E-SCM AT AMUL

E-SCM
What is the fuss about?

Supply Chain Management

SCM is the management of upstream and downstream relationships in order to deliver
superior customer value at less cost to the supply chain as a whole

E-Supply Chain Management

E-SCM can be defined as the

integrated management
approach for planning and
controlling the flow of materials
from suppliers to the end users
using IT and internet
technologies.

Eg: Walmart, Amul etc

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INDUSTRY OVERVIEW
Insights into the Dairy Industry

 India is the biggest producer, consumer and exporter of milk

and milk products

 In 2012-13, India exported 87,824.19 Metric tons of milk

products worth 1412.09 crores

 Growth Periods: Public companies 1971 onwards

Private companies – 1991 onwards

 Operations governed by Traditional methods. Plagued by

problems such as low per cattle yield, shortage of fodder,
inadequate transportation and Cold storage facilities.

 Recently, transformations in the sector have been spearheaded

by Amul’s adoption of IT services.

 Major Players : Amul, Mother Dairy, Nestle and other regional

players

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COMPANY OVERVIEW
Amul’s Inception and Business Model

AMUL’s INCEPTION
• Launched in 1946
• Prior to Amul’s launch, Indian Dairy industry was dominated British Polson Dairy
• In the protest against Polson’s discriminatory policies, a non-cooperation movement was launched
which eventually culminated in to the inception of Amul in late 1946

BUSINESS MODEL

• Eliminating the middlemen

• Division of Procurement units on the basis of Societies (Amalgamation of villages)
• On the Supply side, daily procurement of 3 million litres a day from 1.25 million milk suppliers, and
thus in 1994, it implemented Automatic Milk Collection Units (AMCUS)
• On the Demand side, GCMMF (Gujarat Co-operative Milk Manufacturing Federation) controls the
manufacturing, distribution and marketing of milk and other related products
• Low price strategy
• Dual strategy of simultaneous development of the market and member farmers helped attain
sustainable competitive advantage. IT and TQM have significantly optimized operations at Amul

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PROBLEM STATEMENT & GAP ANALYSIS
Understanding the Current Scenario
PROBLEM STATEMENT
 Maximizing the network surplus & maintaining equity among unions
 Matching demand and supply
 Milk collection and storage (perishable good)
GAP ANALYSIS
STAGES AS-IS TO-BE
Process Analysis • Inflexible to expansion • Smooth Expansion; flexible
• Complex supply chain • Minimum Wastage
• weak infrastructure • Instant payments
Product Analysis • Decentralized applications • Easy information flow
• No online access • Data analysis for decision
• Data discrepancies support & productivity
IT infrastructure • Disparate systems • Communication systems like e-
• Unstructured data capturing mail, fax etc
Competitive analysis • Availability of branded milk • Increase availability; promotion

Strategic Analysis • Demand-supply mismatch • Match demand; expansion

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BUSINESS SOLUTION
E-SCM to Amul’s rescue
•In order to address the scalability and integration issues, Amul started implementing a collection of
Technical and IT initiatives.
•As a part of its E-SCM implementation, the following systems were introduced:

1. AMCUS Supply Side -- Procurement

2. DISK
3. VSAT Milk Processing and Marketing
4. GIS
5. Amul Cyber Store Demand Side - Distribution
Thus, over a period of 7 years, Amul introduced a
variety of end-to-end IT solutions to tightly integrate
the various components of its Supply Chain.

GCMMF
Farmers Village Societies Milk Unions Distributors Retailers

(Marketing)
(Production) (Procurement) (Milk Processing) (Distribution) (Retailing)

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IMPLEMENTATION METHODOLOGY
How things changed at AMUL
1. PROJECT PLANNING
(a) SCOPE MANAGEMENT:
(b) HUMAN RESOURCE
• Location Scope
MANAGEMENT
• Business Scope
• Recruitment
• Process Scope
• On the job Training
• Application Scope
• Online Portal
• Report Scope
• Team
• Data Migration Report
• User Scope
• Technology Scope

(c) TIME MANAGEMENT

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IMPLEMENTATION METHODOLOGY
How things changed
1. PROJECT PLANNING
(d) TRAINING MANAGEMENT
• ‘Chirag Banas Internet Seva’ in Gujarat
• Infrastructure for training

(e) QUALITY MANAGEMENT

• TQM- Internal Consultant Development
• Developing internal competencies for technology
user community

(f) CHANGE MANAGEMENT

• Free systems- diffused IT in villages
• Empowered village cooperative societies

(g) RISK MANAGEMENT

• Minimum delay in payments
• Whole milk accepted
• Surplus paid in the form of dividends

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IMPLEMENTATION METHODOLOGY
How things changed

2. IMPLEMENTATION STRATEGY
• Assigned the ERP software development project on a turnkey
basis to TCS
• Phased transition
• FIrst implemented AMCUS in Navali Village co-operative society
on a pilot basis in 1996

3. TEAM STRUCTURE

Retail B2B & B2C Portal Wholesale depots and Connect with the Direct
Retailers customer base

EIAS & GIS Internet GCMMF head office members Interface between the
and the distributors suppliers and the retailers

ERP DISK Union members, Head of the Connect with the farmers and
village society and suppliers village cooperative societies

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IMPACT ASSESSMENT (1/3)
SWOT, PEST and Operational Impacts

Strengths Weaknesses

-Platform independent -Inability to adapt to change, which could lead to inaccurate

estimates
-Supports exchange of real time information
-Speed of underlying network could spell trouble for the
-24/7 processing capability
company
-Open architecture that allows rapid deployment and scalability
-Amul no longer has total control over its operations as it
which permits almost unlimited users in a real time environment
partners with others
-Incorporates broadcast and active messaging

Threats Opportunities

-Loss of competitive advantage due to shared strategy -Creation of a massive supply chain that is tightly integrated with
Amul’s processes and is able to adapt to continuously changing
-True amount of information that can be shared with suppliers
requirements and demands
may hamper progress
-Expansion of this supply chain to other products would create a
-Suppliers who want to work with multiple companies would be
significant advantage for Amul
reluctant to adopt this system
-Excellent platform to promote inter-departmental coordination
-Information security is a concern

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IMPACT ASSESSMENT (2/3)
SWOT, PEST and Operational Impacts

Political
-Strong support from Sardar Patel & Pandit Nehru helped initiate and develop the traditional Amul Business model
-Reliance on state & district cooperatives to provide milk producers with:
-Facilities and support services
-Training programmes
-Conflict resolution

Economical
-Cost of implementation of the system is high
-Is the system adding significant value to the company?
-Break even period for the investment?
-Could this system create a monopoly for Amul? And would there be any regulatory consequences ?

Social
Parity between partners at three levels:
-Village level
-District level
-State level
Technological
-The system would undergo continuous development in order to keep up with the latest technology
-Extending the reach of the network to all villages and towns
-Overcoming skeptics to drive system adoption among suppliers

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 IMPACT ASSESSMENT (3/3)
SWOT, PEST and Operational Impacts
Increase in Milk Collection -
Post IT implementation in 1995

Increase in Total Revenue-

Increase in Member Base-
Post IT implementation in 1995
Post IT implementation in 1995

NOTE: Data till 2001 has been taken into account to reflect on the
immediate impact(1995-2001) of IT implementation at AMUL.
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PROCESS MAPPING
Business Functions, Processes and KPIs at AMUL
Business Function
PROCUREMENT
PRODUCTION AND PROCESSING
RECORD KEEPING AND ACCOUNTING
DISTRIBUTION AND LOGISTICS
STAFF TRAINING
Process
1. Milk Collection using
AMCUS
2. Value Determination
1. Milk processing and
further processed goods
1. Tracking individual
Supplier records
2. Tracking Payments and
Disbursements
1. Tracking Sales data
geographically
2. Tracking of Distribution
Trucks
1. IT compatibility training of
the employees
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KPI
i. Daily volume of Milk procured
ii. Response Time for milk collection per supplier
iii. Waiting time in the queue
iv. Rise/change in average daily procurement
i. Fat Content in the Milk
i. Shelf life of the processed products
ii. Waste and Pilferage rate during production
i . Total milk supplied by individual farmers
ii. Consistency in the quality of Milk supplied
i. Payment Cycle of the farmers and milk suppliers
ii. Time lag in the payments (if any)
i. Increase/Decrease in demand at a location
i. Cost effective route for delivery
ii. Availability of trucks
iii. Utilization of trucks
iv. Number of distribution centers
i. Time processing for Transactions
ii. Volume of Daily/weekly/Periodic Transactions
iii. Error Rate
ORGANISATION METRICS
How effective is Amul and its supply chain

(a) QUALITY MEASUREMENT ISSUES

METHOD USED: Kaizen Techniques of six sigma
• Number of AMCUS installed
• Satisfaction level of villagers is measured
• Improvement in quality of milk (reduction in acidity and sour milk)
• Planned activities for maintenance of machines

(b) COMMUNICATION EFFECTIVENESS

METHOD USED: INFORMATION COMMUNICATION TECHNIQUES
• Reduced time delay in getting money.
• Improved cash availability and reduced the need for loan.
• Possibility of error was reduced.
• Reduced Waiting time

(c) TRAINING AND SKILL DEVELOPMENT

• Procurement system- integrator and knowledge sharing platform
• Trained 2 or 3 operators by system provider

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BUSINESS PARTNERS
Who contributed in the success story of Amul
Helped implement SAP ERP system which
enabled to have a complete view of
supply chain and integrate GCMMF and
district unions
Business intelligence system which gave
them an insight on all its products all over
the country and generated reports to
manage the supply chain
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To achieve the objective of C2C (cow to
consumers), Amul laid down a five point
agenda using ERP, which were:
•ERP implementation for GCMMF
•ERP implementation for member unions
•a uniform and automated milk
collection system covering all the
villages in the Amul family
•a distributor managed solution
•a retail management solution for Amul
Preferred Outlet
IBM is helping Amul in achieving all these
objectives
CHALLENGES
Implementation of IT in supply chain was not easy

(a) Challenges faced by Management:

• Change Management
• Scalability

(b) People/ Human Resources Related Challenges

• Training and Skill Re-orientation

• Farmer Literacy and support

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ADVANTAGES
Has E-SCM been useful to Amul?

After the implementation of AMCUS in 1995 and other IT initiatives, there have been a steady
and a healthy increase in the procurement of milk

Demonstrated benefits of the ICT platform: After calculating the economic benefits it is
• Reduction in lead time found that the AMCUS benefits the farmer
• Reduction of pilferage community by saving Rs. 1159.4 million per
• Reduction in human errors year.
• On the spot payment for farmers (from
a week to a couple of minutes)
• Reduction in wastage
• Transparency in operation
• Integration in operation

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CONCLUSION
• E-SCM has helped Amul achieve better efficiency in terms of inventory
management, reduce lead time, reduce processing time (by 90%) and
better distribution and reach.
• AMCUS has ensured transparency in the process, which has lead to
better relations with stakeholders.

FUTURE SCOPE
• Agreement with Walmart to export milk to 15 countries
• Mission for 2020, whose objectives are:
• Turnover of Rs. 27,000 crores
• Milk production of 33.1 million litres / day
• Milk drying capacity of 200 m3 / day
• Introduction of banking and ATM services to enable milk societies to credit payments
directly to a seller’s bank account
• Replacement of plastic cards with smart cards that enable one to use banking & ATM
facilities
• Strong e-commerce push - JIT supply chain, online selling & distribution via
amulb2b.com

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