Problems and issues with respect to supply chain faced by the t he AMUL Managing this supply chain efficiently is critical as GCMMF's competitive position is driven by low consumer prices supported by a low cost system. In the past years the concept of justin-time was not introduced, all GCMMF branches were engaged in route scheduling and have dedicated vehicle operations. Even though the cooperative was formed to bring together farmers, professional managers and technocrats would be still required to manage the network effectively and make it commercially viable. It is worth noting that a number of third parties are not in the organized sector, and many are not professionally managed with little regard for quality and service. This is a particularly critical issue in the logistics and transport of a perishable commodity where there are already weaknesses in the basic infrastructure. Its network which consists of large number of members requires regular roll out improvement programs and high implementation rate of these programs. Having a strong supply chain is only the beginning, the remaining part includes making consumer products that sell well and that the same consumers are able to be impacted by marketing and advertising movements. The organization was also suffering from the high middleman cost which was tackled by managing milk supplies from the cattle farmer and sending it straight to the factory. Due to the perishable nature of the product, it has to invest in cold storage which is an extra burden in distribution and warehousing. At the time Amul was formed; consumers had limited purchasing power, and modest consumption levels of milk and other dairy products. Thus Amul adopted a low-cost price strategy to make its products affordable and attractive to consumers by guaranteeing them value for money. 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. GCMMF was one of the first FMCG (fast-moving consumer goods) firms in India to employ Internet technologies to implement B2C commerce. Today customers can order a variety of products through the Internet and be assured of timely delivery with cash payment upon receipt. Another e-initiative underway is to provide farmers access to information relating to markets, technology and best practices in the dairy industry through net enabled kiosks in the villages. GCMMF has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process.
ANALYSIS and FINDINGS Following are the major issues analyzed with respect to the SCM of Amul: Larger lead time:A number of third parties are not in the organized sector, and many are not professionally managed with little regard for quality and service. Due to the old and obsolete means of transportation, failure of machinery etc. leads the delay in reaching to retailers and end users. In the past years the concept of just-in-time was not introduced, all GCMMF branches were engaged in route scheduling and have dedicated vehicle operations. Due to the perishable
nature of the product, it has to invest in cold storage which is an extra burden in distribution and warehousing. As a result need of JIT were felt and the concept has introduced to avoid any kind of delay and destruction of products. Introduction of just-in-time inventory strategy improves dealers' return on investment (ROI). Gap between demand and supply: Due to the unprofessional and inexperienced 3PL providers there is vast gap between demand and supply. In the peak season, the company fails to satisfy the retailers’ demand on certain products. Since the lead time was high so company were unable to get raw material on time and also were unable to produce final product to match with the quantity demanded by retailers and consumers. Amul decided to focus on farmers facing business processes such as supply, distribution and its own internal operations. The main goals of the supply chain initiative were improving forecast accuracy to match supply with demand, delivery performance to avoid stock-outs thereby creating a dependable and reliable brand image without excessive spend. These steps were taken to reduce dependency on cold storage. Suppliers:The member-suppliers were typically small and marginal farmers with severe liquidity problems, illiterate and untrained. AMUL and other cooperative 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 and reasonable return. Second, aware of the liquidity problems, cash payments for the milk supply was made with minimum of delay.
Managing Third Party Service Providers: Well before the ideas of core competence and the role of third parties in managing the supply chain were recognized and became fashionable, these concepts were practiced by GCMMF and AMUL. From the beginning, it was recognized that the core activity for the unions lay in processing of milk and production of dairy products. Accordingly, the unions focused efforts on these activities and related technology development. The marketing efforts (including brand development) 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. Some other issues found in its supply chain are as follows:· It has excellent ability to anticipate the right type of product at the right time through the years. · Amul is a cooperative where the milk suppliers are the shareholders. The owners decide what they should pay themselves for the raw material they supply. A unique situation where the owners of the company are also its largest vendors! · To implement their vision while retaining their focus on farmers, a hierarchical network of cooperatives was developed, which today forms the robust supply chain behind GCMMF's endeavors. · Introduction of just-in-time inventory strategy improves dealers' return on investment (ROI). · In order to manage the network effectively and make it commercially viable professional managers and technocrats were introduced. · The company has core competency in milk processing and the production of dairy products and all other activities were entrusted to 3PLs · Infreight logistics solutions limited, Transport Corporation of India, Gammon India ltd. are some of its main 3PL providers.
· Amul was one of the first FMCG firms in India to employ Internet technologies to implement B2C commerce. Today customers can order a variety of products through the Internet and be assured of timely delivery with cash payment upon receipt. It has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process. Recommendations & suggestions · Amul should improve its distribution system, as it has already implemented on ERP in the company, still due to in disciplined behavior of its distributors, retailers suffers which ultimately affect the consumers. · We know that the time schedule of the distributors & their transportation system cannot be capsuled, but they can reduce their errors. E.g. drive carefully to prevent accidents. · Manpower should be more than 18 years of age. (in some of the areas, we have observed small children engaged in loading & unloading the trays from the truck) · Before offering any extra benefits or schemes to their retailers, Amul should aware them in advance, so that the incentives can be reached in the right hands at right time. otherwise distributors enjoy the benefits of retailers. · Codification of raw material should be done in an easily understand manner. · Reduce the solving time of the consumer/retailers’ complaints. · Payment to the milk suppliers should be made on time to ensure the proper inflow of milk. · Amul should also launch certain schemes for households. It has schemes for retailers but not for households. This section being the major user of milk and in order to enter into a new area such starting schemes can be very helpful. · For refrigerated and frozen food distribution, a world class cold chain would help in providing quality assurance to the consumers around the region. · Logistics and transportation services should be professionally managed to avoid wastes. · Use of internet for exploring the unknown terrain. · Active customer feedback should be taken regularly for increasing product line. · Employees of GCMMF should involved actively in all activities of the member unions. · Relationship with business associates like wholesaler should be made closer and deeper. 12 · The company should take initiative to reduce transportation time from the depots to the wholesale dealers, improvement in ROI of wholesale dealers, implementation of Zero Stock Out through improved availability of products at depots and also the implementation of Just-in-Time in finance to reduce the float. · Completely in tune with the ground reality an enquiry is initiated on the organizational climate. This gave detail about the core competencies and most importantly gave details about the handicaps and inadequacies. · Have recognized “change” as an essential factor governing business needs and hence incorporates changes in every form at every stage. Employees, suppliers and distributors also “change ready” always.
