers, Tribhuvandas Patel, and the professional manager,
Verghese Kurien, rightly converted this setback into an opportunity. Within two
years of this incident, a dairy plant was built with powder and butter manufacturing
capacity. There was no looking back.
New products were added, the brand name Amul was created and milk
cooperatives on the lines of Anand were formed in the other districts of Gujarat in
quick succession. In 1973, a need was felt to professionally market the products
being packed at several dairy plants in the state and GCMMF was born. The National
Dairy Development Board initiated operation flood all over the country wherein the
Anand pattern was getting emulated all over the country. Over and above formation
of milk cooperatives and empowering the farmers, it includes breeding, feeding,
milk collection, cattle management, disease control, nutrition, milk processing and
product manufacture and marketing.
Though cooperative in nature, GCMMF is run like any other corporate
company with professional managers running the show. In 1994 when all over
india, quality and TQM philosophy was being implemented, GCMMF was one of the
frontrunners. With the twin pillars of customer focus and continuous improvement,
GCMMF introduced the concept of TQM. The concept encapsulated a wide array of
philosophies including employee involvement, waste reduction, problem solving
techniques and improvement of the processes, together with continuous training.
The main motto of Amul is to help farmers i.e. Milk producers. The Amul
system works under the objective of highest possible compensation to the milk
producers and lowest possible price to consumers. Farmers are paid money in cash
payment for the milk. Milk gives them money for their daily necessities.
1.3 PRODUCT CONFIGURATION
Amul has a wide variety of products ranging from milk, butter, bread spreads to ice
creams, sweets and milk supplements. Amul is synonymous with butter in India and
claims that the “Utterly Butterly delicious” taste of Amul butter is a must on the
breakfast tables of almost every Indian household. Amul has expanded its market
reach to countries like USA, Singapore, Sri Lanka, UAE, Malaysia, Myanmar,
Bangladesh and Hong Kong etc.




Some products and their properties
PRODUCT STORAGE CONDITIONS SHELF LIFE

Amul Butter At 4°C or below Best before

12 months
from
packaging
when stored
Refrigerated
at 4°C or
below
Amul Lite Under Refrigeration below Best Before
10° C 6 months
when stored
under
refrigeration
below 10° C
Amul Delicious Table Store Under Refrigeration 9 months
Margerine Under 10° C under
refrigeration
Amul Garlic & Herbs At 4°C or below Best before
Buttery Spread 6 months
from
packaging
when stored
refrigerated
at 4°C or
below



Amul Kool Flavoured Milk Ambient 180 days when stored in cool
(elaichi, kesar, badam, thandai, and dry place
chocolate, rose)

Amul Kool Cafe, Koko Ambient 180 days when stored in cool
and dry place

Amul Masti Spiced Butter Milk Ambient 180 days when stored in cool
and dry place

Amul Lassi Cool dry place 120 days from the date of
manufacturing

Amul Prolife Buttermilk chilled 7 days when stored below 8°

Celsius

Amul Kool Shakers Ambient 180 days when stored in cool

and dry place

Amul Smoothies Cool place 120 days from the date of

manufacturing

As most of these products require refrigeration and are perishable in nature, it
becomes the responsibility of the company to ensure that the retailers have proper
storage facilities.
Other products of Amul include dahi, paneer, milk powder, ice cream, ghee, mithai
mate, mithai range, chocolates, cattle feed, etc.








1.4 PRODUCT CUSTOMISATION

AMUL realises that with increasing competition, it is essential to diversify its
products to meet specific needs of the customer and to win a greater market share.

Amul lactose free milk:
• Amul Lactose Free Milk with less than 0.01% lactose content, this milk has all
the goodness of protein, calcium vitamins and pre-digested Lactose that
helps in easy digestion of milk for lactose intolerant people.

• Storage: Cool and dry condition with ambient temperature

• Shelf life: 120 days from date of manufacturing

UHT Milk:

• No need to boil; virtually zero bacteria

• No need to refrigerate until open

• Tamper evident packaging

Amul Pro:

• Amul PRO is a malt based milk additive, which not only enhances milk’s
nutritive value but also makes milk a very tasty drink for people of all ages,
especially kids, who need milk and nutrition for healthy growth.

Such products only go to show the level of innovation and diversification, which
Amul has achieved over the years.












2.1 Supply Chain Configuration of AMUL:

The Amul Model is a three-tier cooperative structure. This structure consists of a
dairy cooperative society at the village level affiliated to a milk union at the district
level which in turn is federated into a milk federation at the state level. Milk
collection is done at the village dairy society, milk procurement and processing at
the District Milk Union and milk products marketing at the state milk federation.
The structure was evolved at Amul in Gujarat and thereafter replicated all over the
country under the Operation Flood programme. It is known as the 'Amul Model' or
'Anand Pattern' of dairy cooperatives.

2.2 Village Dairy Cooperative Societies:

The main functions of the VDCS are:
• Collection of surplus milk from the producers of the village and payment
based on quality and quantity,
• Providing support services to the members like veterinary first aid, artificial
insemination services, cattle-feed sales, mineral mixture sales, fodder and
fodder seed sales, conducting training on animal husbandry and dairying,
• Selling liquid milk for local consumers of the village,
• Supplying milk to the District Milk Union.

2.3 State Cooperative Milk Federation

The main functions of the federation are as follows:
• Marketing of milk and milk products processed/manufactured by Milk
Unions,
• Establish a distribution network for marketing of milk and milk products,
• Arranging transportation of milk and milk products from the Milk Unions to
the market,
• Creating and maintaining a brand for marketing of milk & milk products,
• Providing support services to the Milk Unions and members like technical
inputs, management support and advisory services,
• Pooling surplus milk from the Milk Unions and supplying it to deficit Milk
Unions,
• Establish feeder-balancing dairy plants for processing the surplus milk of the
Milk Unions,
• Arranging for common purchase of raw materials used in
manufacture/packaging of milk products,
• Decide on the prices of milk and milk products to be paid to Milk Unions,
• Decide on the products to be manufactured at Milk Unions and capacity
required for the same.
• Conduct long-term milk production, procurement and processing as well as
marketing planning.
• Arranging finance for the Milk Unions and providing them technical know-
 how.
• Designing and providing training in cooperative development and technical
and marketing functions.
• Conflict resolution and keeping the entire structure intact.

2.4 Major Milk Marketing Federations in INDIA:

— Andhra Pradesh Dairy Development Co-operative Federation Ltd. (APDDCF)
— Bihar State Co-operative Milk Producers Federation Ltd (COMPFED)
— Gujarat co-operative Milk Marketing Federation Ltd (GCMMF)
— Haryana Dairy Development Cooperative Federation Ltd. (HDDCF)
— Himachal Pradesh State Cooperative Milk Producers Federation Ltd
(HPSCMPF)
— Karnataka Cooperative Milk Producers Federation Ltd (KMF)
— Kerala State Cooperative Milk Marketing Federation Ltd. (KCMMF)
— Madhya Pradesh State Cooperative Dairy Federation Ltd. (MPCDF)
— Maharashtra Rajya Sahkari Maryadit Dugdh Mahasangh (Mahasangh)
— Orissa State Cooperative Milk Producers Federation Ltd (OMFED)
— Pradeshik Cooperative Dairy Federation Ltd (UP)(PCDF)
— Punjab State Cooperative Milk Producers Federation Ltd (LASSEEFED)
— Rajasthan Cooperative Dairy Federation Ltd (RCDF)
— Tamilnadu Cooperative Milk Producers Federation Ltd (TCMPF)

2.5 About GCMMF:
The GCMMF is the largest food products marketing organisation of India. It is
the apex organisation of the dairy cooperatives of Gujarat. It is the exclusive
marketing organisation for products under the brand name of Amul and Sagar. Over
the last five and a half decades, dairy cooperatives in Gujarat have created an
economic network that links more than 3.1 million village milk products with
millions of consumers in India. Gujarat Cooperative Milk Marketing Federation Ltd.
(GCMMF), is India's largest food product marketing organisation with annual
turnover (2014-15) US$ 3.4 billion. Its daily milk procurement is approx. 14.85
million lit per day from 18,536 village milk cooperative societies, 17 member unions
covering 31 districts, and 3.37 million milk producer members. More than 70% of
the members are small or marginal farmers and landless labourers including a
sizeable population of tribal folk and people belonging to the scheduled castes.









2.6 Supply Chain Configuration:
2.6.1 Flow of Revenue:
 2.6.2 Product Flow:













































3. Strategic Fit

3.1 What is Strategic Fit?
Strategic fit is a set of interdependent and complementary differentiators designed
to provide the company with a unique and sustainable competitive advantage.
From the perspective of the company, it is the process of taking up a clear strategy
based on unique activities relevant to the market and then building/matching all its
resources and capabilities to strengthen this uniqueness. [1]

3.2 AMUL’s strategic achievements

One of Amul’s primary achievements (which is often ignored) is it established that
cooperatives can also be competitive, sustainable, independent and profitable in
the face of national, and even well-muscled international commercial rivals.
First, it created a set of powerful, scalable, sector-specific competitive advantages
that helped it take a leadership position in its market. Next, it ensured these
activities complemented each other, creating a network of interdependent
advantages that are, by design, very difficult for competitors to imitate.

“We are not a Foods company, we are an InfoTech company in the Foods
Business”
-B M Vyas
Former Managing Director, AMUL

3.3 AMUL Model
Their success has been built around combining
the advantages of a cooperative and a corporate
model.

Its core strength lies in its stated principles of
a) Linking milk producers and consumers
directly and eliminating the middle-man,
b) Ensuring milk producers also control up-
stream activities like processing and marketing,
and
c) Professional, commercially-sound
management to keep them competitive.

3.4 Amul from the customer’s viewpoint:

1. Wide variety of products (most comprehensive dairy portfolio by far)

2. Unparalleled reach (available across the country)

3. Affordable prices (products at all price points beginning with the lower end)
Pricing is a major source of advantage for Amul. With its lean processing and
distribution and scale of operations, it has the ability to balance surplus and deficit
in supply – a critical advantage in extremely perishable goods.

Amul also exploits its social capital, as a successful co-op and a source of pride for
India – which means it needs to spend less than its competitors to generate the
same demand for its products. [3]



3.5 Amul from a company’s viewpoint:

1. Massive, loyal supplier base (profit-distributing cooperative model)

2. Lean processing and distribution (outsources non-core activities)

3. Focus on research and development (appropriate reinvestment of profits)

Amul manages its R&D professionally, reinvesting its profits in quality and yield-
focused research, which ensures they stay abreast of large dairy corporations, while
miles ahead of other cooperatives.







3.6 Interdependent Variables:

3.6.1. Massive Loyal Supplier Base:
Amul ensures that all its supplier base is loyal to it by providing a range of benefits
to the farmers. This includes services like Financial security, Health Benefits,
subsidized cattle feed, veterinary services etc. This makes sure that the farmers stay
happy and loyal to AMUL even in the presence of stiff competition from local dairy
companies. [2]






3.6.2. Quality:
Amul makes sure that the quality of raw materials that it obtain as well as the
products it serves are of top notch quality. This is facilitated by adequate investment
into R&D studies and cattle check on regular basis.

3.6.3. Product Variety:
Amul has a range of products including cheese, butter, paneer, ice creams, and
drinks etc. that are widely available at almost every small store across India. This
way, Amul makes sure that the customer has a wide variety of products to choose
from which is made possible because of the strong massive supplier network. [4]

3.6.4. Affordability:
The products from Amul are priced in such a way as to cater to the needs of general
public of the country. Its products range from Rs.5 for a pack of butter to anywhere
around Rs.100 for a pack of ice creams. This is done so that even the lower sections
of the society can afford Amul products on a daily basis.

3.6.5. Reach & Availability:
Amul has a strong distribution network that makes it possible to avail its products
across the country ranging from hill tops to remote villages at almost the same cost.

3.6.6. Decentralized, Networked Supply Chain:
The decision making in Amul is sufficiently decentralized that even the famers get to
say what kind of strategies the firm should work upon. The presence of a networked
supply chain makes it easier for Amul to keep a balance of the surplus/deficit of
products and maintain profitability. [4]

3.6.7. Lean Processing and Distribution:
By maintaining a tight control over inventory and distribution, Amul also outsources
its non-core activities to other firms thereby not wasting any material resources.


Amul thus combines the best of both worlds (cooperative and corporate) to build,
maintain and constantly enhance a network of interdependent advantages that has
thus far proven to be imitation-proof.











4 SUPPLY CHAIN DRIVERS

The four main challenges Amul faces are as follows:

a) Collection of milk
b) Processing of milk
c) Storage of milk
d) Distribution of milk

These are tackled with the help of efficient supply chain drivers namely facilities,
transportation, inventory management, information and pricing.


4.1 FACILITIES

To ensure high quality milk reaches the end consumers, milk processing requires
modern equipment. Amul has around 51 dairy processing plants across India, of
which 40 are in Gujarat, to process milk. Amul has also decided to invest ₹5000 Cr
in setting up 10 new plants across India. It also plans to setup its biggest plant in
East in Kolkata soon.

An overview of milk processing:

Ø Collection of Raw Milk: Raw milk is collected from different co-operatives of
Gujarat and tested for FAT and SNF proportion.

Ø Testing of raw milk: After collecting the samples of milk they are taken to the
laboratory where two types of test are conducted:
1. Electronic Milk Test: The proportion of FAT and SNF is checked with phosphate
solution in electronic milk tester. When the color of the milk become yellow, it is
sent for pasteurization.
2. Methylene blue reduction test: This test is done to check the freshness of the milk.
To check this, 10 ml of milk is taken and 1 ml of METHYL solution is added to it. It is
then kept under water at 57 `C. If the solution remains the same even after 5 hours
then it is considered fresh.

Ø Pasteurizing and standardizing

Ø Separation Process: Separates skimmed milk and cream
Ø Quality Check

Ø Storage


Amul also has around 60 depots/warehouses across the country with dry, cold and
frozen storage to buffer inventory of various types of products.
Amul has the largest cold chain network, with 18000 refrigerators, in India. Amul
also setup its first plant outside India in New Jersey, USA in a third party-owned
facility in October 2014.

Fig: Amul processing plant in Anand, Gujarat



4.2 INVENTORY

Amul practices the just-in-time inventory strategy.Wholesale dealers carry
inventory that is just adequate to take care of the transit time from the branch
warehouse to their premises. This strategy improves dealers' return on investment
(ROI).

Each Amul product has its own life cycle. The products like packed Milk and
flavoured milk are perishable due to short shelf life (may be a week), and cannot be
stored for long period and need to be consumed immediately. Also these items are
need to be refrigerated during that short product life cycle from the production
stage till distributed to end customer. Packed milk / flavoured milk (30 or 40 units)
are kept in plastic crates and stored in cold storage facility and distributed to all
retailers. Each plastic crate with packed milk can be handled by labourers and it
does not require any mechanized equipment for storage, retrieval, loading and
unloading. Since the stocks can be stored vertically (i.e., 6 to 8 crates on each other),
the area usage is minimized resulting less storage cost. There is no need of any
pallet or steel rack to store products vertically. The plastic crate can be stored on
each other so that maximum height should be reachable by the worker without
difficulty. The empty crates are returned (termed as Reverse Logistics*) to Amul
company warehouse for future milk packet dispatch.

*Reverse logistics is for all operations related to the reuse of products and
materials. It is "the process of moving goods from their typical final destination for
the purpose of capturing value, or proper disposal.

4.3 TRANSPORTATION

Transportation is a crucial driver of the supply chain. This controls the movement of
goods across various supply chain players. Amul has two cycles:

i) Procurement Cycle (Upstream flow)

Upstream are the processes which occur before manufacturing of production into a
deliverable product or services, typically processes dedicated to getting raw
materials from suppliers. The procurement cycle involves two steps

• Step 1: Milk is taken to the VCS by the farmers on foot or bicycles in small
quantities.
• Step 2: Milk is taken from cooperatives to manufacturing units in special
trucks with tankers.






















Fig: Schematic of Upstream channel


ii) Distribution cycle (Downstream channel)

Downstream are the processes which occur after manufacturing or production,
typically those processes dedicated to getting goods and services to customers and
consumers. The distribution cycle involves 3 steps

• Step 1: Manufacturing units to company depots using 9 and 18 MT trucks
(frozen foods and wet dairy are transported in cold storage trucks with
appropriate temperatures)
• Step 2: Depots to wholesale distributors using insulated 3 and 5 MT trucks
• Step 3: Wholesale distributors to retailers using auto-rickshaws, bicycles.



























Fig: Schematic of the Downstream channel


Amul started a new initiative "milk train" in the year 2010 with the help of Adani
Logistics Ltd to help transport 4 lakh litres of milk. The first train was flagged off
from Palanpur, Gujarat to Kanpur, Uttar Pradesh. This has helped Amul save 50% of
the transportation cost.
Ice Trail Logistics is the current cold chain partner of Amul.


4.4 PRICING

Amul has a low cost pricing strategy. Even though there weren't many players in
the national milk market during the time Amul started, Amul had a vision to provide
their products to end customers at the best affordable rates. And the same vision is
in place even today. The prices have increased over the years due to increase in
transportation cost, inventory handling cost etc. Still, Amul tries to keep the prices
of its products in the affordable bracket.

The pricing strategy is influenced by various factors like
• Company's objectives
• Marketing Mix strategy
• Nature of market and demand
• Competition
• Cost of raw materials
• Cost of labour
• Profit margin to the distributors
• Fair returns to the farmers
• Target consumers

Amul's pricing strategy also varies with product. In the milk and breadspreads
segment, Amul's prices are determined by the competitors prices. Whereas in the
milk powder and flavoured drinks segment, the prices are determined by the
demand for the product.



4.5 INFORMATION















Fig: IT initiatives of GCMMFL-Amul
“Amul is not a food company, it is an IT company in the food business”
-B.M. Vyas, Former MD

GCMMF started off with AMCUS – Automatic Milk Collection Unit System
initiative at village societies to enhance the transparency of transaction between the
farmer and the Co-Operative Society. These systems not only ensured the
transparency but also gave Co-Operative societies a unique advantage by reducing
the processing time to 10 percent of what it used to be prior to this. GCMMF indeed
got the entire supplier information through the systems integration. The
information related to members, fat content, volume of the milk procured and the
amount payable to the member are accessible to the Co-Operative Society in the
form of a database.

The Dairy Information and Services Kiosk (DISK) is another initiative that is
started with the help of IIM - Ahmedabad by GCMMFL. ‘DISK’ model has built upon
the existing application by expanding the database of the milk societies to include a
complete history of milk cattle owned by the member farmers. The details such as
the breed and a history of diseases, inoculation, and artificial insemination are
maintained in the system. The data history on milk production by individual farmer
is also available in the database at the collection centers.

The following are the demonstrated benefits:

• time reduction
• reduction of pilferage
• reduced human errors
• on the spot payments for farmers
• wastage is reduced
• transparency of operation
• operational integration


GCMMF is also using Geographical Information System (GIS) at its Head Office
and key Marketing Offices. Using the All India Map in GIS. They are in position to
plot zone/depot boundary as well as pointer for zone, depot & distributor locations,
which are superimposed by product-wise sales data. The same is being used for
sales & distribution planning and review. Moreover, GIS is being used for business
planning activity at milk centres and it covers animal census data. This has helped
them to know average milk production and productivity of cows and buffaloes in
Gujarat and track the animals and trend analysis etc.

The Enterprise wise Integrated Application System (EIAS) customized
Enterprise Resource Planning (ERP), setup with the help of TATA Consultancy
Services (TCS), is designed in such a way that is can be plugged into various points
of supply chain. GCMMF is also in the process of web enabling the selected process
of EIAS so as to capture the key information at source and use the same through out
the enterprise of on-line view & decision making, which includes Transporters,
Members manufacturing units, Oil packing stations, suppliers, depots and C&Fs,
Field force etc. This will optimize further the Logistic Supply chain activities of
GCMMF to a great extent. Moreover, GCMMF is one among the first Indian corporate
on the Web since 1996 and we have put Amul Cyber store as a first step towards e-
commerce activity in India. This has helped us to interact directly with the
consumers and delighting them with our values added services.



Fig: Structure of the Information Systems



























5.1 Co-ordination in the Supply Chain

Robust coordination is one of the key reasons for the success of operations involving
such an extensive network of producers and distributors at GCMMF. GCMMF is a
unique organization. It's a body created by Farmers, managed by competent
professionals serving a very competitive and challenging consumer market.
Coordination mechanisms have to link the lives and activities of 2.12 million small
suppliers and 0.5 million retailers. Given the large number of entities in the supply
chain and the need for decentralized responsibility for various activities, effective
coordination is critical for efficiency and cost control.
There are two critical mechanisms of coordination that ensure that decision making
is coherent and that the farmers gain the most from this effort:

5.1.1 Inter-locking control:

GCMMF board is comprised of the heads of all the unions, and the boards of
the unions comprises of farmers elected through village societies. Each
Village Society elects a chairperson and a secretary from amongst its member
farmers of good standing to manage the administration of the VS. Nine of
these chairpersons (from amongst those VS affiliated to a Union) are elected
to form the Board of Directors of the Union. The Chairperson of the Union
Board is elected from amongst these members. The managing director of the
Union, 17 who is a professional manager, reports to the chairperson and the
board. All chairpersons of all the Unions form the Board of Directors of
GCMMF. The managing director of GCMMF reports to its Board of Directors.
Each individual organization, the Union or GCMMF, is run by professional
managers and highly trained staff. It must be pointed that all members of all
the boards in the chain are farmers who pour milk each day in their
respective Village Societies1.

A key reason for developing such an inter-locking control mechanism is to
ensure that the interest of the farmer is always kept at the top of the agenda
through its representatives who constitute the Boards of different entities
that comprise the supply chain. This form of direct representation also
ensures that professional managers and farmers work together as a team to
strengthen the cooperative. This helps in coordinating decisions across
different entities as well as speeding both the flow of information to the
respective constituents and decisions.







1 http://www.iimb.ernet.in/~chandra/AMULpaper2.pdf
 Structure of inter-locking control at Amul

(Source: http://www.slideshare.net/lucky7shimla/amul-logistics)


5.1.2 Coordination agency:


Federations handle distribution of end products and coordination with the
retailers and dealers. The objective of the federation is to ensure that all milk
that the farmers produce gets sold in the market either as milk or as value
added products and to ensure that milk is made available to increasingly
large sections of the society at affordable prices2.

The GCMMF strives towards two major things – (i) maximizing the network
surplus
(ii) maintaining equity among unions for the surplus realized. In many cases,
the GCMMF allocates products to less efficient unions in order to achieve
better balance rather than having a higher realizable surplus.

2 Supply chain management; creating linkages for faster business turnaround Kulkarni, Sarika



Amul has incorporated a few models and strategies to make their supply
chain more efficient. Some of these have been listed below along with their
impact in the company.

5.2 Total Quality Management model:

GCMMF implemented TQM in 1994. TQM at the grassroots has been a strong
movement to develop leadership, operational and strategic capabilities in the
entire network – farmers, village cooperatives, dairy plants, distributors and
wholesalers and retailers. The concept included a wide array of philosophies
including employee involvement, waste reduction, problem solving
techniques and continuous training.


Total Quality Management model

(Source: http://www.carristech.com/total-quality-management-tqm-encyclopedia-business.html)











The effects of the TQM model can be seen very distinctly in the following:
1. There is improvement in quality of milk in terms of acidity and sour content.
2. Sabor milk union records show a 2% reduction in the amount of sour milk
received from the union.
3. Improved microbiological quality of upcoming raw milk in the form of
methylene blue reduction.
4. Improved shelf life of the product.
5. Programs like Red Tag Day were launched for cleaning the milk collection
center.3

5.3 Kaizen strategy:

Kaizen is a culture of sustained continuous improvement focusing on
eliminating waste in all systems and processes of an organization. This
technique is used by Amul to make the employees more participative. These
workshops are held for all departmental heads and branch managers to
develop and review action plans.4
Hoshin Kanri is a system of forms and rules that encourage employees to
analyze situations, create plans for improvement, conduct performance
checks, and take appropriate action. Application of Hoshin Kanri principles
was used to bring about a bottom-up setting of objectives – aligning policies
for effective management of Unions & village societies on hand with those of
channel member on the other hand. ISO/HACCP certification was obtained
for all the Unions and each village society is in the process of obtaining the
same.

5.4 Quality checks:
Quality checks at all levels – collection from the farmers to manufacturing of
the finished product. Quality includes product quality and service quality.
200 Amul Quality Circles have been created for the federation’s wholesale
dealers who meet every month to discuss and improve distribution. The
Unions and GCMMF have developed a number of mechanisms to retain
control and assure quality and timely deliveries.











3 Supply chain management: concepts, practices and implementation Sharma, Sunil
4 Supply chain management: a managerial approach Sinha, Amit
 Quality control process at Amul

(Source: http://www.projectsjugaad.com/wp-
content/uploads/2015/03/doodh.jpg)

5.5 Ownership in the supply chain:

Every stage has complete ownership. Hence all employees constantly
endeavour to improve the environment in which all the stages operate. An
example can be seen in the transportation process from the warehouses to
the distributors. This sector is very important because the warehouses
receive the money from the distributors in advance. Hence, having total
ownership of that sector of the supply chain, they are held accountable for
any problems.







6. CURRENT ISSUES IN THE AMUL SUPPLY CHAIN AND HOW THEY HAVE BEEN
ADDRESSED:

The issues in the Amul supply chain can be classified into three categories broadly:
Upstream issues, Processing issues and Downstream issues. India, is the largest
producer of milk and has the world’s largest livestock population.

6.1 Definition of Upstream

The upstream stage of the production process involves searching for and extracting
raw materials. The upstream part of the production process does not do anything
with the material itself, such as processing the material. This part of the process
simply finds and extracts the raw material. Thus, any industry that relies on the
extraction of raw materials commonly has an upstream stage in its production
process. In a more general sense, "upstream" can also refer to any part of the
production process relating to the extraction stages.

6.1.1 Examples of Upstream Processes

In the petroleum industry, locating underground or underwater oil reserves
characterizes the upstream process. Additionally, the upstream process in this
industry involves bringing oil and gas to the surface. Extraction wells represent an
example of a structure operating in this stage in the process. The upstream stage in
the production process may also manifest itself as a supplier providing raw
materials to manufacturers or other businesses that ultimately process the
materials.

6.2 Definition of Downstream

The downstream stage in the production process involves processing the materials
collected during the upstream stage into a finished product. The downstream stage
further includes the actual sale of that product to other businesses, governments or
private individuals. The type of end user will vary depending on the finished
product. Regardless of the industry involved, the downstream process has direct
contact with customers through the finished product.


6.2.1 Examples of Downstream Processes

In the oil and gas industry, the downstream process consists of converting crude oil
into other products and then selling those products to customers. Thus, oil
refineries represent structures that operate within the downstream process.
However, any kind of plant that processes raw materials may qualify as operating
within the downstream stage of production. A company that combines both
upstream and downstream processes is an integrated company.

6.3 UPSTREAM ISSUES:

Despite having the world’s largest cow population but the productivity of Indian
cows is among the lowest in the world.

Furthermore, upstream issues can be classified into to the following factors:
1. Veterinary service problems:
Manpower
Information
Inadequate Availability of Vaccines
Foot-and-Mouth Disease (FMD)

2. Breeding Issues:
Climate
Breeding Research

3. Fodder Problems:
Income disparity among farmers causing a huge yield differential
High quality fodder seeds missing
Crop residue disposal is more profit oriented and sold to paper industry
instead of using as animal feed
Livestock increasing, grazing land decreasing due to real-estate mafia and
cultivation of food grains preferred over fodder production


6.4 SOLUTIONS:
1. Increased Fodder banks:
1.1 To procure surplus fodder from the farmers in areas with good rainfall /
irrigation.
1.2 Convert this fodder into silage or fodder blocks for storage
1.3 Supply this packed fodder to the deficient areas.
 2. Efficient use of forest area: The degraded forest areas, mostly under the Joint
Forest Management Committees (JFMCs), can be used for assisting growth of
indigenous improved fodder varieties of grasses, legumes, and trees under
area-specific silvi-pastoral systems.

One other problem that can be considered as an upstream issue is the milk quality.
The main reasons for the lack of translation of quality from the farm to the dairy are
inadequate infrastructure and lack of proper handling including the lack of cold
storage facilities.
Amul has addressed it in the following ways:

• Amul has recognized the need for farmers to rely on fat-content alone as
their yield target and has setup quality testing facilities at collection centre to
test bacteria count, acidity, smell/taste, bacterial count, heavy metals,
pesticides residue etc.
• Conventionally, Amul has been setting up camps for training of farmers on
hygiene habits for milk collection.
• Amul has also incentivized better quality milk by paying farmers
proportionately.
• Through the supply of hygiene Kits and Training to staff Amul has been able
to improve its standards.
• Less manual handling, use more machines: Bucket Milking machines, Feed
racks, water bowls and partitions etc have been introduced into the supply
chain.


6.5 PROCESSING ISSUES:
Capacity utilization of dairy plants is about 60% (assuming 300 working days in a
year). Due to Lack of milk availability in the lean season. Due to the co-operative
sector type of operation in the Amul Supply chain there are several limitations in the
operations:
• Reach: While dairy Cooperatives have played an important role in Indian
milk industry’s development, but still dairy cooperatives reach barely ~20%
of the Indian farmers
• Competition: Other private players are more agile, offering better incentives
to farmers compared to the cooperative. Even after being the largest Indian
dairy player (Amul)’s annual turnover is quite lower than a large MNC dairy
company like Nestle.
• Management: Dairy cooperatives are subject to state laws /regulations. But
often, the elections in dairy cooperatives are won using money and caste
equations. Hence, the Gujarat State governments is making these dairy
 cooperatives more accountable, democratic and professional in their
functioning.



6.6 DOWNSTREAM ISSUES:
6.6.1 MRP AND ADULTERATION: Pricing has been a great problem for the Amul
supply chain considering the Whole sale price Index (WPI) for Milk product
was more than 190 (for 2012) translating to 90% increase in the wholesale
price of Milk, compared to base year 2004. This type of killer price rise led to
adulteration, fake milk from urea, Nakli Maawaa etc., particularly in Delhi-UP
region.

6.6.2 ETHNIC PRODUCTS: UNTAPPED POTENTIAL: Examples of ethnic milk
products: Paneer, Rasogolla, Sandesh, Pantua, Rasomalai, Cham, Rajbhog,
Kulfi, Rabri, Basundi, Burfi, peda, Gulabjamun, Kalakand, Dahi, Mishti Doi,
Lassi, Chhach / Mattha, Srikhand etc. The Scope for ethnic milk products is
immense as the profit level is ~12-38% of the input cost. Amul has invested
in Research and development to catalyse commercialization of ethnic dairy
products. Training small manufacturers of ethic dairy products, such as
halwaiis: making them adopt hygienic practices, using state / district level
bodies, cooperatives, ITI’s have been involved in such efforts.

6.6.3 EXPORT ISSUES:

1.Low quality and hygiene standards.
2.Only ~35% of milk produced in India is processed. Rest is sold by local milk
dwellers.
3.Domestic consumption of milk has increased which means less surplus left
for exports
4.Lack of experience in marketing products in international markets,
particularly for ethnic milk products.
5.Low productivity and quality are the key reasons due to which processors
in India, are not able to achieve the scale of operations of their counterparts
in New Zealand or Australia.
 All the negative publicity about Fonterra and banning of New Zealand dairy
products gives opportunity for Amul to tap those export markets.

6.6.4 TAX ON INPUTS: In earlier times, dairy industry had been subjected to octroi
and sales tax etc. creating a non-level playing field with the unorganized
sector.
There had been high level of taxation on dairy equipment and machinery
(excise, sales tax, octroi). Even the excise duty on polyethylene film, aseptic
packaging machines, milk vending machines, pouch filling machines, used in
packing and distribution. This has hampered the growth of dairy industry.
Although nowadays, taxes on most of these items have been reduced /
abolished.
Solution: Hope for speedy implementation of GST.


























7.1 Diversity
Amul's product range includes milk powders, milk, butter, ghee, cheese, dahi,
yoghurt, buttermilk, chocolate, ice cream, cream, shrikhand, paneer, gulab jamuns,
flavoured milk, basundi and others. Amul PRO is a recently launched brown
beverage just like bournvita and horlicks offering whey protein, DHA and essential
nutrients. In January 2006, Amul launched India's first sports drink, Stamina, which
competes with Coca-Cola's Powerade and PepsiCo's Gatorade.

Amul offers Mithai Mate which competes with Milkmaid by Nestle by offering more
fat at lower price.

In August 2007, Amul introduced Kool Koko, a chocolate milk brand extending its
product offering in the milk products segment. Other Amul brands are Amul Kool, a
low-calorie thirst quenching drink; Masti Butter Milk; and Kool Cafe, ready to drink
coffee.

Amul's icecreams are made from milk fat and thus are icecreams in real sense of the
word, while many brands in India sell frozen desserts made from vegetable fat.

Amul's sugar-free Pro-Biotic Ice-cream won The International Dairy Federation
Marketing Award for 2007.

7.2 Brand Value
Amul spends very less on its advertising budget, but spends it very effectively. It has
the power of an umbrella brand Amul, which is highly respected brand name &
enjoy the trust of 1000 million households. Thanks to its brand mascot, the Amul
girl, the co-operative has been able to get away with spending just one per cent of its
revenues on advertising. In contrast, its competitors spends anywhere between 7 to
10 per cent on advertising. Amul positioning is “Value for Money”. It uses the
services of Da Cunha Associates & FCB Ulka for its advertising efforts.
An umbrella brand is an overarching brand used across multiple related products.
Umbrella branding is also known as family branding. It contrasts with individual
product branding, in which each product in a portfolio is given a unique brand name
and identity. There are often economies of scope associated with umbrella branding
since multiple products can be efficiently promoted with a single advertisement or
campaign. Umbrella branding facilitates new product introductions by providing a
familiar brand name, which can lead to trial purchase, product acceptance, or other
advantages. Umbrella branding may impose on the brand owner a greater burden to
maintain consistent quality. If the quality of one product in the brand family is
compromised, it could impact on the reputation of all the others. For this reason
umbrella branding is generally limited to product lines that consist of products of
similar quality. A good example is AMUL - Amul Butter, Amul Cheese, Amul Milk,
Amul Ice cream, Amul Chocolates etc. The AMUL 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. Although many companies do not
adopt umbrella branding as it is a risky affair. Amul achieved sustainable growth
with this umbrella branding as always their maintain quality they could retain to
their brand equity
Because of the excellent products, the top of the mind positioning, the fantastic
distribution and supply chain channels and fin5ally the point of purchase branding
and advertising of the Amul girl, Amul finds itself in a very strong position where its
brand equity is concerned. Amul brand is worth $3.2 billion as per the 2013 brand

equity report. Furthermore, most analysts say that Amul would have touched the $4
billion mark, but the dropping value of the rupee is what caused the difference.




7.3 TOTAL QUALITY MANAGEMENT CONDUCTED BY
AMUL COMPANY

As AMUL concerned with the manufacturing of perishable products it had a

bird eye on the quality of the products produced by the company. In today’s stiff
competition it tried to strengthen its functional processes. Emerging trends of
liberaliZzation and impact of WTO has led to focus on Total Quality Management.
Realizing that unless the TQM initiatives is been accepted by all business partners,
the same would remain ineffective. As a very unique measure Amul extended all the
TQM initiatives to its business partners whether it was the farmer producer in the
village or a wholesale distributor in a metro town or its most sophisticated
production unit.

Shri B.M. Vyas, Managing Director, championed this movement realized way back in
1994 that with emerging competition, doing business would become more exciting
yet extremely competitive which would require at times not only a whole set of new
skills and competencies but quick adaptability to change without much stress or
turbulence. The initiation of TQM was to work with the well known quality
management initiatives which have proven to be effective elsewhere to create a
culture of transparency, openness and leadership in the organization.

1. Kaizen: Employees of GCMMF have done more than 1.60 lakhs Kaizen since
May, 1995 which has impacted in bringing in a culture of continuous
improvement.
2. Housekeeping: The housekeeping initiatives have helped keeping the
offices/warehouses neat, clean and more productive, be it is the Office
premises or the godowns or even Computers.
 3. Small Group Activities : 150 SGA’S have been carried out in cross functional
groups to address the problem and pain areas of the organization i.e. issue of
sales, marketing, HR or IT. The organization has implemented a customized
ERP for seamless integration of its 40 odd sales offices from Jammu to Port-
Blair and Head Office. All its wholesale dealers are computerized and GCMMF
is moving on a B2B model for integration interface with its dealers be it for
placing order for buying its products, sharing information or for tracking
logistic of dispatch/receipt of goods.
4. Hoshin Kanri (Policy Development): GCMMF has also embarked upon for
last 14 years, 'Hoshin Kanri' a employment initiative where more than 100
Officers/Heads participate twice in a year to review its business
goals/processes and implement new initiatives. These are further cascaded
to the wholesale dealers in different territories in a two-day exercise called
Vision Mission Strategy (VMS) Workshop. These initiatives have resulted
common understanding of goals, eliminating communication barrier.

7.4 EFFECTIVENESS:

The initiative of TQM more than a decade back has made the
organization efficient whether it be in launch of brands, or in implementing ERP's or
expanding its distribution network. More striking feature of GCMMF's TQM
experience is the integration of its business linkages at the village level to the
forward linkage through its sales offices/wholesale dealers in the market.

7.5 Backward Integration of process:
AMUL is organized as a cooperative of cooperatives (i.e., each village society, a
cooperative in itself, is a member of the AMUL cooperative) thereby deriving the
advantage of scale and uniformity in decision making. The founders of Kaira Union
realized that to fulfill their objectives, a large number of marginal farmers had to
benefit from the cooperative – a network of stakeholders had to be built. And once
built, it had to grow so as to draw more rural poor to undertake dairy farming as a
means of livelihood. The network had to have several layers – the organizational
network where the voice of the owners governed all decisions, a physical network of
support services and product delivery process and a network of small farmers that
could deliver the benefit of a large corporation in the market place. More
importantly, a process had to be put in place to build these networks.
Building an organizational network that would represent the farmers and the
customers was the most complicated task. A loose confederation was developed
with GCMMF representing the voice of the customers, the Unions representing the
milk processors and the village societies representing the farmers. Competition in
the markets ensured that the entire network was responding to the requirements of
the customers at prices that were very competitive. The task of ensuring that
returns to the farmers was commensurate with the objectives with which the
cooperatives were setup was achieved through representation of farmers at
different levels of decision making throughout the network – the board of directors
of societies, Unions and the Federation comprised farmers themselves. In order to
ensure that most returns from sales went to the producers, the intermediaries had
to operate very effectively and on razor thin margins. This turned out to be a
blessing in disguise – the operations remained very “lean” and started to provide
cost based advantage to the entire network.
Backward integration of the process led the cooperatives to advances in animal
husbandry and veterinary practice. The system succeeded mainly because
it provides an assured market at remunerative prices for producers' milk besidesact
ing as a channel to market the production enhancement package. It does not disturb
the agro-system of the farmers. It also enables the consumer an access to high
quality milk and milk products. Contrary to the traditional system, when the profit
of the business was cornered by the middlemen, the system ensured that the profit
goes to the participants for their socio-economic up liftmen and common good.
Recently the Indian cooperative movement got a much needed facelift. With
competition snapping at its heels, the sector which has been
governed by arcane laws until the recent past will see a special provision inserted in
the companies Act, 1956.


7.6 Support to suppliers
Any dairy is able to survive if the amount of milk procurement increases. For this
various aids have been provided by the unions to the farmers like cattle feeds, the
mineral mixture powder, the veterinary services, better breeding of the cattle they
have artificial insemination. It has been found that all these inputs have helped in
the production of milk. The procurement at Amul has increased from 41.42 lakh kg
to 64.38 lakh kg resulting a growth of 55.42% in last 10yrs. In Gujrat, the village
societies have got so much profit that they have a fund from which they are able to
contribute some money for the upliftment of their village like opening a school,
building a hospital etc. This gives a good impact on the villagers and encourages
them to become a part of the cooperative. These village societies are a link between
the members and the union. The co-operative helps the farmers to get remunerative
price as well as continuous market for the milk. In addition to the price of the milk
they also get a bonus at the end of the year from the profit of the organization. The
professionals utilize it by diversifying the products and finding suitable market. To
further improve the efficiency of the procurement the organization has used the
technology for this. Every society has its own computerized system where the
testing of milk is done and payment is made according to the quantity and quality.
Milk being a perishable commodity it is necessary to preserve it properly. To
maintain its quality the society maintains a Bulk Milk Cooling system which
preserves the milk below 40oC. This also reduces the expenses of the transportation
as the society which has this unit the van goes only once a day to collect the milk.
Further to prevent the sourage of the milk the union has its own chilling centers
which help in preserving the milk procured from the far off societies
7.7 E-Revolution
While several continuous innovations to equipment and processes have been done
at AMUL, the most significant one has been the development of processes for using
buffalo milk to produce a variety of end products. Gujarat (and most of India) is a
buffalo predominant area. As more farmers joined the cooperatives, the need to
develop a mechanism for storage of increasing quantities of milk became intense.
Moreover, the cooperative was established on the promise that it would buy any
quantity of milk that a member farmer wanted to sell. The need to store milk in
powder form increases as excess milk quantities in winter seasons could then be
used in lean summer seasons. Moreover, demand for liquid milk was not growing
along with growth in milk production. No technology, however, existed worldwide
to produce powder from buffalo milk. Engineers at AMUL successfully developed a
commercially viable process for the same – first time in the history of global diary
industry. Subsequently, it also developed a process for making baby food out of this
milk powder. It has also developed a unique process for making good quality cheese
out of buffalo milk thereby converting a perceived liability into a source of
comparative advantage – the task was done through process technology research.
Most of its plants are state of art and automated. Similar efforts in the area of
“embryo transfer technology” have helped create a high yield breed of cattle in the
country. AMUL’s innovations in the areas of energy conservation and recovery have
also contributed to reduction in cost of its operations. AMUL also indigenously
developed a low cost process for providing long shelf life to many of its perishable
products.
AMUL is the first company in the co-operative form to adopt the e-revolution. In this
information communication-Entertainment age, the barriers between the business
organization and consumers, between manufacturers and end-users are all breaking
down. This is what was started fifty years back by AMUL by eliminating the
‘middlemen’ and bringing the ‘producers’ closer to the ‘consumers’. The
organization believes in innovations in product as well as process. For rapid
communication access to Veterinary Health Assistance they have introduced the GIS
facility. The adoption of the electronic milk testers to ensure efficient testing and
measurement of milk constituents is a step in this direction. This is first Indian
organization to have its own website – www.amul.com. They have nationwide
cyberstores, functioning in some 120 cities, and an AMUL cyber stores gifting
service capable of serving consumers in more than 220 cities, on special occasions.
This has been possible by creating an IT network, which links the production,
centres with sales offices and dealers by VSAT and e-mail connectivity

7.8 Co-operative Law:
The cooperative act had been framed some eighty years back by the colonial
government. It was under the pressure of these farmers the English government had
to form a cooperative. The Englishman did not have faith in the Indians, so they
included in the cooperative act that the registrar of the cooperatives would be a
member of the board. In independent India, we must understand the role of
cooperatives in rural development. The real development can take place when we
depoliticize the cooperative act.

7.9 Local brands competition:
Amul has some good competitors who have entered the market in the last decade
and growing strong steadily. Most of these ice creams entered regionally but then
held on to the regional market share. Thus, even though individually these brands
might not be a worthy adversary, combined and with their total net aggregate, all of
them together are giving a very tough competition to Amul. Some of these
competitors are Kwality walls, Vadilal, Havmore, Dinshaws, Arun Ice cream, Baskin
Robbins, London dairy and others. Many of these ice cream products have their own
niche or geographic targets. Arun ice cream is strong in the south whereas havmor
and Vadilal are strong in the west. Besides these organized players, there are many
unorganised local players who also give competition to Amul by having their own
outlets and their own variants of ice cream. However, the competition in Butter and
Cheese and other dairy products is far lesser.

7.10 Managing Competition:
The Indian market is dominated by a large number of small local and
regional players. There are an estimated 150 manufacturers in the organized segme
nt, which accounts for 30-35% of sales and about 1000 units in the unorganized
segments of the market. In the organized segment the significant brands are Kwality
Walls, Vadilal, Amul, Havmor, Mother dairy and Baskins & Robbins. GCMMF is facing
very tough competition from both in and outside India. Amul combats competition
from its competitors by providing quality products
at a price which its customers value. Along with good quality products andreasonabl
e price the packaging is also very good. Most of its products are available in many
flavours. Excellent advertising backs its products and helps GCMMF (AMUL) to leave
its competitors a tough time. Also
Amul has come out with Amul Parlours to cater to various segments of customers.
Amul has a very strong Brand Image in the Domestic market. Many products are
exported by GCMMF

7.11 Attrition Rate:
Manpower is the force of the organization. In case of Amul producer members are
the most important factor. The organization works upon the principle of giving
maximum benefits to its members, but professionals play an equally important role
in the success of the organization. They also have to be satisfied in order to realize
the dreams of the producer members. The rate of attrition at Amul is high. The
salary and perks are not at par with that of the multinationals. Amul has started
with taking a bond for three years with the employees who are inducted. The
promotions must be on the appraisal basis and with every promotion; the increment
amount should be good enough to retain back the employees.

7.12 Awareness in Unexplored Areas:
Although Amul has been doing lot of projects for the awareness of the people in
regards to cattle care and better breeding facilities. But unfortunately these
programs have been concentrated in those areas which have higher literacy rate.
The remote areas which are the potential zone for milk production must be taken up
by Amul. Extensive programs should be done to attract the farmers to become
members of the society. Some demonstrations or some experience of the producers
like them should be taken there to share their experience. This way they can be
convinced easily.

7.13 Six Sigma vs TQM
Application of Six Sigma Amul has implemented TQM very successfully, but this
concept has grown old. In order to succeed in this competitive environment Amul
must use the concept of Six Sigma, which means putting the customer first and using
facts and data to drive better solutions. Six Sigma generally focuses on three key
areas: Improving customer satisfaction, reducing cycle time, reducing defects.
Improvements in these areas usually represent dramatic cost savings to businesses,
as well as opportunities to retain customers capture new markets, and build a
reputation for top performing products and services. This is a system that combines
both strong leadership and grassroots energy involvement. This system is not
owned by the senior leaders or middle level management; it takes place at the front
lines of the organization. This will help the organization tom put more responsibility
into the hands of the people who work directly with customers.

7.14 Problems due to Diversification:
A part of AMUL’s growth has come from diversification into other agri-products
such as vegetable oils, instant foods etc. In some of these initiatives AMUL adapted
its successful cooperative organization structure, but the experience to date has
been somewhat mixed. More recently, the network is exploring conventional joint
venture arrangements with suitable partners for diversification into areas such as
fast food and speciality chocolates. While it is too early to assess the success of these
ventures, challenges involved are becoming quite visible. For example,
diversification has resulted in expansion of the network with disparate elements,
each motivated by their own objectives. This in turn has led to a lack of focus within
the network and dilution in the commonality of purpose. These developments are
likely to have serious implications for coordination and control in the network.
More important, shared vision and common goal was one of the main planks of
AMUL’s growth during the past 50 years, and its dilution is likely to adversely
impact the network performance.

7.15 Dependence on 3rd party, rising prices and moving on of people after
gaining economic stability:
AMUL’s growth during the past five decades has been fuelled primarily by growth in
milk supply with corresponding pricing strategy to generate demand. This growth
has been sustained by a two-pronged strategy – (a) growth in the number of
member farmers by widening its coverage with more village societies and
increasing the membership in each society, and (b) growth in per capita milk supply
from its members. This growth is achieved by increasing milk yields and by helping
members raise their investments in cattle. It is worth noting that AMUL has funded
these support activities from its earnings (instead of repatriating them to the
members either as dividends or with a higher procurement price). It is expected
that AMUL’s growth in the immediate future will continue to rely on this strategy.
However, in the new emerging environment, several challenges have become
apparent and AMUL network needs to evolve proactive mechanisms to counter
these threats. First, competitors are cutting into milk supply by offering marginally
higher procurement prices thereby challenging the practice of provision of services
for long-term growth in lieu of higher prices in the short-term. Second, for a section
of its membership, dairy activity is a stepping-stone for upward mobility in the
society. Typically, such members move on to other occupations after raising their
economic position through milk production. As a result, AMUL is unable to realize
the full benefits of its long-term strategy, and finds new members (mostly marginal
farmers) to replace those who have higher potential and capacity. While this is a
welcome 21 development for the society as a whole, it is unclear whether AMUL
would be able to sustain it in the light of increased competition.




8 SWOT ANALYSIS
8.1 Strengths
— Diversity of products

— Brand Value

— Advertising as a brand rather than products

— 1% of revenue in advertising against 7-8% of competitors

— Introduction of TQM (Total Quality Management)

— Backward integration of the process

— Even though, growing with time and on scale, it has remained with the
smallest producer members

— Support to suppliers

— E-revolution

8.2 Weaknesses
— Dependence on 3rd parties not from organised sector

— Short shelf life of products

— Attrition Rate

— The pay to officials is not as much as in multinationals. Also, new

recruits have to sign a 3 year bond

— Lack of retention of suppliers after an improvement in their economic

capabilities

— Diversification has resulted in expansion of the network with disparate

elements

8.3 Opportunities
— International export of products
 — Processed food sector

— Online presence

— Awareness in Unexplored Areas (especially rural)

— Chocolates

— Current market share is 10%

— Use of Six Sigma against TQM

8.4 Threats
— Rising price of milk and its derivatives

— Changing policies on export of milk and milk products

— Local brands and dairies with lesser complex supply chains

— Estimated 150 manufacturers in the organized segment, which

accounts for 30-35% of sales and about 1000 units in the unorganized
segments of the market. (as of 2013)

— Slowdown in the growth of milk supply

9. CONCLUSION


Amul plans to be a leader in food business. This 3458 crore
co-operative is planning to foray in restaurants, ready-to-eat curries etc.
it also plans to launch ready to drink coffee and tea. The plan of this co-
operative is to make Amul, India’s best known food brand and also to
garner a sizable marketplace in 30 countries wherein its products are
exported to. The brand should not be known in milk, butter & cheese
but as a food brand. Its numerical target, a turnover in excess of Rs.
10000 crore.
In words of Dr, verghese Kurien, chairman (GCMMF). Amul
is a brand that is trustworthy of 1000 million Indians. Why should it be
seen only as a brand label for butter? Hope, its competitors are
listening!

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