STUDY OF SUPPLY CHAIN OF AMUL

INTRODUCTION
Amul is an Indian state government cooperative under the ownership of Gujarat Cooperative
Milk Marketing Federation, Ministry of Cooperation, Government of Gujarat based at Anand
in Gujarat. Formed in 1946, it is a cooperative brand managed by the Gujarat Cooperative
Milk Marketing Federation Ltd. (GCMMF), which today is jointly controlled by 36 lakh (3.6
million) milk producers in Gujarat, and the apex body of 13 district milk unions, spread
across 13,000 villages of Gujarat. Amul spurred India's White Revolution, which made the
country the world's largest producer of milk and milk products.
Kaira Union introduced the brand “Amul” for marketing its product range. The word “Amul”
is derived from Sanskrit word ‘Amulya’ which means ‘priceless’ or precious, a name
proposed by then founding leader of Agriculture College, Maganbhai Patel.
Tribhuvandas Kishibhai Patel under the guidance of Sardar Vallabhbhai Patel became the
founding chairman of the organization and led it until his retirement in the 70s. He hired
Verghese Kurien in 1949 and convinced him to stay and help with the mission.[8][9] Under
the chairmanship of Tribhuvandas, Kurien was initially the general manager and helped guide
the technical and marketing efforts of Amul. Kurien was the chairman of Amul briefly after
Tribhuvandas Kishibhai Patel died in 1994. Kurien, founder-chairman of the GCMMF for
more than 30 years (1973–2006), is credited with the success of Amul's marketingAmul :
Intergated Supply Chain Management.

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AMUL was launched in 1946, by the Gujarat Co-operative federation and has created
the white revolution in India with its focus on quality, value for money, availability, and
service to customers. The supply chain management process of Amul can be explained as
follows:
Buy it
Dairy farmers in the villages supply milk to the Village Cooperative Societies where milk is
cooled and stored using chillers. Chilled milk is transported from the Village cooperative
societies to the District unions.
Make it
Milk is pasteurized in the District Union. Pasteurized milk is transported to the State Co-
operation Marketing Federation (GCMMF)* factories where dairy products are manufactured
and branded.
Move and Market it
Products are transported to various wholesale and retail stores. Amul has an extended supply
chain to Amul’s food factory Reverse logistics to return milk churn, pouch milk tray, bottles,
and damaged products to the dairy is effective in Amul.
Let us now map each of the processes

Process 1: Buy it

The upstream supply chain of Amul links the farmers and village cooperative societies. The
milk is procured at the local cooperative milk collection centre and transported to the cold
storage network and the process is as follows:

Mascot : Amul

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Buy it – links farmers to local cooperative milk collection societies

Every farmer who supplies milk to Amul is given a plastic card for identification.
Farmer’s identification number is captured and transmitted to the local personal computer.
Milk weighed and fat content measured. The amount due to the farmer is calculated based on
the fat content. Value of the milk is printed on the slip and farmers collect the payment.
Village Co-operative society, in turn, provides cattle feed, veterinary service, and rural health
schemes to ensure the quality of milk and suppler well- being.
The process at Amul from supplier identification to payment is digitally integrated
with Automatic Milk Collection Unit Systems (AMCUS). Amul has
implemented Geographic Information Systems (GIS) for tracking of milk at the village
collection centres. The Dairy Information and Service Kiosk (DISK) is set to establish a good
supplier relationship.
The kiosk provides information to improve cattle yield and connects them to procure or
collaborate with dairy products and services suppliers. It also provides information and
functions as a decision support system for Village collection centres to improve performance.

Process 2: Make it and move it

At Amul, the milk is pasteurized at the District Milk Unions referred to as the Cool storage
network. The internal supply chain of “Make it “starts with the milk being received at District
Milk unions with chilling plants. Amul’s chillers (District Milk Unions) are strategically
located in proximity to the villages and delivery to local chillers is by insulated rail
tankers and chilled trucks.
Amul facilitates prompt transportation to district facilities and further dispatch it to consumer
or processing units. Transport of processed products is through chilled trucks to distribution
centers.
Electronic systems to track inventory provides information for replenishment schedules.
Amul has interconnected its zonal offices, regional offices, and member
diaries through VSAT, and Gujarat Co-operative Federation has a strategic tie-up with IBM
to implement SAP ERP on IBM technologies.
This will digitally connect end to end business processes and ensure effective supply chain
performance.

Process 3: Move it and sell it

The downstream supply chain of Amul indicates that processed milk and dairy products
move from dairy unions to GCMMF owned warehouses. Orders are received by GCMMF
(Devas Naka) and products are distributed through its 56 Sales offices, and a network of
10,000 dealers and 100,000 retailers. Amul adopts a three-tier downstream
flow as Manufacturing units – Company depots- Wholesale depots – Retailers and Direct
retailing through Amul utterly delicious parlours/franchisees.

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Logistics decisions for distribution are controlled by Amul and the transportation cost is
borne by Amul. GCMMF monitors suppliers of milk and distributors of finished goods.
Effective reverse logistics minimizes cost. Amul has established a B2B and B2C portal that
links its supply partners, distributors, and customers, and it e -sells all its products
through cyber stores.

Process 4: Integrate it

Amul as a cooperative society has integrated its supply chain effectively both vertically and
horizontally. The basic advantage of Amul’s supply chain is
 It’s backward integration with dairy farmers who are members and the village
co-operative societies who function as collection centres.
 It’s forward integration to meet customers is through Amul utterly delicious
parlours/ franchisees and Amul ‘s cyberstores.

Lessons

Lessons 1 – Buy it

 Geographic proximity of supplies provides a competitive advantage.

 Provide simple automated procurement services to reduce procurement time.
 Develop a long-term supplier relationship.
 Provide support systems to suppliers for improved productivity and to meet
quality standards.
 Partnering and revenue sharing with the supplier to indicate your growth is
also his growth.
 Digital integration provides better supplier service and ensures quality
assessment and speedy delivery by suppliers.

Lessons 2 – Make it and move it

 Strategic location of manufacturing facilities that captures local manufacturing

advantages.
 Resources and internal logistics systems need to be designed to suit the
product and process type.
 Outsourcing decisions for supply chain processes and supporting processes
determine the success of supply chain management.
 Digital integration with enterprise resource planning enhances supply chain
efficiency and responsiveness.

Lesson 3 – Move it and sell it

 Storage, transportation, and logistics need to be monitored effectively.

 Cost and lead time in transportation is an important factor to be considered in
the supply chain.
 A network of distributors need to be maintained without conflict of interest.

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  Digital integration needs to trigger customer analysis, integrate demand
management with supply chains.esign Business portals and cyber stores for
responsive supply chains.

Lessons 4 – Integrate it

 Vertical and horizontal integration is the extended supply chain of any

organization.
 Design effective processes that ensure quality, speedy delivery, and flexibility
across the supply chain partners.

Integrated supply chain management is about linking 5 functions namely buy it, make it,
move it, sell and service it, integrate it and this is achieved by well- designed and
unique supply chain processes namely customer analysis, supplier partnership, inventory
management, materials and lead time management, manufacturing and outsourcing, storage,
logistics, and transportation, selling and servicing. Through perfectly designed downstream,
internal and upstream supply chains that are vertically and horizontally integrated.

Supply Chain – AMUL

Company
 Gujarat Co-operative Milk Marketing Federation (GCMMF) is the largest co-operative
society in diary sector in India
 They procure, produce, distribute and sell AMUL brand milk and other diary products.
 The company is in co-operative structure formed by milk producers/farmers in Gujarat

AMUL/GCMMF structure
 Members – 13 district co-op. milk producers unions
 No of Village Co-operative Societies (VCoS) – 13328
 No of milk producers/farmer in VCcS – 2.79 million (all members)
 Milk handling capacities – 11.22 mil. Lit. per day

AMUL Products
 Fresh Milk
 Milk Powder
 Milk drinks
 Bread Spreads and
 Cheese

Delivery Net work

 47 company owned depots with dry cold warehouses for all products
 4000 distributors

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  5 Lakh retailer outlets

Business Model
 Responsive business model with pull system
 Advance order with DD from 4000 distributors to GCMMF
 Advance order with DD from retailer to distributor

SCM Model

1. Supply Side
 Farmers deliver milk to each VCoS
 VCoS with chilling plant chill the milk and transport it to Union Processing Unit
 VCoS with out chilling plant will transport milk to chilling plant and then to processing
unit
 Excess milk is sold by VCoS locally to local customers

2. Processing
 Union processing unit process milk to various products and store in dry cold ware
houses of GCMMF at factory site

3. Delivery Side

 3 PL Company transport products to 47 GCMMF depots

 3 PL transport products to 4000 distributors on behalf of GCMMF
 Distributor transport products to retailers on ‘milk- run model’
 Customers come and by from retailer, or home delivered to customers

SCM Net work Design

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  Implemented ERP by TCS at Rs 3 Cr
 Synchronized working of all elements from distributor – depot – 3PL – Factory to
VcoS/Chilling Plants.
 Real time demand and inventory management
 Union Factory is responsible for production.
 Marketing and Supply Side and Delivery side logistical integration is responsibility of
GCMMF central and regional offices.

SCM model is as shown below

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E- Business initiative of AMUL-
 Enterprise-wide Integrated Application System (EIAS- ERP) was implemented by TCS
 EIAS cover factory operations, distribution, planning, stock control, sales, order
management, e- fund transfer, accounting and quality management.
 EIAS connected all zonal office, regional offices, factory, depot, distributors, 3PL.
VcoS through V-SAT fro seamless exchange of information
 Customized EIAS ERP can be plugged to any additional SCM link and external
systems.

Benefits of SCM implementation

 Reduced lead time
 Faster inventory turnover
 Reduced warehouse space requirements and safety stock due to accurate forecast
 Minimum stock out situations
 Sustainable advantage and benefits to farmers in the supply side with regular assured
market and income.

Challenges now faced by AMUL

 Farmers are not interested in selling to VCoS mainly because of higher prices given by
private local diaries even though they are getting all supports from GCMMF.
 No. of diary farmers coming down due to urban migration from villages and more
lucrative contract agricultural cash crop farming in Gujarat
 Increasing cost of inputs to farmers for cattle feeds, scarcity of grass due to poor rain
 Competition from international and national brands likes Nestle, Godrej, ITC, Nilgiries
etc in non-milk products with superior qualities.
 Increasing competition in milk and milk products from local state co- societies like
MILMA at lower cost.
 Increasing 3PL and local transportation costs