Drivers of Amul Supply Chain

Facilities:

Factors that Amul management keeps in mind during facility location layout:

The location of an industry is determined by taking into consideration the following factor:

• Primary Factors:
– Supply of raw materials
– Nearness to the market
– Transport Facilities
– Supply of Labour
– Availability of power
– Supply of Capital

Secondary factors:

(1)Proximity to customers: AMUL Management during facility location analysis keeps in

mind the proximity of target cus tomers and target market, so that the target customer can be
approached easily to outlets.

(2) Policies of management: AMUL managerial policies relate to future volume of

production and expansion, size of the plant, integration of production processes; facilities to
employees, sales and marketing policies and purchasing policies etc.

(3) Plant location: Location of a plant greatly influences the layout of the plant.
Topography, shape, climate conditions, and size of the site selected will influence the
general arrangement of the layout and the flow of work in and out of the building.

(4) Total Cost: The core objective of the KFC is to select a site with the lowest total cost
include land, labor, constructions, taxes and energy cost. By minimizing the total cost they
can be able to reduce the product cost

(5) Volume of production: Plant layout is generally determined by taking into

consideration the quantum of production to be produced.

(6) Availability of floor space: Availability of floor space is other decisive factor in
adopting the mode of layout. If there is a scarcity of space, product layout may be
undertaken. On the other hand more space may lead to the adoption of process layout.

(7) Nature of manufacturing process: The type of manufacturing process undertaken by a

business enterprise will greatly affect the type of layout to be undertaken
Facility Layout

Facility layout is an arrangement of different aspects of manufacturing in an appropriate

manner as to achieve desired production results. Facility layout considers available space,
final product, safety of users and facility and convenience of operations.

An effective facility layout ensures that there is a smooth and steady flow of production
material, equipment and manpower at minimum cost. Facility layout looks at physical
allocation of space for economic activity in the plant. Therefore, main objective of the facility
layout planning is to design effective workflow as to make equipment and workers more
productive.

Factors that influence layout

 Volume, weight of items to be produced.

 Nature of the service to be provided.

 Cost of the building to house the operation.

 The fragility of the product or component

AMUL facility layout:

The plant is engaged in producing milk, ice creams, milk powder and ghee. Entire department
is uniquely provided with facilities for the processing each Product. There are 4 production
departments and packaging departments pertaining to each product respectively.
THE THREE-TIER “AMUL MODEL”

DAIRY COOPERATIVE SOCIETY AT VILLAGE LEVEL

MILK UNION AT DISTRICT LEVEL

MILK FEDERATION AT STATE LEVEL

The Amul Model is a three-tier cooperative structure. This structure consists of a Dairy
Cooperative Society at the village level affiliated to a Milk Union at the District level, which
in turn is further, federated into a Milk Federation at the State level. The above three-tier
structure was set-up in order to delegate the various functions, milk collection is done at the
Village Dairy Society, Milk Procurement & Processing at the District Milk Union and Milk
& Milk Products Marketing at the State Milk Federation. This helps in eliminating not only
internal competition but also ensuring that economies of scale are achieved. As the above
structure was first evolved at Amul in Gujarat and thereafter replicated all over the country
under the Operation Flood Programme, it is known as the Amul Model or Anand Pattern of
Dairy Cooperatives.

Advantages of Amul good layout

1. Labour cost

 Increase in productivity with more units being produced per man hour.
 Reduction in the number of workers.
 Minimization of motions between operations.

2. Production control

 Increased production rate

 Providing convenient and adequate storage points.
 Increased production rate.
 Improved ability of forecasting manufacturing time.

3. Supervision

 Lesser requirement of supervision.

 Reduction in time spent on inspection.
 Reduction in cost of inspection.

4. Other manufacturing costs

 Reduced consumption of power.

 Minimization of scrap and defectives.
 Better quality due to reduced handling.
 Reduced costs of maintenance.
 Improved utilization of materials.
Role of facilities in Competitive Strategy:

Facilities are the key driver of supply chain performance. The three tier system involved in
facilities have ensured economies of scale. Location of the facilities, the proximity to the
customers increses efficiency of the supply chain.

Inventory:

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.
AMUL 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
AMUL'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 AMUL branches engage in route scheduling and have dedicated
vehicle operations.

Transportation:
Amul follows a distinctive transportation model as far as its transportation is concerned.The
major production units of Amul are located in Gujarat. Major distribution hubs are located in and
around the periphery of the production units. Since Amul produces majorly perishable goods, it
becomes mandatory to follow a proper and smooth transportation of goods. Physical distribution
is a very important part of the whole business.
Milk is procured from the villages and collected at the Village Co-operative societies (VCS).
From there milk is taken to the manufacturing units where the milk is processed into various
products. The products are then transported to the company depots located in various parts of the
country. The products are then sent to the wholesale distributors (WD) and from there to the
retailers. It is then available in over 1,000,000 retail outlets across India through its network of
over 3600 distributors. While for Amul pouch milk, there are 17 distributors. The wholesale
distributors carry inventory that is just adequate to take care of the transit time from the branch
ware house to their premises. This just-in-time inventory strategy improves the distributors’ ROI.
There are two channels involved in the supply chain of Amul.
1) Upstream channel i.e. the procurement channel for milk from the farmers to the
manufacturing units
a. First the milk is taken to the VCS by the farmers on foot or bicycles in small
quantities. The new VCS in Maharashtra have rapid milk chillers.
b. Then milk is transported from co-operatives to the manufacturing units via special
trucks equipped with tankers to carry milk once a day. A tanker carries three to
four societies’ milk together which helps in achieving economy in transportation
of milk. Geo-remote sensing based vehicle tracking system has been put in use for
efficient handling of Road Milk Tankers carrying milk to Dairy Plant.
2) Downstream channel i.e. the distribution channel from manufacturing units to retailers
a. First the products are taken from manufacturing units to the depots. This is done
by using 9 to 18 MT trucks. The frozen food is kept at a temperature below -18C,
while milk is kept between the temperature of 0-4C
b. From depots to the WD’s the transportation is done using insulated 3-5 MT
TATA 407’s. A permanent dispatch plan (PDP) is prepared as per the demand of
various products
c. Finally the goods are to be transported from the WD’s to the retailers. The beat
plan is prepared and the transportation is done by auto-rickshaws, rickshaws and
bicycles
The vehicles have a carrying capacity of 750-850 crates and one crate consists of 40 pouches of
500ml each. The vehicles start leaving the plant at 19:00. All the crates which are placed in the
vehicles have some ice cubes in them, so as to increase their shelf life. The truck drivers are
responsible for the loading and unloading of the crates.
Aside from using the fleet of trucks , Amul has also integrated their transport system with
railway cooling units to improve transport cost and its supply to Delhi. It has tied up with Adani
Logistics to have a dedicated train to transport milk daily from Dudhsagar Diary of Mehsana to
Delhi. This train transport uses 50 wagons with a capacity of 24,000 litres each
Amul has more than 49 depots with dry and cold warehouse for entire storage of products and
the largest cold chain network in India with 18000 refrigerators.
Milk is a product which has time band for consumption; hence it needs to reach the retailers
early morning. For up-country distribution, the dispatch time of milk is between 3-8pm,
depending on the location, while for local distribution in Ahmedabad the dispatch timings is
between 8pm to midnight. The location of the trucks are monitored through cell-phones.
While distribution, is the transportation vehicle breaks down, it is the transporters responsibility
and he arranges for a back-up to minimize delay.
Role of transportation in competitive strategy:
Since JIT inventory system is being recently used by Amul. So transportation plays a very
important role. It is transportation that allows the right balance between responsivenss and
efficiency.
Information :
Good information can help improve the utilization of supply chain assers and the coordination of
supply chain flows to increase responsiveness and reduce cost.
AMUL is the first company in the co-operative form to adopt the e-revolution. In this
informationcommunication-Entertainment age, the barriers between the business organization
and consumers, between manufacturers and end-users are all breaking down. This is what was
started fifty years back by AMUL by eliminating the ‘middlemen’ and bringing the ‘producers’
closer to the ‘consumers’. The organization believes in innovations in product as well as process.
For rapid communication access to Veterinary Health Assistance they have introduced the GIS
facility. The adoption of the electronic milk testers to ensure efficient testing and measurement
of milk constituents is a step in this direction. This is first organization to have its own website –
www.amul.com They have nationwide cyberstores, functioning in some 120 cities, and an
AMUL cyber stores gifting service capable of serving consumers in more than 220 cities, on
special occasions. This has been possible by creating an IT network, which links the production,
centres with sales offices and dealers by VSAT and e-mail connectivity.

Role of information in Competitive Strategy:

The right information helps a supply chain to meet customer needs at lower cost. The appropriate
investment in Information Technology such as having a website and inclusion of nationwide
cyberstores improves visibility of transactions and coordination of decisions across the supply
chain.

Sourcing:
The set of business processes required to purchase goods and services. Every morning 27 lac
women across 13000 villages bringing in milk worth crores of rupees are now celebrating their
economic independence thanks to the co-operative movement called Amul.

Role of sourcing in Competitive Strategy:

Sourcing decisions are crucial for effieciency and responsiveness. Amul source its raw material
mainly milk by outsourcing and thus gives a source of income to the rural household. Amul aims
for quality manufacturing and economies of scale because trargeted market values quality and
low cost.