ANALYSIS OF END TO END

SUPPLY CHAIN FRAMEWORK

OF AMUL – A GLOBAL
PERSPECTIVE
A STUDY ON THE SUPPLY CHAIN FRAMEWORK AND
STRATEGIES INCORPORATED BY AMUL
Distribution and supply chain management
Master of business administration
2019-2021

Submitted By:
Group – 2
4th Trimester
Section – M3

Surbhi Lath 1927953

Dayanandan M 1928106
Maneesh Das 1928114
Aveena Prathish 1928128
Mansi Agarwal 1928134
S. Aparna 1928142

Submitted To:
Prof. Suresh A. S
TABLE OF CONTENT

S. No SECTION PAGE NO
Introduction 1
1
Supply chain framework of Amul 2

2.1. Supply chain operations reference model 2

2.2.Supply chain processes of Amul 5

2
2.3.Strategic framework for integrating Marketing 8
and Supply chain strategies

7 R’s of Logistics 10
3
Global supply chain practices (AI & ML) 18
4
References 24

DIVISION OF WORK

Supply chain framework Dayanandan M & S. Aparna

7R’s of Logistics Mansi Agarwal & Surbhi Lath
Global supply chain practices (AI & ML) Maneesh Das & Aveena Prathish
1. INTRODUCTION

Supply chain management (SCM) is the process of managing the flow of goods and
services including the processes incorporated in transforming the raw materials into
finished goods. Supply chain management includes all the efforts taken by the
manufacturer from production to product development to making them available to
their end consumers in a more efficient and effective manner. The supply chain consists
of various individuals, organizations, activities and technologies that are involved in
the manufacture or the sale of the product.
SCM centrally links the production, distribution and the logistics of the company. It is
important for companies to manage their supply chain properly which can lead to
cutting down of unnecessary excess costs and fasten the process of making their
products reach their consumer faster. Building an efficient supply chain helps to be
competitive in the marketplace.
Mapping out a supply chain is an important step in performing external analysis and
strategic planning process. It helps in understanding their won market and strategically
transform themselves to the future trends. The supply chain management helps in
understanding each and every one who are involved in the process at various stages and
analyze their strengths or weakness from the insights.
Building an efficient supply chain helps to be competitive in the marketplace.

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2. SUPPLY CHAIN FRAMEWORK OF AMUL

Amul is the largest producer of milk and milk products in India. The business model of
Amul is that it brings their producers (farmers) together to form an integrated approach
to eliminate the middlemen bringing the producers in direct contact with the consumers.

Amul is a three-tier co-operative Organisation. The first tier is the village co-operative
society who are responsible for procurement of milk from the suppliers. Farmers who
either reach by walk or cycle sells their milk to these village co-operatives and get
money in exchange. There are more than 11,000 co-operatives in Gujarat where local
farmers sell their milk.

The second tier is the district unions which collects the milk from the individual village
co-operatives, process the milk and produce milk related products and markets them
locally. There are around 12 district unions that are managed by a 15-member board
elected by the college comprising of nominated representatives or members of village
co-operatives.

The third tier is the is the state federation which all the district unions are associated
with. They are responsible for marketing and selling the products nationally and
internationally.

2.1. Supply chain operations reference model –

The supply chain operations reference model (SCOR) is a management tool used to
address, improve and communicate supply chain management decisions within a
company and with suppliers and customers of a company. It was developed by the
Supply Chain Council. The framework concentrates on five areas of supply chain –

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 Plan

Return Source

Deliver Make

Plan –

The first step is to manage the demand and supply. This requires accurate forecast of
the demand and procurement of resources according to the demand to meet the
requirements by communicating it along the supply chain. Amul being the largest
manufacturer of milk and milk products in India has a huge demand in the market
serving the entire Indian market. Having a wide variety of products under their
portfolio, Amul procures their raw material, Milk form regional farmers in bulk and
utilizes them in making various products. Typically, nearly 40% of the procured milk
is treated and sold in the market while remaining 60% are converted into value added
products such as ghee, butter, cheese etc. This ration is altered by Amul seasonally as
per the demand and meet their supply. Thus, strategically Amul balances their demand
and supply.

Source –

This is where and how the company procures their raw material for their operation. It
is important to maintain good relationships with the suppliers, form agreements and
evaluate supplier performance as it is one of the key areas where the unnecessary or
non-profitable costs and partnerships can be mitigated. Amul sources their raw
materials from farmers who sell it to the village co-operatives. Amul maintains a good
relationship with their suppliers who are the farmers by procuring milk at a fair price

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and also providing other benefits such as providing cattle fodder and other services. On
an average, Amul collects 23 million litres per day.

Make –

This includes the production processes of a company. The production is done by

pushing the product according to the demand, or pulling the customers by creating the
demand. Amul manufactures various dairy and dairy products. Since dairy products are
perishable, it is necessary to understand the market demand and accordingly engage
themselves in the manufacturing process.

Deliver –

Deliver includes the process of storage, distribution and logistics. It includes the transfer
of the products from manufacturer to the customers. Amul, once they process and
produce their products move their products to Warehouse’s from where C&F agents
take control over the movement of these goods. The products are then transported to
Wholesale dealers or distributors through cold storage trucks and vans from where they
are further moved to the retailers from where the customers can buy the products. Apart
from this, Amul also have their own sales and marketing team who distributes directly
to large retail chains and also in Amul parlors which are owned by Amul.

Return –

This includes the return of unsold or defective products. Dairy products being highly
perishable requires proper reverse logistic practices.

Reverse logistic practices of Amul

Milk Churn From dairy to VC’S

Pouch milk tray From retailer to dairy

Bottle From retailer to dairy

Damaged From customers to

products retailer then dairy

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2.2. Supply chain processes of Amul -

Procurement process –

Amul follows a good strategic sourcing method of collecting milk from the regional
farmers in the villages. Farmers from each village sell their milk to the Village co-
operatives, who in turn sell it to the district unions where the milk is treated and
converted into various dairy products. The products are then taken into the control by
the state federation who takes care of the sales and marketing activities of the product.
Amul procures milk from nearly 16 million milk producers who sell it to 185903 village
co-operatives across the country. By bringing together all the farmers together, Amul
has managed to strategically source their milk for their products.

Category management –

Building a category plan requires to understand the business and create value through
demand management, total cost management, sourcing and supplier relationship
management.

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Demand Total Cost Sourcing SRM
Management Management

Demand management – Demand management is the process of controlling what we

buy and how much of it. Amul has a wide range of products and as per the demand they
procure milk and utilize them in manufacturing various dairy products. They have
numerous points of sale to sell their products and thus manage to balance their demand
and supply efficiently.

Total cost management – Amul optimizes their procurement cost through their
supplier management. Amul collects milk from the farmers and weighs them and
checks for the fat content of the milk through an electronic fat testing machine. Amul
then pays the farmers based on the fat content and not on the weight or quantity of milk.
This way, Amul optimizes their cost of procuring milk through their standardized
procedure.

Sourcing – Amul sources milk directly from the farmers. This helps them to ensure that
they get the best quality of milk and also pays them adequately and maintains a good
relationship with them to ensure there is no obstruction in the procurement of milk.

Supplier relationship management –

Amul maintains a strong relationship with their suppliers. The Village co-operatives
provide good quality feed, fodder, and other services to the farmers. Each farmer has
his unique identification through a card. The identification number is stored in a
database when the co-operative collects milk from the farmer. This way, Amul both
strategically and tactically controls their procurement process.

Warehouse Operations –

Amul has warehouses that are strategically used as distribution points to the wholesalers
and retailers. The milk collected from the village co-operatives are transported to the
district level milk unions through cold storage tanks where it is treated and processed.
From there on, the products are passed on to the C&F agents who are responsible for
the marketing and selling the products. The C&F agents stores the products of Amul in
bulk at Warehouses and transfers the products to the distributors who in turn move it to

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the retailers. Amul manages the demand and supply equilibrium strategically through
these warehouses where they store their products and sell them as per the demand or
transport them to locations of high demand.

Classification of inventory –

Inventory are generally classified as

• ABC Classification
• HML Classification
• VED Classification
• SDE Classification
• FSN Classification
• XYZ Classification

Inventory includes all the raw materials, semi-finished goods and the processed and
final goods in the supply chain. The inventory of Amul can be classified under FSN

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classification since Milk is a fast moving good due to its high demand and high
perishability.

2.4.Strategic framework for integrating Marketing and Supply chain strategies

(Source – Publication by Martin Christopher on SCM-MARKETING

INTEGRATION)

The proposed framework builds on the three perspectives like inter functional, process
& business concepts. Hence the above framework is built on these perspectives and
moves them onto a strategic level. Integrating marketing and supply chain strategies
involves the management of four integration levels: corporate integration; strategic
customer integration; strategic supplier integration and marketing & supply
pipeline strategy integration.

The proposed framework points illustrate the need for an interaction approach
which challenges the traditional view of marketing in the demand creation and SCM
in the demand fulfilment role. Marketing and SCM integration is a topic which has
received considerable interest in both fields for the last 30 years. Despite the notion

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that a close integration can contribute to the company and even supply chain success,
no contribution to date addresses the integration from a strategy perspective.

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3. 7R’S OF LOGISTICS

Logistic management is a component of supply chain management. Logistics

management is used to satisfy the customer by meeting their needs and demands by
effectively planning, controlling and implementing any storage of information,
goods and services and reaching them out to the customers from the origin to the
required destination.

Source: Google

The logistics management process begins with raw material accumulation to the final
stage of delivering goods to the destination.

Better logistics management requires planning and handling freight complexities

efficiently. This is important, just not only for curbing the possible inconsistencies
in the supply chain but also for cutting the extra costs.

One of the most important concepts in logistics management is the concept of 7 R’s
or 7 “Rights”. These 7 “Rights” lay the foundation of the smooth functioning of all
the processes from lading to the procurement of goods to customers.

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Source: https://www.niotex.com/logistics/ 
 

Right Time  
In the world of shipping management, time plays a critical role. There should be no
delay when it comes to delivery of the product to end customer. Prior planning and
management needed to be done in advance, for shipping in right time. 
Time is one of the most important critical issue lists that contains hygiene
and temperature in AMUL supply chain. As with time there is likeliness for bacterial
spoilage or non-freshness of dairy products. So, an AMUL product has batch numbers
and best before date for each product. For maximizing the delivery of perfect products
to the customers, the best before dates   and batch number should are cautiously
scrutinized. Today customers can order a variety of products through the Internet and
be assured of timely delivery with cash payment upon receipt. 
 
Right Condition  

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Logistics firms should make sure about the condition of the product when it reaches the
end customer. The products shouldn’t be broken, and the packaging must be intact.
There should be proper R&D, so that product reaches the customer in right condition. 
 The packaging design and materials shall provide protection for products in order to
prevent contamination, damage and accommodate required labeling as per the
guidelines laid down by FSS. AMUL uses packaging materials like aluminum, tin and
plastic, tetra packs are used. They also take care that filling, Bottling, wrapping,
packaging etc. are carried out hygienically. Packaging of milk and milk products is
carried after processing. The packages are   designed so as to ensure they are tamper
proof and are not easily damaged during general handling /operation. After
packages are opened it can be easily identifiable and cannot be duplicated against a
fresh/unopened packaging, so that the product is reached to customer in proper
condition.  
 
Right Quantity  
It is important for the companies to determine the right quantity of the product. At the
retail end, it's easy to evaluate the right quantity by relating it to the number of products
sold. However, in logistics, it becomes important to determine the right quantity by
operational manager. It varies from business to business. Right quantity is constrained
by factors such as perish ability, cost of product/stocking etc.  
AMUL operates through several channels and AMUL ensures that there is an optimum
distribution of products in each channel.  The products AMUL sells are perishable in
nature, so need to be consumed in shorter span before the expiry date. Further when it
comes to size the most preferred are 500 ml by maximum number of people. The second
most preferred is size between 500ml to 1000 ml quantity, very few opt for a quantity
above 1000 ml. So, basically pack size of 500 ml to 1000 ml are most preferred by the
consumers.

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Right product – Amul knows the type product it is dealing with and what appeals to
its target segment. It has a diversified product portfolio. The products are inter-related
to each other. Amul deals with milk and its by-products. The products portfolio is
designed in such a way that advertisement of one product leads to the awareness and
sale of other products offered as well thereby managing time and resources. The product
portfolio of Amul is as follows:

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Right Place – It is very important for the product to be delivered to the right place.
Right place also includes the right channels of distribution. Amul preferred outlet, also
known as Amul railway parlour or Amul kiosk, requires an area of 100-150 square feet,
the space requirement for the ice cream scooping parlour is a minimum of 300 square
feet. Amul does this to show uniformity among all its outlets and make it easily
recognized by the customers.

Now coming to the distribution part of the product, the company has enormous
distributive channel which covers almost the entire country. Amul’s whole model works
on collecting the raw material in mass and then keeping it and chunking it down into
small size which finally reaches as a single unit to consumer. Amul has rightly adopted
two distinct channels through which Distribution occurs. One is the acquisition channel
which is in charge of gathering Milk through dairy agents. The other is the channel
which is in charge of circulating the item to the end clients. Amul works with farmers,
village co-operative society then it goes to manufacturing units then to company depots,
wholesale distributors and finally to retailers. There is also one more channel which
carries and sends specialists who help in minimizing the administrative and
transportation costs.

This shows how rightly Amul has adopted the right place strategy for its products which
has led to greater brand awareness and easy distribution of its products.

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Right Price – It is very important to have the right price for the products as the price is
the major factor in attracting customers. The price should be kept such that, not only
the company but also the other members involved in logistics should be benefitted by
it. Mostly Amul follows a price strategy which is more inclined towards market.
Products which covers a huge market segment and are used on the daily basis like milk,
ghee, ice-cream, cheese, butter were provided to the consumers at a lower rate in
comparison to competitors whereas the price of products which were of niche segment
like amul spray, prolite, milk powder. Prices are kept in such a way that the distributors
get a margin of 2.5 per cent on a milk pouch, 10 per cent on milk products and 20 per
cent commission on ice cream.

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Right Customer – It is very important just not for the company to identify the right
customer but also for every member of the logistics. Trying to convert someone who
isn’t right will be a waste of efforts. Amul has already done market segmentation for its
products and have designed the product, price and everything based on the segment
targeted. Amul uses the traditional marketing method to reach the right customers. The
manufacturers target the right distributors with good margins and then these distributors
target the right retailers to make the products ultimately available to the end consumer.

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4. GLOBAL SUPPLY CHAIN PRACTICES (AI & ML)

In the age of AI & ML, we understand that older modelling techniques fail to
incorporate the wide variety of data sources needed to produce precise results. Supply
chain optimization impacts every industry, from retail to manufacturing, transportation
to warehousing. Machine learning and AI bring additional opportunities to tighten
supply chain logistics using new sources of data and new techniques that can radically
improve operations, most notably at the hyper-local level. A January 2018 research
found that 42% of organizations surveyed, identified supply chain and operations as
driving revenue from AI capabilities today.

AI algorithms can also help forecast demand on resources in warehousing and analyse
inventory against shipments going out and new products coming in. Since supply chain
is complex, it consists of Information, products & ingredients and finances. As per the
study by Business Insider, in 2020, demand for AI software is expected to grow by
154% over the last year. Food technology and Logistics are predicted to be the two of
the top industries for AI application.

For FMCG companies, supply chain management is a constant struggle. However,

machines with the ability to think like humans could solve most of the industry’s SCM
problems.

Today, people have become picky about what they eat. While previous generations ate
whatever they could muster, humans today expect gourmet meals, at street-food prices,
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on demand. Put simply, consumers want their food fast, affordable, healthy and
delicious. All this puts FMCG companies in a conundrum.

Not only do consumers today want their food fast, affordable, healthy and delicious,
they also want to know where their food is coming from. On top of that, FMCG
companies must turn around inventory quickly at competitive prices while maintaining
stock and supplier relations. But this isn’t the end of their concerns. Manufacturers must
also keep a check on quality to ensure that all products in the supply chain meet industry
and consumer specifications.

1) Quality Assurance - The companies involved in the FMCG Industry has to

ensure that the quality is assured and is able to mitigate the risk of consumer illness
when a product or ingredient is known to be contaminated, while protecting the other
products which are known to be unaffected.

Food & beverage manufacturers are utilising AI through better predictions of what food
has been contaminated, to make sure that these products don’t reach consumers.

2) Consumer visibility – One of the key aspects of the AI in beverage industry is

offering better visibility into what consumers need and how frequently. Currently, we
see a lot of data silos between marketing and product creation, which can negatively
impact sales.

Better consumer visibility should be able to come from a variety of different sources:
federal or demand forecasts for certain products and trends, private demand forecasts
that manufacturers and brands can purchase, sales data from retailers, demand statistics
from real product orders, and more. Without AI, it would be nearly impossible for
humans to integrate, clean, and utilize all of these disparate data sources. But with AI,
product manufacturers can pull in all of the valuable data sources they can possibly get
their hands on and feed them to a smart algorithm that helps them make better decisions
in order to make sure products are available to consumers but don’t go to waste.

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Some of the consequences of supply chain that lacks advanced processes and
technology are –

• Inability to meet consumer demands for a product, frustrating retailers and

consumers missing out on revenue.
• Products that go to waste and can’t be sold due to an oversupply, thus cutting
into profits.
• Products being slow to arrive in the locations where they’re needed, slowing
lead times and causing undue stress and transportation costs to increase.
• Warehousing costs unnecessarily rising due to poor warehouse utilization.

3) Logistical optimizations – The logistical optimizations include improving

warehouse layout & storage, knowing when to move the products to different
warehouses & locations, advanced shipping of products to locations, where they are
predicted to be needed like the way, Amazon does to get those Amazon prime orders to
customers on time, and thereby creating a differentiation between the amazon prime
customers and others.

Some of the benefits of the AI, when it comes to logistics are –

• Predictive Capabilities – SCM workers are able to know what product needs to be
where and when.

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• Robotics – Robots help with tracking, moving and locating products.

• Better data - with AI, all forms of data can be made cleaner and more usable so
that humans can make faster decisions without having to first process and spruce up the
data.

4) Image based Procurement - The procurement decision is the most critical in

the entire supply chain. It involves finding different suppliers, marking their locations,
checking raw materials quality, and cost negotiations before setting up the supply chain.
Raw material procurement is considered to be the fundamental step of global supply
chain management. Within that, we can import products from other countries and
integrate it into our final product to reduce the production cost while ensuring a
minimum transportation cost. This process is called outsourcing.

But these decisions can be affected by environmental, political, and financial factors
and the final cost will be changed accordingly. This situation calls for the intervention
of Artificial Intelligence (AI). With AI-based models, we can evaluate different
suppliers from historic data and provide the ratings. Based on ratings, we can provide
them a credit score and finalize the decision on whether to buy it from local or global
suppliers or outsourcing some work.

FMCG companies can ease the procurement process and minimize the time required to
send an order by using AI and image-recognition technologies. To activate an
automated database, we have search for the exact item or an equivalent product,
employees simply need to take a photo of the item. This is how simple AI makes things.
Today more and more companies are moving towards using AI to keep up with the
consumer trends, and thus improve quality assurance, which further leads to rising
revenues and decreasing costs.

5) Boosting SCP (Supply Chain Productivity) with AI based Insights – When

AI integrates with the supply chain, it is assumed to have an impact only on the overall
cost. More than that, AI applications can analyse the whole supply chain by finding
bottlenecks within each and every process. Supervised, unsupervised and reinforcement
learning make AI more powerful to boost the productivity of the supply chain with
overall performance optimization.

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 Human efforts are important in 2 parts of the successful technology integration within
the global supply chain. One is finding the critical points for integrating AI and the
other one is like finding newer technologies for further improvement in the supply
chain. Equal contribution of humans and technology is required to optimize and manage
the global supply chain.

6) Big Data - apart from robots, artificial intelligence is also about big data. For the
logistics companies, Big Data helps to optimize future performance and forecast
accurate outlooks better than ever. When the insights of Big Data are used along with
artificial intelligence, it helps to improve different areas of supply chain like supply
chain transparency and route optimization.

For AI in the logistics industry, coming up with clean data is a huge step, and they
cannot implement without having such usable figures. It is not easy to measure
efficiency as data comes from different sources. At the source level it is not possible to
improve such data, and so algorithms are used to analyse data, enhance the quality of
data, identify issues to attain transparency which can be used for business benefits.

7) Autonomous Vehicles - Autonomous vehicles are the next big thing that artificial
intelligence offers the supply chain. Having driverless trucks can take a while, but the
logistics industry is now making use of high-tech driving to increase efficiency and
safety. The significant change is expected in this industry in terms of assisted braking,
lane-assist, and highway autopilot.

In order to achieve lower fuel consumption, better-driving systems are coming up which
works on to bring together multiple trucks to have formations. Computers control such
formations and they are connected with one another too. Such kind of configuration is
said to help the trucks save fuel distinctively.

8) Corporate Decision Making - By making use of AI methods, the fright transport

system can make use of prediction methods to know about their volume in order to
simplify planning for the transport company. Moreover, it is possible to design a
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number of decision-making tools which can be run by AI. Such kind of investments in
AI will help the companies in the future in a better way.

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References
https://www.amul.com/
https://scm.ncsu.edu/scm-articles/article/the-scor-model-for-supply-chain-strategic-
decisions
https://www.niotex.com/logistics/ 

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