supply chain management case study of amul

Case Study: The Supply Chain Of Amul - From Cow To Kitchen!

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Problem Statement:

Initially, the producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand – often milk went sour, especially in the summer season, as producers had to carry milk in individual containers physically. These agents decided the prices and the off-take from the farmers by the season. In winter, the producer was either left with unsold surplus milk or had to sell it at very low prices.

The Establishment Of Amul

Thus the Kaira District Cooperative was established to collect and process milk in the district of Kaira. The first modern dairy of the Kaira Union was established at Anand “ which popularly came to be known as AMUL dairy after its brand name” . The new plant had the capacity to pasteurize 300,000 pounds of milk per day, manufacture 10,000 pounds of butter per day, 12,500 pounds of milk powder per day, and 1,200 pounds of casein per day.

The model of Amul is such that it benefits small producers like farmers, who together form an integrated approach to form an economically large-scale business. The model eliminates middlemen, bringing producers in direct contact with the customers.

Every day, Amul collects 447,000 litres of millk from 2.12 million farmers, converts the milk into branded, packaged products and delivers the goods which are worth Rs. 60 million to about 500,000 retail outlets across the country.

Decoding Supply Chain Of Amul

As shown in the figure, the Supply Chain Of Amul consists of farmers who produce milk from their cattle. The farmers are organized into cooperatives called Village Cooperative Societies (VCS). These VCSs supply milk to thirteen different dairy cooperatives, called Unions, of which Amul is one. The milk or milk products made at these unions are supplied to the Gujarat Cooperative Milk Marketing Federation (GCMMF) . 

Read Related Article: The Pay, Scope, And Opportunities In Supply Chain Management: Decoded

All we know about Amul's advertisement is of the Cartoon girl who markets products by making fun of recent issues and encouraging people everywhere. This development of a common identity is at the core of the GCMMF’s marketing strategy. 

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What moves the company amul.

“Keeping Farmers as Decision makers!!”

The Supply Chain Of Amul eliminates middlemen and directly engages farmer with the processor (dairy). The model has linked rural dairy producers to urban consumers through dairy cooperatives, trucking networks,  chilling plants and processing  plants. Further, the programme has also motivated dairy producers and others involved in the supply chain to invest and increase their earnings from dairying. Amul has developed organization representing not only the farmers but also customers thus securing both Demand and supply side of the milk industry.

Overall AMUL has been successful to develop linkages among cooperatives and develop partnership among Milk Producers, processors and marketers. Such partnerships reduce the operational risk and help to understand the consumer through its reliable partners. It provides flexibility and makes the entire organization responsive to changing environment conditions. Amul model has successfully shown the management through cooperatives and how cooperatives can be used to build larger organization. One can learn many things from this model and apply it in business practices. The approach may be different but message remains same- Building organizations through cooperatives.

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Related Tags

Kajal Vishwakarma

If we want to sell milk from our stable to Amul company, what is the process? And where is Amul Milk Center in Mumbai?

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Business Case Study: Amul's Strategy during the Pandemic

Amul - how amul beat its competition & made rs.39,200 cr during the 2020 pandemic.

24th March 2020 , on this day PM Modi declared a nationwide lockdown because of pandemics. In addition to that, a nightmare came with it, for which our nation was not prepared. Millions of people, especially laborers and daily wage workers lost their jobs. The lockdown costed the Indian economy more than 10 lakh crores. Many billion-dollar industries came into a dilemma. One such industry was the dairy industry. The impact was so heavy that it costed the milk producers of India more than 112.3 crores of rupees every day.

But one legendary company, which every Indian child knows was so strategically able to navigate the situation. They did not only minimize their losses but they even increased their revenue by almost 700 crores. the brand we are talking about here is none other than Anand Milk Union Limited , which we also know as AMUL.

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Anand Milk Union Limited, popularly known as Amul is a cooperative society based in Anand, Gujarat in India. The company was started with the motive of providing welfare to the farmers and in the process, it went on to establish itself as one of the most successful brands in India. Dr Verghese Kurein, who is known as the “Milkman of India”, was responsible for turning India from a milk deficient country to the largest producer of milk in the world today in which Amul has played a key role.

We all know that it has been in the market for so long now, and it also has acclaimed itself a position in the market. But we need to take a look at its magnificent business strategies. One such example can be seen from how Amul reacted to nationwide lockdown and COVID-19. It has done an astounding job during Covid-19. While in 2020, where the rest of the companies were fighting to keep their supply chain going, AMUL launched 33 new products in the market and got hold of additional 35 lakh liters of milk every day. And even paid Rs.800 crores extra to rural milk produces of India.

Now the question arises, what were the business strategies that made AMUL manage to achieve such an incredible height in business in difficult times? What are the business strategies lessons that we need to learn from them?

And the answer lies within the extraordinary supply chain management of AMUL. So, when the lockdown was announced, the dairy industry was allowed to operate with certain restrictions because milk is also an essential food. But as soon as the lockdown was declared, several businesses either cut down or shut their businesses. This resulted in the loss of demand in the dairy industry.

Because 20% of the revenue of the dairy industry came from hotels, catering businesses, and restaurants for the organized dairy sector. As a consequence, of this, AMUL also saw a drop of almost 12% in its demand. When the dairy company saw this massive fall in demand, they quickly pulled down the milk procurement, decreased their logistics, and slowed down their production up to a large extent. As an outcome of this, many farmers were left in a helpless state. Many workers such as truck drivers and factory workers lost their daily bread because less milk meant less operation of factories which means less transportation of milk. But when most of the dairy industry was preparing for a loss in demand, AMUL on the contrary prepared for a surge in demand.

Change in Consumer Behavior

Now the question arises again when it was clearly visible that there was a major decline in demand from the restaurant and the hotels that account for 20% of the revenue. Why was AMUL preparing for a surge in demand, isn’t it like taking a risk of 1000 crores?

Well, AMUL intelligently played, there was one important factor that many few people took in notice, which is a change in consumer’s behavior . Although there was no demand from restaurants and hotels, but the consumption of milk products in houses took a massive shoot up as more and more people began to stay at home. And this also gave rise to the homemade food trend. The demand for both groceries and milk products skyrocketed.

Secondly, because of the pandemic, people became more health-conscious and moved on from buying loose milk to packaged milk. While other companies misjudged consumer demand and started decreasing their supplies, Mr. R. S. Sodhi, Managing Director of AMUL insisted that they should keep the supply chain running at full capacity.

Despite the closures of restaurants, as of May 2020, during the peak of lockdown times, the demand for milk-based products took a massive shoot up. Milk products like cheese increased by almost 80%, demand for cottage cheese increased by 40%, and demand for condensed milk almost doubled. Despite running at its full capacity of 115%, the demands were so massive that they had to hire other plants from other companies that were lying vacant. Except for ice creams, all their plants were running at full capacity throughout the lockdown. They also realized that moving of trucks through the country would be very difficult because of the shortage of labor and the lockdown restrictions. They started using railways for the transportation of products quickly throughout the country.

Strategic Partnerships

Now, considering the vast supply chain of AMUL, i.e., 18,700 societies, 5000 milk tankers which go up to 200 chilling stations, 10,000 distributors, 1 million retailers, and most importantly more than 3.6 million farmers . The question arises that how did they manage to coordinate with their huge supply chain and manage their resources properly?

Well, the answer lies in a strategic partnership that was established between AMUL and IBM in 2009 wherein AMUL invested a hefty amount of 80 crores transforming the information technology landscape of the company. Now what they meant is that IBM would develop a full-fledged digital system and it would track every small detail of operation that is being carried out in the supply chain of AMUL. And just like Amazon, IBM could tell you how many plants are working at full capacity, how many trucks are engaged, and in which areas. Most importantly, it also tells you when and how many trucks or plants are at idle capacity so that they can divert the workload to them to make optimum utilization of every element of the supply chain.

This system turned out to be a game-changer for AMUL during the lockdown. Because on the one side, the supply chain of milk was overloaded, ice cream and frozen foods of the business were shut down. Therefore, labors, storage, trucks were lying at idle capacity at the end of the frozen industry. But due to the IBM system, the AMUL team was able to accurately oversee the entire operation of the supply chain. And this end-to-end digitalization gave them so much clarity about their operations that AMUL was even able to provide incentives to the ground staff. The casual workers were given 100-125 rupees incentives. And for the workers, food and stay arrangement were made, so that they don’t get sick and affected by covid.

When they realized that the cattle feed was not sufficient to meet the needs. AMUL even made extra arrangements for cattle feeds for farmers. All of this made the supply chain so effective that, while the rest of the dairy industry was completely shut down, AMUL procured 3.5 million liters of milk every day and even paid 800 crores of rupees extra to rural milk producers of India.

AMUL even used third part e-commerce sites like Flipkart, Big Basket, Dunzo and even started prompting deals with Swiggy and Zomato to sell butter, milkshake, and paneer. According to Mr. R. S. Sodhi, managing director of AMUL , they got more than 60,000 orders through Zomato and they sold AMUL products of almost 3 crores in more than 200 cities.

Now moving on to the last part of Amul's strategy, i.e., the huge investment of AMUL into marketing . Now when other brands were decreasing down their advertisements, AMUL on the contrary increased its advertisements volumes by 316% compared to 2019 . Their ads were so aggressive that they were viewed 10 times more than the IPL itself. Yes, you read right, the Amul ads were so popular that they crossed all the barricades of TRP.

When Door darshan started broadcasting the epic Ramayana and Mahabharata during the lockdown. AMUL started running their old ads to resonate with the nostalgic moods of the audience creating an even better impact on the audience’s mind. Then even made immunity-boosting products they never went overboard with any kind of ridiculous covid claims.

This is how using an extraordinary foresight of consumer behavior through an agile supply chain management system. So, using digital transformation, third party collaboration, incentivizing of labor, and through strategic marketing initiatives. Anand Milk Union Limited, i.e., AMUL established a benchmark for crisis management for dairy companies from all across the world to follow.

Important Business Lessons

This brings us to the most important part of this case study, i.e., what are the lessons that we need to learn in order become an extraordinary business leader,

While good leaders prepare to face risk, great leaders prepare to embrace them with open arms.

No matter how big your organization is, resourcefulness is one attribute that will always save you during crisis.

The only question is how to build such an agile system, in this case, it was Amul's futuristic investment of Rs. 80 crores into the IBM system that helped them operate such a huge supply chain in such an optimized manner.

Always remember during such a crisis, either choose to see it as an obstacle or you can see it as a golden opportunity to get ahead of your competitors.

This is how AMUL became an opportunist during times of crisis and established a benchmark from brands, all across the world to learn from.

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Unlocking in the Lockdown: Amul`s Surge during Testing Times

Navigating the Lockdown

When the government of India announced the nationwide lockdown with effect from March 25, 2020, to contain the spread of the coronavirus, Amul converted the pandemic crisis into an opportunity. The dairy industry was allowed to operate during the pandemic since milk came under the essential food category. Amul had the experience of operating in situations like curfews and natural calamities in Gujarat. “We are used to working in curfews during riots and natural disasters, especially in Gujarat. Just the scale of it was nationwide this time,” Sodhi said. Given its ground experience of operating in difficult situations, the milk giant assured people that it would make dairy products available during the lockdown. Amul took all possible steps to enable smooth business operations during the pandemic, giving millions of Indians, even in the remotest of regions, access to its products...

Consumer Behavior

Despite the fall in demand for milk and related products from the hospitality and commercial segments, increasing household consumption helped Amul make up for the lost demand. It procured around 26 million liters of milk daily in normal times and this increased by 15% during the lockdown, mainly because milk collection in the private sector including the restaurants, hotels, small dairies, vendors, and ice cream manufacturers had completely come to a standstill...

Uninterrupted Supply Chain

Unlike the supply chains of other business units that started from a factory or an ancillary supplier, Amul’s supply chain was multi-layered and multi-dimensional, starting from the source of milk production (the cattle and the milk suppliers). Given the changing dynamics of supply – increasing demand for dairy products and reduced demand for frozen products – Amul faced logistic and supply chain issues for delivery of milk products. Particularly during the early part of the lockdown, it was unable to deliver its products to distributors and retail outlets...

Incentives and Safety Measures

Amul not only procured more milk during the lockdown, but it also increased incentives through the supply chain. It incentivized supply chain partners like labor, transporters, and employees in order to encourage them to work and cooperate during the supply chain disruption. Soon after the lockdown,..

Media Promotion

After the lockdown was announced, Amul started dominating the television media in advertising, taking the maximum target rating points (TRPs) as the low advertising by other brands worked strategically in its favor, N Chandramouli (Chandramouli), CEO, TRA Research , said. Amul believed advertisements on television would help it reach the maximum number of people as television was the most widely used as a source of entertainment all across the country...

Online Sales

Amul adopted the approach of using a third-party online sales platform to increase online sales, bypassing physical retailers. The lockdown accelerated the milk cooperative’s e-commerce sales by two, three, or even four times, depending upon the cities. Amul used third-party e-commerce players in India (online grocery portals) such as BigBasket, Dunzo, Flipkart, and Milkbasket to expand its online sales during the pandemic...

India’s credit rating agency CRISIL estimated that the Indian dairy sector would see a flat revenue growth during 2020-21, as against a 10% compound annual growth rate (CAGR) over the past decade due to the fall in the sale of value-added products. With the closure of hotels and restaurants and fall in the consumption of products including ice-cream, the demand for value-added products was expected to de-grow 2-3% in the fiscal year 2020-21, reducing operating profitability by as much as 50-75 basis points (bps), CRISIL said...

Exhibit I: Sales Turnover of GCMMF (From 1994-95 to 2019-20)

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Story of An Utterly Butterly Supply Chain

Established in 1946 as a dairy cooperative in response to the corrupt Polson Dairy in Anand, Gujarat, Amul has become a household name over the years. The cooperative was born with the vision of providing low-cost, high-quality dairy products to consumers, while eliminating middlemen and ensuring maximum remuneration to farmers. Under the expert guidance of Sardar Patel and ingenious leadership of Dr. Verghese Kurien, dairy technology saw a breakthrough with Amul as the pioneer- relentlessly serving the countrymen with ‘Amulya’(priceless) quality. Behind the utterly butterly girl clad in a red polka-dotted dress, there is a long queue of stakeholders integrated under the Amul umbrella. In their ‘cow-to-consumer’ supply chain, the company ensures that farmers are paid at the time of delivery. Being a highly perishable food sector, Amul encounters quite a complex logistics chain including special treatment, efficient cooling mechanism, quality control and quick action. The joint effort and productive team work, encompassing farmers, processors, marketers and consumers, has made Amul the symbol of strong business, high quality at low cost.   

An Amulya Universe- The Taste of India

Tech-Backed White Revolution

As the pandemic unfolded, with strict nationwide lockdown imposed across 3 weeks, Amul despite facing a massive imbalance in the supply-demand chain, was able to rise high. Technical adaptation a decade ago made it possible for the company to divert all the idle resources and bring back balance to the chain to ensure steady supply overnight!

Diving into the multi layered structure of Amul, the company boasts of an expansive supply chain with-

3.6 million farmers

18700 societies

5000 milk tankers

200 chilling stations

62 branches

10000 distributors

1 million customers

Rungs of the Amul Supply Chain

The humongous chain with a multitude of stakeholders from diverse levels, was not easy to handle as it expanded. The three-tiered model, with producers at the base, village cooperatives federated under a milk union at the district and state level became increasingly complex as the company proliferated. 

It was Amul’s decision to embark on technology to digitize the supply chain to increase visibility at every point that transformed the business and made it thrive through the lockdown. To remove data silos and scan through the end-to-end supply chain, Amul partnered with IBM way back in 2009.

The technological infrastructure was pivoted around planning to control the supply chain and manage inventory in a more efficient way.

By setting up an ERP (Enterprise resource planning) , the cooperative was able to improve its operational efficiency and bring flexibility in the chain, while strengthening its focus on customers and enhancing the livelihood of grassroot level producers. The 10-year contract, with Amul’s investment of INR 80 crore for such a leap in digital transformation proved to be the trump card for the company during pandemic.  

Sharp increase in revenue after accessing tech-backed end-to-end visibility in 2009

Resilience in the Pandemic

As the nation was glued to TV Screens on 24th March, 2021 when the Prime Minister announced the 21-day lockdown, fearing loss in demand, the dairy companies shut down their production units. Amul however saw the opportunity amidst the bleak surrounding. Instead of factory shut downs, Amul doubled its production capacity. Milk was declared to be an essential item and Kirana stores saw throngs gathering around them with increased demand for domestic food items. 

While most of the unorganized trade sector and small dairies stopped buying milk from the farmers, Amul increased its share by 15-17% . Even as restaurants, which contribute to 20% of milk demand, were shut down, Amul was quick enough to understand the shift in points of consumption. The sales channel had moved from restaurants to grocery stores and household consumption demand had increased overnight. With families locked inside and work life halted, Amul kept on serving the high-quality products for in-house chefs who unleashed their culinary skills at home. Idle resources were tracked by their robust tech-enabled supply chain that gave the company real-time insights. Thus, even though the demand for ice-creams had seen a dip, Amul utilized this opportunity to divert all resources for ice-cream production towards other product verticals which saw the spike, with the result that all of their factories and production units were operating at 100% capacity.

Realizing the change in consumer behaviour, the company relied heavily on 3rd Party ecommerce sites like Zomato to deliver Amul products to its customers. In May, 2020, Zomato saw 60,000 orders placed for Amul dairy products.

The demand for milk increased by 5-7%, cheese by 30%, butter by 10-20% . Amul witnessed the highest ever sales, amounting to INR 39,248 crore as in-house consumption sore. Sensing an increase in demand for nutritious food, Amul launched new products in the immunity boosting food sector. The opulence for the company was enough for it to stick to its vision of supporting farmers- Amul offered cash incentives for dairy plant workers, sales executives, distributors and retailers, while serving life under lockdown with the Taste of India.

The Amul Girl

The iconic mascot girl, who has been vocal in all occasions, be it social, political or celebration of victory at sports or commending the brave army, did not budge during lockdown. While most companies curtailed their ad-spends, Amul with its unique marketing ideas and strategy, kept investing on marketing. They realized lockdown to be a time for families to watch TV together. The streaming of the epics added a cherry on the cake. Amul too induced the sense of nostalgia by streaming their past advertisements, making the entire life in lockdown an utterly butterly period, tinged with sweet memories amidst the despair around.

Amul - The Marketing Genius

As the pandemic professed of resilience and adaptation being the key skills for survival, Amul preached it by practicing the same. Amidst the gloom of the raging COVID-19, it stood firm by its brand image, delivering the best dairy products to countrymen at affordable prices, with an efficient digitally enabled supply chain bonded by trust among stakeholders.

The Economic Times daily newspaper is available online now.

How technology helped amul create supply chain resilience during covid-19.

IBM developed a private cloud with a data centre and a disaster recovery system that has automatic back-ups in place. So, whenever there are issues the disaster recovery kicks in, ensuring zero down time. This was proven during the recent lockdown when Amul was able to divert idle resources overnight and ensure steady supply of dairy products.

• 3.6 million farmers
• 18,700 societies
• 5,000 milk tankers that go to
• 200 chilling stations
• 62 branches
• 10,000 distributors
• 1 million retailers

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Technology and Operations Management

Mba student perspectives.

• Assignments
• Assignment: The TOM Challenge: TOM…

“Amul – The Taste of India”

How an uprising against corrupt middlemen launched one of India’s longest standing and arguably most successful cooperative movements

Background and Business Model

Small producers of milk in the state of Gujarat established Amul Diary in 1946. This was a reaction to the inefficient, corrupt monopoly (Polson) in place at that point of time. The objective was the ensure that the small fragmented milk producers received the maximum possible remuneration while creating low cost high quality products for consumers, while eliminating the middlemen. Ensuring availability and providing great service to both the suppliers and consumers was of great importance as well.

The main challenges to effectively achieving Amul’s vision are

• Highly fragmented, small scale supplier base
• Low income consumers
• Lack of infrastructure
• Milk is a highly perishable good
• Lack of capital

Operating Model

Amul has very effectively aligned its business and operational models to achieve its vision since its launch.

Pathways to Just Digital Future

Supply Chain

Amul has effectively managed both upstream and downstream partners in establishing one of the most complex supply chains across the globe. The producers bring milk to the village cooperatives (foot/bicycle), which is then transported to the unions by specialised trucks. From the union’s production facility, milk is transported to wholesale distributors who then transport the milk to retailers in specialised trucks.

All of these processes are outsourced to third party logistics and retail partners to ensure efficient execution. A stringent verification process and guarantees for the safety of the milk products are required from channel members before they are on-boarded to the network.

To the wholesalers and retailers, Amul offers reasonable margins on a high volume good. It offers support in demand prediction, reducing the potential bullwhip effects that might arise from inexperienced sales partners. It also offers easy repayment programs for capital investments in infrastructure (freezers etc) by the retailers.  

Organisational Alignment

The heads of the village cooperatives sit on the management of the union at the district level. The heads of the unions at the district level comprise the governing board for the federation. This board appoints the chairman of Amul diary. This strategy has effectively ensured that the management has “skin in the game”.

The incentive structure is also aligned in that it reward suppliers who generate the most amount of business, which is judged based on a mix of the quality and quantity of milk supplied.

Increasing the Supply of Milk

As we saw in the e-choupal case, increasing the supply of product leads to better economies of scale (optimizing sunk costs). To this end, the unions provide various aids to the milk producers (like cattle-feed, veterinary aid, technical training) obtained at a low cost due to large scale sourcing, to increase supply. Aids are also aimed at overall community development.

Bridging Gaps in a Fragmented/Unstable Supply Side Market

Given the fragmented nature of the producers, supply tends to vary based on various factors, but demand remains fairly constant. The unions have invested in cold storage facilities to ensure that surpluses can be stored and redistributed to village level centers that are facing a shortage of supply, efficiently reducing supply instabilities.

Technology Initiatives

An automatic Milk Collection System was established that could identify and test the quality/quantity of milk. This leads to time saving since over 1000 producers enter a village cooperative each day and increased transparency.

Enterprise-wide Integrated Application Systems were used to align various sub software systems in place. A Geographic Information System was also established to view supply disparities in real time. Cyber stores have been recently launched as well.

Marketing/Advertising Campaign

One of the most interesting things about Amul is how a dairy cooperative evolved into a social commentator through their advertisements. The cartoon is usually has the Amul mascot (Amul Girl) in a current context with a catchy tagline. These ads have now become an establishment of their own right, elevating Amul’s brand image from just a diary cooperative to a household name outside the diary products context.

Product Diversification

Amul diversified into various diary products such as milk powders, butter, cheese, yogurt, ice creams and a number of other variations specific to the Indian market. It has managed to capture significant market share in others. This move was highly strategic once the brand image (quality at affordable prices) and distribution chains were established – a clear indication of successful horizontal integration.

Business Strategies for Managing Complex Supply Chains in Large Emerging Economies: The Story of AMUL; Chandra, Pankaj; Tirupati, Devanath; IIM A – April 2003

A case study of AMUL cooperative in India In relation to organizational design and operational efficiency; Prasad, Ruchira; International Journal of Scientific & Engineering Research Volume 4, Issue 1, January-2013 1

https://en.wikipedia.org/wiki/Amul#The_three-tier_.22Amul_Model.22

http://www.ndtv.com/photos/news/amuls-take-on-barack-obamas-four-more-years-10709#photo-183793

http://www.amul.com

http://www.business-standard.com/article/companies/amul-turnover-grows-14-to-cross-rs-20k-cr-in-fy15-115051400858_1.html

“Role of Cooperatives in Inclusive Growth – Comparative study of success of AMUL & Lijjat Papad in India.” Victoria, Queen and Ingale, M.K.

Student comments on “Amul – The Taste of India”

Tami, this is such an interesting company! I love the way they leverage their scale to support each member of their value chain, by providing fair margins to purchasers, assisting with demand prediction and capital expenditure payments, providing less costly cattle-feed, etc. It sounds like they also have good systems in place for quality control, which is something I would be worried about given the fragmentation of the supplier base and the perishability of the product.

Amul’s advertising campaign is very interesting to me, and I’m curious to know if you think it is well aligned with its mission. Is the fact that it was a reaction to a corrupt milk monopoly well known? If that is an important part of the brand, I wonder if that changes the way it should think about its more risqué cartoons that make political statements. I can see both sides. I could imagine that if its brand is associated with fairness and justice, political statements may be well received and consistent with its brand. On the other hand, I could also imagine that consumers may not respond well to feeling like they are making a political statement when they buy their dairy products. Would love to hear your thoughts!

Nicole – thanks for your comment. I like that you picked up on the advertising because at the outset it seemed out of alignment with their business model to me as well.

But thinking through, I think the political commentary actually helped them build a much stronger brand identity (while the initial establishment was against a corrupt monopoly, that image is now buried in its history) which is much more relevant to the current day and age. And I see your point about how it could be perceived negatively, but it has played out in the positive angle in India and is now integral to their brand – allowing them to leverage it and diversify horizontally.

Also, for the majority of the Indian population (middle aged, low-mid income with no real avenues to express their political opinions), Amul’s advertisements are an easy way to stay connected and included into India’s “pop culture”.

Tami, having grown up in India, Amul really was an integral part of our daily diet. And the legend of Verghese Kurien is well known. I think this write up provides some really good insight into operations of Amul. And I really like that you mentioned the Social advertising, since that was something we all used to really enjoy. Only suggestion I had in here was that it missed a mention of ‘The White Revolution’, which is so critical when you speak about Amul. That was the phase that converted India from a milk deficient nation to a milk surplus nation, eventually going on to become the largest producer of milk in the world. For a country of a billion plus people, for one organization to turn things around that way is no mean feat.

Sagar – thanks so much for your post. It is interesting that you mention the White Revolution because I put it in the post and then removed it when editing for length! While Amul played an integral role in the White Revolution, I wasn’t sure if the White Revolution fundamentally changed Amul’s operational model (it was more a replication of Amul’s models on large scale to me) and hence I left it out. Glad you pointed it out though – the story/brand identity is incomplete without that.

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Supply Chain Strategy of Amul

Amul is a dairy cooperative based in the Anand district of Gujarat, India. The word AMUL is derived from the Sanskrit word “amulya” , meaning invaluable. The cooperative was initially referred to as Anand Milk Federation Union Limited and hence the name AMUL.

The ultimate goal of the Amul is to benefit the farmers through this hierarchical supply chain that includes different kinds of entities ranging from small suppliers to large fragmented markets. It changed the supply chain paradigm in order to reduce the cost to the consumer while increasing the return to the supplier.

The key supply chain strategies of Amul are:

Core activities and third-party service providers: Amul chose a strategy to focus on core dairy activities and rely on third parties for other complementary needs. For example, AMUL focused on the processing of liquid milk and conversion to a variety of dairy products and associated research and development. On the other hand, logistics of milk collection and distribution of products to customers was managed through third parties.

Assistance to stakeholders: To the wholesalers and retailers, Amul offers reasonable margins on a high volume good. It offers support in demand prediction, reducing the potential bullwhip effects that might arise from inexperienced sales partners. It also offers easy repayment programs for capital investments in infrastructure (freezers etc) by the retailers.

Increasing the Supply of Milk: Increasing the supply of product leads to better economies of scale (optimizing sunk costs). To this end, the unions provide various aids to the milk producers (like cattle-feed, veterinary aid, technical training) obtained at a low cost due to large scale sourcing, to increase supply. Aids are also aimed at overall community development.

Bridging Gaps in a Fragmented/Unstable Supply-Side Market: Given the fragmented nature of the producers, supply tends to vary based on various factors, but demand remains fairly constant. The unions have invested in cold storage facilities to ensure that surpluses can be stored and redistributed to village level centres that are facing a shortage of supply, efficiently reducing supply instabilities.

Technology Initiatives: An automatic Milk Collection System was established that could identify and test the quality/quantity of milk. This leads to time-saving since over 1000 producers enter a village cooperative each day and increased transparency.

Enterprise-wide Integrated Application Systems were used to align various sub software systems in place. A Geographic Information System was also established to view supply disparities in real-time. Cyber stores have been recently launched as well.

Sources: https://www.slideshare.net/pramodvishe/amul-supply-chain-management , https://www.coursehero.com/file/11895199/A-Project-Report/ .

An Article By: B-Events Team

Shaastra TechShots’ publications contain information, opinions and data that Shaastra TechShots considers to be accurate based on the date of their creation and verified sources available at that time. It does not constitute either a personalized opinion or a general opinion of Shaastra or IIT Madras. The information provided comes from the best sources, however, Shaastra TechShots cannot be held responsible for any errors or omissions that may emerge.

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GCMMF – Amul Supply Chain

Published by admin on june 12, 2022 june 12, 2022.

GCMMF – Amul Supply Chain Case Study Solution

• Operational function of Amul Case study solution
• Amul Supply chain & Production Process

Core challenges faced by Operation functions at Amul

• Issues related to managing third parties service providers of Amul
• Strategies to be implemented to improve operational efficiency of Amul

In this assignment you are asked to assume the role of a manager in the operations function of the organisation that you work for (or one with which you are otherwise familiar).

In the last top management meeting the outgoing CEO requested that you write a report (of no more than 2,500 words) introducing the operations function to the incoming CEO, who is new to the organisation. She has specifically requested that you include the following three parts in your report:

An overview of operational activities, including:

• the type of good or service that the company provides (including a summary of the order qualifiers and order winners of those goods/services and the related operations strategy)
• the production process of that good or service
• the key performance objectives of operations
• and a brief overview of the supply chain network and/or any key business processes that are outsourced.

An explanation of how the operations function collaborates with other business functions (such as human resources, sales & marketing, or financial management) to improve efficiency and customer service. Add examples for clarity.

A summary of the core challenges that the operations function faces (and why) and, based on that summary, a proposal for one improvement accompanied by a strategy for the implementation of that improvement.

Established in the year 1973, with a motive to help poor farmers to get good return on milk they sell, Gujarat Cooperation Milk Marketing Federation Limited has now become the largest food product marketing organisation in India having an annual turnover of 4.8 billion dollar (2018-19). It procures approximately 23 million liter milk per day from 18700 village milk cooperative societies, 18 member unions covering 33 districts and 3.6 million milk producer members. (Source:Amul website).Popularly known as Amul, its operations is managed by 61 sales office and it has a network of 10000 dealers and 10, 00,000 retailers making it one of the largest operational networks in India. Product range of Amul includes milk, milk powder, ghee, butter, cheese, Pizza cheese, Ice cream, Paneer, chocolates, health beverages and traditional Indian sweets. (Source: Amul website). It is also largest exporter of dairy products selling its products in USA, Singapore, Gulf countries, Philippines, Japan, China & Australia. (Source:Amul website). Amul follows an umbrella branding strategy. It uses a common brand name ‘Amul” for all categories of products it deals in. Amul’s sub-brands include variants such as Amulspray, Amulspree, Amulya and Nutramul. The edible oil products are grouped around Dhara and Lokdhara, mineral water is sold under the Jal Dhara brand while fruit drinks bear the Safal name. (Source:Amul website).

(Source:Amul website).

Production process of Amul

Milk Reception

Milk receipt process is done in Amul 3 Process and reception lab. Raw Milk brought in from trucks is unloaded, tested and processed. Milk from Amul 2 is brought here in cans . Three reception points are available to unload milk from tankers. Each reception line is equipped with centrifugal pumps having a capacity of 30000 LPH, Air decompressor to remove air from milk, filters, pre heat exchange chiller and raw milk silo that is used to store milk.

Amul 3 Milk Pasteurization Process

Pasteurization process follows following sequential steps:

From Raw milk tankers, milk flows to chiller for cooling. There is a raw milk buffer tank where milk gets stored. From Raw milk buffer tank it is stored in milk silo and from there milk goes to pasteurization tank to complete pasteurization of milk. After that it goes to regeneration section to separate cream from pasteurized milk. cream separation section consist of two parts, one of skimmed milk section and other of cream buffer tank. From cream separation section to skimmed milk section, milk is heated at 80 degree Celsius and then stored in milk silo. Skimmed milk after pasteurization is issued to powder section,

Milk Powder Section has two units one for skimmed milk pasteurisation and other for whole milk pasteurization. After proportionate mixing in milk storage tank, pasteurized standard milk is converted into milk powder, sent to Amul 2 section, or transported via rail or road tanker to distributors. From cream separation unit, cream is sent to cream buffer tank where it is pasteurized at 80 degree Celsius and then transferred to Cream Balance tank. Afterwards it is issued to butter section unit.

Amul 3 Milk Dispatch

Milk processed at Amul is sent to different sections such as Amul 2 for pouch packaging, Flavoured milk section, Milk Powder section, butter section, ghee section L& T section and transferred to different dairies.

Amul 2 Milk receipt process

Amul 2 receives milk in cans at RMRD. Both cow and buffalo milk marked with separate colour is received in morning and evening. Two reception lines are available. Cans are verified for sour or curdled milk. After that milk is added to weighing tank. Empty cans are shifted to washer. Samples are collected for checking fat and SNF calculations. After that it is sent to Amul 3 section for further processing. Milk at Amul 2 is also used for producing butter milk which is packed at packaging department.

Milk Pouch Packaging section

Pouch packaging sections deal with packaging of milk into pouches. 3 packing machines having two identical heads for packaging, each head drawing heat sealable polythene sheet from distinct separate roll which is supplied with milk to be packed from overhead tank by gravity.

Butter Section

Separator vessel separates excess fat from milk, which is used to manufacture butter. Butter is manufactured using fresh cream of milk. Coloured salt is added with cream to make butter Cream from Milk 3 and Milk 2 section is brought to Butter section where they are pasteurized at 90 degree Celsius and then cooled to 10 degree Celsius. After that it is rotated in pipe for 20 hours and after that it is moved to cream balance tank. Plate heat exchanger is used to maintain heat level in the process. From there churning process starts which results into production of butter milk as well as butter. After churning butter milk is cooled in chiller from where it is transferred to butter milk silo. Churning leads to butter grains which are washed with butter milk and salted and non salted butter is prepared. Non salted butter is used to make ghee and salted butter is grinded for adding colour and then blended thereafter it is stored in butter silo. From where is packaged into 10 gm chiplet, 8gm blister pack, 100 gm refill pack and 500 gm refill pack.

Flavoured Milk, Coffee and Chocolate manufacturing Process

Process of making flavored milk, chocolate and coffee are slightly different. Sugar, SMP and TSP is mixed and dissolved with pasteurized milk for homogeniastion. The mixture is chilled at 5 degree Celsius while taking caring of prevention of acidity and then it is transferred to storage tank. Colour and flavour is added and filtration process is done to automatically wash, fill and cork milk in glass bottles and then placed in metal crates. Then the product os sterlised and cooled in cooling rooms where they are stored for 5 days at ambient temperature to watch quality defects such as curdling, leakage and discolouration. After that it is labeled and wrapped with hot glue machine.

Ghee Section

Sour milk is used to produce ghee. This milk is sent to cream machine for extracting cream. Cream is then converted into butter and butter is heated to make ghee. After that it packed into tins or plastic bags.

Supply Chain of Amul

Supply chain management of Amul Dairy starts with milk being brought by farmers and milk producers to village cooperative society on their conveyance either by bicycle or on foot. Village cooperative unit measures the quality of milk and it is then transported to union production facility by special milk container trucks. From there it is further sent to wholesale Amul distributors who in turn send them to retailers in special trucks.

The whole process is outsourced to different operations and logistics partners to implement the supply process effectively and efficiently. Amul follows stringent process of verification and surety for maintaining safety and quality of products from channel partners. All members in supply chain have to adhere rules and guidelines issued by Amul at different levels of logistics management. Amul offers good profit margin for its wholesalers and retailers, support in estimating demand and easy repayment policies for retailers for capital investment done by them.

Technology and e-initiatives in Supply chain management of Amul

Amul is one of the first FMCG firms in India to employ Internet technologies to implement B2C commerce. Another e-initiative taken by Amul is to provide farmers access to information relating to markets, technology and best practices in the dairy industry through net enabled kiosks in the villages. Amul has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process. Farmers now have better access to information on the output as well as support services while providing a better planning tool to marketing personnel. In collaboration with IBM, Amul has set up an ERP base system to integrate its upstream and downstream partners thus keeping a track to improve efficiency, reduce wastage and meet supply and demand effectively and efficiently.

Key strategic performance objectives of operations in Amul

All plants of Amul are ISO 22000:2005 certified for having Excellency in food safety management system. It has executed Total quality management system of international standard to avail best quality products to its national and international customers.

Since Amul deals in perishable products, speed is something which is essential for conduct of operations at Amul. Amul has outsourced partners to collect, deliver and transport raw milk and finished products on time without any delay. The company stringent rules in terms of getting raw material and finished products delivered on time.

3. Dependability

Amul has Ecommerce website through which customers can order products and get it delivered on stipulated time. To maintain its supply chain and customer relationship management, it has implemented SAP system to reduce wastage, keep track of inventory of raw material at plant and finished goods at retail outlets and distributors. Transport vendors are also aligned on ERP system which makes possible to track shipment.

4. Flexibility

Amul believes in continuous improvement in its operation process since its inception. They have diversified their product range from dairy products to manufacturing of oils, selling of fruits and vegetables. From time to time they bring necessary changes to meet market and customer requirements. Operation process of Amul is rigid in terms of following manuals and guidelines of manufacturing products and quality maintenance but flexible at adopting changes in process of manufacturing to gain competitive advantage and quality improvement.

Reduction in cost of manufacturing product is at utmost priority in Amul. To achieve this, they have initiated multiple programs with their milk producers to increase productivity of milk thus achieving economies of scale at production and reducing cost of finished goods. Amul has removed third parties in distribution channel and set up retail outlets to sell their products directly to its customers. Amul follows JIT system that allows reduction in cost which can incur due to money invested in stocks. Multiple operational procedures are followed to reduce cost of manufacturing in Amul.

Collaboration of Operational function with other functional areas

None of the organisations can survive for a longer period of time if functional areas of that business are not aligned. Amul uses integrated ERP system to keep a track of harmonious coordination among efforts of all functional departments towards achievement of organisational goals. Relationship of operation function with other managerial function is of immense use in getting a steady, planned and long term growth of any organisation. Relationships among these functional departments have been explained below:

Accounting and Finance Function

Operation department provides valuable information with regard to cost of production of goods, cost of inventory holding, budgeted production units, requirement of plant expansion, software upgradation and finance and account department provides information on availability of funds that can be allocated on operation functions of the company. On the basis of the information, finance manager takes capital budgeting decisions, and raise funds to meet procurement and working capital requirement of the organisation. On the basis of the information, finance manager decides over make or buy decision and outsourcing decisions too.

Technical function

Operation manager seeks information from technical department to improve production efficiency and technological upgradation that is required at production floor. Technical department assists in availing best production technologies to enhance production and reduce cost. Technical department has to install suitable MIS to control systems for production control which takes inputs from marketing information system and provides output to purchasing information system.

Human resource function

Both departments remain in touch with each other where operation managers gives input on number of employees currently working at production floor. If there is any shortage or surplus of employees in operation department, the same is made known to HR department. And HR department recruits or shifts employees to fulfill the desired needs at operation level. HR team seeks information on salary to be paid to different categories of employees working in operation department on the basis of acquaintance of skills required to perform that job. They also collection information from production department regarding job analysis, job design KSA and KRA of the employees to be recruited for production department. Operation team also seeks information on training and development programs for employees working at operational level.

Marketing Function

Marketing manager provides current demand status of products to operation department and operation department has to schedule production to meet those demand needs on time. Marketing Managers need to understand production schedules to meet their delivery requirements. Marketing managers also provide information with regard to customization to be done as per customer needs. Operation department provides monthly production status to marketing department which helps them to avail products to customers as per production schedule and meet the demand of market according to availability of products. It also help them to avoid false commitments to customers with respect to availability of products.

Some of the major issues faced at Amul with respect to operation function include:

Unstructured lead time

Due to faulty and obsolete means of transportation, products are not delivered on time. Since people at logistics and transportation system are not professionals, they posses delay in delivery. However this impediment has been reduced to maximum extent by implementation of JIT at Amul. Still more needs to done to improve level of efficiency at logistics and distribution part.

Gap between demand and supply

There is huge gap in determining demand and supply of products at Amul. In peak season, company is not able to satisfy the demand of the market and in off season many products got expired due to less demand of that particular product. It is a core challenge being faced at operation level and steps have been taken to accurately forecast demand and supply needs of various products so as to reduce wastage and shortage without incurring huge investment on it. To reduce this gap, Amul focused on adopting farmers business facing process. Still a lot is to be done to meet supply and demand needs.

Suppliers of milk to Amul are farmers. Most of them are illiterate, untrained and have liquidity issues with them. Mismanagement and delay in payment to the producers always initiate backlog in supply of milk on time. Amul focuses on making payment to them without delay. Pricing of milk has been fixed by Amul but fixed price also creates issue at pick time as these farmers get better price in market than what Amul gives them. Amul has done a lot of programs with farmers to keep them intact with Amul and benefits they accrue by becoming permanent members of the system. But liquidity issue with them imposes a threat to Amul and lot is to be done at this level.

Issues related to managing third parties service providers

Except for marketing of products, all other operational activities are entrusted with third party service providers at Amul. Farmers are the shareholders at Amul and they decide the price of raw material payable to them. Processing of milk nad production of dairy products lies in purview of union from the beginning. Logistics and distribution management is attributed to third party service providers, who possess impediment in the successful implementation of operation functions by causing delays, using old vehicles to perform their jobs. They are not specifically trained, skilled and professional to manage the operations professionally. Amul has started giving training and keeping vigilance by successful implementation of JIT and ERP bases vendor management system still things go out of the way which is uncontrollable many times at functional level. Issues related to Cold storage system for frozen food distribution is still not handled by distribution vendors. They are not equipped with such vehicles due to which quality of food gets deteriorate. Many times, children are used as labours to load and unload trucks which are unlawful.

Strategies to be implemented to improve operational efficiency

Time schedule of logistics, transportation & distribution can be set and traced from ERP system which is being done at Amul; still things go in haphazard manner due to undisciplined behaviour of vendors leading to suffering to retailers and ultimately consumers. Stringent rules and penalty provision should be implemented to reduce number of occurrence of such events. Parallely, Amul should train drivers, and vendors to drive carefully and avoid accidents on roads and delay in logistics and transportation. None of the manpower in operation process should be less than 18 years as it has been observed many times children loading and unloading dairy products from vehicles, which is even against conduct of law. Many times, benefits offered by Amul do not reach to retailers and whole benefit is enjoyed by distributors. Amul must encompass programs to ensure that it reaches to retailers thus benefitting retailers and not only distributors and wholesalers. This will also provide them an incentive to sell more and more products of Amul. Raw material codification should be done in such a way that it can be easily understood by logistics team and operation personnels to avoid any miscommunication and understanding. Since farmers suffer from liquidity Crunch Company should take action and make payment to farmers even before stipulated time to keep them happy and feel proud to be associated with Amul. Consumer complaints at Amul are not resolved at stipulated time creating nuisance and rupturing of reputation of the company. Amul should provide training to its retailers to handle consumers’ issues and grievances and provide all levels of support in resolving their queries. Demand Supply analysis predictor softwares can be used in alignment with retailers and wholesalers valuable information to predict actual demand of products. Farmers should be provided training on cattle management system to avoid diseases caused to cattle and increase milk productivity. Amul must explore new market and develop new products that can be manufactured and sold to utilise unused milk of off season.

Business Strategies for Managing Complex Supply Chains in Large Emerging Economies: The Story of AMUL; Chandra, Pankaj; Tirupati, Devanath; IIM A – April 2003

A case study of AMUL cooperative in India In relation to organizational design and operational efficiency; Prasad, Ruchira; International Journal of Scientific & Engineering Research Volume 4, Issue 1, January-2013 1

http://www.amul. com ; http://www.amuldairy. com/ ; Amul Operational manuals. Amul store manuals of production process.

(https://www.rediff.com/money/2005/sep/23spec.htm )

http://www.pearsoned.co.uk/media/onlinepreview/slack_9780273731603/assets/pdf/9780273731603_c01.pdf

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Simulation model for a sustainable food supply chain in a developing country: a case study of the banana supply chain in malawi.

1. Introduction

Problem definition, 2. literature review, 2.1. food sustainable supply chain practices in developing countries, 2.1.1. awareness, 2.1.2. collaboration, 2.1.3. efficiency, 2.1.4. knowledge and information-sharing, 2.1.5. resilience, 2.1.6. governance, 2.2. modelling in sustainable supply chains, 2.2.1. simulation techniques, 2.2.2. design science research, 2.2.3. des and dsr in combination, 2.2.4. gap in the literature, 3. materials and methods, 3.1. dsr methodological approach, 3.2. model input parameters, 3.3. base model assumptions.

• Harvest is always available; therefore, the input is not starved at any point.
• Disruptions caused by resource breakdowns are not modelled (due to a lack of the required statistical data).
• The model operates 24 h, but all operations, up to truck loading, are completed within seven hours, a typical daily shift for the case study.
• A week has five working days, but operations can occur on an additional sixth day.
• Randomness simulation in operations is not performed (due to a lack of statistical data).
• Storage capacity is unlimited at any stage in the SC for the quantities typically harvested.
• Period randomness is evened out.
• There is stable market for the products

3.4. Base Model Validation

3.5. evaluation of alternative model designs, 4.1. standalone model, 4.2. integrated model, 5. discussion, 5.1. theoretical implications, 5.2. managerial implications, 5.3. practical and policy recommendations, 6. conclusions, 6.1. findings, 6.2. research limitations, 6.3. recommendations for future work, supplementary materials, author contributions, data availability statement, conflicts of interest.

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Share and Cite

Moyo, E.H.; Carstens, S.; Walters, J. Simulation Model for a Sustainable Food Supply Chain in a Developing Country: A Case Study of the Banana Supply Chain in Malawi. Logistics 2024 , 8 , 85. https://doi.org/10.3390/logistics8030085

Moyo EH, Carstens S, Walters J. Simulation Model for a Sustainable Food Supply Chain in a Developing Country: A Case Study of the Banana Supply Chain in Malawi. Logistics . 2024; 8(3):85. https://doi.org/10.3390/logistics8030085

Moyo, Evance Hlekwayo, Stephen Carstens, and Jackie Walters. 2024. "Simulation Model for a Sustainable Food Supply Chain in a Developing Country: A Case Study of the Banana Supply Chain in Malawi" Logistics 8, no. 3: 85. https://doi.org/10.3390/logistics8030085

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