A Project Report on AMUL’S E-SUPPLY CHAIN MANAGEMENT
Submitted By : Abhishek Anand - (11FN-003) Atul Garg – (11FN-126) Anurag Khan – (11IB-012) Rohit Chandak – (11FN-081)
Index Executive Summary................................................................ ...................................................................................................... ....................................................3 ..............3 Objective ........................................................................... ................................................................................................................ ..........................................................4 .....................4 Introduction ...................................................................... ........................................................................................................... ..........................................................5 .....................5 Strategy of Amul .................................................. ....................................................................................... .......................................................................6 ..................................6 Introduction To E-Supply Chain Management............................... Management...................................................................... .........................................7 ..7 E- Supply Chain Management Of Amul ..................................................... .................................................................................9 ............................9 Components of E-SCM ........................................ ............................................................................ ...................................................................... .................................. 9 E-SCM Diagram Diagram of Amul................................................ Amul..................................................................................... ........................................................ ................... 10 Working of E-SCM.................................. E-SCM....................................................................... ........................................................................... ............................................ ...... 11 Amul’s Supply Chain Management ...................................................................... ......................................................................................... ................... 12
Amul Supply Chain C hain Management Practices ..................................................................... .......................................................................... ..... 13 The Distribution Distribution Network.......................................................................... ....................................................................................................... ............................. 14 The Business Model...................................................................... ............................................................................................................ ........................................... ..... 15 Supply & Distribution Distribution .................................................................................................. ............................................................................................................. ........... 19 Strong Initiatives in i n E-commerce......................................................................... ........................................................................................... .................. 21 Benefits of E-SCM ......................................................................... ............................................................................................................... ........................................... ..... 22 Future Plans ...................................................................... ........................................................................................................... ....................................................... .................. 23 Conclusion ........................................................................ ............................................................................................................. ....................................................... .................. 24 References ......................................................................... .............................................................................................................. ....................................................... .................. 25
Executive Summary Firms that desire to do business in large emerging markets need to develop a new paradigm for looking at opportunities in these markets. The success of many such firms has depended on how well have they formed or managed to become a part of an existing network of suppliers and consumers. These economies are complex and have unique characteristics that range from underdeveloped markets to small and fragmented supplier base. Clearly, traditional business models are not adequate for this environment. Successful firms participate in the development of both these elements of the supply chain. The prize, needless to mention, is significant sales in a large market. AMUL is a dairy cooperative in the western India that has been primarily responsible, through its innovative practices, for India to become the world’s 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. This report draws various lessons from the experiences of AMUL that would be useful to firms contemplating entry into emerging market.
Objective
The report analyses the interaction of two topics: Supply Chain Management (SCM) and the Internet. Merging these two fields is a key area of concern for contemporary managers and researchers. It has been realized that the Internet can enhance SCM by making real time information available and enabling collaboration between trading partners. The objective is to collect, organize and synthesize existing knowledge relating to ESCM for AMUL.
Introduction
The Kaira District Co-operative Milk Producers Union Limited, popularly known as Amul Dairy is a US $ 500 million turnover institution. It is a 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.
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
Strategy of Amul
Amul’s 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.
Introduction To E-Supply Chain Management Enhanced competitiveness requires that companies ceaselessly integrate within a network of organisations. Firms ignoring this challenge are destined to fall behind their rivals. This integration of companies within a network has led to put more emphasis on Supply Chain Management (SCM). “SCM is the management of upstream and downstream relationships in order to deliver superior customer value at less cost t o the supply chain as a whole” .The integral value of the SCM philosophy is that “total performance of the entire supply chain is enhanced when we simultaneously optimise all the links in the chain as compared to the resulting total performance when each individual link is separately optimized. In order to achieve coordination/integration of all the links in the supply chain, information is critical. Recent technological developments in information systems and information technologies have the potential to facilitate this coordination, and this, in turn, allows the virtual integration of the entire supply chain. The focus of this integration in the context of Internet-enabled activities is generally referred to as eSCM. Merging these two fields (SCM and the Internet) is a key area of concern for contemporary managers and researchers. Managers have realised that the Internet can enhance SCM decision making by providing real-time information and enabling collaboration between trading partners. Many companies have implemented point of-sales scanners, which read, on real time, what is being sold. These companies do not only collect information on real-time to make decisions about what to order or how to replenish the stores; they also send this information, through the Internet, to their suppliers in order to make them able to synchronise their production to actual sales.
Information Flow
Tier 2 Supplier
Manufacturer
Tier 1 Supplier
Customer Logistics Purchasing
Mktg/ Sales PRODUCT FLOW
Production
Finance R&D
CUSTOMER RELATIONSHIP MARKETING CUSTOMER SERVICE MARKETING DEMAND MANAGEMENT ORDER FULFILLMENT MANUFACTURING FLOW MANAGEMENT PROCUREMENT PRODUCT DEVELOPMENT & COMMERCIALIZATION RETURNS
Customer/ End customer
Source: (Cooper,
Lambert et al. 1997) Fulfilment
Procurement
Industry structure and competitive challenges
SCM PROCESSES
..... CRM
Returns
e-SCM
Impact on peformance
ENABLERS Supply chain relationships
Information flows and IS integration
Figure 2. A framework for e-SCM
Planning and optimisation
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
E-SCM Diagram of Amul
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 indentification
Computer calculate amount due to the farmer on the basis of the fat co ntent
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 a 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 Anand,
Amul’s Supply Chain Management
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 world’s 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 litres 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 GCMMF’s
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.
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.
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 sup ply 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.
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.
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 an 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 VSs. 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
GCMMF’S SUPPLY CHAIN
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 stockists 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
Amul Cyber Store
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
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 d eployment & scalability combining unlimited users in real time environment
Incorporates broadcast & active messaging
Future Plans
Introduce Internet Banking Services & ATMs which will enable Milk societies to credit payments directly to seller’s 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 l evels and growing affluence among Indian consumers.
Tapping the rising demand for new value-added products.
Conclusion It has been demonstrated that the Internet can have an important impact on the management of the supply chain and it can improve the competitiveness of firms. The literature review undertaken on the topic has shown that e-SCM has been acknowledged as an outstanding topic in the supply chain literature in the most prestigious Operations Management and Logistics journals, especially after year 2000. However, our literature review has shown that there is a disjointed scattering of research activity that fails to clearly represent what we currently know about the effects of the Internet on SCM and what we still need to learn. In this paper we have attempted (1) to describe the impact that the Internet has on the different supply chain processes, (2) to review the existing literature on the topic, (3) to provide a framework for the analysis of e-SCM, and (4) to identify further lines of research. Further research should also put more emphasis on conducting empirical studies regarding the implementation of the Internet in the product development process. Another important area of research is the application of decision models and technologies on the Internet and the development of Application Service Providers (ASP) to obtain knowledge for the firms belonging to a supply chain. As more and more firms have high quality and real-time information available, the use of these decision technologies will increase, since they add significant value to the members of a supply chain. Although e-fulfilment has been one of the most covered topics there are still some further lines of research in this area: to study new strategies to respond to the challenge of the last mile problem, and to conduct more empirical studies to explore what companies are doing to respond to this challenge and which are the results of the different actions taken. E-procurement has been the most covered topic, especially the subtopics related with marketplaces and auctions. One promising line of further research is to investigate under which circumstances different Internet-enabled supply chain collaboration tools have a higher impact on performance.
References 1. Extracted from www.Wikipedia.com for E- supply chain management theory. 2. Extracted from Operation Management (6th Edition) by Russell & Taylor. 3. Extracted from www. www.amul.com for information about products and supply chain management. 4. Extracted from http://articles.timesofindia.indiatimes.com/2010-0224/ahmedabad/28139283_1_lakh-litres-milk-banas-dairy-dudhsagar-dairy 5. Reference http://articles.economictimes.indiatimes.com/2011-1213/news/30511706_1_milk-procurement-gcmmf-daily-procurement 6. Reference http://www.indianexpress.com/news/amul-milk-to-be-dearer-by-rs-2litre/937050/ 7. Reference http://articles.timesofindia.indiatimes.com/2010-0224/ahmedabad/28139283_1_lakh-litres-milk-banas-dairy-dudhsagar-dairy 8. Reference http://www.financialexpress.com/news/amul-gears-up-to-strengthenfresh-milk-base-in-delhi/86054/2 9. "MANAGING COMPLEX NETWORKS IN EMERGING MARKETS:THE STORY OF AMUL" ; Pankaj Chandra, Devanath Tirupati; Working Paper No. 2002-05-06; Indian Institute of Management-Ahmedabad
