A STUDY ON SUPPLY CHAIN MANAGEMENT OF AMUL INDIA Ltd.

Assignment of SUPPLY CHAIN MANAGEMENT

Submitted to: Pro . Su!"mit# P#u$ Sri&#!t#&# 'F#(u$ty)

Submitted by:Ab"i!"e% PGF*+,+-

.#i/uri# I0!titute o M#0#1eme0t2 Noid# TABLE OF CONTENT S.No.

1. 2. 3. $. 5. ' (.

Topic
Company background Conceptual framework-SCM at Amul Problems !ssues !n conte"t to SCM faced by Co.

P.No.
3 5 # 1% 12 1$ 15

Analys!s and f!nd!ngs &ecommendat!ons Conclus!on )!bl!ograp*y

Company background:
Amul means pr!celess !n Sanskr!t. +*e company *as been comes !nto t*e p!cture !n year 1,$'. A range of products suc* as butter- m!lk powder- c*eese- c*ocolates etc. *a.e made Amul a lead!ng food brand !n /nd!a. Amul or 0u1arat Co-operat!.e M!lk Market!ng 2ederat!on 30CMM24 !s probably one of t*e best cases w*ere t*e raw mater!al as well as f!n!s*ed product !s per!s*able. As many as 2.2 m!ll!on farmers5 supply t*e raw mater!al !.e. m!lk. +*e ad.antages are probably t*at t*e raw mater!al supply !s assured- come w*at may but on t*e fl!p s!de w*ate.er *appens to t*e f!n!s*ed goods market- raw mater!al *as to be procured and used up !n t*e !n t*e st!pulated per!od. /nsp!red by Sardar 6allab*b*a! Patel and e"ecuted by Morar1! 7esa! a *andful of farmers formed t*e 8a!ra 7!str!ct m!lk co-operat!.e 387MC4 !n 1,$'. About 25% l of m!lk collected da!ly from t*e farmers of two .!llage co-operat!.e soc!et!es was pasteur!9ed and sent tot t*e )ombay m!lk sc*eme. /n 1,(3- a need was felt to profess!onally market t*e products be!ng packed at se.eral da!ry plants !n t*e state and 0CMM2 was born. +*e growt* process cont!nued and t*e Anand pattern become a benc*mark. /n 1,,$- w*en all o.er /nd!a- :ual!ty and +;M p*!losop*y was be!ng !mplemented- 0CMM2 was be!ng one of t*e frontrunners. Kaizen Programme was !mplemented !n May 1,,5 to !mpro.e employee part!c!pat!on and !ncrease a feel!ng of belong!ng. +*!s was followed by < Hoshin kanry5- w*!c* means a met*odology for strateg!c d!rect!on sett!ng. /t pro.!des a step by step plann!ng- !mplementat!on and re.!ew process for managed c*anged.

AMUL fac fi!":#

+ype= 2ounded= >ead:uarters= 8ey people= /ndustry= M!lk Product!on= &e.enue= Bmployees= Slogan= Cebs!te= Cooperat!.e 1,$' Anand 30u1arat4- /nd!a C*a!rman- 0u1arat cooperat!.e m!lk market!ng federat!on ?td. 30CMM24 7a!ry 1%% m!ll!on ton 32%%#-%,4 +emplate= &e.enues @1b!ll!on AS7 3/n 2%%#-%,4 2.$1 m!ll!on m!lk producers +aste of /nd!a www.amul.com

AMUL !ogo and i $ impor anc":#

Symbol of Amul 3anand m!lk un!on ltd.4 !s r!ng of four *ands- w*!c* are coord!nated eac* ot*er. +*e actual mean!ng of t*!s symbol !s coord!nat!on of *ands of d!fferent people by w*om t*!s un!on !s at top. +*e f!rst *and !s of farmer- second *and of processor- t*!rd *and of marketer- and t*e fourt* *and of customer. /t5s t*e 1o!nt effort product!.e team work t*at *as enabled !ts success.

Conc"p ua! fram"%ork SCM a AMUL &'CMMF(:#

+*e supply c*a!n of Amul can be descr!bed !n t*e follow!ng steps= Some 2.2 m!ll!on farmers from 12 d!str!cts of 8a!ra 3k*eda4- Sabar 8ant*a)aroda- Panc*ma*al- &a1kot- )*aruc*- Me*sana- )anas 8ant*a- SuratA*medabad- 6alsad and 0and*! nagar reac* t*e m!lk collect!on centers e.ery day !n t*e morn!ng and afternoon to sell t*e m!lk t*e!r buffaloes *a.e g!.en !n t*e morn!ng and !n t*e noon +*e total m!lk procurement !n t*e last year 2%%2 was an a.erage $(.32 l per day w*ere t*e peak t*e peak procurement touc*ed a *!g* of '2 l. All t*e m!lk procurement centers are e:u!pped w!t* computers and electron!c m!lk testers 3BM+s4. BM+s ensure eff!c!ent test!ng and measurement of m!lk const!tuents. +*e computers run t*e automat!c m!lk collect!on systemw*!c* ensures !mmed!ate preparat!on of m!lk payment b!lls- transparency of operat!ons and greater eff!c!ency of m!lk collect!on. +*e m!lk !s t*en sent to c*!ll!ng depots !n eac* .!llage of t*e member un!ons. +*ere are 1%#52 .!llages under 0CMM2 and eac* one *as a .!llage Cooperat!.e soc!ety. 67C also runs t*e automat!c m!lk collect!on system. +*e m!lk !s t*en sent to t*e 12 member un!ons. All of t*em run an ultra modern da!ry t*at processes t*!s raw mater!al- w*!c* *as tra.eled from faraway .!llages to t*e d!str!ct *ead:uarters. +*e .ar!ous products made under t*e flags*!p of AMA? suc* as butterm!lk powder- c*eese- da*!- ready made foods suc* as gulab 1amun- p!99a etc. Are manufactured at t*ese .ar!ous plants and d!str!buted t*roug* t*e .ar!ous d!str!butors across t*e country and abroad t*roug* 0CMM2.

FA3ME3S -.- mi$$io0

4CS 5+678

MEM*E3 UNIONS 5- u0it!

GCMMF 7++ Em/

.)ST/)BUTO/S 01112

/ETA)LE/S 3111112

EN. USE/S

Fig: - The flow of materials and information at AMUL

Dne reason t*at Amul !s t*e g!ant !t !s because !t5s bu!lt on t*e back of a cooperat!.e mo.ement. /t encourages women and farmers to collect m!lk from t*e!r cows and pass !t on to t*em for a pr!ce. )y manag!ng m!lk suppl!es from t*e cattle farmer and send!ng !t stra!g*t to t*e factory- !t5s been able to el!m!nate t*e m!ddleman. Comple"!ty and dynam!cs of t*e supply c*a!n make !t .ery d!ff!cult to assess t*e !nteract!on effects. /ncreased cooperat!on among network members *as resulted !n a number of c*anges at all le.els -- operat!onal- tact!cal and strateg!c- and *as led to t*e emergence of pract!ces and strateg!es for !mpro.!ng t*e c*a!nEs performance. Most prom!nent among t*ese !nclude t*e follow!ng= 3!4 )nforma ion $*aring+ of "n dynamica!!y+ "-"cu ion. o impro," p!anning and

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S*ar!ng of PDS data !s a class!c e"ample for m!n!m!9!ng t*e d!stort!ons due to bullw*!p effect and reduc!ng perce!.ed .ar!ab!l!ty of demand by t*e partners !n t*e c*a!n. +yp!cally- !nformat!on s*ar!ng e"tends to costs as well. 3!!4 Focu$ on cor" comp" "nc" of "ac* p!ay"r in *" c*ain. +*e ob1ect!.e !s to ensure t*at eac* task !s performed by t*e ent!ty best su!ted for !t. As a result- f!rms *a.e become w!ll!ng partners !n ced!ng control to a network partner for !mpro.!ng performance. 6M/ !n many !ndustr!es !s a d!rect result of suc* c*ange !n management t*!nk!ng. S!m!larly- t*e role of t*!rd part!es for pro.!d!ng spec!f!c e"pert!se suc* as log!st!cs *as grown substant!ally w!t* emp*as!s on supply c*a!n. 3!!!4 Capaci y impro,"m"n : /t *elps network partners !n !mpro.!ng t*e!r capab!l!ty and mak!ng t*em compet!t!.e.

Mi!k procur"m"n
+otal m!lk procurement by our Member An!ons dur!ng t*e year 2%%,-1% a.eraged ,3.%2 lak*s k!lograms 3,.3% m!ll!on kgs4 per day represent!ng a growt* of '.'#F o.er #(.1, lak*s kgs 3#.( m!ll!on kgs4 per day ac*!e.ed dur!ng t*e year 2%%#-%,. +*e *!g*est procurement as usual was recorded dur!ng Ganuary- 2%1% at 122.5 lak*s kgs per day

T*" di$ ribu ion n" %ork

Amul products are a.a!lable !n o.er 5%%-%%% reta!l outlets across /nd!a t*roug* !ts network of o.er 3-5%% d!str!butors. +*ere are $( depots w!t* dry and cold ware*ouses to buffer !n.entory of t*e ent!re range of products. 0CMM2 transacts on an ad.ance demand draft bas!s from !ts w*olesale dealers !nstead of t*e c*e:ue system adopted by ot*er ma1or 2MC0 compan!es. +*!s pract!ce !s cons!stent w!t* 0CMM2Es p*!losop*y of ma!nta!n!ng cas* transact!ons t*roug*out t*e supply c*a!n and !t also m!n!m!9es dump!ng.

Managing *ird par y $"r,ic" pro,id"r$

/ts core act!.!ty lay !n m!lk process!ng and t*e product!on of da!ry products and all ot*er act!.!t!es suc* as log!st!cs of m!lk collect!on- d!str!but!on of da!ry productssale of products t*roug* dealers and reta!l stores- pro.!s!on of an!mal feed- and .eter!nary ser.!ces were entrusted to t*!rd part!es.

Prob!"m$ and i$$u"$ %i * r"$p"c o $upp!y c*ain fac"d by *" AMUL

Manag!ng t*!s supply c*a!n eff!c!ently !s cr!t!cal as 0CMM2Es compet!t!.e pos!t!on !s dr!.en by low consumer pr!ces supported by a low cost system. /n t*e past years t*e concept of 1ust-!n-t!me was not !ntroduced- all 0CMM2 branc*es were engaged !n route sc*edul!ng and *a.e ded!cated .e*!cle operat!ons. B.en t*oug* t*e cooperat!.e was formed to br!ng toget*er farmers- profess!onal managers and tec*nocrats would be st!ll re:u!red to manage t*e network effect!.ely and make !t commerc!ally .!able. /t !s wort* not!ng t*at a number of t*!rd part!es are not !n t*e organ!9ed sector- and many are not profess!onally managed w!t* l!ttle regard for :ual!ty and ser.!ce. +*!s !s a part!cularly cr!t!cal !ssue !n t*e log!st!cs and transport of a per!s*able commod!ty w*ere t*ere are already weaknesses !n t*e bas!c !nfrastructure. /ts network w*!c* cons!sts of large number of members re:u!res regular roll out !mpro.ement programs and *!g* !mplementat!on rate of t*ese programs. >a.!ng a strong supply c*a!n !s only t*e beg!nn!ng- t*e rema!n!ng part !ncludes mak!ng consumer products t*at sell well and t*at t*e same consumers are able to be !mpacted by market!ng and ad.ert!s!ng mo.ements. +*e organ!9at!on was also suffer!ng from t*e *!g* m!ddleman cost w*!c* was tackled by manag!ng m!lk suppl!es from t*e cattle farmer and send!ng !t stra!g*t to t*e factory. 7ue to t*e per!s*able nature of t*e product- !t *as to !n.est !n cold storage w*!c* !s an e"tra burden !n d!str!but!on and ware*ous!ng. At t*e t!me Amul was formedH consumers *ad l!m!ted purc*as!ng power- and modest consumpt!on le.els of m!lk and ot*er da!ry products. +*us Amul adopted a low-cost pr!ce strategy to make !ts products affordable and attract!.e to consumers by guarantee!ng t*em .alue for money.

/n add!t!on to t*e weaknesses !n t*e bas!c !nfrastructure- log!st!cs and transportat!on ser.!ces are typ!cally not profess!onally managed- w!t* l!ttle regard for :ual!ty and ser.!ce. 0CMM2 was one of t*e f!rst 2MC0 3fast-mo.!ng consumer goods4 f!rms !n /nd!a to employ of /nternet t!mely tec*nolog!es del!.ery w!t* to !mplement cas* payment )2C commerce. rece!pt. +oday customers can order a .ar!ety of products t*roug* t*e /nternet and be assured upon Anot*er e-!n!t!at!.e underway !s to pro.!de farmers access to !nformat!on relat!ng to markets- tec*nology and best pract!ces !n t*e da!ry !ndustry t*roug* net enabled k!osks !n t*e .!llages. 0CMM2 *as also !mplemented a 0eograp*!cal /nformat!on System 30/S4 at bot* ends of t*e supply c*a!n- !.e. m!lk collect!on as well as t*e market!ng process.

ANAL4S)S and F)N.)N'S

2ollow!ng are t*e ma1or !ssues analy9ed w!t* respect to t*e SCM of Amul=

Larg"r !"ad im":#

A number of t*!rd part!es are not !n t*e organ!9ed sector- and many are not profess!onally managed w!t* l!ttle regard for :ual!ty and ser.!ce. 7ue to t*e old and obsolete means of transportat!on- fa!lure of mac*!nery etc. leads t*e delay !n reac*!ng to reta!lers and end users. /n t*e past years t*e concept of 1ust-!n-t!me was not !ntroduced- all 0CMM2 branc*es were engaged !n route sc*edul!ng and *a.e ded!cated .e*!cle operat!ons. 7ue to t*e per!s*able nature of t*e product- !t *as to !n.est !n cold storage w*!c* !s an e"tra burden !n d!str!but!on and ware*ous!ng. As a result need of G/+ were felt and t*e concept *as !ntroduced to a.o!d any k!nd of delay and destruct!on of products. /ntroduct!on of 1ust-!n-t!me !n.entory strategy !mpro.es dealersE return on !n.estment 3&D/4.

'ap b" %""n d"mand and $upp!y:#

7ue to t*e unprofess!onal and !ne"per!enced 3P? pro.!ders t*ere !s .ast gap between demand and supply. /n t*e peak season- t*e company fa!ls to sat!sfy t*e reta!lers5 demand on certa!n products. S!nce t*e lead t!me was *!g* so company were unable to get raw mater!al on t!me and also were unable to produce f!nal product to matc* w!t* t*e :uant!ty demanded by reta!lers and consumers. Amul dec!ded to focus on farmers fac!ng bus!ness processes suc* as supply- d!str!but!on and !ts own !nternal operat!ons. +*e ma!n goals of t*e supply c*a!n !n!t!at!.e were !mpro.!ng forecast accuracy to matc* supply w!t* demand- del!.ery performance to a.o!d stock-outs t*ereby creat!ng a dependable and rel!able brand !mage w!t*out e"cess!.e spend. +*ese steps were taken to reduce dependency on cold storage.

SUPPL)E/S:#
+*e member-suppl!ers were typ!cally small and marg!nal farmers w!t* se.ere l!:u!d!ty problems- !ll!terate and untra!ned. AMA? and ot*er cooperat!.e An!ons adopted a number of strateg!es to de.elop t*e supply of m!lk and assure steady growt*. 2!rst- for t*e s*ort term- t*e procurement pr!ces were set so as to pro.!de fa!r and reasonable return. Second- aware of t*e l!:u!d!ty problems- cas* payments for t*e m!lk supply was made w!t* m!n!mum of delay.

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Managing T*ird Par y S"r,ic" Pro,id"r$:

Cell before t*e !deas of core competence and t*e role of t*!rd part!es !n manag!ng t*e supply c*a!n were recogn!9ed and became fas*!onable- t*ese concepts were pract!ced by 0CMM2 and AMA?. 2rom t*e beg!nn!ng- !t was recogn!9ed t*at t*e core act!.!ty for t*e un!ons lay !n process!ng of m!lk and product!on of da!ry products. Accord!ngly- t*e un!ons focused efforts on t*ese act!.!t!es and related tec*nology de.elopment. +*e market!ng efforts 3!nclud!ng brand de.elopment4 were assumed by 0CMM2. All ot*er act!.!t!es were entrusted to t*!rd part!es. +*ese !nclude log!st!cs of m!lk collect!on- 7!str!but!on of da!ry products- sale of products t*roug* dealers and reta!l stores- some .eter!nary ser.!ces etc. Some ot*er !ssues found !n !ts supply c*a!n are as follows= /t *as e"cellent ab!l!ty to ant!c!pate t*e r!g*t type of product at t*e r!g*t t!me t*roug* t*e years. Amul !s a cooperat!.e w*ere t*e m!lk suppl!ers are t*e s*are*olders. +*e owners dec!de w*at t*ey s*ould pay t*emsel.es for t*e raw mater!al t*ey supply. A un!:ue s!tuat!on w*ere t*e owners of t*e company are also !ts largest .endorsI +o !mplement t*e!r .!s!on w*!le reta!n!ng t*e!r focus on farmers- a *!erarc*!cal network of cooperat!.es was de.eloped- w*!c* today forms t*e robust supply c*a!n be*!nd 0CMM2Es endea.ors. /ntroduct!on of 1ust-!n-t!me !n.entory strategy !mpro.es dealersE return on !n.estment 3&D/4. /n order to manage t*e network effect!.ely and make !t commerc!ally .!able profess!onal managers and tec*nocrats were !ntroduced. +*e company *as core competency !n m!lk process!ng and t*e product!on of da!ry products and all ot*er act!.!t!es were entrusted to 3P?s /nfre!g*t log!st!cs solut!ons l!m!ted- +ransport Corporat!on of /nd!a- 0ammon /nd!a ltd. are some of !ts ma!n 3P? pro.!ders. Amul was one of t*e f!rst 2MC0 f!rms !n /nd!a to employ /nternet tec*nolog!es to !mplement )2C commerce. +oday customers can order a .ar!ety of products t*roug* t*e /nternet and be assured of t!mely del!.ery w!t* cas* payment upon

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rece!pt. /t *as also !mplemented a 0eograp*!cal /nformat!on System 30/S4 at bot* ends of t*e supply c*a!n- !.e. m!lk collect!on as well as t*e market!ng process.

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/"comm"nda ion$ 5 $ugg"$ ion$

Amul s*ould !mpro.e !ts d!str!but!on system- as !t *as already !mplemented on B&P !n t*e company- st!ll due to !n d!sc!pl!ned be*a.!or of !ts d!str!butorsreta!lers suffers w*!c* ult!mately affect t*e consumers. Ce know t*at t*e t!me sc*edule of t*e d!str!butors to pre.ent acc!dents. Manpower s*ould be more t*an 1# years of age. 3!n some of t*e areas- we *a.e obser.ed small c*!ldren engaged !n load!ng truck4 )efore offer!ng any e"tra benef!ts or sc*emes to t*e!r reta!lers- Amul s*ould aware t*em !n ad.ance- so t*at t*e !ncent!.es can be reac*ed !n t*e r!g*t *ands at r!g*t t!me. ot*erw!se d!str!butors en1oy t*e benef!ts of reta!lers. Cod!f!cat!on of raw mater!al s*ould be done !n an eas!ly understand manner. &educe t*e sol.!ng t!me of t*e consumerJreta!lers5 compla!nts. Payment to t*e m!lk suppl!ers s*ould be made on t!me to ensure t*e proper !nflow of m!lk. Amul s*ould also launc* certa!n sc*emes for *ouse*olds. /t *as sc*emes for reta!lers but not for *ouse*olds. +*!s sect!on be!ng t*e ma1or user of m!lk and !n order to enter !nto a new area suc* start!ng sc*emes can be .ery *elpful. 2or refr!gerated and fro9en food d!str!but!on- a world class cold c*a!n would *elp !n pro.!d!ng :ual!ty assurance to t*e consumers around t*e reg!on. ?og!st!cs and transportat!on ser.!ces s*ould be profess!onally managed to a.o!d wastes. Ase of !nternet for e"plor!ng t*e unknown terra!n. Act!.e customer feedback s*ould be taken regularly for !ncreas!ng product l!ne. Bmployees of 0CMM2 s*ould !n.ol.ed act!.ely !n all act!.!t!es of t*e member un!ons. unload!ng t*e trays from t*e t*e!r transportat!on

system cannot be capsuled- but t*ey can reduce t*e!r errors. B.g. dr!.e carefully

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&elat!ons*!p w!t* bus!ness assoc!ates l!ke w*olesaler s*ould be made closer and deeper.

+*e company s*ould take !n!t!at!.e to reduce transportat!on t!me from t*e depots to t*e w*olesale dealers- !mpro.ement !n &D/ of w*olesale dealers!mplementat!on of Kero Stock Dut t*roug* !mpro.ed a.a!lab!l!ty of products at depots and also t*e !mplementat!on of Gust-!n-+!me !n f!nance to reduce t*e float.

Completely !n tune w!t* t*e ground real!ty an en:u!ry !s !n!t!ated on t*e organ!9at!onal cl!mate. +*!s ga.e deta!l about t*e core competenc!es and most !mportantly ga.e deta!ls about t*e *and!caps and !nade:uac!es.

>a.e recogn!9ed Lc*angeM as an essent!al factor go.ern!ng bus!ness needs and *ence !ncorporates c*anges !n e.ery form at e.ery stage. employees- suppl!ers and d!str!butors also Lc*ange readyM always

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Conc!u$ion
Amul *as establ!s*ed !tself as a un!:uely appropr!ate model for rural de.elopment. Amul *as spurred t*e w*!te re.olut!on of /nd!a- w*!c* *as made /nd!a t*e largest producer of m!lk and m!lk products !n t*e world. Amul products *a.e been !n use !n m!ll!ons of *omes s!nce 1,$'. +oday Amul !s a symbol of many t*!ngs l!ke of *!g*-:ual!ty products sold at reasonable pr!ces t*e genes!s of a .ast co-operat!.e network. /ts supply c*a!n !s eas!ly one of t*e most compl!cated !n t*e world. +*e supply c*a!n l!nk!ng farmer-suppl!ers of m!lk w!t* t*e m!ll!ons of consumers. Amul encourages women and farmers to collect m!lk from t*e!r cows and pass !t on to t*em for a pr!ce d!rectly el!m!nat!ng cost of m!ddleman. /ntroduct!on of 1ust-!n-t!me !n.entory strategy !mpro.es dealersE return on !n.estment 3&D/4.Amul was one of t*e f!rst 2MC0 f!rms !n /nd!a to employ /nternet tec*nolog!es to !mplement )2C commerce. +oday customers can order a .ar!ety of products t*roug* t*e /nternet and be assured of t!mely del!.ery w!t* cas* payment upon rece!pt. /t *as also !mplemented a 0eograp*!cal /nformat!on System 30/S4 at bot* ends of t*e supply c*a!n- !.e. m!lk collect!on as well as t*e market!ng process.

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B)BL)O'/AP64 %"b$i "$

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Book$ 8ulkarn! S S*arma A.32%%24-supply c*a!n management- #u$arat cooperative %ilk %arketin& 'ederation ()%ul*++M> publ!s*!ng co.ltd.,5-1%, C*!dambaram S.- C*!tman ?.- c*erag*! S.>. 31,,,4 a supply chain trans'or%ation %ethodolo&y+ San Anton!o- + N ASA= *ttpJJ15'.2'.35.52JpapersJ(%SC C SC.pdf

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