Supply Chain Management

PROJECT Supply Chain Management Study: Milma

Submitted By : Group 4, Section B

Debolin Dey (PGP/16/015) Jyotsna Gautam (PGP/16/026) Ravi Kant Verma (PGP/16/041) Arjun Menon (PGP/16/072) Nayanika (PGP/16/327)

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Acknowledgement The success and final outcome of this project required a lot of guidance and assistance from many people and we are extremely fortunate to have got this all along the completion of our project. We respect and thank Prof. Rupesh Kumar Pati for giving us an opportunity to do the project work in Milma Plant and providing us all support and guidance which made us complete the project on time . We are extremely grateful to him for providing guidance though he had busy schedule. We owe our profound gratitude to the Marketing Manager, Plant Manager and the Operations Manager at Milma Plant, Kozhikode who took keen interest in our project work and guided us all along, till the completion of our project work by providing all the necessary information for developing a good system.

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Contents
Executive Summary ................................................................................................................... 4 MILMA The milkman of Kerala: ........................................................................................... 4 The purpose of the cooperative: ............................................................................................. 5 The distribution channels used by Milma: ............................................................................. 5 Awards and recognitions: ....................................................................................................... 5 Structure of the organization: ................................................................................................. 5 Process and distribution at MILMA ....................................................................................... 6 Plant process ....................................................................................................................... 6 Distribution process ............................................................................................................ 6 Inventory Control and Demand Forecasting .......................................................................... 7 Centralisation of System ........................................................................................................ 7 Despatch process .................................................................................................................... 7 Supply Contract ...................................................................................................................... 8 Improvements for the future ................................................................................................... 8 Performance Measurement Systems ...................................................................................... 8 Recommendations .................................................................................................................. 8 References: ........................................................................................................................... 10

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Executive Summary In this project we have tried to study and analyse the operations system and supply chain mechanism at Milma Plant, Kozhikode and have suggested some recommendations. In this project, with the assistance of the Operations Manager and Marketing Manager at Milma, we have tried to analyse the major problems faced by Milma; being the leading milk producing company in south, predominantly in Kerala and suggested the following recommendations to fight against the nearest competitors like Nandhini, popular in karanataka and maintain its market share. * Better distribution system: Starting new depots to meet the demand in remote areas * Better networking and information sharing system * Ensuring consistent and quality supply through contracts * A mobile payment mechanism * Outsourcing of logistics operations Keeping in mind that the above recommendations are time consuming, thus we have suggested that more emphasis should be given on better distribution system by starting new depots and to establish a mobile payment mechanism.

MILMA The milkman of Kerala: MILMA is another name given to Kerala Co-operative Milk Marketing Federation (KCMMF), formed in April, 1980. A cooperative system is a system wherein a number of entities work to accomplish a common goal. It has other companion unions in Thiruvananthapuram and Ernakulam. Its head office is in Thiruvananthapuram, the capital city of Kerala. Malabar Regional Co-operative Milk Producers Union (MRCMPU) Limited is a cooperative of around three thousand village dairy cooperatives which are situated in 6 districts of Kerala state which are: Kasaragod, Wayanad, Kannur, Kozhikode, Malappuram and Palakkad. It is owned by the member farmers of the various societies. The societies work on the working pattern of AMUL societies. The products of the cooperative include milk products and cattle-feeds. It was started under the Indo-Swiss project which was an agreement between Indian Government and Swiss Confederation. It has resulted into a betterment of livestock farming in the state of Kerala. Today, it is under the management of Kerala Livestock Development and Milk Marketing Board.
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The current product line of MILMA includes: smart milk, toned milk, peda, ghee, milk curd, rich milk, ice-creams, beverages, sweets, butter milk and flavoured milk.

The purpose of the cooperative: The purpose is to undertake activities that would lead to the socio-economic development of the dairy farmers. This is done by effective organizing, procuring, processing and marketing of commodities according to guidelines of Kerala Co-operative Milk Marketing Federation Ltd. (KCMMF).

The following are the activities that are given importance for achieving this objective: 1.) The total milk produced by the farmers is bought at remunerative prices even if there is a surplus. 2.) There is adequate packing and proper processing done of the products in the dairies in order to guarantee quality of the product. 3.) Milk and other dairy products are marketed well regularly to ensure consumer satisfaction and also to maximize farmers returns.

The distribution channels used by Milma: Various distribution channels are used for the distribution of the products, like: milk booths, stalls, agents, wholesalers, regional distributors etc. The booths are situated at different locations like bus-stops, railways, schools, colleges, hospitals, malls etc. Awards and recognitions: Milma has received many awards for its eco-friendly operations. The list of awards includes: Pollution control award which was given to the Kasaragod dairy of Milma. Another award that was given to the Kozhikode dairy was the Kerala State Govt. Award for Energy Conservation, in 2004. Also, the Kozhikode dairy received the award: Safety award of the Government of Kerala, in 2009.

Structure of the organization: The organization was formed as a state adjunct of the National Dairy Programme Operation Flood. It consists of 3059 Anand model primary milk co-operative societies (in year 2012) and the number of local farmer members equal to 8,60,000. The organization has three tiers i.e. regional co-operative milk producers unions, namely: for Thiruvananthapuram region
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(TRCMPU), for Ernakulam region (ERCMPU) and for Malabar region (MRCMPU). The headquarters of MILMA are located at Thiruvananthapuram. It has been successful in achieving the self-sufficiency goal in production of milk in Kerala. It works in close collaboration with the Dairy Development Department of the State, National Dairy Development Board, Kerala Livestock Development Board and Animal Husbandry Department. Process and distribution at MILMA The milk is procured from all over the state to the respective cooperative wing. The milk is collected by various societies from villages and fed across the plants. The collection is on a daily basis and only recognised societies and farmers are allowed to contribute to maintain the overall quality of the milk. The steps to the different processes are as follows:

Plant process 1. The milk is collected in pre-sterilized/chilled containers from various societies across the district in order to take it through large distances. It makes sure the milk is not spoiled during transportation. 2. The milk is assessed for quality and then transferred to chambers at temperature of 0.070C. 3. Before shipping the milk undergoes pasteurization process. 4. The milk is then segregated on the basis of requirement for processed products and for use as raw milk. 5. Milk is transported in low temperature silos and containers. 6. The distribution is done within 24 hours. (shelf life)

Distribution process The milk is distributed using two basic methods of 1. Direct distribution: MILMA booths have come up all over the state to directly provide the MILMA products. 2. Indirect distribution: The distribution is mainly done through wholesale agencies and direct retailers. The milk processing to make sure that it is preserved for at least 5 hours in order to facilitate it to match the standards while being transported. Also it has been seen that raw milk has less

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profitability than the processed products hence a large portion is used for making processed products. Inventory Control and Demand Forecasting There are shortages during the festive Season. Also there is shortage during April-May due to lack of grass for the cows. Saturdays have a greater demand in normal season of milk production so forecasting is done one month prior. Daily Demand is generally stable and orders are placed one day in advance. There is no lead time. Demand is forecasted one month in advance to adjust the production accordingly. Also during marriage seasons. These things are taken into consideration when demand is forecasted. This information is passed on to the supply management department by the dealers and the field staff of Milma. Till now, cases of unmet demand hasnt occurred. Milk is always kept at a surplus. The authorities claimed that an optimum level of inventory is always maintained. Centralisation of System Every region (eg. Calicut, Cochin, Trivandrum) works like a centralised system. It follows Direct Supply Chain that is it does not have any warehouses to stock the milk after production which are closer to the agents , so as a result safety stock is less, chances of stock outs are present. Service levels are also high. Overhead costs are less due to economies of scale. Lead times are high compared to a decentralised system. Despatch process The despatch process consists of mainly covering of 68 routes which starts at 1:30 PM the same day and continues till 8:30 AM the next morning. It is based on the distances of the routes. The whole despatch process is shown as follows:

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Supply Contract There are no supply contracts as such. Milma runs through cooperatives. Hence, milk is procured by the local cooperatives which then pass it on to the plant. This is a continuing relation. Price for the milk procured is stated taking into consideration both quantity and quality of the milk. Improvements for the future - Tetra pack is going to be launched in lieu of milk plastic packets Production of butter has begun

Performance Measurement Systems Performance measurement is through regular audits. This is done by ISO. Also the plant manager conducts monthly performance checks. Quality issues generally are very rare. Customer complaints if any are noted by the customer cell department which operates for 24 hrs. Mostly complaints are about leakage or spoilage. Recommendations On a broad note, after the analysis following are the recommendations that we have arrived upon: * Better distribution system: Starting new depots to meet the demand in remote areas * Better networking and information sharing system * Ensuring consistent and quality supply through contracts * A mobile payment mechanism * Outsourcing of logistics operations
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Based on the analysis, we find that implementing all of these would be time consuming. Moreover, a lack of focus may dilute the benefits that each of them offers. Hence, we have selected two of them which we feel are the most necessary and have tried to analyse its pros and cons. a) Better networking and information sharing system Pros Will be helpful in tracking shortages and surpluses across different regions Better tracking of the agents and dealers Better information control, reduction in lead time and costs related to forecasting errors Cons Cost of implementation of the IT system Training of employees needed Milk being a perishable product, IT system will have limitations in eliminating the randomness in supply shortages

b) Mobile payment mechanism This will help in better cash transfer Pros Cons The agents and cooperatives can make direct Current system lacks the technical capability payments through mobile phone to incorporate this Reduces misallocation of funds Increases despatch efficiency as time is saved and more routes are covered in less time

It is observed that there are challenges in the implementation. There is a need to educate the employees, dealers and the cooperative societies. However, the long term benefits of these options substantiate the spending of time and money.

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References: - MILMA official website: http://kcmmf.in/

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Indiamart website, MILMA: http://www.indiamart.com/milam-milkproducers/ Interview with Plant manager, marketing manager, operations manager of Milma

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