Executive summary:Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat, India. The word amul () is derived from the Sanskrit word amulya (), meaning rare, valuable. The co operative was initially referred to as Anand Milk Federation Union Limited hence the name AMUL.Formed in 1946, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3 million milk producers in Gujarat. Amul spurred India's White Revolution, which made the country the world's largest producer of milk and milk products. In the process Amul became the largest food brand in India and has ventured into markets overseas. Dr Verghese Kurien, founder-chairman of the GCMMF for more than 30 years (19732006), is credited with the success of Amul.Introduction:Amul the co-operative registered on 1 December 1946 as a response to the exploitation of marginal milk producers by traders or agents of the only existing dairy, the Polson dairy, in the small city distances to deliver milk, which often went sour in summer, to Polson. The prices of milk were arbitrarily determined. Moreover, the government had given monopoly rights to Polson to collect milk from mikka and supply it to Bombay city.Angered by the unfair trade practices, the farmers of Kaira approached Sardar Vallabhbhai Patel under the leadership of local farmer leader Tribhuvandas K. Patel. He advised them to form a cooperative and supply milk directly to the Bombay Milk Scheme instead of Polson (who did the same but gave them low prices). He sent Morarji Desai to organise the farmers. In 1946, the milk farmers of the area went on a strike which led to the setting up of the cooperative to collect and process milk. Milk collection was decentralized, as most producers were marginal farmers who could deliver, at most, 12 litres of milk per day. Cooperatives were formed for each village, too.The cooperative was further developed and managed by Dr.Verghese Kurien with H.M. Dalaya. Dalaya's innovation of making skim milk powder from buffalo milk (for the first time in the world) and a little later, with Kurien's help, making it on a commercial scale, led to the first modern dairy of the cooperative at Anand, which would compete against established players in the market. Kurien's brother-in-law K.M. Philip sensitized Kurien to the needs of of attending to the finer points of marketing, including the creation and popularization of a brand. This led to the search for an attractive brand name. In a brainstorming session, a chemist who worked in the dairy laboratory suggested Amul, which came from the Sanskrit word "amulya", which means "priceless" and "denoted and symbolised the pride of swadeshi production."

The trio's (T. K. Patel, Kurien and Dalaya's) success at the cooperative's dairy soon spread to Anand's neighbourhood in Gujarat. Within a short span, five unions in other districts Mehsana, Banaskantha, Baroda, Sabarkantha and Surat were set up. To combine forces and expand the market while saving on advertising and avoid competing against each other, the GCMMF, an apex marketing body of these district cooperatives, was set up in 1973. The Kaira Union, which had the brand name Amul with it since 1955, transferred it to GCMMF.In 1999, it was awarded the "Best of all" Rajiv Gandhi National Quality Award.Adding to the success, Dr. Madan Mohan Kashyap (faculty Agricultural and Engineering Department, Punjab Agricultural University Ludhiana), Dr. Bondurant (visiting faculty) and Dr Feryll (former student of Dr Verghese Kurien), visited the Amul factory in Gujarat as a research team headed by Dr. Bheemsen. Shivdayal Pathak (ex-director of the Sardar Patel Renewable Energy Research Institute) in the 1960s. A milk pasteurization system at the Research Centre of Punjab Agricultural University (PAU) Ludhiana was then formed under the guidance of Kashyap.

About GCMMFThe GCMMF is the largest food products marketing organisation of India. It is the apex organisation of the dairy cooperatives of Gujarat. It is the exclusive marketing organisation for products under the brand name of Amul and Sagar. Over the last five and a half decades, dairy cooperatives in Gujarat have created an economic network that links more than 3.1 million village milk products with millions of consumers in India.[citation needed] The daily milk procurement of GCMMF is around 13 million liters per day. It collects milk from about 16914 village milk cooperative societies, 17 member unions and 24 districts covering about 3.18 million milk producer members. More than 70% of the members are small or marginal farmers and landless labourers including a sizeable population of tribal folk and people belonging to the scheduled castes.

The three-tier "Amul Model"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 federated into a milk federation at the state level. Milk collection is done at the village dairy society, milk procurement and processing at the District Milk Union and milk products marketing at the state milk federation. The structure was 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.

The main functions of the VDCS are: Collection of surplus milk from the producers of the village and payment based on quality and quantity, Providing support services to the members like veterinary first aid, artificial insemination services, cattle-feed sales, mineral mixture sales, fodder and fodder seed sales, conducting training on animal husbandry and dairying, Selling liquid milk for local consumers of the village, Supplying milk to the District Milk Union.

Internal Organization Structure: The following is internal organization chart of Amul:

Strategy of Amul

Amuls strategy is broadly divided into two components:The first one is the collection chain and the second one is the Supply chain. The collection chain starts from weighing the milk to determination of the fat content in the milk to finally calculation of the purchase price. While the supply chain starts from storing the milk to processing the milk to finally distributing the milk.

Supply chain management of Amul

Any dairy is able to survive if the amount of milkprocurement increases. For this various aids have been better breeding of the cattle they have artificial insemination. It has been found that all these inputs haeve helped in the production of milk. The procurement at Amul has increased from 41.42 lakh kg to 64.38 lakh kg resulting a growth of 55.42% in last 10yrs . In Gujrat, the village societies have got so much profit that they have a fund from which they are able to contribute some money for the upliftment of their village like opening a school, building a hospital etc. These village societies are a link between the members and the union. The co-operative helps the farmers to get remunerative price as well as continuous market for the milk. In addition to the price of the milk they also get a bonus at the end of the year from the profit of the organization. The professionals utilize it by diversifying the products and finding suitable market. To further improve the efficiency of the procurement the organization has used the technology for this. Every society has its own computerized system where the testing of milk is done and payment is made according to the quantity and quality. Milk being a perishable commodity it is necessary to preserve it properly. To maintain its quality the society maintains a Bulk Milk Cooling system which preserves the milk below 40oC. This also reduces the expenses of the transportation as the society which has this unit the van goes only once a day to collect the milk. Further to prevent the sourage of the milk the union has its own chilling centers which help in preserving the milk procured from the far off societies.

Six million litres of milk per day from about 10,675 separate village co-operative societies Storing, processing and producing of milk products at the 12 district dairy societies 3,000 Automatic Milk Collection System Units (AMCUS) at village societies 10 million payments daily Rs 17 crores paid in cash, everyday More than 5,000 trucks move the milk from the villages to 200 dairy processing plants twice a day Just-in-Time supply chain management with Six Sigma accuracy.

Amul supply chain management practices

AMUL is a dairy cooperative in the western India that has been primarily responsible, through its innovative practices, for India to become the worlds largest milk producer. The distinctive features of this paradigm involves managing a large decentralized network of suppliers and producers, simultaneous development of markets and suppliers, lean and efficient supply chain, and breakthrough leadership.

Every day Amul collects 447,000 litres of milk from 2.12 million farmers , converts the milk into branded, packaged products, and delivers goods worth Rs 6 crore (Rs 60 million) to over 500,000 retail outlets across the country.To implement their vision while retaining their focus on farmers, a hierarchical network of cooperatives was developed, this today forms the robust supply chain behind GCMMFs endeavors. The vast and complex supply chain stretches from small suppliers to large fragmented markets.Management of this network is made more complex by the fact that GCMMF is directly responsible only for a small part of the chain, with a number of third party players (distributors, retailers and logistics support providers) playing large roles. Managing this supply chain efficiently is critical as GCMMF's competitive position is driven by low consumer prices supported by a low cost system of providing milk at a basic, affordable price.

Logistics:Amul makes over 10 million payment transactions daily. On the logistics more than 5000 trucks move milk from the villages to 200 dairy processing plants twice a day according to a carefully planned schedule. Its ERP software named as Enterprise Wide Integrated Application System(EIAS) covers a plethora of operations like market planning advertising and promotion, distribution network planning. Each of amul offices are connected via internet and all of them send daily reports on sales and inventory to the main system at Anand. Has also connected all zonal, regional & member dairies through VSAT Supply management through internetI. Logistics in collection 6 million liters of milk per day From about 10,600 separate village cooperative societies. Approximately 2.8 million milk producing member.II. Logistics in coordination of Storing the milk. Processing the milk. Distributing the milk.III. Supplier logistics Weighing the milk. Determining of fat content. Calculation of the purchase price.

Reverse Logistic

EVOLUTION of ITAmul is not a food company, it is an IT company in the food business " - B M Vyas, Chief Executive Officer The evolution of IT in AMUL was took place in the guidance of DR.B.M Vyas. The milk collection center at village cooperative societies, were first automated. Data analysis software utilization for milk production estimation and increasing productivity. VATS network between all the level of distribution network and GCMMF.

The distribution network

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

Benefits of ITAMUL 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. Processing of 10 Million payments daily, amounting to transactions worth USD 3.78 million in cash. Radical changes in business processes - eliminating middlemen. Improved delivery mechanisms and transparency of business operations. Due to this process, AMUL is able to collect six million litres of milk per day. Huge reduction in processing time for effecting payments to the farmers from a week to couple of minute. Movement of 5000 trucks to 200 dairy processing plants twice a day in a most optimum manner. Practicing just in time supply chain management with six sigma accuracy. Online order placements of Amuls products on the web. Distributors can place their orders on the website. Amul exports products worth around US$ 25 million to countries in West Asia, Africa and USA.

Automatic milk collection unit system:

Amul has installed over 3000 Automatic milk collection system units(AMCUS) at village societies to capture member information, milk fat content, volume collected and amount payable to each member. Each farmer is given a plastic card for identification Computer calculates amount due to farmer on the basis of fat content The value of the milk is then printed out on slip & handed over to the farmer, who collects the payment from adjacent window With the help of IT farmers receive their payment within minutes How AMCUS work

Total quality managementQuality is very important for any food industry. Quality implies maintenance of functional values of the product as well as improving the style of management by keeping customer in focus. The milk producers of the member unions have a commitment to achieve quality in basically six priority areas Cleanliness of the dairy cooperative societies, Planning and Budgeting of the Dairy Society, Artificial Insemination Service, Quality Testing and Milk measurement at Dairy co-operative Societies and Management Practices and Self-leadership Development. This TQM movement has also been extended to the wholesale dealers by organizing workshops for them. Quality circles that work in tandem with the sales force . This movement also involves the process of policy deployment known as Hoshin Kangri. This involves strategy formulation and implementation, involving every member of the value chain There is improvement in quality of milk in term of acidity and sour milk Milk union records show 2% reduction in the amount of the sour milk received from the union Improved microbiological quality of upcoming raw milk in the form of methylene blue reduction This gives better shelf life to the product Friday Departmental meetings: to disscuss issues related to quality.

The business model

From the very beginning, in the early 1950s, AMUL adopted the network as the basic model for long-term growth. The network explicitly includes secondary services to the farmer-suppliers. Several of the entities in the network are organized as cooperatives linked in a hierarchical fashion.

Customers: In comparison with developed economies, the market for dairy products inIndia is still in an evolutionary stage with tremendous potential for high value products such as ice cream, cheese etc. The distribution network, on the other hand, is quite reasonable with access to rural areas of the country. Traditional methods practiced in western economies are not adequate to realize the market potential and alternative approaches are necessary to tap this market.

Suppliers: A majority of the suppliers are small or marginal farmers who are often illiterate, poor, and with liquidity problems as they lack direct access to financial institutions. Again, traditional market mechanisms are not adequate to assure sustenance and growth of these suppliers.

Third Party Logistics Services: In addition to the weaknesses in the basic infrastructure, logistics and transportation services are typically not professionally managed, with little regard for quality and service. In addition to outbound logistics, GCMMF takes responsibility for coordinating with the distributors to assure adequate and timely supply of products. It also works with the Unions in determining product mix, product allocations and in developing production plans. The Unions, on the other hand, coordinate collection logistics and support services to the member-farmers. In what follows we elaborate on these aspects in more detail and provide a rationale for the model and strategies adopted by GCMMF.

Simultaneous Development of Suppliers and Customers: From the very early stages of the formation of AMUL, the cooperative realized that sustained growth for the long-term was contingent on matching supply and demand. The member-suppliers were typically small andmarginal farmers with severe liquidity problems, illiterate and untrained. AMUL and othercooperative Unions adopted a number of strategies to develop the supply of milk and assure steady growth. First, for the short term, the procurement prices were set so as to provide fair andreasonable return. Second, aware of the liquidity problems, cash payments for the milk supply was made with minimum of delay. This practice continues today with many village societies making payments upon the receipt of milk. For the long-term, the Unions followed a multi-pronged strategy of education and support. For example, only part of the surplus generated by the Unions is paid to the members in the form of dividends

Managing Third Party Service Providers: Unions focused efforts on these activities and related technology development . The marketing efforts were assumed by GCMMF. All other activities were entrusted to third parties. These include logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, some veterinary services etc. It is worth noting that a number of these third parties are not in the organized sector, and many are not professionally managed. Hence, while third parties perform the activities, the Unions and GCMMF have developed a number of mechanisms to retain control and assure quality and timely deliveries. This is particularly critical for a perishable product such as liquid milk.

Coordination for Competitiveness

Coordination is one of the key reasons for the success of operations involving such anextensive network of producers and distributors at GCMMF. Some interesting mechanisms exist for coordinating the supply chain at GCMMF. These mechanisms are:

Inter-locking Control

The objective for developing such an inter-locking control mechanism is to ensure that the interest of the farmer is always kept at the top of the agenda through its representatives who constitute the Boards of different entities that comprise the supply chain. This form of direct representation also ensures that professional managers and farmers work together as a team to strengthen the cooperative. This helps in coordinating decisions across different entities as well as speeding both the flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of Federation

Its objective is to ensure that all milk that the farmers produce gets sold in the market either as milk or as value added products and to ensure that milk is made available to an increasingly large sections of the society at affordable prices

Supplier Enhancement and Network servicing

Their objective is to ensure that producers get maximum benefit and to resolve all their problems. They manage the procurement of milk that comes via trucks & tankers from the VSs. They negotiate annual contracts with truckers, ensure availability of trucks for procurement, establish truck routes, monitor truck movement and prevent stealing of milk while it is being transporter.

GCMMFs supply chain

E- supply chain management of amul Amul uses E- SUPPLY CHAIN MANAGEMENT E-SCM may be described as the integrated management approach for planning and controlling the flow of materials from suppliers to the end users using internet technologies. E-SCM refers to the complex network of relationship that organizations maintain with trading partner to source, manufacture and deliver the products.

Components of E-SCM

e-scm diagram of amul

Working of E-SCM Amul has installed over 3000 automatic milk collection system units (AMCUS) at village societies to capture member information, milk fat content and amount payable to each member. Each member is given plastic card for indentification Computer calculate amount due to the farmer on the basis of the fat content The value of the milk is printed out on the slip and handed over to the farmer ,who collects the payment from the adjacent window Thus with the help of it farmer gets the payment within the minutes On the logistic more than 5000 trucks move milk from the villages to 200 dairy processing plants twice a day according to a carefully planned scheduled Every day Amul collects 7 million liters of milk from 2.6 million farmers (many illiterate), converts the milk into branded, packaged products, and delivers goods to over 500,000 retail outlets across the country ERP software named as enterprise wide integrated application system covers a operation like planning advertisement and promotion and distribution network planning. Each Amul office are connected via internet and all of them send daily reports on sales and inventory to the main system at Anand, Supply & Distribution At the supply end a computerized database has been setup of all suppliers & their cattle. Computer equipment measures & records qualities & quantities collected. At the distribution end stockists have been provided with basic computer skills. Amul experts assist them in building promotional web pages. Amul Cyber stores have been setup in India, USA, Singapore and DubaiAmul cyber store

Strong initiatives in e-commerce Amul has linked distributors to the network & also incorporated web pages of top retailers on their website Distributors can place their order on website amulb2b.com Automated supply & delivery chain Practices just in time supply chain management with six sigma accuracy

Benefits of E-SCM Supports exchange of real time information Platform independent Web visibility & processing capability 24/7 Return on investment It has open internet application architecture which allows for Rapid deployment & scalability combining unlimited users in real time environment Incorporates broadcast & active messaging

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