Amul

SUPPLY CHAIN MANAGEMENT

Of AMUL

About Company

Amul means "priceless" in English. Amul is the largest food brand in India and world's largest pouched milk brand with an annual turnover of US $1700 million (2009–10). Currently unions making up GCMMF (Gujarat Cooperative Milk Marketing FederationLtd.) have 2.9 million producer members with milk collection average of 9.10 million litres per day.GCMMF is India's largest food product marketing organization with annual turnover (2010-11) US$ 2.2 billion. Its daily milk procurement is approximately 12 million litres (peak period) per day from 15,712 village milk cooperative societies, 17 member unions over 24 districts, and 3 million milk producer members.It is the Apex organization of the Dairy Cooperatives of Gujarat, popularly known as 'AMUL', which aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money. Its success has not only been emulated in India but serves as a model for rest of the World. It operates through 47 Sales Offices and has a dealer network of 5000 dealers and 10 lakh retailers, one of the largest such networks in India. Its product range comprises milk, milk powder, health beverages, ghee, butter, cheese, pizza cheese, Ice-cream, paneer, chocolates, and traditional Indian sweets etc.

GCMMF is India's largest exporter of Dairy Products. For its consistent adherence to quality, customer focus and dependability, GCMMF has received numerous awards and accolades over the years. It received the Rajiv Gandhi National Quality Award in1999 in Best of All Category. In 2002 GCMMF bagged India's Most Respected Company Award instituted by Business World. In 2003, it was awarded the The IMC Ramkrishna Bajaj National Quality Award - 2003 for adopting noteworthy quality management practices for logistics and procurement. GCMMF is the first and only Indian organization to win topmost International Dairy Federation Marketing Award for probiotic ice cream launch in 2007.The Amul brand is not only a product, but also a movement. It is in one way, the representation of the economic freedom of farmers.

Supply chain management of AMUL

GCMMF (AMUL) is a company where the raw material as well as the finished product is perishable.It is one of the very unique cases where production is a function of both raw material supply and finished product demand. In 1994, amul was one of the frontrunners to implement TQM philosophy. With the twin pillars of customer focus and continuous improvement, GCMMF introduced the concept of TQM. It encapsulated all the concepts a wide array of philosophies including employee involvement, lean management etc. Kaizen, a concept of continuous improvementwas launched in 1995.

The Amul Model of dairy development is a three-tiered structure with the dairy cooperative societies at the village level federated under a milk union at the district level and a federation of member unions at the state level.

The 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. This helps in eliminating not only internal competition but also ensuring that economies of scale are achieved. Responsible for Marketing of Milk & Milk Products Responsible for Procurement & Processing of Milk Responsible for Collection of Milk Responsible for Milk Production

1.Village Dairy Cooperative Society (VDCS)

The main functions of the VDCS are as follows:

Collection of surplus milk from the milk producers of the village & payment based on quality & quantity

Providing support services to the members like Veterinary First Aid, Artificial Insemination services, cattle-feed sales, mineral mixture sales, fodder & fodder seed sales, conducting training on Animal Husbandry & Dairying, etc.

Selling liquid milk for local consumers of the village Supplying milk to the District Milk Union

Thus, the VDCS in an independent entity managed locally by the milk producers and assisted by the District Milk Union.

2.District Cooperative Milk Producers’ Union (Milk Union)

The main functions of the Milk Union are as follows:

Procurement of milk from the Village Dairy Societies of the District Arranging transportation of raw milk from the VDCS to the Milk Union. Providing input services to the producers like Veterinary Care, Artificial Insemination

services, cattle-feed sales, mineral mixture sales, fodder & fodder seed sales, etc. Conducting training on Cooperative Development, Animal Husbandry & Dairying for milk

producers and conducting specialised skill development & Leadership Development training for VDCS staff & Management Committee members.

Providing management support to the VDCS along with regular supervision of its activities. Establish Chilling Centres& Dairy Plants for processing the milk received from the villages. Selling liquid milk & milk products within the District Process milk into various milk & milk products as per the requirement of State Marketing

Federation. Decide on the prices of milk to be paid to milk producers as well on the prices of support

services provided to members.

3. State Cooperative Milk Federation (Federation)

The main functions of the Federation are as follows:

Marketing of milk & milk products processed / manufactured by Milk Unions. Establish distribution network for marketing of milk & milk products. Arranging transportation of milk & milk products from the Milk Unions to the market. Creating & maintaining a brand for marketing of milk & milk products (brand building). Providing support services to the Milk Unions & members like Technical Inputs,

management support & 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 & milk products to be paid to Milk Unions. Decide on the products to be manufactured at various Milk Unions (product-mix) and

capacity required for the same.

Conduct long-term Milk Production, Procurement & Processing as well as Marketing Planning.

Arranging Finance for the Milk Unions and providing them technical know-how. Designing &Providing training on Cooperative Development, Technical & Marketing

functions. Conflict Resolution & keeping the entire structure intact.

Amul start implementation of ERP in phases.

Automatic milk collection system units(AMCUS) at village society were installed in the first phase to automate milk production logistics.

AMCUS facilities to capture member information, milk fat content, volume collected, and amount payable to each member electronically.

Fig- structure of information system

Amul also connected its zonal offices, regional offices and member’s dairies through VSATs. The customized ERP- EIAS has been implemented across the organization integrating various operational departments. Amul is also using Geographic Information Systems (GIS) for business planning and optimization of collection processes

The Amul model has helped India to emerge as the largest milk producer in the world. More than 13 million milk producers pour their milk in 1,28,799 dairy cooperative societies across the country. Their milk is processed in 176 District Co-operative Unions and marketed by 22 State Marketing Federations, ensuring a better life for millions.

Supply chain of Amul

Practices (competency) followed for excellence in SCM:

Codification of raw material in an easy to understand manner: Raw material codification is an extremely vital area often neglected. Proper codification is the basis for an efficient and smooth information flow throughout the system. Be it knowledge about how much is available and where is it available to who has supplied the raw material to where will it be used and when. So much information is dependent on this vital data. As there are 2.2 million farmers, it is essential to codify all these farmers to keep the information generated by them under control. Each farmer is a part of a VDS. Hence each farmer’s house number along with the VDS number is the code for each of the farmer.

Payment to the milk suppliers on time and whenever they need it- Supplier satisfaction on account of proper timely payments is one of the most essential aspects of relationship building. The best practice is to have so much trust in your supplier that after he has supplied the material pay him as and when he needs it in the form he needs it. Amul is one organization which is completely flexible in this respect. It provides the monetary comfort and thus is regarded as a family wherein each family feels comfortable with the relationship.

Quality checks at every level: Automatic checks at every level from collection from the farmers to the manufacturing of all finished products ensures the quality remains standard at all phases through which the product moves

References:

1. http://www.amul.com/2. http://en.wikipedia.org/wiki/Amul3. http://www.iimahd.ernet.in/publications/data/2002-05-06PankajChandra.pdf

Appendix 1

GCMMF - An Overview

Year of Establishment 1973

Members 17 District Cooperative Milk Producers' Unions (13 Members & 4 Nominal Members)

No. of Producer Members 3.03 Million

No. of Village Societies 15,712

Total Milk handling capacity per day 13.67 Million litres per day

Milk Collection (Total - 2010-11) 3.45 billion litres

Milk collection (Daily Average 2010-11) 9.2 million litres (peak 12 million)

Milk Drying Capacity 647 Mts. per day

Cattlefeed manufacturing Capacity 3690 Mts. per day

Sales Turnover -(2010-11) Rs. 9774 Crores (US $2.2 Billion)

Member Unions

1. Kaira District Cooperative Milk Producers' Union Ltd., Anand2. Mehsana District Cooperative Milk Producers' Union Ltd, Mehsana3. Sabarkantha District Cooperative Milk Producers' Union Ltd., Himatnagar4. Banaskantha District Cooperative Milk Producers' Union Ltd., Palanpur5. Surat District Cooperative Milk Producers' Union Ltd., Surat6. Baroda District Cooperative Milk Producers' Union Ltd., Vadodara7. Panchmahal District Cooperative Milk Producers' Union Ltd., Godhra8. Valsad District Cooperative Milk Producers' Union Ltd., Valsad9. Bharuch District Cooperative Milk Producers' Union Ltd., Bharuch10. Ahmedabad District Cooperative Milk Producers' Union Ltd., Ahmedabad11. Rajkot District Cooperative Milk Producers' Union Ltd., Rajkot12. Gandhinagar District Cooperative Milk Producers' Union Ltd., Gandhinagar13. Surendranagar District Cooperative Milk Producers' Union Ltd., Surendranagar

Appendix 2

Sales Turnover

Sales Turnover Rs (million) US $ (in million)

1994-95 11140 3551995-96 13790 4001996-97 15540 4501997-98 18840 4551998-99 22192 4931999-00 22185 4932000-01 22588 5002001-02 23365 5002002-03 27457 5752003-04 28941 6162004-05 29225 6722005-06 37736 8502006-07 42778 10502007-08 52554 13252008-09 67113 15042009-10 80053 17002010-11 97742 2172

Appendix 3

The Product Range

Product Category Brands availableBread Spreads Amul Butter, Amul Lite, Delicious Table Margarine

Cheese Range

Amul Pasteurized Processed Cheddar Cheese, Amul Processed Cheese Spread, Amul Pizza (Mozarella) Cheese,AmulEmmental Cheese, Amul Gouda Cheese, Amul Malai Paneer (cottage cheese), Utterly Delicious Pizza

Fresh MilkAmul Gold Full Cream Milk 6% fat, Amul Shakti Standardised Milk 4.5% Fat, Amul Taaza Toned Milk 3% fat,Amul Slim & Trim, Amul Cow Milk

UHT Milk Range Amul Gold 4.5% fat Milk, Amul Shakti 3% fat Milk, Amul Taaza 1.5% fat Milk, Amul Lite Slim-n-Trim Milk, Amul Fresh Cream

Milk PowdersAmul Full Cream Milk Powder, Amulya Dairy Whitener, Sagar Skimmed Milk Powder, Amulspray Infant Milk Food, Sagar Tea and Coffee Whitener

Milk DrinkAmul KoolFlavoured Milk, Amul KoolCafé, Amul KoolKoko,AmulKoolMillkShaake, Amul Kool Chocolate Milk,Nutramul Energy Drink

Health Drink Stamina Instant Energy DrinkBrown Beverage Nutramul Malted Milk Food

Curd Products Amul MastiDahi (fresh curd), Amul Masti Spiced Butter Milk,AmulLassee, Amul Flaavyo Yoghurt

Pure Ghee Amul Pure Ghee, Sagar Pure GheeSweetened Condensed Milk Amul Mithaimate

Mithaee Range (Ethnic Sweets)

Amul Shrikhand, Amul MithaeeGulabjamuns, Amul Basundi,AvsarLadoos

Ice-cream Sundae Range, probiotic,,sugarfree and probioticChocolate & Confectionery

Amul Milk Chocolate, Amul Fruit & Nut Chocolate, Amul Chocozoo, Amul Bindass, Amul Fundoo