Chapter 1 Introduction of industry

1.1.1Milk & Milk processing industry profile:

Dairy is a place where handling of milk and milk products is done and technology refers to the application of scientific knowledge for practical purposes. Dairy technology has been defined as that branch of dairy science, which deals with the processing of milk and the manufacture of milk products on an industrial scale. The dairy sector in the India has shown remarkable development in the past decade and India has now become one of the largest producers of milk and value-added milk products in the world. The dairy sector has developed through co-operatives in many parts of the State. During 1997-98, the State had 60 milk processing plants with an aggregate processing capacity of 5.8 million litres per day. In addition to these processing plants, 123 Government and 33 co-operatives milk chilling centres operate in the State. Also India today is the lowest cost producer of per litre of milk in the world, at 27 cents, compared with the U.S' 63 cents, and Japans $2.8 dollars. Also to take advantage of this lowest cost of milk production and increasing production in the country multinational companies are planning to expand their activities here. Some of these milk producers have already obtained quality standard certificates from the authorities. This will help them in marketing their products in foreign countries in processed form. The urban market for milk products is expected to grow at an accelerated pace of around 33% per annum to around Rs.43,500 crores by year 2005. This growth is going to come from the greater emphasis on the processed foods sector and also by increase in the conversion of milk into milk products. By 2005, the value of Indian dairy produce is expected to be Rs 10,00,000 million. Presently the market is valued at around Rs7,00,000 mn.

1.1.2Milk Production from 1950 to 2020: 2

1950 17 million tonnes 1996 70.8 million tonnes 1997 74.3 million tonnes (Projected) 2020 240 million tonnes Expected to reach- 220 to 250 mt 2020

India contributes to world milk production rise from 12-15 % & it will increase up to 30-35% (year 2020).

World's Major Milk Producers (Million MTs)

Figure 1.1.1 World's Major Milk Producers

Products and Industry Status: 3

Among the products manufactured by organized sector are Ghee, Butter, Cheese, Ice-Creams, Milk powders, Melted milk food, Infant food, condensed milk etc. some milk products like Casein and Lactose are also being manufactured lately. Therefore, there is good scope for manufacturing these products locally. Liberalization of the economy has led to a flood of new entrants, including MNCs due to good prospects and abundant supply. Investment Potential in Milk Products: At the present rate of growth, India is expected to overtake the US in milk production by the year 2010, when demand is expected to be over 125.69 ml.tn. Being largely imported, manufacture of casein and lactose has good scope in the country. Exports of milk products have been decentralized and export in 2005-2010 is estimated at 71.875 cr.

1.1.3 Production of Milk in India: India ranks first in the world in terms of milk production. Indian production stands at 91 million tonnes growing at a CAGR of 4 per cent. This is primarily due to the initiatives taken by the Operation flood programmes in organizing milk producers into cooperatives; building infrastructure for milk procurement, processing and marketing and providing financial, technical and management inputs by the Ministry of Agriculture and Ministry of Food Processing Industries to turn the dairy sector into viable self-sustaining organized sector. About 35% of milk produced in India is processed. The organized sector (large scale dairy plants) processes about 13 million tonnes annually, while the unorganized sector processes about 22 million tonnes per annum. In the organized sector, there are 676 dairy plants in the Cooperative, Private and Government sectors registered with the Government of India and the state Governments. India has a unique pattern of production, processing and marketing/consumption of milk, which is not comparable with any large milk producing country. Approximately 70 million rural households (primarily, small and marginal farmers and landless labourers ) in the country are engaged in milk production. Over 11 million farmer are organized into about 0.1 million village Dairy Cooperative Societies (DCS)(about 110 farmers per DCS). The cumulative milk handled by DCS across the country is about 18 million kg of milk per day. These cooperatives form part of a 4

national milk grid which links the milk producers throughout India with consumers in more than 700 towns and cities bridging the gaps on account of seasonal and regional variations in the availability of milk. The Ministry of food Processing Industries is promoting organized Dairy processing sector to accomplish upcoming demands of processed dairy products and helping to identify various areas of research for future product development and quality improvement to revamp the Indian dairy export by way of providing financial assistance to the dairy processing units. 32 Units have been sanctioned financial assistance (Rs.591 lakhs) under the plan scheme of the Ministry during the year 2006-07.

1.1.4 A SWOT Analysis of Dairy Industry in India: Strengths: Enhanced milk production with consequently increased availability of milk processing. Improved purchasing power of the consumer. Improved transportation facilities for movement of milk and milk products. Increasing availability of indigenously manufactured equipment. Vast pool of highly trained and qualified manpower available to the industry. Countrys vast natural resources offer immense potential for growth and development of dairying With our strengths we have to be aware of our weaknesses also.

Weaknesses: Tropical climate conditions. Seasonal fluctuations in milk production pattern. Species-wise variation (buffalo, cow, goat etc.) in milk quality received by milk plants. Lack of marketing avenues for the dairy produce.

Opportunities: Great improved export potential for milk products of western as well as traditional types. 5

 Established and expanding market for traditional dairy products. Increasing demand for fluid milk as well as value added products.

Threats: Introduction of foreign products in Indian market. Increasing chemical contaminants as well as residual antibiotics in milk. Poor microbiological quality of milk. Export of quality feed ingredients particularly cakes under the liberalization policy. Deficiency of molasses, a rich source of energy and binding agent in feed industry and constituent of urea molasses mineral lick. Excessive grazing pressure on marginal and small community lands resulting in complete degradation of land.

Extinction of the indigenous breeds of cattle due to indiscriminate use of crossbreeding program
to enhance milk production.

The liberalization of the Dairy Industry is likely to be exploited by multi-nationals. They will be
interested in manufacturing milk products which yield high profits. It will create milk shortage in the country adversely affecting the consumers.

1.1.5 Policies in Milk & Milk Products: Milk and Milk Products Order (MMPO) regulates milk and milk products production in the country. The order requires no permission for units handling less than 10,000 litres of liquid milk per day or milk solids upto 500 tpa.

All the milk products except malted foods are covered in the category of industries for which foreign equity participation upto 51% is automatically allowed. Icecream, which was earlier reserved for manufacturing in the small scale sector, has now been dereserved. As such, no license is required for setting up of large scale production facilities for manufacture of ice cream. Subsequent to dechannelisation exports of some milk based products are freely allowed provided these units comply with the compulsory inspection requirements of concerned 6

agencies like: National Dairy Development Board, Export Inspection Council etc. Bureau of Indian standards has prescribed the necessary standards for almost all milk based products, which are to be adhered to by the industry.

1.1.6 INTRODUCTION TO ICECREAM INDUSTRY IN INDIA: Ice-cream Industries occupies important place in India. It is one of the consumer goods industries in products is important popular diet. India is an agricultural based country because of the large number of cattle and large milk production most of the dairy and icecream industries has developed and India is well ranked in the world. Ice-cream industry has brought magnificent change in the rural economy. It provides employment to the marginal farmers. Today the competition in ice-cream like Amul, Kwality Walls, Vadilal, Havmor etc. as ice-cream has been a regular edible item the consumption of in more. In 1983 when Indian Government issued a control in which the certain price level was fixed. It has an important role in employment generation and reducing the migration of villagers the town and cities for dine hood.

The Industry

Organised (70%)

Unorganised (30%)

Mass Market

Tiny Market

Amul Havmor Vadilal Dairy Den

Baskin Robbins Nivaas

Chapter 2
8

Introduction of Company

2.1.1 The Birth of Amul

It all began when milk became a symbol of protest Founded in 1946 to stop the exploitation by middlemen Inspired by the freedom movement The seeds of this unusual saga were sown more than 65 years back in Anand, a small town in the state of Gujarat in western India. The exploitative trade practices followed by the local trade cartel triggered off the cooperative movement. Angered by unfair and manipulative practices followed by the trade, the farmers of the district approached the great Indian patriot Sardar Vallabhbhai Patel for a solution. He advised them to get rid of middlemen and form their own co-operative, which would have procurement, processing and marketing under their control.

In 1946, the farmers of this area went on a milk strike refusing to be cowed down by the cartel. Under the inspiration of Sardar Patel, and the guidance of leaders like Morarji Desai and Tribhuvandas Patel, they formed their own cooperative in 1946.

This co-operative, the Kaira District Co-operative Milk Producers Union Ltd. began with just two village dairy co-operative societies and 247 litres of milk and is today better known as Amul Dairy. Amul grew from strength to strength thanks to the inspired leadership of Tribhuvandas Patel, the founder Chairman and the committed professionalism of Dr Verghese Kurien,who was entrusted the task of running the dairy from 1950.

The then Prime Minister of India, Lal Bahadur Shastri decided that the same approach should become the basis of a National Dairy Development policy. He understood that the success of Amul could be attributed to four important factors. The farmers owned the dairy, their elected representatives managed the village societies and the district union, were sensitive to the needs of farmers and responsive to their demands. they employed professionals to operate the dairy and manage its business. Most importantly, the co-operatives

At his instance in 1965 the National Dairy Development Board was set up with the basic objective of replicating the Amul model. Dr. Kurien was chosen to head the institution as its Chairman and asked to replicate this model throughout the country.

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2.1.2. Vision & Mission statement of AMUL: VISION: Amils vision is to provide more and more satisfaction to the farmers, their customers, employees and distributers. MISSION: we the motivated and dedicated workforce at amul are committed to produce wholesome and safe foods of excellent quality to remain market leader through development of quality management system, state of art technology, innovation and eco-friendly operations to achieve delightment of customers and milk producers.

2.1.3 The Amul Model

The Amul Model of dairy development is a three-tiered structure with the dairy cooperative societies at the village level federated under a milk union at the district level and a federation of member unions at the state level.

Establishment of a direct linkage between milk producers and consumers by eliminating middlemen

Milk Producers (farmers) control procurement, processing and marketing

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12

The Amul model has helped India to emerge as the largest milk producer in the world. More than 15 million milk producers pour their milk in 1,44,246 dairy cooperative societies across the country. Their milk is processed in 177 District Co-operative Unions and marketed by 22 State Marketing Federations, ensuring a better life for millions.

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2.1.4. Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF): GCMMF is India's largest food product marketing organisation with annual turnover (2011-12) US$ 2.5 billion. Its daily milk procurement is approx 13 million lit (peak period) per day from 16,117 village milk cooperative societies, 17 member unions covering 24 districts, and 3.18 million milk producer members.

It is the Apex organisation of the Dairy Cooperatives of Gujarat, popularly known as 'AMUL', which aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money. Its success has not only been emulated in India but serves as a model for rest of the World. It is exclusive marketing organisation of 'Amul' and 'Sagar' branded products. It operates through 47 Sales Offices and has a dealer network of 5000 dealers and 10 lakh retailers, one of the largest such networks in India. Its product range comprises milk, milk powder, health beverages, ghee, butter, cheese, Pizza cheese, Ice-cream, Paneer, chocolates, and traditional Indian sweets, etc

GCMMF is India's largest exporter of Dairy Products. It has been accorded a "Trading House" status. Many of our products are available in USA, Gulf Countries, Singapore, The Philippines, Japan, China and Australia. GCMMF has received the APEDA Award from Government of India for Excellence in Dairy Product Exports for the last 13 years. For the year 2009-10, GCMMF has been awarded "Golden Trophy' for its outstanding export performance and contribution in dairy products sector by APEDA.

For its consistent adherence to quality, customer focus and dependability, GCMMF has received numerous awards and accolades over the years. It received the Rajiv Gandhi National Quality Award in1999 in Best of All Category. In 2002 GCMMF bagged India's Most Respected Company Award instituted by Business World. In 2003, it was awarded the The IMC Ramkrishna Bajaj National Quality Award - 2003 for adopting noteworthy quality management practices for logistics and procurement. GCMMF is the first and only Indian organisation to win topmost International Dairy Federation Marketing Award for probiotic ice cream launch in 2007.

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GCMMF - An Overview

Year of Establishment Members No. of Producer Members No. of Village Societies Total Milk handling capacity per day Milk Collection (Total - 2011-12) Milk collection (Daily Average 2011-12) Milk Drying Capacity Cattlefeed manufacturing Capacity Sales Turnover -(2011-12)

1973 17 District Cooperative Milk Producers' Unions (16 Members & 1 Nominal Members) 3.18 Million 16,117 13.67 Million litres per day 3.88 billion litres 10.6 million litres (peak 13 million) 647 Mts. per day 3690 Mts. per day Rs. 11668 Crores (US $2.5 Billion)
Figure 2.1.3.1 GCMMF overview

Chapter 3 Distribution channel management

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3.1.1 Introduction: Distribution channel is a series of firms or individuals that facilitates the movement of a product from the producer to the final customer You can eliminate the middleman, but not the function. Place: products available where and when customers want them a way of selling a

company's product either directly or via distributors; "possible distribution channels are wholesalers or small retailers or retail chains or direct mailers or your own stores" 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.

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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. The network follows an umbrella branding strategy. Amul is the common brand for most product categories produced by various unions: liquid milk, milk powders, butter, ghee, cheese, cocoa products, sweets, ice-cream and condensed milk. Amul's sub-brands include variants such as Amulspray, Amulspree, Amulya and Nutramul. The edible oil products are grouped around Dhara and Lokdhara, mineral water is sold under the Jal Dhara brand while fruit drinks bear the Safal name. By insisting on an umbrella brand, GCMMF not only skillfully avoided inter-union conflicts but also created an opportunity for the union members to cooperate in developing products.

Managing the supply chain Even though the cooperative was formed to bring together farmers, it was recognized that professional managers and technocrats would be required to manage the network effectively and make it commercially viable.

Coordination Given the large number of organizations and entities in the supply chain and decentralized responsibility for various activities, effective coordination is critical for efficiency and cost control. GCMMF and the unions play a major role in this process and jointly achieve the desired degree of control. 17

Buy-in from the unions is assured as the plans are approved by GCMMF's board. The board is drawn from the heads of all the unions, and the boards of the unions comprise of farmers elected through village societies, thereby creating a situation of interlocking control. The federation handles the distribution of end products and coordination with retailers and the dealers. The unions coordinate the supply side activities. These include monitoring milk collection contractors, the supply of animal feed and other supplies, provision of veterinary services, and educational activities.

Distribution channel of Amul

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3.1.2 Role of distribution channels: To adjust the discrepancy of assortment through the process of sorting, accumulation, allocation, and assorting. To minimize the distribution costs through routinising and standardizing transactions to make exchange more efficient and effective. To facilitate the searching process of both buyers and sellers by structuring the information essential to both the parties. 19

To provide a place for both parties to meet each other and reducing uncertainty.

3.1.3 Activities that a typical distribution channel performs: Spatial discrepancy: exists because of physical distance between the location where it is

manufactured and location where it is being consumed Temporal discrepancy: time at which it is produced and the time at which it is being consumed Need to break the bulk: products are consumed in small quantities Need to provide assortment: variety of products & not a single product

3.1.4 Intermediation: Is it really needed Cost and control aspects of intermediation

3.1.5 Distribution channel strategy: Setting distribution objectives in terms of the customer requirements 20

Finalizing the set of activities that are required to be performed to achieve the channel objectives Organizing the activities so that the responsibility of performing the activities is shared among the entities who are meant to perform these activities

Developing policy guidelines for the smooth functioning of the channel on a day to day basis Distribution channel management encompasses all activities dealing with the distribution function of the firm

The distribution strategy provides guidelines for decision making The distribution management function can be viewed as happening in two phases: the ex ante phase and the ex Poste phase

3.1.6 Channel Management tasks:

Chapter 4
21

Designing Customer-oriented marketing channels

4.1.1 Introduction: The channel design is normally meant to give a clear idea about: 22

 The number of channel entities in the channel network, The way in which they are linked, The roles and responsibilities of the entities in the network The rewards for participating in the activities and also Clear cut guidelines for the major activities to be performed during the normal functioning of the channel.

What are the service outputs? between ordering and receiving products and services Longer waiting times mean customers must be able to predict needs and plan further in advance Original equipment versus post-sale service customers to buy in their desired quantities Smaller lot size is equal to the higher service output level which is equal to the higher price per unit. customers transportation requirements and search costs. Assortment: greater the product Spatial convenience: Reducing Breaking the bulk: Enabling Waiting time: Time period

variety is available, higher the output of marketing channel and higher the distribution costs.

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4.1.2 Distribution channel design:

List down all the service output that the channel needs to offer, it has to be exhaustive as possible.

Develop the levels at which each of the service output have to be offered.

Work back from each of the service output levels and conceive activities that will fulfill the objectives.

Cost incurred for performing these activities if they are performed by particular channel.

Designing the ideal channel structure consisting of network and function.

Compare the ideal channel structure with the existing channel structure.

Assess the channel design with criteria like effectiveness, equality, scalability, efficiency and flexibility.

Develop the channel establishment plan.

4.1.3 Parameters for comparing channel designs: Efficiency Effectiveness Equity Scalability Flexibility

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4.1.4 The channel establishment plan: The main purpose of the channel to be set-up The profile of the customers who are the target market for the channel The needs and requirements of the target market with regard to the identified service outputs provided by the proposed/ existing channel: Analysis of the operations of the existing channels that deal in similar product/service lines Detailed activity chart for achieving the service output objectives Details about the various channel constituents who will be performing these tasks The cost of performing the activities The designated roles and responsibilities of the channel constituents The proposed remuneration for performing these roles and responsibilities Standards for measuring the performance Procedures for reporting and information sharing Monitoring mechanisms Criteria for appointing the channel members

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Chapter 5 Customer-Oriented Logistics Management

26

5.1.1 Introduction FMCG company manufacture of Milk related Products. In the Health Drink segment they have Amul Sakthi and Nutramul. In the milk segment they are having Amul Milk in sachet/pouch, Amul Tazza Toned milk in Tetra pack. In the powder milk segment they have Amulya Dairy whitener, Amul Instant Full cream Milk powder. Amul Butter, Amul Kool caf, Flavoured Milk , Amul Chocolate etc. We will first understand the products nature, type and distribution pattern.

Each Amul products are having their own life cycle. The products like packed Milk and flavoured milk are perishable by nature due to short span life cycle (may be a week), cannot be stored for long period and need to be consumed immediately. Also these items are need to be refrigerated during that short product life cycle from the production stage till distributed to end customer. Packed milk / flavoured milk (30 or 40 units) are kept in plastic crates and stored in cold storage facility and distributed to all retailers. Each plastic crate with packed / flavoured milk weight 20 25 Kgs and can be handled by labourers and it does not require any mechanized equipment for storage, retrieval, loading and unloading. Each packed milk cost Rs. 10 and hence the crate with packed milk cost may not exceed Rs 600. Since the stocks can be stored vertically (i.e., 6 to 8 crates on each other) the area usage is minimized resulting less storage cost. One need not require any pallet or steel rack to store products vertically. The plastic crate can be stored on each other so that maximum height should be reachable by the worker without difficulty.

Since milk and butter are consumed by all (basic necessity commodity) they should be made available to consumer on demand at convenience due to severe competition. If a consumer could not find Amul milk packet from nearby retail shop, he can take milk packet of other brand or ask local milk vendor (doodhwala) to supply the milk to his house. Hence it is Amul company responsibility to arrange these products available at all retailers, in a particular market with proper storage (refrigeration) facility. Due to wide distribution nature, the milk packets are placed in small plastic crates which can be unloaded by workers with ease at different retailer points. The empty crates are returned (termed as Reverse Logistics) to Amul company warehouse for future milk packet dispatch. Hence the warehouse and storage operations are manual and simple which require no modern equipments in this operation. In case of packed milk and butter, the cost 27

related to cold storage warehouse and transportation through container having cold storage facility will be on the higher side.

5.1.2 Logistics strategy Cost reduction Capital reduction Service improvement

5.1.3 Logistics Planning: The network Milk is procured from the villages and collected at Village Cooperative Societies (VCS), from there the milk is taken to manufacturing units where the milk is processed into various products. The products are then transporters to the company Depots located in various parts of the country. The products are then sent to Wholesale Distributors (WD) and from there to the retailers. The fact sheet Milk is procured twice a day from 2 million from Gujarat alone The payment is made under twelve hours of procurement There are 10000 village cooperative societies There are 3600 wholesale distributors in the country 45 depots The C&F agents are not fixed and are decided by the local company offices There are aproxx. 4,50,000 retailers spread all over India Total house hold consumers covered are 100,000 The milk procured per day is 5 million liters Where the total capacity of operation is 7 million liters per day The peak processing till date has been 6 million liters per day These co operative societies are bound to supply there produce only to GCMMF 28

Enterprise resource planning The company at has implemented an ERP program as low as Rs. 3 corers in collaboration with TCS ltd. The company uses it, the data right from the procurement from the farmers till the delivery of goods to the retailers is fed into the system. The software enabling the channel members to use for the synchronized working and best possible utilization of the available resources maintains details regarding the inventory management. Market logistics deals with the implementation of the SCM of the company.

Upstream Channel: In this the which milk is procured from the farmers to the manufacturing units. 1. In the first step, the milk is taken to the VCS by the farmers on foot or bicycles in small quantities 2. The second step involves the transportation of milk from the co-operatives to the manufacturing units this is done in special trucks which are equipped with tankers to carry milk.

Downstream Channel, it is the distribution part of the supply chain. From the manufacturing units to the retailers. 1. First leg of transport is from the manufacturing unit to the company depots. This is done using 9 and 18 MT trucks any lesser quantity will be uneconomical to the company there fore is some time the quantity ordered is lesser then club loading is done which means that the product ordered is supplied with some other products. a. Frozen food the temperature of these trucks is kept below -18C b. Dairy wet the temperature of these trucks is kept between 0-4C

2. Second leg is from the depot to the WDs, this transport is carried out in insulated 3 and 5 MT TATA 407s here a permanent dispatch plan (PDP) is prepared where the distributor plans out the quantity of various products to be ordered on a particular date.

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3. Third leg this is the flow of good from WDs to retailers, a beat plan is prepared and transportation is done on auto-rickshaws, rickshaws and bicycles. 5.1.3 Factors affecting transportation cost: Human factors affecting transportation Road users can be defined as drivers, passengers, pedestrians etc. who use the streets and highways. Together, they form the most complex element of the traffic system - the human element which differentiates Transportation Engineering from all other engineering. Thus, the transportation engineer should deal with a variety of road user characteristics. For example, ac signal timed to permit an average pedestrian to cross the street safely may cause a severe hazard to an elderly person. Thus, the design considerations should safely and efficiently accommodate the elderly persons, the children, the handicapped, the slow and speedy, and the good and bad drivers. Vehicle factors It is important to know about the vehicle characteristics because we can design road for any vehicle but not for an indefinite one. The road should be such that it should cater to the needs of existing and anticipated vehicles. Some of the vehicle factors that affect transportation is discussed below.

Design vehicles Highway systems accommodate a wide variety of sizes and types of vehicles, from smallest compact passenger cars to the largest double and triple tractor-trailer combinations. According to the different geometric features of highways like the lane width, lane widening on curves, minimum curb and corner radius, clearance heights etc some standard physical dimensions for the vehicles has been recommended. Road authorities are forced to impose limits on vehicular characteristics mainly. Road surface The type of pavement is determined by the volume and composition of traffic, the availability of materials, and available funds. Some of the factors relating to road surface like road roughness, tire wear, resistance, noise, light reaction, electrostatic properties etc. should be given special 30

attention in the design, construction and maintenance of highways for their safe and economical operation.

Chapter 6 Managing Channel Member Behavior

31

6.1.1 Selection: The company takes into consideration a host of factors while selecting the channel members. This is because GCMMF believes that selection of channel members is a long run decision & the rest of the decision regarding the supply chain depends upon the efficiency & coverage by the channel members. The following are the host of factors considered by the company in selecting the channel members:

Authentication is required by the regarding the identity of the channel members, which

includes the name & address, photograph of the location.

Proof of solvency which requires name & address of the channel members bankers

Safety of the inventory, which means that the distributor/ dealer should get the stock of

the company insured.

Inventory or the perishable goods kept by the distributor/ dealer should be in good

condition which means a detail of storage space & Refrigeration facility is to be provided. Refrigeration system should have deep freezers, cold room & walk in coolers.

Details of the delivery vehicle, which includes Light Commercial Vehicles, Matador, 3

Wheeler Van, Tricycle Van & Hand/Push cart. The number & model of each of the vehicle needs to be furnished to the company.

GCMMF acknowledges the fact that it needs to be sensitive to the market demands. For

this it requires that a number of salesmen needs to be present on the field. The salesmen too are divided into various categories like the Field salesmen & Counter salesmen. Also the details of

32

Clerical Staff & Mazdoors are to be provided. The technical competence of the salesmen needs to be mentioned

Details of the product kept of other companies have to be provided. The annual sales of

these products too have to be mentioned. Also details of complementary products & product lines need to be mentioned.

Dealers of the company must carry a good reputation. This is due to the fact that the

company believes reputation of the dealer affects the clientele.

Market coverage by the distributors needs to be defined which includes details of

Geographic coverage & Outlets per market area.

The company also requires the dealers to furnish any Advertising & Sales initiative

undertaken by them on behalf of the company.

6.1.2 Motivation of Channel Members:

GCMMF strongly believes in maintaining a good relationship with the channel members so that they are genuinely motivated to work for the company. Also if the channel members are motivated, they can also initiate advertising & sales promotion schemes on behalf of the company. However to keep the channel members motivated to work, the company has to incur certain costs but the benefits of it are felt in the long run. The following are the motivation programs run by the company: Distributors One of the main factors, which keep the distributors motivated, is the margin. Usually the margins offered by the company are 8% & it is raised to 8.5%. Volume wise this comes out to be a big figure since Amuls product has a good demand in the market. However compared to the other companies the margins are still lower since the new players in the market offer a much 33

higher margin. But the very fact that Amuls products have good demand in the market motivates the distributors to stock it.

Amul being a cooperative cannot afford to give heavy monetary incentives. Amuls products are considered to be value for money since the company does not believe in charging high margins. In fact all monetary incentives are just the short run means to promote the companys product. In order to keep the Channel members motivated in the long run, Amul builds on the concept of Trade Marketing which makes the dealers & the distributors believe that the companys products are worthy of being pushed in the market.

The company is organizing various Total Quality Management initiatives & workshops. Here various counseling measures are undertaken by the company to improve the overall working of the distribution network.

Vision and mission statement: the company cascades down the vision to the various channel members, this is done through various events organized by the company at different locations where the values of the company are made clear and enforced to the channel members. Also the fact that Amul being a cooperative society cannot afford to spend exorbitantly on such events therefore it has a very traditional way of organizing these get together which leaves an impact on the members.

Amul yatras: this includes taking the channel members on a guided tour of the manufacturing and procuring facilities in Gujarat. So that the channel members can have an experience of the working of the company and can pick up some quality measures that can help them to synchronize and improve their own functioning at various levels. This in turn help the company to co ordinate the entire value chain, as the channel members understand the various constraints and liberties the company goes through. The company has already got the Rajiv Gandhi award for quality.

The Retailers Trade schemes: these are undertaken by the company only for the hard selling items e.g. Ice creams, flavored milk etc. for these the company raises the margins by 2%, also schemes like good packaging incase of butter and cheese is undertaken by the company. However this is only a short-term initiative to push the products of the company.

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Glow boards: the company puts up glow boards at the retailer and pays the major portion of the cost.

Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre estimate the quantities of the various products needed.

Infrastructure facilitation: the company facilitates the retailers to buy freezers and fridges by formulating an easy payment program and a commitment to buy back the equipment at a reasonable price when the value of the equipment has depreciated.

6.1.3 Evaluation of channel members: Beat plan: this plan is generated for the various product categories i.e. diary dry, diary wet, Dhara and ice cream. A weekly schedule is prepared for various markets and the retailers the turnover for each of the product is calculated for the wholesale dealers. Cumulative performance: the performance of the dealers is averaged out over a period of three years where a comparison is made of the present performance vis--vis the previous ones.

Target versus achievement: the performance and the targets are compared and therefore the gaps are identified which help in evaluating the WD and planning for the next year as well. This is done for each of the product category.

Other criterion

o o o o o

Details of the bank guaranty Photographs of the offices Details of the WD salesmen and the product lines he deals in The computerization facility available The storage space 35

o o o o

Refrigeration facility with photograph Details of the delivery vehicle with photograph Summary of the monthly potential sales of markets Summary of the product wise monthly sales potential of institutions

6.1.4 CONFLICTS AND CO-OPERATION AMONG CHANNEL MEMBERS: Conflicts

Ownership of assets: Previously the company used to give the cooling equipment on

lease to the retailers, when the company wanted the stuff back; the retailer disagreed to comply and created issues of ownership.

Stocking issues: The company doesnt want the retailers to stock the competing brand in

the company leased fridges, which at times s hard to manage as retailers tend to do it often.

Replacement of products: The deterioration in the product calls for fail in replacement by

the company this major issue of vertical conflict.

Credit policy: Compared to the market, the companys credit period is less that specially

incase of institutional sales is very important.

Packaging: The channel members for easy storing demand a better quality of packaging.

Replenishment: The replenishment of the stocks is not prompt in case of amul cheese and

all hard selling items.

Margins: The Company provides least margins to all the channel members. For e.g. The

retailers margin in case of butter is 8% as compared to Britannias 12%

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Co-operation among channel members

Amul quality circles: The members of the local channel meet together every month to

share issues and the achievements of the channel members. This is an ongoing activity facilitated by the company offices in different locations; this enables the channel members to learn together and reduces the horizontal conflicts among the WDs.

Pilot salesmen scheme: To reduce the financial burden of the distributors this scheme is

run whereby half the cost of the salesmen is born by the company and the rest half by the distributor

Scheduling of sales: The WDs provides Schedule of the distributors sales men to the

retailers so that the retailers can plan out and place the orders in advance.

Agreement defining rights: The company makes the distributors sign an agreement where

the areas of operation for each of the distributors are defined, therefore avoiding any conflict amongst the distributors regarding their areas of operation.

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Observations:
The companys strength is in its procurement and not the distribution even they know

this, as this is the industrys main problem. Other companies fail to replenish demand due to lack in procurement of raw milk.

Amul has loyal cooperatives that provide milk only to them, over time the relationship of

trust has built up with these people that amul leverages now.

Transport channel is another strength as the transporters have grown with the company

overtime the bonding with them enables the company to give least margins when it comes to the distributors in the industry, lowering the costs.

The company believes that there is an ongoing demand in the market and therefore no

promotions are needed to increase the sales, also the fact this would affect the cost of the product the company doesnt undertake many promotion schemes.

The not being a profit driven organization, is able to provide products at the least price in

the industry, and is able to give least channel margins as the channel members earn through volumes and not through high margins.

The company is enabled to push its new products into the market by hooking them onto

the fast moving products like Amul butter; they force the channel members to carry the new products as well.

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Suggestion:

Amul should go in for exclusive outlets in at least all the shopping malls coming up these

days and any location where footfalls are large in number. The advantages of this channel will be:

i. ii. iii. iv.

Full range display Easier to promote new products Easy to push impulse purchase products Brand building will be facilitated

Pushcarts should be increased in number in order to increase the market reach this can

provide with e very effective channel for ice creams and flavored milks.

Trade promotion should be formulated for newly launched products instead of just

tagging them onto best sellers.

The company should start a home delivery where a particular household will order full

range of products required by it over a period of time. For this the company could provide a deliveryman with cycle to reach the different houses.

In order to motivate the channel members it is also very essential for the company to

increase the margins for the hard selling items e.g. Amul dahi where it faces competition from Nestle & Mother dairy.

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In order to remain sensitive to market demand, it is essential for the company to place

additional salesmen on the field since the brand as such commands a high demand in the market but fails to match it with the supply.

Bibliography:

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Books
Philip Kotler, Kevin L. Keller, Abraham Koshy and Mithileshwar Jha (2009), Marketing
Management, 13th Edition, Pearson Education.

Marketing book Tapan Panda.

Web Link www.amul.com www.proquest.com www.scribd.com www.palgrave-journals.com/bm/

http://www.dsir.gov.in/reports/ittp_tedo/agro/AF_Animals_Milk_Dairy_Intro.pdf

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