Organization: Amul

Introduction:

Amul made an extra INR 698 Crores during the lockdown, it did everything in the book to use the
pandemic as an accelerator. For example, it began running its old ads alongside the reruns of
Ramayana and Mahabharata on Doordarshan when it spotted a lot of viewers getting nostalgic
about them, on their social media timelines. We dive into the operational structure of Amul, its
trump cards in its arsenal and how Amul reacted to covid-19, how effectively and efficiently they
forecasted the change in demand and consumer behaviour and tapped into the opportunity to
expand its market share in the dairy industry.

OPERATIONAL EFFICIENCY:

Operational Efficiency of an organization is based upon the nature of a firm’s operations strategy.
This comes from the mission of the firm itself and is tied to the notion of achieving competitive
advantage through operations. A key subsequent decision is what type of process a business needs.
Design must follow strategy; so given priorities from the strategic plan, a process can be designed
that will support these priorities. There should always be flexibility in the strategy adopted by an
organization. Strategies ensure organizational effectiveness and efficiency because with the help of
strategies the resource can be put to the best of their efficiency and maximum contribution to
organizational objectives. Thus, strategies ensure that resources are put in action in a way in which
they are specified. The strategies can be implemented only when we have a proper organizational
design.

Chart 1A
E-REVOLUTION:

AMUL is the first company in the co-operative form to adopt the e-revolution. In this information
communication-Entertainment age, the barriers between the business organization and consumers,
between manufacturers and end-users are all breaking down. This is what was started fifty years
back by AMUL by eliminating the ‘middlemen’ and bringing the ‘producers’ closer to the
‘consumers’. The organization believes in innovations in product as well as process. For rapid
communication access to Veterinary Health Assistance they have introduced the GIS facility. The
adoption of the electronic milk testers to ensure efficient testing and measurement of milk
constituents is a step in this direction. This is first organization to have its own website –
www.amul.com They have nationwide cyber stores, functioning in some 120 cities, and an AMUL
cyber stores gifting service capable of serving consumers in more than 220 cities, on special
occasions. This has been possible by creating an IT network, which links the production, centres with
sales offices and dealers by VSAT and e-mail connectivity.

How Amul beat its competition & made 39,200 Cr during Lockdown:

On 24th March 2020, Prime Minister Narendra Modi announced a nation-wide lockdown. The dairy
industry in India was one of the heavily affected industries due to the lockdown and milk producers
were losing approximately INR 112.3 Crores every day. In case of Amul, it was able to make a profit
of extra INR 698 Crores during the lockdown. Amul went on to introduce 33 new products and
procured an additional 35 lakh litres of milk every day, paid INR 800 Crores extra to the rural milk
producers of India. Let’s see how Amul managed to make these incredible feet. The answer lies in
the extraordinary supply chain of Amul. After announcement of lockdown, dairy industry was able to
continue its operations at limited restriction because milk belonged to essential products, but as
soon as the announcement of lockdown was done, several businesses closed or cut down its
services. Amul also saw a decline of 10 to 12% in demand of its products. Amul was different from
the others in the industry and started preparing for a surge in demand while others were preparing
for a loss in demand. Amul considered an important factor which is change in consumer behavior.
Since there is a paradigm shift in consumer behavior every time there is a crisis. As more people
began to stay at home, the household consumption of milk and milk products skyrocketed. Amul
plants started working at 115% their capacity throughout the lockdown forecasting the rise in
demand in home consumption of milk and milk products. They went further and hired other vacant
plants to extend their operations. They realized moving trucks through the country will be difficult
due to shortage of labour and lockdown restrictions. Instead, they started using railways to transport
the products quickly throughout the country. The vast supply chain of Amul; 18700 societies, 5000
milk tankers to 200 stations, 10000 distributors, 1 million retailors, and more than 3.6 million
farmers.
 Fig 1A

Amul was able to manage this vast supply chain thanks to the strategic partnership established
between Amul and IBM in 2009. Amul invested 80 Crores to transforming the information
technology landscape of the company. This means IBM would develop a full fledged digital system to
track every small detail of operation that is being carried out in the supply chain of Amul. Through
IBM system, the management team of Amul could exactly tell the current scenario at the moment i.e
how many plants working at full capacity, how many trucks are engaged, in which areas, and which
plants and trucks are at idle capacity etc. This helped Amul to divert the work load to bring optimum
utilization of every element of the supply chain. This system turned out to be a game changer for
Amul during the lockdown because on one side the supply chain of milk was overloaded, the ice
cream and frozen food verticals of the company was almost shut down and the labors, trucks and
storage were laying at idle capacity from that end. Thanks to IBM system, R. S. Sodhi sir and team
wad able to accurately oversee the entire operation of the supply chain and very conveniently
diverted all idle resources from ice cream and frozen foods vertical to the milk supply chain. The
entire process is said to have happened overnight. This end to end digitalization made the process so
efficient and gave them so much clarity about their operations that Amul was able to give incentives
to their ground staff i.e. farmers. The casual workers were given 100 to 125 rupees cash incentives
and food and stay arrangement was arranged for the workers so that they don’t get sick and
affected by covid-19. When they realized that their cattle feed was not efficient, Amul even made
extra arrangement for cattle feed for farmers. All of this made supply chain of Amul so efficient and
effective that while the rest of the dairy industry was completely shut down, Amul tapped on to their
market share and procured 3.5 million extra litres of milk every single day and paid 800 Crores extra
to the rural milk producers of India. Amul even used third party e-commerce sites like Flipkart,
Dunzo, BigBasket and made exclusive deals with Swiggy and Zomato to sell butter, milkshake and
paneer. According to Sodhi sir, in May 2020 they got more than 60000 orders through Zomato and
sold INR 3 Crores worth of Amul products in 200 cities across India. This was a second pillar of their
historic success i.e. 1. The end to end successful digitization of their entire supply chain and 2.
Incentivizing their labour forces. Amul even increased in its ad spend and ran its old advertisements
alongside Ramayan and Mahabharata in Door Darshan which resonated with the nostalgic mood of
the country creating an even better impact.

Observation:

Amul was able to give an extraordinary foresight of consumer behavior through Agile Supply Chain
Management System using Digital Transformation, third party collaboration, incentivizing labour and
through strategic marketing initiatives, Amul established a benchmark for crisis management for
dairy companies all across the world to follow.

References:

www.amul.coop

www.amul.com

http://www.amul.com/organization.html

https://www.ijser.org/researchpaper/A-CASE-STUDY-OF-AMUL-COOPERATIVE-IN-INDIA-IN-
RELATION-TO-ORGANIZATIONAL-DESIGN-AND-OPERATIONAL-EFFICIENCY.pdf