1

Chapter
no.
Table of Contents Pg. no.

Certificate I

Acknowledgement II

Executive Summary III

Declaration IV

List of tables V
1. Introduction 2
2. Objective of study 4
3. Strategy of Amul 5
4. Supply Chain Management 7
5. Supply and Distribution 14
6. E-supply Chain Management 25
7. Conclusion 32
Bibliography and Webliography




2









Introduction

The Kaira District Co-operative Milk Producers Union Limited, popularly known as
Amul Dairy is a US $ 500 million turnover institution.
It is an institution built up with a network of over 10000 Village Co-operative
Societies and 500,000 plus members.
Formed in the year 1946 Amul is the leading food brand in India.
Amul initiated the dairy co-operative movement in India and formed an apex co-
operative organization called Gujarat co-operative Milk Marketing Federation
(GCMMF) and today 70,000 villages and 200 districts in India are part of it.

3


GCMMF markets its products through 50 sales offices throughout India and
distribution is done through a network of 4,000 stockiest who in turn supply 500,000
retail outlets.
Managed by an apex cooperative organization, Gujarat Co-operative Milk Marketing
Federation Ltd. (GCMMF), which today is jointly owned by some 2.41 million milk
producers in Gujarat, India
Amul is the largest food brand in India with an annual turnover of US $1068 million
(2007-08)
Currently Amul has 3.11 million producer members with milk collection average of
6.04 million liters/day.
Amul is the largest producer of milk and milk products in the world.













4


OBJECTIVE OF THE STUDY


The objectives of the Projects are: -
OBJECTIVE
To know the effectiveness of logistics management of Amul and to bench mark the
organization with respect to the industry
To understand role of logistics system in functionality of Amul
To evaluate the image of Amul in customers mind

SCOPE OF THE STUDY
In order to understand the concepts of logistics in terms of practical usage and to glimpse in
to the how real company or organization uses logistics as a formidable tool to gain customer
satisfaction, reduce overall cost and increase efficiency I selected Amul the best retailing
company of India. The study is done only how Amul uses logistics system effectively.




5
Strategy of Amul








Collection
Chain
Supply
Chain
Weighing the
milk
Determination of fat
content
Calculation of the purchase
price
Storing the milk
Processing the
milk
Distributing the milk
Amul
Strategy

6

Amuls strategy is broadly divided into two components:
The first one is the collection chain and the second one is the Supply chain. The collection
chain starts from weighing the milk to determination of the fat content in the milk to finally
calculation of the purchase price. While the supply chain starts from storing the milk to
processing the milk to finally distributing the milk.



















7
Amuls Supply Chain Management


Farmers
Village
Cooperative
Societies (with
Chilling Units)
Village
Cooperative
Societies
(Without Chilling
Units)
Local
Restaurants/Other
Milk related
Businesses
Milk Sold to
Village &
Local Residents
Milk
Processing
Union &
Warehouses
Warehouses
Wholesalers/C&S
Retailers Home Delivery
Contractors
CONSUMERS
Network
Services
* Veterinary
Services
* Animal
Husbandry
* Animal
Feed Factory
* Milk Can
Producers
* Agriculture
University
* Rural
Mgmt.
Institute
* Trucking
Facilities
Chilling
Plants
CONSUMERS

8
AMUL SUPPLY CHAIN MANAGEMENT PRACTICES

AMUL is a dairy cooperative in the western India that has been primarily responsible,
through its innovative practices, for India to become the worlds largest milk producer. The
distinctive features of this paradigm involves managing a large decentralized network of
suppliers and producers, simultaneous development of markets and suppliers, lean and
efficient supply chain, and breakthrough leadership.

Every day Amul collects 447,000 liters of milk from 2.12 million farmers , converts the milk
into branded, packaged products, and delivers goods worth Rs 6 crore (Rs 60 million) to over
500,000 retail outlets across the country.
To implement their vision while retaining their focus on farmers, a hierarchical network of
cooperatives was developed, this today forms the robust supply chain behind GCMMFs
endeavors. The vast and complex supply chain stretches from small suppliers to large
fragmented markets.
Management of this network is made more complex by the fact that GCMMF is directly
responsible only for a small part of the chain, with a number of third party players
(distributors, retailers and logistics support providers) playing large roles. Managing this
supply chain efficiently is critical as GCMMF's competitive position is driven by low
consumer prices supported by a low cost system of providing milk at a basic, affordable
price.









9

The distribution network

Amul products are available in over 500,000 retail outlets across India through its network of
over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory
of the entire range of products.
GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the
cheque system adopted by other major FMCG companies. This practice is consistent with
GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it
also minimizes dumping.
Wholesale dealers carry inventory that is just adequate to take care of the transit time from
the branch warehouse to their premises. This just-in-time inventory strategy improves dealers'
return on investment (ROI). All GCMMF branches engage in route scheduling and have
dedicated vehicle operations.


















10

THE BUSINESS MODEL


From the very beginning, in the early 1950s, AMUL adopted the network as the basic model
for long-term growth.
The network explicitly includes secondary services to the farmer-suppliers.
Several of the entities in the network are organized as cooperatives linked in a
hierarchical fashion.

Customers: In comparison with developed economies, the market for dairy products in
India is still in an evolutionary stage with tremendous potential for high value products such
as ice cream, cheese etc. The distribution network, on the other hand, is quite reasonable with
access to rural areas of the country. Traditional methods practiced in western economies are
not adequate to realize the market potential and alternative approaches are necessary to tap
this market.

Suppliers: A majority of the suppliers are small or marginal farmers who are often illiterate,
poor, and with liquidity problems as they lack direct access to financial institutions. Again,
traditional market mechanisms are not adequate to assure sustenance and growth of these
suppliers.

Third Party Logistics Services: In addition to the weaknesses in the basic infrastructure,
logistics and transportation services are typically not professionally managed, with little
regard for quality and service. In addition to outbound logistics, GCMMF takes responsibility
for coordinating with the distributors to assure adequate and timely supply of products. It also
works with the Unions in determining product mix, product allocations and in developing
production plans. The Unions, on the other hand, coordinate collection logistics and support
services to the member-farmers. In what follows we elaborate on these aspects in more detail
and provide a rationale for the model and strategies adopted by GCMMF.


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Simultaneous Development of Suppliers and Customers: From the very early stages of the
formation of AMUL, the cooperative realized that sustained growth for the long-term was
contingent on matching supply and demand. The member-suppliers were typically small and
Marginal farmers with severe liquidity problems, illiterate and untrained. AMUL and other
Cooperative Unions adopted a number of strategies to develop the supply of milk and assure
steady growth. First, for the short term, the procurement prices were set so as to provide fair
and
Reasonable return. Second, aware of the liquidity problems, cash payments for the milk
supply was made with minimum of delay. This practice continues today with many village
societies making payments upon the receipt of milk. For the long-term, the Unions followed a
multi-pronged strategy of education and support. For example, only part of the surplus
generated by the Unions is paid to the members in the form of dividends

Managing Third Party Service Providers:
Unions focused efforts on these activities and related technology development. The
marketing efforts were assumed by GCMMF. All other activities were entrusted to third
parties. These include logistics of milk collection, distribution of dairy products, sale of
products through dealers and retail stores, some veterinary services etc. It is worth noting that
a number of these third parties are not in the organized sector, and many are not
professionally managed. Hence, while third parties perform the activities, the Unions and
GCMMF have developed a number of mechanisms to retain control and assure quality and
timely deliveries. This is particularly critical for a perishable product such as liquid milk.












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Coordination for Competitiveness

Coordination is one of the key reasons for the success of operations involving such an
Extensive network of producers and distributors at GCMMF. Some interesting mechanisms
exist for coordinating the supply chain at GCMMF.
These mechanisms are:

Inter-locking Control

The objective for developing such an inter-locking control mechanism is to ensure that the
Interest of the farmer is always kept at the top of the agenda through its representatives who
Constitute the Boards of different entities that comprise the supply chain. This form of direct
Representation also ensures that professional managers and farmers work together as a team
to
Strengthen the cooperative. This helps in coordinating decisions across different entities as
well as speeding both the flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of Federation

Its objective is to ensure that all milk that the farmers produce gets sold in the market either
as milk or as value added products and to ensure that milk is made available to increasingly
large sections of the society at affordable prices


Supplier Enhancement and Network servicing

Their objective is to ensure that producers get maximum benefit and to resolve all their
problems. They manage the procurement of milk that comes via trucks & tankers from the
Vs. They negotiate annual contracts with truckers, ensure availability of trucks for
procurement, establish truck routes, monitor truck movement and prevent stealing of milk
while it is being transported



13


GCMMFS SUPPLY CHAIN














14




Supply & Distribution

At the supply end a computerized database has been setup of all suppliers & their
cattle.
Computer equipment measures & records qualities & quantities collected.
At the distribution end stockiest have been provided with basic computer skills. Amul
experts assist them
In building promotional web pages.
Amul Cyber stores have been setup in
India, USA, Singapore and Dubai










15



TQM (Total quality management) at the grassroots has been a strong movement to develop
leadership, operational and strategic capabilities in the entire network farmers, village
cooperatives, dairy plants, distributors and wholesalers and retailers. Key elements of this
TQM movement have been:
Friday Departmental Meetings : Each Friday, at a prescribed time, everyone in the network
(from the farmers to the carry & forwarding agents) joins their respective departmental
meeting to discuss quality initiatives and share policy related information.
Training for Transformational Leadership so that individuals are able to control their
thoughts, feelings and behavior and take more responsibility in ones life and surrounding
environment.
Application of Hoshin Kanri principles to bring about a bottom-up setting of objectives
aligning policies for effective management of Unions & village societies on hand with those
of channel member on the other hand. ISO/HACCP certification was obtained for all the
Unions and each village society is in the process of obtaining the same.
Training for farmers and their families emphasizing the need for good health care for not
only cattle during its pregnancy and feeding but also for expecting and feeding mothers and
the whole family. This effort has brought about a significant social change towards such
issues in villages that have cooperative milk societies.
Retail Census: GCMMF undertakes a census of all retail outlets (over 500,000) to evaluate
customer perceptions and distribution efficacy of their network. This is being done by
wholesalers in their respective territories at their own cost. This information is used for policy
deployment exercise.





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THE NETWORK

Milk is procured from the villages and collected at Village Cooperative Societies (VCS); from
there the milk is taken to manufacturing units where the milk is processed into various
products.
The products are then transporters to the company Depots located in various parts of the
country. The products are then sent to Wholesale Distributors (WD) and from there to the
retailers.
THE FACT SHEET

Milk is procured twice a day from 2 million from Gujarat alone
The payment is made under twelve hours of procurement
There are 10000 village cooperative societies
There are 3600 wholesale distributors in the country
45 depots
The C&F agents are not fixed and are decided by the local company offices
There are approx. 4,50,000 retailers spread all over India
Total house hold consumers covered are 100,000
The milk procured per day is 5 million liters
Where the total capacity of operation is 7 million liters per day
The peak processing till date has been 6 million liters per day
These cooperative societies are bound to supply there produce only to GCMMF
Amul products are available in over 500,000 retail outlets across India through its of over
3,500 distributors.
47 depots with dry and cold warehouses to buffer inventory of the entire range of products


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AMUL PARLOURS (DIRECT DISTRIBUTION)

With products being highly perishable, the supply chain ought to have to maintain correct
temperature, humidity etc. and the chain should move fast.

To reach out its consumers more directly and let them the total brand experience, Amul has
come up with Amul parlors. These are called Utterly delicious parlors. They have come up
in major cities like Ahmadabad, Bangalore, Baroda, Delhi, Mumbai, Hyderabad and Surat
already, and many more starting up real soon. Till date there are about 400 Amul parlors
across the country. These parlors are set at prominent locations such as campuses of Infosys,
Wipro, IIM-A, IIT-B, temples, Metros etc.

Amul has franchisee plans in regards of the Amul parlors. This might start pretty soon, since
the talk is almost at the end.

Facts
2300 Amul Parlors in 2007-08
Goal of setting up 10,000 outlets by March 2010






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Selection:

The company takes into consideration a host of factors while selecting the channel members.
This is because GCMMF believes that selection of channel members is a long run decision &
the rest of the decision regarding the supply chain depends upon the efficiency & coverage by
the channel members. The following are the host of factors considered by the company in
selecting the channel members:

Authentication is required by the regarding the identity of the channel members, which
includes the name & address, photograph of the location.

Proof of solvency which requires name & address of the channel members bankers

Safety of the inventory, which means that the distributor/ dealer should get the stock of the
company insured.

Inventory or the perishable goods kept by the distributor/ dealer should be in good condition
which means a detail of storage space & Refrigeration facility is to be provided. Refrigeration
system should have deep freezers, cold room & walk in coolers.

Details of the delivery vehicle, which includes Light Commercial Vehicles, Matador, 3
Wheeler Van, Tricycle Van & Hand/Push cart. The number & model of each of the vehicle
needs to be furnished to the company.


19
GCMMF acknowledges the fact that it needs to be sensitive to the market demands. For this it
requires that a number of salesmen needs to be present on the field. The salesmen too are
divided into various categories like the Field salesmen & Counter salesmen. Also the details
of Clerical Staff & Mazdoors are to be provided. The technical competence of the salesmen
needs to be mentioned

Details of the product kept of other companies have to be provided. The annual sales of these
products too have to be mentioned. Also details of complementary products & product lines
need to be mentioned.

Dealers of the company must carry a good reputation. This is due to the fact that the company
believes reputation of the dealer affects the clientele.

Market coverage by the distributors needs to be defined which includes details of Geographic
coverage & Outlets per market area.

The company also requires the dealers to furnish any Advertising & Sales initiative
undertaken by them on behalf of the company.










20



Distributors
One of the main factors, which keep the distributors motivated, is the margin. Usually the
margins offered by the company are 8% & it is raised to 8.5%. Volume wise this comes out to
be a big figure since Amuls product has a good demand in the market. However compared to
the other companies the margins are still lower since the new players in the market offer a
much higher margin. But the very fact that Amuls products have good demand in the market
motivates the distributors to stock it.
Amul being a cooperative cannot afford to give heavy monetary incentives. Amuls products
are considered to be value for money since the company does not believe in charging high
margins. In fact all monetary incentives are just the short run means to promote the
companys product. In order to keep the Channel members motivated in the long run, Amul
builds on the concept of Trade Marketing which makes the dealers & the distributors
believe that the companys products are worthy of being pushed in the market.
The company is organizing various Total Quality Management initiatives & workshops. Here
various counseling measures are undertaken by the company to improve the overall working
of the distribution network.
Vision and mission statement: the company cascades down the vision to the various channel
members; this is done through various events organized by the company at different locations
where the values of the company are made clear and enforced to the channel members. Also
the fact that Amul being a cooperative society cannot afford to spend exorbitantly on such
events therefore it has a very traditional way of organizing these get together which leaves an
impact on the members.

Amul yatras: this includes taking the channel members on a guided tour of the
manufacturing and procuring facilities in Gujarat. So that the channel members can have an
experience of the working of the company and can pick up some quality measures that can
help them to synchronize and improve their own functioning at various levels. This in turn
helps the company to coordinate the entire value chain, as the channel members understand

21
the various constraints and liberties the company goes through. The company has already got
the Rajiv Gandhi award for quality.


The Retailers

Trade schemes: these are undertaken by the company only for the hard selling items e.g. Ice
creams, flavored milk etc. for these the company raises the margins by 2%, also schemes like
good packaging in case of butter and cheese is undertaken by the company. However this is
only a short-term initiative to push the products of the company.

Glow boards: the company puts up glow boards at the retailer and pays the major portion of
the cost.

Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre
estimate the quantities of the various products needed.

Infrastructure facilitation: the company facilitates the retailers to buy freezers and fridges
by formulating an easy payment program and a commitment to buy back the equipment at a
reasonable price when the value of the equipment has depreciated.

Evaluation of channel members
Beat plan: this plan is generated for the various product categories i.e. diary dry, diary wet,
Dhara and ice cream. A weekly schedule is prepared for various markets and the retailers the
turnover for each of the product is calculated for the wholesale dealers.


22
Cumulative performance: the performance of the dealers is averaged out over a period of
three years where a comparison is made of the present performance vis--vis the previous
ones.

Target versus achievement: the performance and the targets are compared and therefore the
gaps are identified which help in evaluating the WD and planning for the next year as well.
This is done for each of the product category.

Other criterion

o Details of the bank guaranty
o Photographs of the offices
o Details of the WD salesmen and the product lines he deals in
o The computerization facility available
o The storage space
o Refrigeration facility with photograph
o Details of the delivery vehicle with photograph
o Summary of the monthly potential sales of markets
o Summary of the product wise monthly sales potential of institutions










23

Conflicts and Co-Operation among Channel Members

Conflicts

Ownership of assets: Previously the company used to give the cooling equipment on
lease to the retailers, when the company wanted the stuff back; the retailer disagreed to
comply and created issues of ownership.

Stocking issues: The company doesnt want the retailers to stock the competing brand
in the company leased fridges, which at times s hard to manage as retailers tend to do
it often.

Replacement of products: The deterioration in the product calls for fail in
replacement by the company this major issue of vertical conflict.

Credit policy: Compared to the market, the companys credit period is less that
especially in case of institutional sales is very important.

Packaging: The channel members for easy storing demand a better quality of
packaging.

Replenishment: The replenishment of the stocks is not prompt in case of amul cheese
and all hard selling items.

Margins: The Company provides least margins to all the channel members. For e.g.
The retailers margin in case of butter is 8% as compared to Britannias 12%


24

CO-OPERATI ON AMONG CHANNEL MEMBERS

Amul quality circles: The members of the local channel meet together every month to
share issues and the achievements of the channel members. This is an ongoing activity
facilitated by the company offices in different locations; this enables the channel
members to learn together and reduces the horizontal conflicts among the WDs.

Pilot salesmen scheme: To reduce the financial burden of the distributors this scheme
is run whereby half the cost of the salesmen is born by the company and the rest half
by the distributor

Scheduling of sales: The WDs provides Schedule of the distributors sales men to
the retailers so that the retailers can plan out and place the orders in advance.

Agreement defining rights: The company makes the distributors sign an agreement
where the areas of operation for each of the distributors are defined, therefore avoiding
any conflict amongst the distributors regarding their areas of operation.


TRANSPORATION METHODS

They manage the procurement of milk that comes via trucks & tankers from the VSs to
manufacturing unit and then to distributers and dealers .They negotiate annual contracts with
truckers, ensure availability of trucks for procurement, establish truck routes, monitor truck
movement and prevent stealing of milk while it is being transported.



25
E- Supply Chain Management of Amul

Amul uses E- SUPPLY CHAIN MANAGEMENT
E-SCM may be described as the integrated management approach for planning and
controlling the flow of materials from suppliers to the end users using internet
technologies.
E-SCM refers to the complex network of relationship that organizations maintain with
trading partner to source, manufacture and deliver the products.

Components of E-SCM




CUSTOMER
ORDER
ADVANCED
SCHEDULING
DEMAND
FORECASTING`
TRANSPORTATION
LOGISTICS
DISTRIBUTION
PLANNING
ORDER
COMMITMENT


26
E-SCM Diagram of Amul












27

Working of E-SCM

Amul has installed over 3000 automatic milk collection system units (AMCUS) at
village societies to capture member information, milk fat content and amount payable
to each member.
Each member is given plastic card for identification
Computer calculate amount due to the farmer on the basis of the fat content
The value of the milk is printed out on the slip and handed over to the farmer ,who
collects the payment from the adjacent window
Thus with the help of it farmer gets the payment within the minutes

On the logistic more than 5000 trucks move milk from the villages to 200 dairy
processing plants twice a day according to a carefully planned scheduled
Every day Amul collects 7 million liters of milk from 2.6 million farmers (many
illiterate), converts the milk into branded, packaged products, and delivers goods to
over 500,000 retail outlets across the country
ERP software named as enterprise wide integrated application system covers an
operation like planning advertisement and promotion and distribution network
planning.
Each Amul office are connected via internet and all of them send daily reports on
sales and inventory to the main system at Amend,




28





Amul Cyber Store




29

Strong Initiatives in E-commerce

Amul has linked distributors to the network & also incorporated web pages of top
retailers on their website
Distributors can place their order on website amulb2b.com
Automated supply & delivery chain
Practices just in time supply chain management with six sigma accuracy
















30

Benefits of E-SCM

Supports exchange of real time information
Platform independent
Web visibility & processing capability 24/7
Return on investment
It has open internet application architecture which allows for Rapid deployment &
scalability combining unlimited users in real time environment
Incorporates broadcast & active messaging














31

Future Plans

Introduce Internet Banking Services & ATMs which will enable Milk societies to
credit payments directly to sellers bank account
Officials at amul are looking at upgrading the plastic cards which are being currently
used only for identification purposes, to smart cards which can be used to withdraw
cash from ATMs.
Expansion of distribution network, creative marketing, consumer education and
product innovation, we will leverage effectively on rising income levels and growing
affluence among Indian consumers.
Tapping the rising demand for new value-added products.













32
Conclusion

It was a great opportunity to carry a research project on such a reputed organization which
gave me a good learning experience and knowledge about the products and industry. The
concept of Supply Chain Management is based on two core ideas. The first is that practically
every product that reaches an end user represents the cumulative effort of multiple
organizations. These organizations are referred to collectively as the supply chain.
The second idea is that while supply chains have existed for a long time, most organizations
have only paid attention to what was happening within their four walls. Few businesses
understood, much less managed, the entire chain of activities that ultimately delivered
products to the final customer. The result was disjointed and often ineffective supply chains.
Supply chain management, then, is the active management of supply chain activities to
maximize customer value and achieve a sustainable competitive advantage. It represents a
conscious effort by the supply chain firms to develop and run supply chains in the most
effective & efficient ways possible. Supply chain activities cover everything from product
development, sourcing, production, and logistics, as well as the information systems needed
to coordinate these activities.
The organizations that make up the supply chain are linked together through physical flows
and information flows. Physical flows involve the transformation, movement, and storage of
goods and materials. They are the most visible piece of the supply chain. But just as
important are information flows. Information flows allow the various supply chain partners to
coordinate their long-term plans, and to control the day-to-day flow of goods and material up
and down the supply chain.








33

Bibliography
1. Vaz Michael et al, Connecting with customers, Mumbai, Manan Prakashan, June
2013.




Webliography
http://www.wikipedia.org
http://www.slideshare.net
https://www.google.co.in
http://www.scribd.com