SUPPLY CHAIN MANAGEMENT (GR1)

(OM04)
AMUL

POST GRADUATE DIPLOMA IN MANAGEMENT

(TERM 4; Batch 2019-21)

UNDER THE SUPERVISION OF

Prof. KESHAV KR. SHARMA

Submitted by - Group 2
Ayush Kaushik (Pgmb1911)
Diksha Taneja (Pgmb1955)
Hardik Choudhary (Pgmb1914)
Rahul Kumar (Pgmb1923)
Sonali Sinha (Pgmb1935)
Ujjwal Chaturvedi (Pgmb1938)

JAIPURIA INSTITUTE OF MANAGEMENT

A-32 A, Sector 62, Institutional Area, Noida – 201309 (U.P.)
1st October, 2020

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Executive Summary

Under this project report we chose company Amul and we tried to study in detail the
supply chain practices the company adopts, types of competitive strategy Amul uses
to outshine its competitors.

Various supply chain drivers the company has and company uses.

We have also tried to establish whether there is a strategic fit between competitive
and supply chain strategy of the company.

In the last part of the project we analysed whether the decision Amul took in
reference to its supply chain or its inventories impacted their business performance
in a positive way or in a negative way

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ACKNOWLEDGEMENT

We the members of group 2 would like to express our heartful thanks and gratitude
to our Prof. Keshav Kr. Sharma who gave us an opportunity to do this wonderful
project and who also guided us through the project, whenever we were in doubt
which helped us in completion of this project and also helped us a lot in increasing
our knowledge regarding the Supply Chain Management.

Secondly, we the members of this group would like to thank each other as the
completion of this project wouldn’t have been possible without the support of each
other. The support was much needed for finalizing this assignment within the limited
time frame.

Thank you one and all.

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 List of Content

TOPIC PAGE NO.

 Background of the Study 5

 Objective of the Study 5

 Introduction of the Company 6

– Amul

 Various deliverables 9
 Competitive Strategy
 Supply Chain
Network/Design
 Strategic Decision
 Strategic Fit
 Supply Chain effects
on Business
Performance

 References 20

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Background of The Study

We have always seen numerous amounts of products of Amul in the market and as
a student of SCM and while doing this project it was very interesting to know and to
analyse how a company with such a long product line and such a wide portfolio
managed its supply chain so effectively.

Objective of the Study

Objective of this project is to highlight the factors and the process in the supply chain
of Amul that makes it such a smooth operating company despite of having one of the
longest chain of products under its belt.

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 Introduction to the company – Amul

The word 'Amul' was used to market the range of milk products produced by the
Kaira Union, derived from 'Amulya', which means 'precious' or 'priceless' in Sanskrit.

Over the years, as its tagline says, “The Taste of India”, Amul, one of our country's
most beloved brands, has become the flavour of India.

Today, Amul is a sign of - many high-quality goods sold at fair prices; of the genesis
of a large network of cooperatives; of the victory of Indigenous technology; of a
farmers' organization's marketing awareness as established model for the production
of milk.

The Taste of India - these four words are more than what the common man, a mere
slogan, would think of them. This is called corporate positioning by advertisers. But
apart from these four words, it gives meaning to the never-ending crusade of Amul;
they affirm Amul 's devotion to bringing quality food products right down to the rural
man, products that the common man would otherwise never have afforded. It was
Amul who first made the 'aam-admi' affordable chocolate, then followed the same
with ice cream, pizza, and a range of value-added items.

Vision and Mission

 Vision –
 Amul’s vision is to – “provide more and more satisfaction to the farmers,
employees and distributers.”

 Mission –
 Amul 's principal goal is to support farmers. The base stone of Amul, as they
were.
 It is only for farmers and customers that the scheme works, not for profit.
 The main goal of Amul is to provide the customer with quality goods at a
minimum cost.

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  Amul 's objective is to provide maximum benefit for farmers in terms of
money.

Product Portfolio

Amul has a very, very large range of products. The product range of Amul is
primarily comprised of dairy products. As they have the largest market share in their
product category, Amul butter, Amul cheese and Amul ice cream are cash cows for
Amul. Amul Ice Cream is among India's top 10 brands of ice cream.

Amul Milk

 Amul Cow
 Amul Gold
 Amul Taaza
 Amul Shakthi

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Amul Butter/Bread spreads

 Amul Butter
 Amul Lite
 Choco Buttery spread
 Delicious Fat spread
 Amul Safed Makkhan

Amul Ice-cream

 Amul Tricone
 Amul Sundae
 Amul Tub 1 Lt
 Amul Jumbo cups

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 VALUE DELIVARBLES
Competitive Strategy of Amul

If we see for Amul, the product portfolio/ product line is quite large which ultimately
allows Amul to run and sustain its product presence on the market, especially when
it comes to retail level. Amul due to its wide product line, faces competition from
different brands for different products. Analysis of the Amul product portfolio shows
that its Butter and Ice Cream are cash cows for it.

Amul has a great supply chain strategy and thus a large number of suppliers of its
dairy products, which gives it immense power and promotes Amul by depending on
its supply chain to generate high volumes.

Another strategy which the company has which gives them a competitive edge is
that the company has increased its milk procurement in the last decade. The
procurement has seen a phenomenal increase as there has been an increase of
138% in the last decade. In the clearer numeric manner, the procurement which was
90.93 LLPD in the year 2009-10, increased to 215.96 LLPD in 2019-20.

The period when we were in a phase of lockdown, various milk unions located at
Gujarat were procuring additional 35 lakh litres of milk from the producers, which in
financial terms we can say that the company paid an extra amount of Rs.800 crores
to the producers of the milk.

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 Supply Chain Network/Design of Amul

Since we all are in a situation of pandemic, Amul with the help of its 3.6 million dairy
farmers across 18,700 village cooperatives, managed almost seamlessly to continue
pick-up twice a day and supply its eventual consumers in 1,000 cities and towns.
They definitely adopted new protocols: of washing hands and social distancing for
milk farmers, of sanitising trucks for drivers.

The company made sure that trucks on all sides of it have the stickers, of ‘ Essential
Product Delivery’ so that there are no unnecessary stoppages on the route.
Technology also played a tremendous role for the company as it helped them in
seeing through this crisis as GPS-enabled trucks could show the real time location of
the truck if being stopped anywhere and the matter directly could be taken to the
officials concerned and get the distribution channel unstopped.

Apart of this pandemic situation, if we talk about the Supply chain network of the
AMUL, it is in this way:

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The supply chain of Amul consists of farmers who produce milk from their cattle, as
shown in the figure. The farmers are organised into village cooperative societies
(VCoS) called cooperatives. VCoS having the chilling plant installed, chills the milk
with cooling plants and transports it to the Union Processing Unit. VCoS which are
not having a chilling plant can take milk to the chilling plant and then to the
processing unit. Excess milk which is left is offered locally to local clients through
VCoS. Thirteen separate dairy cooperatives, called Unions, of which Amul is one,
are supplied with milk by these VCoS. The Gujarat Cooperative Milk Marketing
Federation (GCMMF) will be supplied with the milk or milk products produced at
these unions. The GCMMF is the marketing body in the state of Gujarat for the
goods of all the unions. In India, GCMMF has 47 regional distribution centres, serves
more than 5,00,000 retail outlets and exports to over 15 countries.

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 Strategic Decisions

The way the company manages its networks architecture and operation creates a
direct impact on the supply chain 's efficiency.

The basic need of the strategic decisions in a supply chain management/network is

required in warehouses, distribution centres, and deciding the transportation modes
to be used.

The drivers of Supply Chain Management are –

1) Facilities
2) Inventory
3) Transportation
4) Information
5) Sourcing
6) Pricing

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Now talking about these drivers in context of Amul –

 Facility –

The company as mentioned above, deals in a number of products. Due to its wide
product line, the facility centres also needs to be in quite a large number and for
catering the consumer needs and providing them the products, the company has
total of 30 plants within a sphere of 10 states in India, most of them being located in
Gujarat. The plants are majorly involved in production of – Milk, Ice-cream, Milk
Powder and Ghee. Each facility has 4 departments of production and same for
packaging. With these numbers we can say that Company follows then responsive
nature in context of Facility.

 Inventory –

Amul keeps it inventory in following ways:

Raw Milk Stock

Raw Materials

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Work-In-Progress

Finished Goods

Engineered Goods

Scraps

Stock-In-Progress

The unique feature here is that they all are in continuous process and this gives the
advantage in minimising the possibility for interruption in the production schedule of
the company and the other benefit is that it keeps the capital to be invested also at a
lower stake.

 Transportation –

The company is majorly dependant on the roads for the transportation of its
products, for which they use the trucks, which was even operating during the
lockdown period with the sticker “Essential product Delivery”. Thus, with this we can
say that the nature of transportation in Amul has been responsive.

 Information –

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An automated milk collection system was built which could recognise the quality /
quantity of milk and evaluate it. When more than 1000 producers join a village
cooperative per day and increase accountability, this contributes to time saving. And
recently, during the time of pandemic the company have yet used the technology in a
very efficient manner as they have made their trucks GPS enabled for seeing the
real time location of the trucks. So, we can say that the company is shifting towards
the responsive way of information.

 Pricing –

The company since its very advent have followed the policy of making available the
dairy products to its customers of every segment at a very lower price. GCMMF
determines the price range of various goods in Amul based on various factors such
as raw materials, labour costs, margin of distributors, benefit from farmers, overhead
of administrative and suppliers, product demand and supply, price of competitors,
cost of transportation, cost of packaging, govt. Around taxation, etc. With the rise in
the cost of transport in the Indian economy, storage costs have risen, but Amul still
offers quality goods at a fair and affordable price compared to others.

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Strategic Fit

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Amul enjoys the leverage of being effectively fit by utilising advantage of its both
cooperatives and corporate entities.

Consumer’s point of view:

 Its vast product line is a great advantage to the consumers.

 Due to its massive supply chain network, it very well manages to cater the
needs of the whole country
 The price range is yet another additional benefit which it provides to its
customer as it offers product at different prices.

Company’s point of view:

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  As mentioned, the supply chain network is massive of the company with 30
plants located in 10 states, helps in cutting the transportation cost and
encouraging profit.
 Amul has always focused on its Research and Development department,
allocating their profit in the best possible way.

We can see how well Amul combines it’s both cooperative and corporate sides for
building and maintaining its various advantages which has proven to be a great
Strategic fit for the company.

Supply Chain’s effect on Business Performance

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 AMOUNT IN LAKHS

METRIC 2016-17 2017-18 2018-19 INERPRETATION

RETURN ON =571570.18/14697.125 =627194/18441.01 =697930.77/22049.5 The return on

EQUITY(ROE)=NET =38.88/100 = 0.38 =34.01/100 = 0.34 =31.65/100 = 0.31 investment
INCOME/AVERAGE made by the
SHAREHOLDER EQUITY firm’s
shareholder has
decreased from
38% in 2016-17
to 31% in
financial year
2018-19. The
value is high
which is a good
sign.
RETURN ON = 3095.80/161753 = 3933.45/200568.16 =1266.18/230384.895
ASSETS(ROA)=EBIT/AVERAGE =0.01/100 = 0.0001 =0.01/100 = 0.0001 =0.005/100 = 0.00005
TOTAL ASSETS
EBIT=NET INCOME+
(INTEREST EXPENSE*(1-TAX
RATE)

RETURN ON FINANCIAL =0.38-0.0001 =0.34-0.0001 =0.31-0.00005 In 2018 the

LEVERAGE(ROFL)= difference =0.3799 =0.3399 =0.30 return on
between ROE and ROA financial
leverage was
45% which
shows 45% of
ROE can be
attributed to
accounts
payable and
debt
ACOUNT PAYABLE =572214.46/7057.67 =625625.62/82578.7 =696633.72/85960.125 In comparison
TURNOVER (APT) =8.1 =7.57 =8.1 with 2016 and
=COGS/ACCOUNTS PAYABLE 2018 the year
=52/8.1 =52/7.57 =52/2.69 2017 has a good
=6.42 weeks =6.86 weeks =6.42 weeks position with
6.86 weeks and
a APT value of
7.57. The APT
value has
increase again
in 2018
ACCOUNT RECEIVABLE =571570.18/22153.52 =627194/29218.82 =697930.77/34821.45 The highest APT
TURNOVER (ART)=TOTAL =25.80 =21.46 =20.04 was in 2016.
REVENUE/NET RECEIVABLE Then APT has
=52/25.80 =52/21.46 =52/20.04 declined in 2017
=2.01 weeks =2.42 weeks =2.59 weeks and 2018. Amul
takes more
weeks on
average to
collect money

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 from sales after
it had made the
sales in 2018 as
compared to
2016

*Figures taken from the financial/annual report

The company has shown immense growth in comparison to its competitors.

The company achieved 52000 crores in year 2019-20 with annual growth rate of
32%

And the reason why the company has shown such immense growth is that the
company has started expanding its wholesaler and retailer network and adopting hub
and Spoke model targeting tier 2 and 3 cities.

The company has expanded 14 branches so that product could be easily supplied to
emerging cities.

As per the year ending on 31st March, 2019, Amul reported an increase in its
turnover by 13%, which in total took the turnover to Rs.33,150 crores.

The 18 member unions of Amul, having more than 3.6 million farmers in 18,700
Gujarat villages, procure an average of 23 million litres of milk a day, which is 10
percent higher than last year.

The factors such as procurement of milk from the farmers, expanding or increasing
the reach of their market and also with launching new products for the customers
benefit and increasing the facilities with milk processing capacities all over the India,
Amul Federation has successfully achieved CAGR of 17.5% or even more than
that.

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 References

https://www.thehindubusinessline.com/economy/agri-business/amul-brand-sales-cross-52000-
crore-in-2019-20/article32122488.ece

https://amul.com/files/pdf/turnover-19.pdf

https://en.wikipedia.org/wiki/Amul

https://www.amul.com/m/brands

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