SCM in Dairy Industry

SUPPLY CHAIN MANAGEMENT IN THE DAIRY BUSINESS

Presented By:

Tushar K gohel

2009MT0051

FLOW OF THE PRESENTATION

Introduction Framework of SCM in Dairy Industry Cooperative model Challenges Case study: AMUL

INTRODUCTION

OVERVIEW OF INDIAN DAIRY INDUSTRY

Largest milk producer in the world, 100 million MT Value of output Rs. 1179 billion (2004 -05) (Almost equals

combined output of paddy and wheat!!) 1/5th of the world bovine population Very low productivity (around 1000 kg/year, world average-

2038 kg/year) 3 Tier structure :

Village society, District unions Federated at state level

DAIRY BUSINESS

Dairy industry is a vertically integrated industry with both parts of the supply chain (farm and manufacture) dependent on each other to ensure safe food

The dairy chain starts at raw milk production and ends when other processors, institutions and consumers utilize products that were created in the value chain

Traditional Model Large number of cooperativesSmall membershipPrimarily Production of raw product (fluid milk) & very less

value addition

RESTRUCTURING OF DAIRY BUSINESS

Efficiencies in managing fewer large plants versus a number of under-utilized small plants,

Need for more milk supply Need to offer wide variety, improvements in trucking

& milk handling thereby facilitating long hauls, Opening of new international markets (also markets

for new products), Seeking marketing clout and need to bring investment

from outside the cooperatives.

FRAMEWORK

FRAMEWORK

Research at the Industrial Research Institute Swinburne (IRIS), Australia

Purpose was to develop a supply chain management framework for the dairy (milk products) business

Supply Chain Operation Reference” or “SCOR” model - adopted elementary framework and the following two standards were adopted: The “CODEX Alimentarius Standard” The “grade “A” pasteurized milk ordinance”

Conve

rted

to

THE COOPERATIVE MODEL

Co-operatives are the best mechanism to address market and supply chain failures in agricultural commodities.

NEED FOR THE COOPERATIVE MODEL

Solve Market Failures Exploitation of producers by the market intermediaries.

Due to low quantum and value of assets Low or negligible carrying capacity-both financial and infra. Lack of market Information Lack of access to financing facilities in absence of collaterals.

Distortions in Supply chainManipulative Middle men Supply Chain Inefficiencies Contribute to 30-50% of revenue

loss – Global Study

CHALLENGES FACED BY THE INDIAN DAIRY SUPPLY CHAIN

CHALLENGES FACED

Procurement (collection) The four-tier system of milk collection

Fluctuation of volume due to presence of too many intermediaries

Price negotiation by milk producers based on: Volume and locality factors An average regional price Raw milk production costs Domestic prices at wholesale and retail levels Overall consumer demand conditions

Little room for negotiation for Indian milk producers

CHALLENGES FACED CONTD.

Advent of organized retail channels Increased availability of branded, packaged milk Reduced role of middlemen, mainly the milk vendors (consequent unemployment)

Distribution Lack of superior cold-storage transport Distribution wastage due to improper storage Inefficiency in milk processing No enforcement of HACCP principles

Hazard Analysis and Critical Control Point Systematic preventive principles for food safety

CHALLENGES FACED CONTD.

Lack of supporting information systems Database maintained by Milk Producers’ Organizations in

developed countries Data on dairy farmer production costs, imports and exports of dairy products,

domestic and world stock of different traded dairy products Helps in price negotiations

Technology solutions Automated milk collection systems Use of analyzers Use of Electronic Data Interchange

As a feedback channel for information feedback Track demand and capacity

CASE STUDY: AMUL

AMUL- INTRODUCTION

The Kaira District Co-operative Milk Producers 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

Managed by an apex cooperative organisation, Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by some 2.41 million milk producers in Gujarat, India

Amul’s products range includes milk powders, milk, butter, ghee, cheese, curd, chocolate, ice cream, cream, shrikhand, paneer, gulab jamuns, basundi, Nutramul brand and others.

AMUL – VALUE CHAIN

IT @ AMUL

Installation of over 3,000 Automatic Milk Collection System Units (AMCUS) at village societies to capture:

member information, milk fat content, volume collected, amount payable to each member.

Proved invaluable in ensuring fairness and transparency throughout the entire organisation.

The role of IT in Amul is best summed up by B M Vyas, chief executive officer, Amul (GCMMF) when he says, “Amul is not a food company, it is an IT company in the food business.”

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AMUL LOGISTICS

Milk collected from farmers Thro

ugh Local Mode of Transport

Milk is send to Local Societies

Through Local Mode of Transport

Milk is send to Chilling CentersThro

ugh Local Mode of Transport

Milk send to Union Dairies

(These may or may not be a part of the

whole system)Through Local Mode of Transport

Milk is send to Processing

Plant

Through Local Mode of Transport

Milk send to the user

REFERENCES:

Thomas D. 1. and P. M. Griffin. , 1996, coordinated supply chain management. European journal of operation research, 94: 1-15.

K. Venkata Subbaiah, K. Narayana Rao K. Nookesh babu,Supply Chain Management in a Dairy Industry-A Case Study. Proceedings of the World Congress on Engineering 2009 Vol I WCE 2009, July 1 - 3, 2009, London, U.K.

Supply-Chain Council, Inc., 1998, Overview of the SCOR Model V2.0, www.supplychain.org/dairy industry.html last accessed on 23rd march-2010.