DEVI AHILYA VISHWAVIDYALAYA, INDORE

Synopsis
MAJOR RESEARCH PROJECT Titled
TO STUDY THE SUPPLY CHAIN MANAGEMENT FOR DISTRIBUTORS OF AMUL BEVERAGES IN AHMEDABAD A Research Synopsis submitted as partial fulfillment for the award of the Degree of Masters of Business Administration

(2009-2011)
GUIDED BY: Vanita Joshi SUBMITTED BY: Priyanka Rathore INDEX

Serial No. 1 2 3 4 5 6

Topic Introduction Literature Review Rationale of Study Objectives of Study Research Methodology References

Page No. 3 5 11 13 14 15

INTRODUCTION
Dairy is a place where handling of milk and milk products is done and technology refers to the application of scientific knowledge for practical purposes. Dairy technology has been defined as that branch of dairy science, which deals with the processing of milk and the manufacture of milk products on an industrial scale. The dairy sector in the India has shown remarkable development in the past decade and India has now become one of the largest producers of milk and valueadded milk products in the world. The dairy sector has developed through co-operatives in many parts of the State. During 1997-98, the State had 60 milk processing plants with an aggregate 2

processing capacity of 5.8 million liters per day. In addition to these processing plants, 123 Government and 33 co-operatives milk chilling centers operate in the State. Also India today is the lowest cost producer of per liters of milk in the world, at 27 cents, compared with the U.S' 63 cents, and Japans $2.8 dollars. Also to take advantage of this lowest cost of milk production and increasing production in the country multinational companies are planning to expand their activities here. Some of these milk producers have already obtained quality standard certificates from the authorities. This will help them in marketing their products in foreign countries in processed form. The urban market for milk products is expected to grow at an accelerated pace of around 33% per annum to around Rs.43, 500 crores by year 2005. This growth is going to come from the greater emphasis on the processed foods sector and also by increase in the conversion of milk into milk products. By 2005, the value of Indian dairy produce is expected to be Rs.10, 00,000 million. Presently the market is valued at around Rs7, 00,000 million.

Research and Development in Dairy Industry

The research and development need to the dairy industry to develop and survives for long time with better status. The various institute and milk dairy companies R&D results provide base for todays industry growth and development. The research and development of products of dairy, like yogurt and cheese market research and company reports provides insights into product and market trends, analysis opportunities, sales and marketing strategies will help local milk unions to develop and spread worldwide through obtaining this knowledge. Specific on market share, segmentation, size and growth in the US and global markets are also helps industry to expand its market worldwide even small union also.

Products and Industry Status

Among the products manufactured by organized sector are Ghee, Butter, Cheese, Ice-Creams, Milk powders, Melted milk food, Infant food, condensed milk etc. some milk products like Casein and Lactose are also being manufactured lately. Therefore, there is good scope for manufacturing these products locally.

Investment Potential in Milk Products

At the present rate of growth, India is expected to overtake the US in milk production by the year 2014, when demand is expected to be over 125.69 million ton. Being largely imported, manufacture of casein and lactose has good scope in the country. Exports of milk products have been decentralized and export in 2005-2010 is estimated at 71.875 cr.

Scope of Distribution in dairy industry

3

India is one of the largest food producers in the world India has diverse agro-climatic conditions and has a large and diverse raw material base suitable for food processing companies Investment requirement of around US$ 22 billion exists in the food processing sector

India is looking for investment in infrastructure, packaging and marketing India has huge scientific and research talent pool A largely untapped domestic market of 1000 million consumers 300 million upper and middle class consume processed food 200 million more consumers expected to shift to processed food by 2012 Well developed infrastructure and distribution network Rapid urbanization, increased literacy, changing life style, increased number of women in workforce, rising per capita income- leading to rapid growth and new opportunities in food and beverages sector

50 per cent of household expenditure by Indians is on food items Strategic geographic location (proximity of India to markets in Europe and Far East, South East and West Asia)

LITERATURE REVIEW
Amul is formed in 1946, is a dairy cooperative in India. Amul is based in Anand, Gujarat and has been an example of a co-operative organization's success in the long term. The brand name Amul means AMULYA. This word derived from the Sanskrit word AMULYA which means PRICELESS. A quality control expert in Anand had suggested the brand name AMUL. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. Organization structure It all started in December 1946 with a group of farmers keen to free themselves from intermediaries, gain access to markets and thereby ensure maximum returns for their efforts. Based in the village of Anand, the Kaira District Milk Cooperative Union (better known as Amul) expanded exponentially. It joined hands with other milk cooperatives, and the 4

Gujarat network now covers 2.12 million farmers, 10,411 village level milk collection centers and fourteen district level plants (unions) under the overall supervision of GCMMF. Gujarat Cooperative Milk Marketing Federation Gujarat Cooperative Milk Marketing Federation (GCMMF) is a Indias largest food product marketing organization. It is a state level apex body of milk cooperatives in Gujarat that aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products that are good value for money. GCMMF faces through competition in the Indian market by different companies. So that by advertising and promoting its product GCMMF has become one of the leading dairies in India. In western of India, GCMMF shares most of the market while in other parts of India it is next so. But slowly and surely GCMMF is growing in sharing the market with other competitors industries.

There are similar federations in other states. Right from the beginning, there was recognition that this initiative would directly benefit and transform small farmers and contribute to the development of society. Markets, then and even today are primitive and poor in infrastructure. Amul and GCMMF acknowledged that development and growth could not be left to market forces and that proactive intervention was required. Two key requirements were identified. The first, that sustained growth for the long term would depend on matching supply and demand. It would need heavy investment in the simultaneous development of suppliers and consumers. Second, that effective management of the network and commercial viability would require professional managers and technocrats. To implement their vision while retaining their focus on farmers, a hierarchical network of cooperatives was developed, this today forms the robust supply chain behind GCMMFs endeavors. The vast and complex supply chain stretches from small suppliers to large fragmented markets. Management of this network is made more complex by the fact that GCMMF is directly 5

responsible only for a small part of the chain, with a number of third party players (distributors, retailers and logistics support providers) playing large roles. Managing this supply chain efficiently is critical as GCMMF's competitive position is driven by low consumer prices supported by a low cost system. Developing demand Every day Amul collects 447,000 litres of milk from 2.12 million farmers (many illiterate), converts the milk into branded, packaged products, and delivers goods worth Rs.6 crore (Rs.60 million) to over 500,000 retail outlets across the country. Its supply chain is easily one of the most complicated in the world. How do managers at Amul prevent the milk from souring? Walk in to any Amul or Gujarat Cooperative Milk Marketing Federation (GCMMF) office, and you may or may not see a photograph of Mahatma Gandhi, but you will certainly see one particular photograph. It shows a long line of Gujarati women waiting patiently for a union truck to come and collect the milk they have brought in shining brass matkas. The picture is always prominently displayed. The message is clear: never forget your primary customer. If you don't, success is certain. The proof? A unique, Rs 2,200 crore (Rs 22 billion) enterprise. At the time Amul was formed, consumers had limited purchasing power, and modest consumption levels of milk and other dairy products. Thus Amul adopted a low-cost price strategy to make its products affordable and attractive to consumers by guaranteeing them value for money. Introducing higher value products beginning with liquid milk, GCMMF enhanced the product mix through the progressive addition of higher value products while maintaining the desired growth in existing products. Despite competition in the high value dairy product segments from firms such as Hindustan Lever, Nestle and Britannia, GCMMF ensures that the product mix and the sequence in which Amul introduces its products is consistent with the core philosophy of providing milk at a basic, affordable price. 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 6

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. Coordination 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. 7

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. For example, every Friday, without fail, between 10.00 a.m. and 11.00 a.m., all employees of GCMMF meet at the closest office, be it a department or a branch or a depot to discuss their various quality concerns. Each meeting has its pre-set format in terms of Purpose, Agenda and Limit (PAL) with a process check at the end to record how the meeting was conducted. Similar processes are in place at the village societies, the unions and even at the wholesaler and C&F agent levels as well. Examples of benefits from recent initiatives include reduction in transportation time from the depots to the wholesale dealers, improvement in ROI of wholesale dealers, implementation of Zero Stock Out through improved availability of products at depots and also the implementation of Just-in-Time in finance to reduce the float. Kaizens at the unions have helped improve the quality of milk in terms of acidity and sour milk. (Undertaken by multi-disciplined teams, Kaizens are highly focussed projects, reliant on a structured approach based on data gathering and analysis.) For example, Sabar Union's records show a reduction from 2.0% to 0.5% in the amount of sour milk/curd received at the union. The most impressive aspect of this large-scale roll out is that improvement processes are turning the village societies into individual improvement centers. Technology and e-initiatives GCMMF's technology strategy is characterized by four distinct components: new products, process technology, and complementary assets to enhance milk production and e-commerce. 8

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.

Need for this project Up to January 2011 all products under the umbrella brand of Amul were sold to the retailers through one distributor only. But since mid April according to new adopted corporate strategy of Amul they divided all products into two categories asProducts that requires cold storage to store at distributor (Amul Ice-cream, Butter, cheese) and Products that doesnt require cold storage at distributor (Amul Beverages and Ghee) At retailers level all Amul products require cold storage before selling to consumers; here we are talking about requirement of cold storage at distributor level before supplying products to all retailers. So now there are two different distributors to sell these two types of product categories and hence there is need to guide these newly appointed distributors for Amul: To set all procedures in place, Manage and motivate sales force, Solve territory conflicts, And improve the efficiency of their business. Also help them to develop his market in given territory. To increase the sales and try to find if any problem to do so and find solution for that problem. Opportunities faced by Amul Distributors

Brand name and positioning of amul products in market. An advanced model of Distribution calledAMUL MODEL. Markets a wide range of products including milk powders, milk, butter, ghee, cheese, chocolate, Shrikhand, Gulab Jamun, ice cream, cream, Nutramul brand and others The Ministry of food Processing Industries is promoting organized Dairy processing sector to accomplish upcoming demands of processed dairy products Enables the consumer an access to high quality milk and milk products.

Challenges faced by Amul Distributors Facing a tough competition from the companies like Nestle, HUL, and Mothers dairy products. The time taken and cost delivering for the product to reach the consumer. Goods are affected by transportation system and its storage compatibility. Deprived linkage among producers and processors, processors-processors, producers-producers Less emphasize was provided to the dairy sector. Be short of workable national dairy program and policy. Availability of inputs for dairy production. Insufficiency of quality based payment system. Dairy Packaging materials /milk utensils/dairy machineries availability.

RATIONALE OF STUDY
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 further, federated into a Milk Federation at the State level. The above three-tier structure was set-up in order to delegate the various functions; milk collection is done at the Village Dairy Society, Milk Procurement & Processing at the District Milk Union and Milk & Milk Products Marketing at the State Milk Federation., it is known as the Amul Model or Anand Pattern of Dairy Cooperatives. Managing this supply chain efficiently is critical as GCMMF's competitive position is driven by low consumer prices supported by a low cost system. It is worth noting that 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 The study comprises of various factors which directly or indirectly affecting the distribution network of AMUL. The most important factor is there competitors. They felt very tough competition in our country and outing countries.

10

The main aim through this study is to improve the opportunities of market development for the distributors/newly appointed distributors and to study their day-to-day challenges faced by them. To find out and suggest the various strategies to be adopted by Amul distributors to counter sales in Ahmedabad. A clean and efficient way of increasing sales is by making regular calls, handling questions and objections, check stocks, discover possible markets for products, estimate retailers potential needs, emphasize quality, explain company policy on price, delivery, and credit, get the order. Also determining various factors that hurdle in distribution network and to compare Amul distribution techniques & suggest possible methods to improve the efficiency.

TOPIC SELECTED FOR STUDY 1. To prove that there is need of point of purchase (POP) display programme at retailers of Amul. 2. To design a point of purchase (POP) display programme for retailers of Amul beverages.

JUSTIFICATION OF THE TOPIC SELECTED FOR STUDY I worked for summer project for two months (May & Jun 2011) with two newly appointed distributors for Amul beverages and ghee (products for which no cold storage is required at distributor) in Ahmedabad. 1) Vayanktesh Sales, Vejalpur
2) Fairdeal, CG Road

During my work I came across two main problems to achieve my objectives of Project and they are as:1. Poor display of products at retailers= products allotted to me i.e. beverages are seasonal in nature (mostly sold during summer season). Also these are impulse products. Consumers dont usually go to shop to have Amul beverages; they go there to quench their thirst so here displays play very important role in making final purchase decision by consumer. So I decided to design a POP display programme for Amul beverages to increase the probability of their sale. 2. No fixed model for functioning for salespeople=as these new salespeople are new with no prior history of sales for beverages, no quotas, without knowledge for 11

market need/potential for Amul beverages and no well defined role of salesmanship for them, they used to work as per their convenience and in turn creating problems for achieving project objectives. So I decided to create a model for salespeople to make them work to their maximum efficiency and increase sales. BACKGROUND STUDY To get conceptual knowledge regarding this project I did following things:1) I read book Marketing Management-Philip Kotlar (chapter no.15: Designing and Managing Integrated Marketing Channels). Channel management decisions, Training and motivating channel members, Evaluating channel members Channel conflict(types, causes and their management) Different channel levels(0,1,2,3)

2) I also read book Sales Management-Pearson Education. Theories of selling AIDAS theory, Right set of circumstances theory, Buying formula theory, Behavioural equation theory Prospecting: the planning work, which is essential in eliminating calls on non buyers

3) I read book Spin Selling-Neil Rackham. Difference between large and small sales and their characteristics Distinct steps of sales Opening the call, Investigating needs, Giving benefits, 12

 Objection handling, Closing the call Different closing techniques Assumptive closes: assuming that the sale has already made. For

example-Where would you like it delivered before the customer has made the purchasing decision.
Alternatives close: giving customer options assuming customer has

made purchase decision. For example-Would you prefer delivery today or tomorrow?
Standing-room-only closes: telling him that if he doesnt make decision

now, Ill have to offer it to another customer.

Last-chance closes: telling him that prices go up next week, so pressing

to buy it.

Order-blank closes: filling in the customers answers on an order form, even though the buyer has not indicated a willingness to make a buying decision.

4) I have studied Amuls website also.

OBJECTIVES OF STUDY
1. To identify major challenges for the new market entrants/distributors of Amul. 2. To find market opportunities for newly Amul distributors. 3. To suggest guidelines for distributors for increasing sales in market and for better product development. 4. To identify various factors which motivates distributors to increase sales and face competitors of Amul effectively. 5. To discover the main reason beyond shifting of distributors from Amul milk to others.

13

RESEARCH METHODOLOGY The Study

1. To prove that there is need of point of purchase (POP) display programme at retailers of Amul. 2. To design a point of purchase (POP) display programme for retailers of Amul beverages.

Hypothesis
By the preliminary research I have done and by observation I came to the hypothesis that Amul need to do Point of Purchase (POP) display at retailers in Ahmedabad.

Sample
Geographical Scope: - research is done in the territory in Ahmedabad The sample of 100 respondents is collected from Amul distributors. A convenient random sampling method will be used for data collections which will helps to reach on a properly analyzed database.

Collection of Data
1. Primary data will be collected with observation and interview methods. 2. Secondary data will be collected from articles and journals.

Tools for Data analysis

MS-EXCEL 2007 and Market Research will be used for statistical analysis of data collected from respondents.

14

REFERENCES
Amul annual report Marketing Management by Kotler Amul.com Wikipedia.com Marketing Research by Dull Hawkins

15