Elevating the constraints – the case of

Atulya Dairy
Prasad Vasant Joshi, Vardhan Mahesh Choubey and Harshal Gangadhar Desale

anraj Deore, Founder and Managing Director of Atulya Dairy, based in Nashik, Prasad Vasant Joshi is

G India, had a discussion with his team about a notice received from the Food and
Drug Administration (FDA) intimating an inspection visit to the dairy plant by the
Assistant Professor,
Vardhan Mahesh Choubey
is Assistant Professor and
financial year end 2022–2023. The notice, dated January 31, 2022, had made him
Harshal Gangadhar Desale
uncomfortable. The dairy business in India had more of an unorganized nature and was
is Student are all based at
primarily dominated by micro-, small- and medium-scale dairies. The pasteurization and
Symbiosis Institute of
packaging process durations varied from 12 to 24 h. As Atulya Dairy had a humble Operations Management,
beginning, it operated as a small plant located within the city with limited capacity that was Nashik Symbiosis
considered sufficient for the initial few years. However, as the business expanded, the International (Deemed
existing chilling system storage capacity was found to be insufficient to match the demand. University), Pune, India.
Due to insufficient storage capacity, some of the milk was kept in storage tanks without
chilling system, which had the risk of milk spoilage. Although this had become a part of
routine management at the plant, the FDA audit would have raised objections regarding the
same, and Atulya Dairy would be penalized for unhygienic practices, possibly costing them
their license. The team had two options available. To opt for either expansion by setting up a
new plant or enhancement of the storage capacity by using a temporary solution that would
not compromise on hygiene and that fit to the FDA inspection norms. This case presented
data related to the dairy operations in terms of the supply of milk, the capacity of storage
tanks, the capacity of pasteurizers, the timings of supply and the types of milk processed.
This case built on understanding the capacities and constraints and making an informed
decision to overcome the constraints.

Overview
Deore, a typical first-generation entrepreneur, was at a crossroads and was worried about
the future of the dairy plant he had nurtured over the past 35 years. He had left school in the
eighth grade and had no formal management education. The life lessons that he learned
through his failures were the only gurus that shaped him into a tough entrepreneur-turned- The authors express our
sincere gratitude towards
leader. Atulya Dairy was registered as a proprietary firm in 1988, even though Deore had Mr Ganraj Deore, Mr Atul Deore
already been in the business since 1980. From being a simple milk vendor who delivered and all the stakeholders of
Atulya Dairy for extending
milk by going door to door on his bicycle, he created his empire with an annual turnover of their generous support and
around Rs 300m. For the year 2021–2022, the dairy reported a profit margin of 9.5%. The information.
dairy had nine outlets in the same city, mainly operated by the family members and relatives Disclaimer. This case is written
solely for educational purposes
of Deore. These outlets covered about 30% of the city. Customer feedback was excellent and is not intended to represent
and huge demand was rarely left unfulfilled. Being an ambitious person, Deore was successful or unsuccessful
managerial decision-making.
considering the expansion of his business in the near future. Deore was an operations man The authors may have
and was always involved in the routine activities on the shop floor. With a slow and steady disguised names and financial
and other recognizable
growth, the dairy had ventured into packing processed milk and manufacturing milk information to protect
products. You found Deore every day working on the shop floor, minutely observing the confidentiality.

DOI 10.1108/EEMCS-04-2023-0102 VOL. 13 NO. 2 2023, pp. 1-15, © Emerald Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 workers and instructing them. His success could be attributed to several factors such as
capitalizing on the right opportunity, maintaining healthy relations with suppliers and
customers and managing with limited resources. His people management skills helped him
in employing the right people at the right place and in getting the most out of them. The
negligible attrition rate in his dairy farms was proof of his humane human resources policies.
The dairy industry in India showed a significant growth. With a contribution of 24% to the
total global milk production, India was ranked at the first position (Sishodia, 2023). The
compound annual growth rate of milk production in India was 6.2% in the year 2020–2021
(Sishodia, 2023). This was complemented by the growth of exports of milk products by
19.45% in the year 2021–2022. The government was also taking efforts to promote the
development of the animal husbandry and dairy sector in India (Ministry of Fisheries, 2022).
For the same reason, a special fund of Rs 15,000 crores was set aside by the central
government in the year 2021–2022. Milk production in the state of Maharashtra was
showing consistent growth year on year, with 13,703.32 thousand metric tons of production
in the year 2020–2021 (IMARC Group, 2020). Among the major contributing districts of
Maharashtra, Nashik contributed to around 6% of the total milk production with 843.9
thousand metric tons of milk in the year 2020–2021 (Ministry of Fisheries, 2022). Nashik
district was ranked second in terms of milk production density in Maharashtra (NDDB,
2015). The Nashik dairy sector mainly comprised marginal producers and sellers who were
the local farmers with one or two cattle selling milk for an extra income. A limited number of
dairies, around three to four, operated to the scale of Atulya Dairy. A couple of them had
grown into farmer-producer companies and were targeting premium customers across
metro cities in the vicinity. However, as opined by the protagonist, among all other dairies
serving Nashik, Atulya Dairy, with a market share of roughly 10%–12%, was the largest. It
was primarily into milk processing and selling milk packets to retail customers. They had
developed a new product segment of milk products, notably sweets, and beverages, that
found a high demand during festive seasons. The input to the dairy came from farmers who
were marginal milk producers and who would deliver milk to the dairy or collection centers.
The collected milk was pasteurized and packaged to be sold by retail. Atulya Dairy had a
small-scale processing unit located in the industrial area of the city and was functional
24  7. The workers worked in two shifts, and the day shift started at 8 a.m. and ended at 8
p.m.

The process
The milk collection was one of the crucial stages of the business process. The quality,
quantity and input timing were the determining factors for the success of the overall supply
chain. Multiple vendors and the categorization of milk as cow milk (CM) and buffalo milk
(BM) added to the complexity of the procurement process. The raw milk was received in
three sessions: morning, afternoon and evening (Tables 1 and 2). The milk received during
the morning and evening sessions was from local vendors, individual farmers or small
village collection centers in and around the city. The vendors came and unloaded the milk

Table 1 Milk procurement details for Monday, Wednesday, Friday and Sunday
Sr. no. Milk type Receiving session Supplier type Quantity (L)

1 Cow Morning Farmers 700

2 Buffalo Morning Farmers 3,500
3 Cow Afternoon Collection center 8,500
4 Buffalo Afternoon Collection center 4,500
5 Cow Evening Farmers 500
6 Buffalo Evening Farmers 3,000
Source: Authors’ compilation from their interaction with the protagonist

PAGE 2 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 13 NO. 2 2023

 Table 2 Milk procurement details for Tuesday, Thursday and Saturday
Sr. no. Milk type Receiving session Supplier type Quantity (L)

1 Cow Morning Farmers 700

2 Buffalo Morning Farmers 3,500
3 Cow Afternoon Collection center 8,500
4 Buffalo Afternoon Collection center 10,000
5 Cow Evening Farmers 500
6 Buffalo Evening Farmers 3,000
Source: Authors’ compilation from their interaction with the protagonist

cans at the factory receiving dock. A quality check was performed, and a sample from the
lot was taken to calculate the fat and solids not fat (SNF). The payments to the vendors were
made monthly according to the percent fat and SNF of the milk they brought.
The afternoon session started at around 1.00 p.m. This session was for receiving the milk in
bulk lots. The milk came in tankers from collection centers and self-owned dairy farms
located 30–40 km away from the city and previously owned by Atulya Dairy but were given
on lease due to operational difficulties. Milk from six different locations was collected using
four tankers. The company owned two tankers and collected milk from four separate
locations (two locations for each tanker) into separate compartments within the same tank.
Vendors from the other two locations sent their tankers to drop off the milk at the factory
receiving dock.

Milk procurement details

The processing of milk started from the receiving dock (Figure 1). As the milk arrived in
cans from the farmers, it was directly poured manually into a 500-L weighing balance. For

Figure 1 Processing of milk

VOL. 13 NO. 2 2023 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 3

 unloading the tankers, a 10-kilo-liter-per-hour (KLPH) pump was used. Using this pump,
even the milk in the tankers was first poured into the weighing balance. The milk from the
weighing balance was then transferred to a tank labeled “primary tank” in lots of 500 L. The
primary tank acted as an entry point to the pasteurizer. The only way into the pasteurizer
was through this tank that had a capacity of 2,000 L. The primary tank also had a valve to
avoid excess inflow of milk into the pasteurizer. Pasteurization is a process by which milk is
heated to a high temperature of around 75˚C for about 15 s to kill harmful bacteria that could
cause multiple bacterial diseases (Phillips, 2023). This heated milk was then suddenly
cooled to a temperature of 3˚C–4˚C. The pasteurizer was of 5 KLPH capacity, i.e. only
5,000 L of milk could have been pasteurized in an hour.
After the pasteurization process, the milk was transferred to the storage tanks of 5,000 L
with chilling system and agitators. Milk was transferred to storage tanks of 10,000 L only
after the previous day’s packaging was completed, as the packaging system was
connected to it. These tanks were located on the rooftops to ease the packaging process
by geo-positivity (Table 3).
The stored milk was divided into lots of fixed quantities for different categories, namely, BM
(8,500 L) and CM (7,500 L).

The constraints
The milk categories, their quantities and the limited capacities gave rise to multiple
operational constraints. The 2,000-L primary tank was filled from the weighing balance by
using a 10-KLPH pump. The pasteurizer was fed from this primary tank. The capacity of the
pasteurizer was 5 KLPH. Thus, it took more time to unload a tanker. As a result of the delay
due to the capacity issue, upstream processes slowed down.
With the arrival of the vendor’s tanker, the unloading of the company-owned tanker had to
be stalled, as the vendor’s tanker had to be attached for unloading on priority. In case there
was a CM–BM mismatch between the newly arrived vendor tanker and the previously being
unloaded company-owned tanker, then this created a further delay, and the vendor’s tanker
was not unloaded until the milk in the weighing balance was over.
Every day the BM (8,500 L) and CM (7,500 L) lots were made before noon, each occupying
two tanks of 10,000 L capacity. Therefore, these tanks could not be used for any further
process until the packing process was completed. Packing took around 5 h for 8,000 L of
milk. Also, the packing system was attached only to the 10,000-L tanks. Milk products were
manufactured by using only BM, which was stored in a tank of 2,000 L capacity. Thus, out of
five tanks, only two tanks were available to store the milk received. Hence, the dairy had
found another way of storing the milk; the transport tanker owned by the dairy was used as
a storage tank to overcome capacity constraints. The challenge with using this transport
tanker was that it did not have a chilling system and thus carried the risk of milk spoilage.
Even though the plant was taking the utmost care to maintain hygiene and purity of milk,
because of capacity constraints that existed in the plant, the managers had to adopt
unhygienic practices like storing the milk in tanks without a chilling system. Although there
were no reports of health concerns from the customers, there was a history of milk spoilage

Table 3 Storage capacity

Capacity (L) No. of tanks Total capacity (L)

10,000 2 20,000
5,000 2 10,000
2,000 1 2,000
Total storage capacity 32,000
Source: Authors’ compilation from their interaction with the protagonist

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in the tanks without a chilling system once or twice every fortnight. On average, 5,000 L of
milk got spoiled every month, costing around Rs 2.5m annually. This led to the additional
cost of procurement of raw milk at a higher cost to bridge the demand–supply gap.

The dilemma
Deore was in a situation where he had to face the FDA inspection in just a few days. It was
all about his empire; any adverse remark from the FDA would taint his brand image. Also, if
the dairy’s process of storing milk in a transport tanker without a chilling system continued,
the business growth will surely decelerate. The solution Deore was looking for should have
been cost-effective and should have sufficed the purpose of the FDA inspection. The team
came up with a few alternatives. The first alternative suggested setting up an additional
plant. This would have helped in the business expansion but, at the same time, would have
attracted capital expenditure of about Rs 100m for the company, which did not seem
financially feasible at this point. Also, the land required for the new plant was not available
near to the existing plant, so the new plant would have to be set up far away from the city.
This will in turn lead to more challenges due to the added distance. The location of the
existing plant was convenient for the farmers to supply milk at the factory. The new location
would make delivery laborious for the farmers. More importantly, setting up a new plant
within a couple of months would have been very difficult. Although the team along with
Deore was convinced to consider the expansion plan, with the given situation, the capital
expenditure involved did not make this suggestion a right fit.
The second alternative suggested by the team was to install an additional 5,000-L storage
tank with a chilling system and agitators. This would have eliminated the need for using the
transport tank as a storage option, thus minimizing the risk of milk spoilage. The investment
required for the tank, including installation, was about Rs 1.5m.
The third alternative suggested by the team was to set up a buffer tank for the primary tank.
The buffer tank of almost equal capacity as the primary tank would have cost around Rs Keywords:
0.7m. Constraints,
Capacity utilization,
Each of these proposals seemed to have good potential; hence, Deore was in a dilemma as Theory of constraints,
to how to find out the proper solution. He decided to approach his professor friend for Dairy operations,
advice to evaluate these alternatives. Pasteurization

References
IMARC Group. (2020). Dairy industry in Maharashtra: Market size, growth, prices, segments,
cooperatives, private dairies, procurement, and distribution, Noida: IMARC Group.
Ministry of Fisheries, A. H. (2022). Retrieved from https://pib.gov.in/PressReleasePage.aspx?
PRID¼1812372
Phillips, D. C. (2023). Louisiana, Retrieved from Louisiana Dept of Health: https://ldh.la.gov/page/660#::
text¼Pasteurization%20is%20a%20process%20by,%2C%20tuberculosis%2C%20diphtheria%20and%
20brucellosis (accessed 4 April 2023).
Sishodia, G. (2023). Invest India, Retrieved from InvestIndia.gov.in: www.investindia.gov.in/sector/food-
processing/dairy (accessed 4 April 2023).

Corresponding author
Vardhan Mahesh Choubey can be contacted at: vardhan.choubey@siom.in

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