SUPPLY CHAIN

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 Introduction
n Framework of SCM in Dairy
Industry
n Cooperative model
n Challenges
n Case study: AMUL

Introduction
 Overview of Indian Dairy
Industry
n Largest milk producer in the world, 100 million MT
n Value of output Rs. 1179 billion (2004 -05) (Almost equals
combined output of paddy and wheat!!)
n 1/5th of the world bovine population
n Very low productivity (around 1000 kg/year, world average-
2038 kg/year)
n 3 Tier structure :
n Village society,

n District unions

n Federated at state level

n
Dairy business

n 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
n 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
n Traditional Model
n Large number of cooperatives

n Small membership

n Primarily Production of raw product (fluid milk) &

very less value addition

n

n
 Restructuring of dairy
business
n 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.

Framework
Framework
n Research at the Industrial Research Institute
Swinburne (IRIS), Australia
n Purpose was to develop a supply chain management
framework for the dairy (milk products) business
n Supply Chain Operation Reference” or “SCOR”
model - adopted elementary framework and the
following two standards were adopted:
n The “CODEX Alimentarius Standard”

n The “grade “A” pasteurized milk ordinance”


 t o
t ed
v er
n
Co
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 Due to low quantum and value of assets
n Low or negligible carrying capacity-both
financial and infra.
n Lack of market Information
n Lack of access to financing facilities in
absence of collaterals.
n Distortions in Supply chain
n Manipulative Middle men
n Supply Chain Inefficiencies Contribute to 30-50% of
revenue loss – Global Study
 CHALLENGES FACED BY
THE INDIAN DAIRY
SUPPLY CHAIN
 Challenges faced
n

n Procurement (collection)
n The four-tier system of milk collection
n Fluctuation of volume due to presence of too
many intermediaries
n Price negotiation by milk producers based on:
üVolume and locality factors
üAn average regional price
üRaw milk production costs
üDomestic prices at wholesale and retail levels
üOverall consumer demand conditions
n Little room for negotiation for Indian milk producers
n
n
 Challenges faced Contd.
n
n
n Advent of organized retail channels
n Increased availability of branded, packaged milk
n Reduced role of middlemen, mainly the milk vendors
(consequent unemployment)
n Distribution
n Lack of superior cold-storage transport
n Distribution wastage due to improper storage
n Inefficiency in milk processing
n No enforcement of HACCP principles
n Hazard Analysis and Critical Control Point
n 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 Data on dairy farmer production costs, imports and
exports of dairy products, domestic and world
stock of different traded dairy products
n Helps in price negotiations
n Technology solutions
n Automated milk collection systems
n Use of analyzers
n Use of Electronic Data Interchange
n As a feedback channel for information feedback
n Track demand and capacity
n
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.
Ø
Amul – Value Chain
IT @ AMUL
n 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.

n Proved invaluable in ensuring fairness and transparency

throughout the entire organisation.
n 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 Logistics

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