UPPLY HAIN MANAGEMENT IN THE DAIRY BUSINESS
Group Members: Abhishek Kumar Dishant Sidana Manas Jain Nilesh Sinha Richa Ruchi Subramonia Sarma Vini Soni
Flow of the presentation n n
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Introduction Framework of SCM in Dairy Industry Cooperative model Challenges Case study: AMUL
Introduction
Overview of Indian Dairy Industry n n
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Largest milk producer in the world, 100 million MT Value of output Rs. 1179 billion (2004 -05) (Almost equals combined output of paddy and wheat!!) 1/5th of the world bovine population Very low productivity (around 1000 kg/year, world average2038 kg/year) 3 Tier structure : n Village society, n District unions n Federated at state level
Dairy business n
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Dairy industry is a vertically integrated industry with both parts of the supply chain (farm and manufacture) dependent on each other to ensure safe food The dairy chain starts at raw milk production and ends when other processors, institutions and consumers utilize products that were created in the value chain Traditional Model n Large number of cooperatives n Small membership n Primarily Production of raw product (fluid milk) & very less value addition n
Restructuring of dairy business Efficiencies in managing fewer large plants versus a number of under-utilized small plants, n Need for more milk supply n Need to offer wide variety, improvements in trucking & milk handling thereby facilitating long hauls, n Opening of new international markets (also markets for new products), n Seeking marketing clout and need to bring investment from outside the cooperatives . n
Framework
Framework n
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Research at the Industrial Research Institute Swinburne (IRIS), Australia Purpose was to develop a supply chain management framework for the dairy (milk products) business Supply Chain Operation Reference” or “SCOR” model - adopted elementary framework and the following two standards were adopted: n The “CODEX Alimentarius Alimentarius Standard” n The “grade “A” pasteurized milk ordinance”
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The Cooperative Model Co-operatives are the best mechanism to address market and supply chain failures in agricultural commodities.
Need for the Cooperative model n
Solve Market Failures n
Exploitation of producers by the market intermediaries. n n
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Due to low quantum and value of assets Low or negligible carrying capacity-both financial and infra. Lack of market Information Lack of access to financing facilities in absence of collaterals.
Distortions in Supply chain n n
Manipulative Middle men Supply Chain Inefficiencies Contribute to 30-50% of
CHALLENGES FACED BY THE INDIAN DAIRY SUPPLY CHAIN
Challenges faced n
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Procurement (collection) n
The four-tier system of milk collection Fluctuation of volume due to presence of too many intermediaries Price negotiation negotiation by milk producers based on: n
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üVolume and locality factors üAn average regional price üRaw milk production costs üDomestic prices at wholesale and retail levels üOverall consumer demand conditions n
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Little room for negotiation for Indian milk producers
Challenges faced Contd. n n n
Advent of organized retail channels n n
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Increased availability of branded, packaged milk Reduced role of middlemen, mainly the milk vendors (consequent unemployment)
Distribution n n n n
Lack of superior cold-storage transport Distribution wastage due to improper storage Inefficiency in milk processing No enforcement of HACCP principles n n
Hazard Analysis and Critical Control Point Systematic preventive principles for food safety
Challenges faced Contd. n n
Lack of supporting information systems n
Database maintained by Milk Producers’ Organizations in developed countries n
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Data on dairy farmer production costs, imports and exports of dairy products, domestic and world stock of different traded dairy products Helps in price negotiations
Technology solutions n n n
Automated milk collection systems Use of analyzers Use of Electronic Data Interchange n
As a feedback channel for information feedback n n
Track demand and capacity
Case Study: AMUL
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
§ § Managed by an apex cooperative organisation, Gujarat Co-
operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by some 2.41 million milk producers in Gujarat, India
§ § Amul’s products range includes milk powders, milk, butter,
ghee, cheese, curd, chocolate, ice cream, cream, shrikhand, paneer, gulab jamuns, basundi, Nutramul brand and others .
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Amul – Value Chain
IT @ AMUL n
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Installation of over 3,000 Automatic Milk Collection System Units (AMCUS) at village societies to capture: n member information, n milk fat content, n volume collected, n amount payable to each member. Proved invaluable in ensuring fairness and transparency throughout the entire organisation. The role of IT in Amul is best summed up by B M Vyas, chief executive officer, Amul (GCMMF) when he says, “Amul is not a food company, it is an IT company in the food business.”
Amul Am ul Lo Logi gist stic ics s
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