2010

[REPORT ON WORKING CAPITAL]

A Project Report On

WORKING CAPITAL MANAGEMENT

At

KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LIMITED

(In partial fulfillment of MBA Course) Submitted To: Dr. T. D. Tiwari Director Sardar Patel Collage of Administration And Management, Anand. Mr. Tanveer Saiyed Mr. Kalpesh Shah Accounts Department. KDCMPU Ltd.

Submitted by: Bijal Shah. Batch (2010-12)

Preface
Practical Knowledge has sizeable importance in M.B.A. programme. The theoretical or conceptual knowledge is not sufficient for the over all development; gaining practical know-how is of more importance than the theories that we study at class room level. Practical exposure helps us in implementing what all things that we have learnt theoretically. Being an M.B.A. student I have to undergo Summer Training Programme for eight weeks, which is in partial fulfillment of M.B.A. course. With regards to this, I pursued training at Kaira District Cooperative Milk Producers Union Limited. Commonly known as Amul. A management student is expected to have all round knowledge of all factoids of business. Industrial training is the best option for gaining a glimpse of what business and industry is. To learn more about the practical implications of Financial Management, I pursued training at Amul. The co-operative produces all dairy products. It is the largest dairy of Asia and the second largest dairy in the world. It pasteurizes milk collected from about 1200 co-operative societies, produces butter, ghee, cheese, paneer, flavored milk, milk shakes, etc. It has got varieties within each product category. The co-operative society also exports a lot many products to as many as 100 countries around the world. Its major importers are the Gulf countries. The financial year 2007-08 was very good for the firm, as it broke its own set records. It is a continuously flourishing organization. The project report has been prepared from the information obtained from the firm. I have put all my efforts to prepare and present the report. All the presented information and data in the report are true to the best of my knowledge.

Acknowledgement

As a student of First Year M.B.A. I have to undergo a practical Summer Training Programme for eight weeks, which is in partial fulfillment of the M.B.A. course. It was a unique experience of the field work outside the four walls of the class room. I am thankful to the management of Kaira District Co-operative Milk Producers Union Limited. for permitting me to pursue my practical training at an esteemed organization like Amul; and for providing me all the required information for preparing the report. I express a sense of gratitude to my Guide and the Head of the Department of Centre of Management Studies, Mr. Hitesh Bhatt for extending help and support through out my project work. am greatly thankful to Mr. Tanveer Sheikh and Mr. Kalpesh Shah for their endless support during the two months training period. I sincerely thank Mr. N. Vakil for his enthusiasm and support and having confidence in us. It was his gratitude that we were able to undertake a unique project at Amul, which will help Amul a lot. I would also like to thank all other senior executives and executives who have helped me in successfully completing the project by providing all the required information. Finally, I would like to thank the other staff members, and colleagues for their co-operation and support. I

Bijal Shah M.B.A. Sem. II

Table of Contents
Chapter Particulars 1 Introducing the Company 1.1 History of the Organisation 1.2 Stages of Development 1.3 Organisation Profile 1.4 Management Profile 1.5 Product Profile 2 Purchase Department 3 Material Handling & Inventory Management 4 Production Department 4.1 Milk Pastuerisation 4.2 Milk Pouch Packing 4.3 Butter 4.4 Chocolate 4.5 Ghee 5 Finance Department 5.1 Meaning 5.2 Scope of Finance 5.3 Functions of Financial Management 5.4 Organisation Chart of Finance Dept. 5.5 Accounting Policies 5.6 Working Capital Management 5.7 Cash Management 5.8 Receivables Management 5.9 Inventory Management 5.10 Calculations pertaining to Working Capital Management Page No. 6 7 9 11 14 22 25 29 35 38 42 44 46 50 51 52 52 55 57 58 60 62 66 68 71

6 7 8 9

Future Prospectss Suggestions & Recommendations Conclusion List of References

79 83 85 87

Executive Summary
Amul is a co-operative society where farmers from different places supply milk to Amul every morning as well as in the evening. Milk is collected from nearly 1232 societies. 234 BMC (Bulk Milk Coolers) are installed by Amul at various societies. All co-operative societies do not have BMC. Between 5 to 6 villages there is one BMC. Amul produces different dairy products from the milk collected by it. During Flush season it collects nearly 15 lac liters of milk per day while during the lean season it collects around 11 lac liters of milk per day. It manufactures it products using high technology equipments meeting the ISO standards. There are various departments at Amul namely, Purchase, stores, production, finance, commercial, HR. As the name suggests each department undertakes its respective functions. The Commercial department undertakes marketing activities at the local level. Only about 2 % marketing is done by Amul the rest is done by GCMMF, the marketing wing of Amul. My project is on working capital management The aim behind selecting the topic was that since managing the short term cash inflows and outflows is difficult, it is better to have a standard policy in using these resources. I have calculated the working capital requirement and its use as per the information provided to me by the Organisation. One recommendation that I would like to make to Amul is that there should be a proper inventory management policy. Since inventory forms a major part of the working capital investment, it is advisable to invest in inventory in the most optimal manner. I would also suggest them to make their credit collection policy a bit severe, so as to reduce the bad debts and the provision made on it.

Success Story of the Biggest Co-operative

During the fourth decade of the 19th century, the basic sources of income for farmers of the Kaira district was farming and selling milk. At that time there was great demand of milk in Bombay. The biggest purchaser of milk was Polson Ltd. It was a privately owned dairy that produced milk products and also supplied milk to various regions of the state. It enjoyed monopoly. All farmers of the Kaira district were at the mercy of the milk traders who dictated the process, they had nowhere to turn to. This unfair system spread widespread discontent amongst the farmers. Hence they all decided and appealed to Shri Sardar Patel, a great leader of Indias freedom movement, for help. Shri Sardar Patel advised them to market milk through a co-operative society that was operated by them individually. He sent his very trusted person, Shri Morarji Desai to organize the farmers. At a meeting held at Samarkha (a village near Anand) on January 4, 1946, it was resolved that milk cooperative societies would be organized in each village of Kaira district to collect milk from the producers and bring it to the district union. The government should be asked to buy milk from the union. When the government turned down the demand, Kaira districts farmers organized a milk strike for 15 days, not a single drop of milk was sold to traders. The Bombay Milk Scheme was badly affected. The milk commissioner of Bombay visited Anand, assessed the situation and decided to concede to the farmers demands. Thus, KDCMPUL Kaira District Co-operative Milk Producers Union Limited, came to existence. It was formally registered on December 14, 1946. During winter season, the quantity of milk received was very high. But the Bombay Milk Scheme did not accept the excess milk brought in by the farmers. Hence, this forced the farmers to sell excess milk to traders, which gave them very nominal amount for this quantity. This led to the decision to set up a plant to pasteurize milk. In the beginning there were only few farmers supplying about 250 liters of milk everyday.

With the financial help from UNICEF, assistance from the government of New Zealand under the Colombo plant, and technical assistance provided by FAO for Rs. 5 million, planning for the factory to manufacture milk powder and butter was done. Dr. Rajendra Prasad the then President of India laid the foundation on November 15, 1954. On October 31, 1955, Pandit Jawaharlal Nehru, the then Prime Minister of India, declared the plant open. In 1958, the plant expanded. It produced sweetened condensed milk. Two years later, Shri Morarji Desai, the then Finance Minister, inaugurated a new wing designed to manufacture 600 tons of cheese and 2500 tons of baby food per year. This was the first time in the world that cheese and baby food was processed and produced from buffalos milk on a large and commercial scale. A plant to manufacture balanced cattle feed, donated by OXYFAM, was formally commissioned on October 31, 1964, by Shri Lal Bahadur Shastri the then Prime Minister of India, at Boriavi. KDCMPUL then set up a plant to manufacture high protein weaning food, chocolate and malted drink at Mogar, about 8 kms south of Anand.

AMUL means "priceless" in Sanskrit. The brand name "Amul," from the Sanskrit "Amoolya," was suggested by a quality control expert in Anand. Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 42.78 billion in 2006-07). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices. Of the genesis of a vast co-operative network. Of the triumph of indigenous technology. Of the marketing savvy of a farmers' organisation. And have a proven model for dairy development. Today there are twelve dairies producing products under the brand name of AMUL. AMUL is now Asias largest dairy brand and it is the worlds second largest firm producing dairy products.

Stages of Development
Growth of Amul is not a one-night story. It took several decades to succeed in the present manner. Initially, Amul started with one single society, now it has around 1231 societies in its net. It poured in 250 liters of milk per day initially, which has now reached up to 15 lac liters per day in FLUSH (winter) season and about 8 lac to 9 lac liters of milk per day during LEAN (summer) season. The main stages of development of Amul are as follows: In 1954: UNICEF provided financial help worth Rs. 50 million to Amul. This financial help led Amul to establish fully automatic plant for producing milk and milk powder. In 1958: Amul expands; it started producing sweetened condensed milk.

In 1960: Excess milk that was brought in by the farmers in the winter season and huge amount of profit made it possible the expansion of Amul. Amul established producing cheese and baby food. This created history in the world dairy industry because, it was for the first time in the world that cheese and baby food was processed from buffalos milk instead of cows milk. In 1981: The new cattle feed plant at Kanjari was commissioned. In 1992: For getting the benefits of excess supply of milk, Amul established another plant named Amul III. This plant has a capacity of processing 14 lac liters of milk everyday. In 1994: The new cheese plant was established at Khatraj. Together with it was established the Mogar plant to produce chocolates and malted drink. Both of these plants were commenced with the help of NDDB. In 2001: Amul launched its flavored milk variety. This was a major jump taken by Amul. In 2003: For expanding the market share, Amul launched the Snowball pizza and flavored lassi. These helped Amul to gain a major chuck of market share.

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In 2004: Amul keeps on achieving new heights in the competitive world. It has launched Chocozoo (chocolate) and Munchtime (crunchy snack). Amul also started new satellite dairies at Pune and Kolkata. This will be a help in gaining larger portion of market share. In 2005: GCMMF donates 6 lacks packs of tetra pack milk for the food victims. As in earlier occasions, the Gujarat co-operative milk marketing federation Ltd. Has once again come to the aid of the victims of the worst ever floods in Gujarat. The approximate cost of milk would come to 28 lacks. In 2006: starting of automatic dairy. Cheese plant. (Asias largest) In 2007: Amul Pro-Biotic Ice-Cream gets no.1 award at world dairy summit. Announcing the award on October 03, at dub lin. Ireland on the occasion of the world dairy summit, Mr. Jim Beggthe IDE President Commented these campaigns are excellent examples of best practice in branded and generic marketing from around the world that are volatile and highly competitive dairy products have a role in health balance diets, and these campaigns have demonstrated the ability of well planned and executed marketing investment. In 2008: GCMMF bags APEDA award for 11th year in a row. The award was received by Mr. Raveen Chaudhari, our AGM(Z-1) Delhi, from Honble Minister commerce, Shri Kamalnath, in a glittering ceremony held at Siri Fort Auditorium 03/06/2008. In 2009: shri B.M. Vyas, MD, GCMMF gets prestigious, Charatar Ratna Award.

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Organizations Profile
Name: Kaira District Co-operative Milk Producers Union Limited Address: KDCMPU Ltd. Amul Dairy Road, Anand 388001 Date of Establishment: 14 December, 1946

Form of unit: A Co-operative Societies Act, 1912. Bankers: 1. 2. 3. 4. 5. 6. 7.

Society,

registered

under

Co-operative

Kaira District Central Co-operative Bank Limited. Axis Bank Bank of Baroda Corporation Bank State Bank of India State Bank of Saurashtra Oriental Bank of Commerce

Plants: 1. Anand Plant Anand plant is the main plant. Most of the raw-milk is procured here. Products being manufactured here are butter, flavored milk, ghee, milk powder and baby food. 2. Mogar Plant It is situated on Anand-Vadodara national highway no.8. It produces chocolates, Nutramul, Amul lite and Amul Ganthia.

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3. Kanjari Plant Cattle feed is produced here. 4. Khatraj Plant This plant is situated between Nadiad and Mhemdabad highway. Cheese is produced here. 5. Satellite Dairies Amul has got satellite dairies at Pune and Kolkata. It helps in handling operations of the organisation from a distant place.

INITIAL PROMOTERS 1). Shri Tribhuvandas Patel. 2). Shri Morarjibhai Desai.

BOARD OF DIRECTORS:             Ramsingh P. Parmar Gordhanbhai A. Patel Shivabhai M. Parmar Maganbhai G. Zala Navinbhai R. Patel Pravinbhai F. Solanki Pravinbhai M. Patel Bhaijibhia A. Zala Somabhai R. Solanki Raijibhai D. Patel Madhuben D. Parmar Suryaben B. Patel Chairman Vice Chairman Member Member Member Member Member Member Member Member Member Member

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Ranjitbhai K. Patel Shri B. M. Vyas Shri Rahulkumar Shrivastav Shri M. N. Buch District Registrar

Individual Member MD (GCMMF) MD (KDCMPU) NDDB Govt. of Gujarat

NUMBER OF EMPLOYEES Approximately 1200. TOTAL NUMBER OF SOCIETY MEMBERS Approximately 2.28 million.

TOTAL NUMBER OF SHIFTS First Shift Time Second Shift Time Third Shift Time 8:30 a.m. to 4:30 p.m. 4:30 p.m. to 12:30 a.m. 12:30 a.m. to 8:30 a.m.

E-MAIL ADDRESS www.amul.com www.amuldiary.com www.amuldairy@kairaunion.coop

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Management Profile

1). Administration The main work of administration department in any company is to appoint right people at right time and then supervise them. In AMUL, there is a combined administration and human resources development department. The administration department also performs all activities related to human resources development.

2). Purchase There is a centralized purchase system. Purchasing of all the Raw Materials except the cattle feed is done through this department. Main type of materials are Engineering materials, packaging stationary, veterinary medicine, chemicals, raw material for production etc. After getting indent from the stores department the purchase order is placed to different purchasing systems for obtaining different materials. For packaging material and veterinary medicine, an RAL (Rate Approval Letter) is provided by GCMMF in which rate party; quantity, quality etc. are predefined by GCMMF. 3). Commercial All activities related to sales and marketing are carried out by the commercial department. Most of the Amuls products are sold through GCMMF. GCMMF works as a media for selling Amuls product. Commercial department is a link between Amul and GCMMF. GCMMF is also the largest buyer of Amul products. The second largest buyer of Amuls products is the Indian Army. There is no intervention of federation while dealing with the Army. Main products that are sold to the Indian Army are Ghee, White Milk Powder, Butter, Cheese, and Nutramul. The byproducts are sold to Vadilal Ice-Cream. Amul also markets some products at small level by itself. Amul sells milk and buttermilk on its own.

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4). Accounts This is the main accounts department. The activities performed by this department are cash and bank related activities, societies accounts, taxes related accounting, investment receipts and payments, milk cycle related activities and data entry. Different types of vouchers are processed here. All final accounting is done in this department. 5). Salary Account This is a sub section of accounts department. All accounting related to salaries and wages, provident funds, pension insurance, gratuity etc. is done in this department. 6). Purchase Bill Department This is again a sub-division of the accounts department. All accounting related to purchase and billing is done here. Vouchers for purchase are prepared in this department and then sent to the accounts department for further clarification and final dispatch. 7). Societies Societies division is a link between milk producers and Amul. Milk producers first contact the societies division for any queries. All the day today transactions with the milk producers are done through this department. 8). Audit There are two audit departments at Amul. One is the internal audit department and the other is the government audit department. As the name suggests government auditing is done by a certified government auditor. Internal audit work is given to an outside accountancy firm. Preauditing and Post auditing of different vouchers are done in t this department. 9). MIS It is a sub-section of the Accounts department. It is called MIS (Management Information System). All the 16

information systems that are required in different departments are first developed in this department. 10). Stores All the raw materials are stored in the store department. When requirement for any material arises, the store department gives the necessary indent to the purchase department. This is done on a proactive basis so that no stock out situation arises. All the incoming materials are received by this department and the quality check is done in the laboratories. Goods receipt notes are prepared through this department. The stores department is divided into three main parts, which are (a). General (b). Miscellaneous (c). Engineering. 11). Time Keeping Amul produces a large volume of different varieties of products and the manufacturing process for the products continues for 24 hours, 7 days a week and 365 days a year. In Amul, the time keeping department has its own importance. This department handles the work of keeping attendance and on basis of this record the monthly or yearly salaries and compensation wages, which are to be paid to the employees, is decided.

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Amul Pattern
Earlier when the Polson Dairy was given monopoly for milk processing and supplies; its aim was to give the lowest possible price to the milk suppliers and to charge highest possible price from the customers. This was demotivating people to supply milk to the dairy and lot of milk was wasted only because of this. Major profits were pocketed by the middle-men. Under the Amul pattern the reverse was done: Highest possible price paid to the milk suppliers and the lowest possible price was charged from the consumers. The profit earned was used for the welfare and betterment of the milk suppliers. The system was a two-tier one. (1) The village society was concerned mainly with the purchase of milk from producers; it also acted as a channel of milk production enhancement schemes. (2) The District Union looked after policy formulation, processing and marketing of milk and provision of technical inputs to enhance milk production in animals like artificial insemination service, veterinary care, better feeds, etc. The system is same now, except for a third tier: a Federation: an apex co-operative of district unions for marketing. A] The Village Co-operative Society There are in all 1232 societies that collect milk from the village people and supply it to the processing plant at Anand. These societies operate twice a day i.e. every morning as well as in the evening. To become a member the milk supplier has to pay Re. 1 and has to buy a share of at least Rs. 10. The farmers elect a managing committee and the committee elects a chairman. Each member has only one vote, regardless of the number of shares held by him. Committee worked honorary and restricts to policy formulation and supervision. Salaried staff is employed for milk collection, fat-testing, clerical and accounting work, artificial insemination, etc. Milk delivered by the supplier is measured and a sample is drawn from the milk. Suppliers are paid every day. Farmers are paid in the evening for milk delivered in the previous morning, and the following morning for milk delivered the previous evening. Details are entered in members passbooks and the societys records. Everyday cash payment is

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a boon for the farmers since it becomes a regular and fixed earning for the farmers. The District Union provides each center with a fat-testing machine. Societies have introduced electronic fat-testing machines. Large numbers of societies have installed automatic weighing cum fat testing equipment with data processing facilities. Chillers are provided by Amul to the villages so as to preserve the freshness of milk supplied. The society earns a profit from its sale of milk to the Union. A part of this profit is distributed to its members each year as bones, calculated on the value of milk supplied. A part of the societys profit is also channeled to schools, libraries, dispensaries and health centers, water works, drinking troughs for cattle, roads, electricity, telephone facilities, youth clubs, cattle relief and veterinary services like first aid and artificial insemination in its village.

B] DISTRICT UNION:

A Board of Directors of which twelve are elected from among the Chairmen of village societies manages the union. The board elects a chairman and vice-chairman and appoints a professional managing director, who in turn appoints supporting professionals. The Board formulates policy; the professionals look after the day-to-day work. Village representatives are elected every three years on the Board. However, the chairman is elected every year from amongst the village representatives. Milk collection routes to terminate at these ends have resulted into improved quality of milk. Milk is graded, sampled and tested for fat and solids-not-fat (SNF) content. The society is paid three times a month on the fat and SNF content in the milk. Low-grade or sour milk fetches lower price. In the early years the Union looked after the marketing of milk and milk products. In 1974, the Gujarat Co-operative Milk Marketing Federation Limited, Anand; the apex body of district unions, was formed to perform the marketing function. Through a Group Cattle Insurance Scheme the animals of the members are insured to mitigate any unforeseen cattle loss.

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First aid veterinary services have been set up by 865 societies. Each has a staff member trained by the Union. The follow-up is provided by the mobile dispensaries. Medicines are supplied by the union at 50% subsidized cost. The Unions cattle feed plant the only ISO-9002 feed factory of the country sells balanced feed concentrate at cost price, to ensure better nutrition for animals. In 1999-2000, the union sold 122792 tons of by-pass cattle feed through the societies.

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Amul- A Catalyst for Social Change

The milk co-operatives in the village of Kaira are contributing in their own way to various desirable social changes as well. Democratic traditions are taking root with yearly elections to the Management Committee. Farmer-members become aware of their right; they also learn the value of electing right people. When milk producers from diverse social and economic groups come together twice every day at the milk collection center, old barriers of inequalities begin to break. Exposure to various modern technologies has an educational effect. Those who visit artificial insemination centers learn the facts about conceptions. Family planning messages thus become easier to grasp. At the cattle feed plant villagers learn about nutrition. Preventive vaccination of cattle has led to greater acceptance of vaccination in children. Milk co-operatives have created more jobs and incomes in Kaira villages. The beneficiaries have no pressing need to migrate to towns. Milk income has added a new confidence and created a better status for women who look after the animals. Independent studies have shown that as high as 48 percent of the income of the rural households in Kaira District is delivered from dairying and it has made a difference in their standard of living and social status. Amul has demonstrated that farmers cooperatives can employ professionals, make use of modern technology, and harness market forces to serve their ends without disturbing the agro-system. To be a small producer is no more a disadvantage. In co-operative dairying, there is a greater chance of rural development leading to the employment of the poor and the lowly. The union maintains a constant link with rural producers. Meetings of women, who generally look after the animals, are held in villages and extension workers explain to them modern methods of animal husbandry. Women are also taken on tour to the cattle feed plant, the dairy and the animal breeding center. The union publishes a newsletter twice a month, which carries write-ups in simple Gujarati on animal husbandry, quality control of milk and the co-operative movement. The union continually guides and supervised the societies so that they remain efficient, viable and strong. Besides business & technology, the union also undertakes

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programmes of moral re-arrangement for men & women from the villages. Two scholarships are given every year to outstanding children of members or the union staff for professional courses. Under the Group Gramin Personal Accident Policy the member and spouse are insured by the union. The union operates a continuous Co-operative Development Programme to up-grade the knowledge of the members management committee members of, the village cooperatives and its staff members. Regular Gram Sabhas are organized in villages where the main as well as satellite villages participate. Women participation is encouraged. The union has also developed an Internal Consultant Group which educates the members, the management committed members and the staff at the village co-operatives in modern systems of operating rural business, maintenance of hygiene at all levels (it also conducts hygiene audit in village co-operatives and grades accordingly. The union appreciates the need to provide basic human health need in the villages under its operational area. The members contributed from the cost of their daily milk supply to establish and run a foundation named after its founder chairman Shri TK Patel. The foundation, which is active since 1974, not only provides primary health care to women and children but also encourages for gainful employment in the villages. Likewise, they also established a Sabhasad Kalyan Fund to meet the emergent needs of the community especially at the time of natural calamities. Two years back in the same model the members doled out a part of their daily milk income to start a trust, which will ensure all medical requirement of members family during genuine sickness, disregarding the cost of treatment.

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Product Profile
Bread spreads: Amul Butter Amul Lite Low Fat Bread spread Amul Cooking Butter Cheese Range: Amul Pasteurized Processed Cheddar Cheese Amul Processed Cheese Spread Amul Pizza (Mozzarella) Cheese Amul Shredded Pizza Cheese Amul Emmental Cheese Amul Gouda Cheese Amul Malai Paneer (cottage cheese) Utterly Delicious Pizza Mithaee Range (Ethnic sweets): Amul Shrikhand (Mango, Saffron, Almond Pistachio, Cardamom) Amul Amrakhand Amul Mithaee Gulabjamuns Amul Mithaee Gulabjamun Mix Amul Mithaee Kulfi Mix Avsar Ladoos UHT Milk Range: Amul Shakti 3% fat Milk Amul Taaza 1.5% fat Milk Amul Gold 4.5% fat Milk Amul Lite Slim-n-Trim Milk 0% fat milk Amul Shakti Toned Milk

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Amul Fresh Cream Amul Snowcap Softy Mix Pure Ghee: Amul Pure Ghee Sagar Pure Ghee Amul Cow Ghee Infant Milk Range: Amul Infant Milk Formula 1 (0-6 months) Amul Infant Milk Formula 2 ( 6 months above) Amulspray Infant Milk Food Milk Powders: Amul Full Cream Milk Powder Amulya Dairy Whitener Sagar Skimmed Milk Powder Sagar Tea and Coffee Whitener Sweetened Condensed Milk: Amul Mithaimate Sweetened Condensed Milk Fresh Milk: Amul Taaza Toned Milk 3% fat Amul Gold Full Cream Milk 6% fat Amul Shakti Standardised Milk 4.5% fat Amul Slim & Trim Double Toned Milk 1.5% fat Amul Saathi Skimmed Milk 0% fat Amul Cow Milk Curd Products: Yogi Sweetened Flavored Dahi (Dessert)

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Amul Masti Dahi (fresh curd) Amul Masti Spiced Butter Milk Amul Lassee Amul Ice creams: Royal Treat Range (Butterscotch, Rajbhog, Malai Kulfi) Nut-o-Mania Range (Kaju Draksh, Kesar Pista Royale, Fruit Bonanza, Roasted Almond) Nature's Treat (Alphanso Mango, Fresh Litchi, Shahi Anjir, Fresh Strawberry, Black Currant, Santra Mantra, Fresh Pineapple) Sundae Range (Mango, Black Currant, Sundae Magic, Double Sundae) Assorted Treat (Chocobar, Dollies, Frostik, Ice Candies, Tricone, Chococrunch, Megabite, Cassatta) Utterly Delicious (Vanilla, Strawberry, Chocolate, Chocochips, Cake Magic) Chocolate & Confectionery: Amul Milk Chocolate Amul Fruit & Nut Chocolate Brown Beverage: Nutramul Malted Milk Food Milk Drink: Amul Kool Flavored Milk (Mango, Strawberry, Saffron, Cardamom, Rose, Chocolate) Amul Kool Cafe

Health Beverage: Amul Shakti White Milk Food

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Purchase Department
Purchase Dept. plays a very important and crucial role in reaching to the organizations goals and profit objective. It is the source from where all sorts of raw material, ingredients, and packaging materials will be procured. Hence it does not only contribute towards making of the product but also has its share in making the product attractive, regarding its outer cover and other packing material. It also helps in preserving the product from the harshness of the outside atmosphere and other harmful environment. Purchase dept. at Amul has been bifurcated into two major parts. One is the Cattle Feed Purchase dept. while the other is the Central Purchase dept. Cattle Feed Purchase Dept. deals with the procurement of various types of grains, pulses and other proteins and vitamins that are then mixed according to a given formula arrived through scientific methods and cattle feed is prepared. The cattle feed plant is located at Kanjari. The plant was set up back on 31st October 1962. Initially the production capacity was merely 50 metric tons per day. It aims at providing quality and highly nutritious food for the cattle. The motive behind setting up this plant was to provide cattle feed to the farmers and other members of all the co-operative societies of Amul so that the quality of milk that their cattle give can be of greater value. Previously they also used to sell it commercially but since last few months they have decided to limit its sales only to the members of the co-operative societies. Capacity of the plant is 750 metric tons of cattle feed per day. Various raw materials that go into the production of cattle feed includes sesame, ground nut, mustard, cotton seeds, palm seeds and so on. While other grains used are bajra, maize, jowar (sorghum), damaged wheat, sugar cane (molasses). The aim of using damaged wheat is that the wheat is not fit for human consumption but it is still nutritious for cattle and it will also not cause undue shortage in the market. Molasses is mainly used as a binder and also helps in sweetness. Other salt, vitamins, minerals and protein are added to the product.

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At Kanjari plant they produce Amul by-pass dan, super dan, josh dan, calf dan, etc. Procedure for purchase of raw materials is as under: Firstly inquiries regarding the various suppliers are made. Quotations are invited. Next, a comparison and study of the prices quoted by the suppliers is done. If they fall into the parameters as decided by the officials here, then the suppliers are negotiated for the prices as quoted by them. Major advantage that is earned by Amul is that, it has got brokers involved in their transactions. This helps in getting suppliers down to the price as expected by Amul. Annual brokerage is paid to the brokers. Instant clearance of deals is possible only due to the brokers. As tender system is followed, it is difficult to have a single price throughout the year. Brokers are contacted daily and a record of the transactions made is maintained to avoid mal practice by the brokers. The basic reason for keeping brokers in between each transaction of raw material purchase is that it becomes possible to negotiate and bargain well with the suppliers of the materials. Since it is an agricultural product, having a constant price is impossible. Hence, bargaining is essential. Almost all transactions are in the form of telephonic saudas. The Purchase Head has a Sauda Record Book with him wherein he maintains a daily record of all the offers made by the brokers and the replies made by Amul. This helps when goods are delivered by the supplier. Again since the prices fluctuate a lot, the Purchase Head has to constantly keep an eye over the movements of the market and negotiate prices accordingly. All suppliers are paid within 25 to 30 days. Plant at Kanjari is run on loss, but only for the betterment of the farmers, production is done and goods are sold at cost. They are planning to expand their production capacity, which they will be able to reach within two months. Talking about the Central Purchase Unit at Anand, all the purchase related to acquiring other raw materials as well as packing materials is undertaken at Anand.

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Purchase Procedure at the Central Purchase unit can be explained as follows: GCMMF, the marketing federation of Amul, annually sends a RAL (Rate Approval Letter) to Amul. GCMMF selects vendors for the supply of various raw materials as well as packing materials as per the specifications framed by them. GCMMF also has maximum quantity that can be bought from a single vendor. Purchase dept. at Amul can make transactions only with these vendors. Starting with the procedure, an indent is placed by the dept. that requires the product. The purchase dept. invites quotations from these vendors. Then a cost comparison statement is prepared on the basis of the quotations sent by the vendors. After studying the statement the purchase dept. negotiates with the vendors regarding prices and other conditions applied with that. The vendor that offers minimum prices is given the order. For both, cattle feed purchase as well as for the central purchase unit, when goods are received at gate are first sent for quality approval test and if they are found proper only then are sent for unloading or to further procedure.

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Material Handling & Inventory Management

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KDCMPU Ltd. follows the below explained procedure for indenting the goods required up till payment is made to the vendors. A] Indenting B] Purchasing C] Materials receipt, stores inventory management D] Bill Processing and Payment These steps can be briefly explained as under: A] Indenting A requisition or indent has to be made by any department or section that requires any material. The Purchase Department shall not initiate its activities unless and until it has received the indent from the respective department or section. If requisition for the same product has been requested by more than two departments at once, the purchase department shall combine the quantities of all such indents and then initiate the procedure for purchase.

All the indents for Capital items will have to be submitted in the form of a Proposal for Capital Items Purchase. Only after the proposal has been approved by the Board of Directors, it shall be initiated by the Purchase dept. to start the procedure for purchase. The AGM (Accts.) shall verify the budgetary aspect for such capital expenditure. GCMMF, the marketing wing of Amul, gives an indent for each product in the first week of every month. Production heads at Amul make this indent their production plan (they adjust their production in this manner). Hence all packaging items are ordered monthly. GCMMF also issues a RAL (Rate Approval Letter) annually, which contains the list of vendors from whom the Purchase Officer at Amul has to select to whom to order. Also the rate at which Amul has to buy the goods is also specified in the RAL.

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Indent for engineering items and spare parts shall be made as and when they are required at the plant. In case of Cattle Feed Purchase, no such indents are sent by the GCMMF, here the C.F.Purhcase Head has to have a close look at the production activity and undertake purchase of various raw materials. In this case the GCMMF does not interfere in the matter of rates and the list of vendors. Brokers are given annual contract for purchase of agricultural products. Since all the raw materials for cattle feed is agricultural in nature, brokers are required in between. A Special facility of ICPO (INDENT CUM PURCHASE ORDER), is given to each production department head so as to not to run out of stock. They can make purchase right at their department if the are in urgent need for goods.

B] Purchasing On receipt of a duly approved indent, purchase dept. shall initiate enquiries for various items covered in an indent. The purchase dept. shall endeavor to float such enquiries to maximum number of suppliers/vendors in order to get most competitive rates for each item. Since GCMMF issues RAL annually, the Purchase Dept. has to select from the list of vendors mentioned in that. On receipt of quotations from the various suppliers, the dept. prepares a comparative statement of these vendors and gets it approved from the person in authority. The Purchase dept. then negotiates with the vendors in terms of rates and arrives at lowest possible rates. Order will be placed to the vendor with minimum rate. For items, which are regularly consumed like Bearings, V-Belts, O Rings, GI and MS Fittings etc. purchase department finalizes Annul Rate Contracts (ARCs) for such items to save the time consumed in floating enquiries, receiving quotations, preparation 32

of comparative statements, taking approvals etc. However, ARC rates are first approved by an appropriate authority. It is necessary that a proper purchase order is issued for ratecontracted items also in unions pre-printed stationary giving description of items as per rate contract, quantity, rates, discounts, taxes, delivery terms etc. However, no purchase order can be issued on a date expired ARC. It is the sole responsibility of the purchase department to follow-up with the suppliers for timely delivery of goods and as per the stores specifications. The indenting department will have to follow up with the purchase department, if the goods are not received within the stipulated time. No other department needs to follow up with the suppliers.

C] Material Receipt, Storage and Issue of goods Store shall receive copies of all the purchase orders placed on the suppliers for which the goods are to be received at the stores. For all the goods received at the factory premises, an entry will be made at the Main Gate of the factory. This will help in getting basic information about the goods entering the factory premises. On receipt of the goods at the Stores, the stores shall thoroughly verify the documents and shall ensure that the goods have been received against a valid P.O. (Purchase Order). Under normal circumstances, excess quantity up to 10 % is allowed in the stores. If the goods are found to be as per stores purchase order, stores department arranges for taking delivery of goods and stores it at appropriate place. The stores department needs to prepare a Goods Receipt Cum Test Report (GR/TR). This can be either prepared manually or generated through the system, if a computerized inventory management programme is in existence. The copies of this (GR/TR) should be distributed as under: (a). User/Indenting department: for their information about the arrival of goods. (b). QA/Engineering department: Where goods are to be tested/inspected before being used.

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(c). Purchase department: For their information to track the delivery of goods in case of partial delivery. (d). Stores department: For their records. Whenever any material which has been once rejected but later on accepted on rechecking/retesting or because of exigencies of production, QA/ Engineering department/indenter submits a fresh report of acceptance, giving references of earlier GR/TR duly approved by the departmental head. The stores carry out the necessary corrections in their records. Gate Pass: No material can be taken out of the factory premises without a properly authorized gate pass. Stores/ concerned department issues a gate pass.

D] Bill Processing and Payment

All the invoices from the suppliers are received in the Purchase bill section. The Purchase bill section enters all the invoices as and when received in a computerized bill tracking system. The invoices, which are received in the Stores, KSD Khatraj, FCM Mogar and CFF Kanjari along with consignments, are also redirected to the Bill passing section. The Purchase department can advise all the suppliers to mention purchase order nos. and date in their delivery documents, invoices against which the goods are being supplied. This helps in easy tracking of invoices vis--vis purchase orders and GR etc. The Stores sends Goods Receipt Cum Test Reports (GR/TR) to the Purchase billing section once the Testing/ Inspection formalities are complete. The Purchase billing section verifies the invoices with the corresponding Purchase orders, Goods Receipt Cum Test Reports and processes the suppliers invoices for payment. It is the responsibility of the Purchase billing section to ensure that only correct payments are made to the suppliers. The advance payment if any is also recovered/ adjusted fully so that no excess payment is ever madder to any party. The Purchase billing section also ensures that timely payment is made to all the suppliers as per PO Terms and no

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payments are delayed for reasons of delay in processing of payment documents etc.

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Production Department

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Production department is very important for every manufacturing unit. The life of the organisation depends upon the production plant. Regular scrutiny and updating the production plant is also equally important. Amul has the following number of plants: 1. Anand Plant Various products like milk, butter, flavored milk, ghee, milk powder, etc. are produced at this plant. 2. Khatraj Plant Cheese is produced at the Khatraj plant. Also paneer is manufactured at this plant. 3. Kanjari Plant Cattle feed is produced at this plant. 4. Mogar Plant Mogar plant manufactures Amul Delicious, Amul Lite, chocolate, Nutramul. 5. Pune satellite dairy This plant manufactures Amul Curd.

6. Kolkata Satellite Dairy Amul Ice cream is manufactured at this plant.

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At Anand itself Amul has got three plants viz., Amul 1, Amul 2 & Amul 3. Amul 1 is currently converted into a storage place. Amul 2 is still used for production purpose. At Amul 3, Amul Spray Powder is produced. Production capacities of different plants at the Anand plant are: j Milk About 2260 to 2500 crates per day. j Butter 50 to 60 tonnes per day. j Flavored Milk 40,000 bottles per day. j Powder plant (L&T) 70 tonnes per day. j Powder plant (F35) 60 tonnes per day. j Powder plant (F60) 30 tonnes per day. Products produced at their respective plants are counted and are sent to the godown and are dispatched to GCMMF as per the orders placed. At regular intervals, repairs and maintenance work is done for up keeping the life of the machineries.

Since Milk is the basic raw material that the organization procures, we shall first study the process flow chart for pasteurizing milk.

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Process Flow Chart for Amul 3 is as follows:

Raw chilled milk (in tankers or cans)

Tested for acidity and temperature (Fat and SNF)

Filter

Chiller (temperature up to 2 degree Celsius)

Raw milk buffer tank

Milk clarifier

Raw milk silos

Balance tank of pasteurize

1st regeneration section of milk pasteurize

Cream separator (60-65 degree Celsius)

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Cream separated

Sent to cream buffer tanks

Cream pasteurize (at 90 degree Celsius for no hold)

Cream balance tank

Sent to butter or ghee section

Explaining the process: Milk from various villages is collected at chilling centers and from there milk is sent to the dairy in tankers. Still at some places where a chilling center is not available, milk is collected in cans. From the milk collected at the Milk Reception Bay or the Raw Milk Receiving Dock, samples are taken and sent for quality check at the laboratory. Various tests that are done to check the quality of the milk tests for fat, SNF (Solid Non Fat), Bacterial count, etc. are done. Acidity and temperature of milk is recorded first because on this basis milk is accepted or rejected. Unloading of milk is done in a milk buffer tank. Milk stored there is cooled at 4 deg. Celsius and sent for clarification. Clarification is a very important process wherein dust, dirt or any kind of other impurities are removed and milk is purified. From clarifiers milk is sent to the raw milk silos and stored temporarily, from where milk is sent for pasteurization and then to further processes.

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Pasteurization is a process whereby the germs and bacteria and pathogens are killed. In this process, milk is heated up to 76 deg. Celsius and is held at that temperature for about 15 to seconds and then cooled up to 4 deg. Celsius. Simultaneously after heating cream is separated from milk. Cream that is separated here is used for standardization of milk and surplus cream is used for production of butter and ghee. Cream is added to milk as per the type of milk that is low fat (skimmed) milk will have minimum fat, while Amul Gold will have more percentage of fat. Surplus of standardized milk is used for production of milk powder or for making flavored milk and sent to market for sale. The separated cream is further pasteurized at 90 deg. Celsius to make it fit for human consumption. After that it is cooled and is stored in cream tanks for ripening and then it is sent for butter manufacturing. Reception of Milk Raw milk collected at Amul 3 is received through cans and in tankers from Amul 2, where three reception lines unload milk tankers. Each reception line is equipped with following 1. 2. 3. 4. 5. Centrifugal pumps each of capacity of 30,000 liters per hour. Deaerator tank to remove air from the milk. Filters to filter out sludge and other impurities from milk. One Pre-heat exchanger after each filter. Raw milk silo for storing raw milk.

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Milk pasteurizing has six sections: 1. Regeneration 1st milk first enters in this section, here the heat of outgoing milk is utilized to heat the incoming chilled milk and incoming chilled milk cools down the outgoing milk. 2. Pre-heating section at this juncture milk is heated at 60 deg. Celsius. 3. Regeneration 2nd now the standardized milk is further heated before going to heating section by milk coming from holding tubes. 4. Heating section milk from the regeneration section 2nd is heated up to the pasteurization temperature by hot water. 5. Holding tubes pasteurized milk is held in the holding tubes, which is 42 m long, and 72 mm wide in diameter. 6. Chilling section milk is chilled here by chilled water.

CIP Process Total lines 9 Lye concentrate 1.5% measured as millisem Acid concentrate 1% Lines for process CIP are 6 Lines for tankers CIP are 3

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Amul 2 Pouch Packing Process (Liquid Milk)

Raw Milk Receiving Dock or the Milk Reception Bay at Amul 2 receives milk twice a day. It receives cows, buffalos and mix milk from different co-operative societies associated with Amul. They collect milk in the morning as well as in the evening. There are total 102 routes and 1230 societies from where milk is collected and sent to Anand plant. Milk is then standardized to prepare flavored milk. It is homogenized and then flavored milk is produced from it. Surplus milk is sent to Amul 3 where various other milk products are manufactured. The farthest milk collection centre is at Balasinor while the nearest is at Anand. Milk Reception For reception of milk there are two reception lines. Cans are manually put on the conveyor. At first instance the cans are tested by the person in charge of it by putting a plunger inside the can and smelling the milk whether it is good or sour. Sour milk and curd are dumped into another tank. Milk is then put on the weighing tank and is along with weighing it, it is tested for fat and SNF. Then the valve of the weighing tank is opened and milk flows into the raw milk storage tank and cans move to the can washer. On each line there is a can washer and each can washer has a capacity of 20 cans per minute.

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Process:
Unloading of cans Chain conveyor Removing lids of cans/ Opening up the tankers mouth Physical inspection of grading of milk

Transfer of milk in tank If quality is good

Transferring curd to butter/ghee Section

Filter

Production of Butter or ghee

Weighing Raw milk collecting tank Pasteurizer and standardizations Processed milk tanks Sent for milk packing and production Of various other milk products

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Butter
Contents y y y y Process Cream for manufacturing butter in Amul 3 is to be received from following sources: a) Cream from other dairies through tankers. b) Cream produced in Amul 3 while standardization of milk. c) Cream pumped from Amul 2. Milk Fat 80% Moisture 16% Salt Curd 2.5% 0.8%

Before initiating the butter making process the Continuous Butter Making Machine has to be rinsed with cold water for about 10 to 15 minutes. The very first step in butter making is churning of cream. Cream is churned at a speed of 800 to 1200 rpm at 12 degree Celsius. Although the speed for churning the cream depends upon the quality of cream and the type of product that is desired from the cream. The properties of cream that influence and are required to be known before churning are viscosity (its thickness), ripening of cream and whether cream is sweet or sour in taste. The butter grains formed in the churning process enter the working cannon along with the buttermilk.

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Process: Raw cream

Pastuerisation (at 90 oC)

Cooled

Ripening (at 9 oC for 20 hours)

Cream balance tank

Heat exchanges (for temperature adjustment at 6 to 10 oC)

Churning

Unsalted Butter

Salting

White Butter

Grinding

Used for ghee manufacturing 100 gm and 500 gm packs

Brine and color addition

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Chocolate
DESCRIPTION OF EQUIPMENT 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Cleaner Roaster Winnower Cocoa mass making machine Cocoa press Mixer / grinder Refiner Conches 3 in numbers Tempering machine Chocolate molding machine Cave mill Chocolate wrapping and packing machine

Method of chocolate production being employed at Amul(mogar)

Cocoa beans

Cleaning

Roasting

Conversion into chocolate liquor

Pressing (Extraction of cocoa butter which is present up to 40 to 45%)

Pumping into tanks (At 48 0C)

Mixing WMP, SMP, Sugar & Cocoa Butter

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Refining

Conching

Tempering [1st stage at 28 to 29 oC][2nd stage at 30 to 31oC]

Mixture kept on moulding machine

Mixture kept on Vibrating machine [To evenly spread the chocolate]

Cooling/Hardening [At 8 to 10 oC]

De moulding [Removing from the moulding machine]

Packaging

Storage

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Process:

In order to control the costs the firm purchases cocoa beans that are dried and fermented, directly from the market. a) Fermentation and Drying: Good flavor in chocolate results only due to good fermentation and drying. b) Cleaning: Cleaning is done in order to remove foreign particles from the cocoa beans. Foreign matters like adhesive, dust and other impurities are removed by blowing air over the beans. Also they are put into a vibrating machine which helps in removing adhesives.

c) Roasting: After cleaning the cocoa beans are transferred to the roaster (through a conveyor) where they are roasted. The purpose behind roasting is to remove moisture from the cocoa beans and so as to produce the special chocolate aroma and flavor. Steam is used for heating. A fan emits hot air which is circulated. Cocoa beans are thus roasted. Cocoa beans are then allowed to cool down for 10 minutes. d) Winnowing: Winnowing is done after roasting. Winnower helps to remove husk and the outer shell from the cocoa beans. It crushes beans into small pieces and hence husks are separated. Shells and husks are separated and collected into a bag which is then sent to the Kanjari Cattle Feed Factory.

e) Pressing (cocoa mass making machine): In this machine there are three rollers. There is a hopper which is fitted with special level device. Cocoa nibs are fed in the hopper. The bins get pressed when passed in between the rollers. The mass is collected in collecting tanks. It is heated and liquor is obtained and is collected in storage tank. Liquor is stored at 100 oC. Magnet is present in this machine so that any metal pieces can be removed. f) Hydraulic pressing: Pressing is done to separate the cocoa butter from the cocoa liquor and to get the cocoa cake which is used for making cocoa powder that is used as an ingredient in chocolate and malted milk food manufacturing. The hydraulic pressure is given to cocoa liquor at 400 kg/sq.cm. Pressing is done 49

at 700 to 1400 rpm. It takes around 1 hour and at the end of it we get cocoa butter and cocoa cakes. g) Grinding: The cocoa cake is then grinded to make cocoa butter. Firstly, cocoa cake is broken into small pieces manually and then it is put into cake breaker to get small pieces so as to grind them in the pin mill. Cocoa powder is collected in drums and packed. h) Mixing: For milk chocolate, chocolate mass, cocoa liquor and icing sugar or milk powder and finally cocoa butter are mixed into the mixer. For compounding coating mass, first vegetable fat then cocoa powder, milk powder, icing sugar and lecithin are mixed. i) Refining: After proper mixing, mix mass is allowed to refine. Refining is done to reduce the particle size up to 20 micron and so we get smooth and homogenous mass. Temperature and pressure of rolls are adjusted for the fineness of the refined mass. j) Conching: There are three conchers with different capacities. The refined mass is then subjected to the conching operation for flavor development, mixing of ingredients and to attain the required moisture content and to get smooth rector and body of chocolate. Nearly 20 hours are spent for conching the refined mass. It is due to this reason why the chocolates of Amul are smoother than that of Cadbury or Nestle. k) Tempering: It is an important operation in chocolate manufacturing. It is done for attaining the proper or stable crystallization. It imparts the shiny characteristic to the chocolate. l) Moulding: Chocolate is now poured into moulders so as to give them a specific shape and size. m) Vibrating: Moulds, into which the chocolate is spread, are vibrated in order to make them properly aligned and to smoothen their level. Chocolate now takes a uniform mass. n) Cooling: For 20 to 22 minutes chocolate is kept at 8 to 10 oC so as to chill them. o) Demoulding: After cooling down the chocolate mass into the coolers, they are now demoulded. p) Packing and storage: Chocolate is wrapped in aluminum foil and then by the paper. The packets are sealed and chocolates are packed in paper boxes. These boxes are stored in big cartons in a cold storage. Chocolates have one year shelf life when stored at 200 oC.

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GHEE
Sour milk is used for the production of ghee. This milk is sent to the cream machine for collecting cream. Cream is converted into butter and butter is heated to make ghee. Ghee is then packed in tins or plastic bags.

PROCESS FLOW CHART Melting Cream / White Butter Sour Butter Butter Boiling For Making Ghee Clarification Setting Tank Testing Packing Storage Dispatch

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Finance Department
Finance is the art and science of managing money. Financial management is concerned with the duties of the financial managers in the business firm. Financial managers actively manage the financial affairs of any type of business namely, financial and non- financial, private and public, large and small, profit seeking or not-for-profit.

Scope of Financial Management

The approach to the scope of financial management is divided in to two broad categories, 1. Traditional Approach 2. Modern Approach

1. Traditional Approach

The traditional approach to the scope of finance function evolved during the 1920s and 1930s. As the name suggests, the concern of corporate finance was with the financing of corporate activities. In the other words, the scope of the finance function was treated by the traditional approach in the narrow sense of procurement of funds by corporate enterprise to meet their financial needs. The term procurement was used in a broad sense so as to include the whole gamut of raising funds externally. There are several weaknesses of this approach forcing us to discard this as an out-dated approach. The first argument against the traditional approach was based on its emphasis on issues relating to the procurement of funds by corporate enterprises. This approach ignored the views and opinions of those who are to use the funds inside the organisation. They considered the outsider-in approach. The internal decision makers were ignored. The second weakness was that focus was on financing problems of corporate enterprise. It did not considered non-corporate enterprises.

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Finally, the traditional treatment was found to have a lacuna to the extent that the focus was on long-term financing. It believed that issues pertaining to working capital management were not under the purview of financial management.

2. Modern Approach

The modern approach views the term financial management in a broad sense. According to it, the finance function covers both acquisition of funds as well as their allocations. Thus, apart from the issues involved in acquiring external funds, the main concern of financial management is the efficient and wise allocation of funds to various uses. The principal contents of modern approach to financial management can be said to be: (i) How large should an enterprise be, and how fast should it grow? (ii) In what form should it hold assets? And (iii) What should be the composition of its liabilities? The questions posed above cover major issues faced by any enterprise. The financial management is concerned with the solution of investment, financing and dividend decisions. Thus, financial management, in the modern sense of the firm, can be broken down into (A) (B) (C)

three major decisions as functions of finance:

The Investment Decision, The Financing Decision, and The Dividend Decision.

(A) The Investment decision relates to the selection of assets in which funds will be invested by a firm. The assets which can be acquired can be divided broadly into two groups: (i) long term assets which yield a return over a period of time in future, (ii) short term assets, defined as those assets which in normal course of business can be converted into cash without diminution in value, usually within a year. It normally includes decisions for capital budgeting and working capital management.

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(B) The Financing decision is concern with the financing-mix or capital structure or leverage. The term capital structure refers to the proportion of debt (fixed interest sources for financing) and equity (variable-dividend securities/source of funds). A capital structure with a reasonable proportion of debt and equity capital is called the optimum capital structure. Thus, one dimension of the financing decision whether there is an optimum capital structure and in what proportion should funds be raised to maximize the return to shareholders? The second aspect of the financing decision is the determination of an appropriate capital structure given the facts and figures.

(C) The third major decision area of financial management is the decision relating to the Dividend policy. The dividend decision should be analyzed in the relation to the financing decision of the firm. Two alternatives are available relating to the dividend decision: (i) they can be distributed to the shareholders in the form of dividend or (ii) they can be retained in the business itself. The decision as to which course should be followed depends largely upon the significant element in the dividend decision, the dividend payout ratio, that is, what proportion of net profits should be paid out to the shareholders. The final decision will rest with the preference of the shareholders and investment opportunities available within the firm. The second major aspect of the dividend decision is the factors determining dividend policy of a firm in practice.

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Functions of Financial Management

1. Financial Forecasting The financial management sees that an adequate supply of cash is available at the proper time for smooth flow of firms activities. As cash inflow and outflow both are closely related to the volume of sales, it requires financial forecasting. The estimation of the prospective cash inflow and cash outflow in the next quarter or year is necessary to maintain the liquidity in the funds. 2. Investment decision The investment decision is the most important function of financial management. It involves the allocation of capital to various investment proposals in order of their priority and profitability. As each investment decision involves risk a financial manager assists in evaluating the various proposals in the processes of capital budgeting. 3. Management of Income Management of income is a major function of financial executive. It includes the allocation of net earnings after payment to taxes among shareholders and retaining earning for employers. The shareholders generally are interested in current cash dividends. In order to provide for future contingencies, the top management (management) wants to retain earnings to the maximum possible extent. Deciding between these two is very crucial. 4. Management of Cash Estimating and controlling cash flows is an important function of financial management The cash must be managed for the benefit of the owners. The financial manager tries two things: (i) how can managers choose the best among alternative uses of funds, and (ii) how can they ascertain that this is a better use than stock-holders could find outside the company? The finance manager must choose most desirable investment option.

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5. Deciding about New Sources of Finance A business firm is always in need of funds. Therefore, on the basis of forecast of the volume of operations the finance manager should decide upon the needs and prepare the detailed financial plan both short term and long term for the procurement of funds. 6. Analysis and appraisal of Financial Performance Proper analysis, checking and appraisal of financial performance are very essential to carry out finance function smoothly. Various financial statements are prepared, analyzed and then necessary guidelines are set for the future.

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Organization Chart of Finance Department

Managing Director

General Manager Assistant General Manager (Finance) (Mr. M.S.Gandhi) Manager Senior Executive (Mr. Kalpesh Shah) Executive (Mr. Tanveer Z. Saiyed) Senior Officer (Mr. Manoj)

Senior Assistant (Ms. Sangeeta and Ms. Jayshree) Junior Assistant (Mr. Hari)

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Accounting Policies
1. Method of Accounting (a) (b) The union follows accrual system of accounting in preparation of accounts. The financial statements are prepared on historical costs, convention and in accordance with the generally accepted accounting principals.

2. Fixed Assets Fixed assets are valued at cost. The cost of assets comprises of purchase price and any directly attributable cost on bringing the assets to its present condition or intended use. 3. Depreciation Depreciation on Fixed assets is provided on Written down Value Method at the applicable rates prescribed under the Income Tax Act, 1961. Depreciation has been provided for the full year for the assets acquired and commissioned by September, and others acquired later are subject to half-year depreciation. Where grant has been received against any assets the depreciation on the grant proportion has been adjusted against the grant (except for the assets of Amul 1 & 2). 4. Inventories (a) (b) (c) Raw material, Packing material, Semi-packed goods and finished goods are valued at FIFO basis. Store and spares are valued at cost on FIFO basis. Excise duty applicable on finished goods stock has been included in the valuation of finished goods.

5. Investment Investments are primarily meant to be held on long-term basis at stated cost.

6. Retirement Benefits Unions contribution towards Gratuity and Super-annuation for its employees is funded with LIC of India. 59

7. Excise Duty Provision has been made for the excise duty applicable on the finished goods stock in the excise expenses. 8. Income Tax In view of the carry forward losses, there is no taxable income and hence no provision for income tax is required to be made under the Income Tax act, 1961. The union has unabsorbed depreciation and carry forward losses under the income tax laws. In absence of virtual certainty of sufficient future taxable income, net deferred tax assets has not been recognized by way of prudence in accordance with the Accounting standard AS 22 Accounting for tax on income issued by the ICAI. 9. Crate Accounting Crates used in the milk distribution at Anand, Pune and Kolkata has been treated as deferred revenue expenditure and charged to Profit and Loss A/c over a period of three years considering their life of usage.

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Working Capital Management

The concept of working capital is used in two ways; Gross working capital and Net working capital. Gross working capital refers to the firms investment in current assets. Current assets are the assets, which can be converted into cash within an accounting year (or operating cycle), and include cash, short-term securities, debtors, (accounts receivable or book debts) bills receivable and stock (inventory). Net working capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year or operating cycle and include creditors (accounts payable), bills payable, and outstanding expenses. Net working capital can be positive as well as negative. A positive working capital will arise when current assets are more than current liabilities. Negative working capital is when current liabilities exceed current assets.

The two concepts of working capital gross and net are not exclusive; rather they have equal significance from point of view of management The gross working capital concept focuses attention on two aspects of current assets management: (a) How to optimize investment in current assets? Excessive investment in current assets should be avoided because it impairs the firms profitability, as idle funds earn nothing. On the other hand, investing fewer funds in current assets can result into inability to meet the current liabilities. How should current assets be financed? It points out the need of arranging funds to finance current assets. Whenever a need for working capital funds arises due to the increasing level of business activity, or for any other reason, financing arrangement should be made quickly.

(b)

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Net working capital is a qualitative concept. It indicates the liquidity position of the firm and suggests the extent to which working capital needs may be financed by permanent sources of funds. Current assets should be sufficiently in excess of current liabilities to constitute a margin of funds for maturing obligations within the ordinary course of business. Net working capital concept also covers the question of judicious mix of long-term and short-term funds for financing current assets. For every firm, there is a minimum amount of net working capital, which is permanent. Therefore, a portion of working capital should be financed with the permanent sources of funds such as equity share capital, debentures, long-term debt, preference shares and so on. The need for working capital arises from the cash/operating cycle of a firm. It refers to the length of time required to complete the following sequence of events: conversion of cash into inventory, inventory into receivables and receivables into cash. The operating cycle creates the need for working capital and its length in terms of time-span required to complete the cycle is the major determinant of the firms working capital needs. Working capital can be (i) permanent and (ii) temporary. While permanent component reflects the need for a certain irreducible level of current assets on a continuous and uninterrupted basis, the temporary portion is needed to meet seasonal and other temporary requirements. While permanent working capital requirements should be financed from long-term sources, short-term funds should be used to finance temporary working capital needs of a firm. Manufacturing and trading enterprises require fairly large amounts of working capital to maintain a sufficient amount of cash, inventories and book debts to support their production and sales activities. The longer the production cycle, the larger is the working capital requirement and vice-versa. Efficiency of operations accelerates the pace of cash cycle and improves the working capital turnover resulting in reduced requirement of working capital. Various components of Working capital Management are cash management, receivables management and inventory management.

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Cash Management
Cash is the ready currency to which all liquid assets can be reduced. Near cash implies marketable securities viewed the same way as cash because of their high liquidity. Marketable securities are shortterm interest earning money market instruments used by firms to obtain a return on temporarily idle funds. A distinguishing feature of cash, as an asset, is that it has no earning power. There are three primary motives for maintaining cash balances: (i) Transaction Motive (ii) Precautionary Motive (iii) Speculative Motive.

(i)

Transaction motive

It refers to the holding of cash to meet routine cash requirements to finance the transactions, which a firm carries on in the ordinary course of business. A firm enters into a variety of transactions to accomplish its objectives, which have to be paid for in the form of cash. For example, cash payments have to be made for purchases, wages, operating expenses, financial charges like interest, taxes, dividends, and so on. Similarly, there is regular inflow of cash to the firm from sales operations, returns on outside investments, and so on. These receipts and payments constitute two-way flow of cash. But inflows and outflows do not perfectly coincide or synchronize. At times receipt exceed outflows while, at other times, payments exceed inflows. To ensure that the firm can meet its obligations when payments become due in a situation in which disbursements are in excess of the current receipts, it must have adequate cash balance. The requirement of cash balances to meet routine cash needs is known as the transaction motive. (ii) Precautionary motive

Precautionary motive is a motive for holding cash-near cash as a cushion to meet unexpected opportunities and contingency demand for cash. It is the cash balance held in business in reserve for such random and unforeseen fluctuations in cash flows are called as precautionary balances. It also helps in conditions when it is difficult to obtain credit from the market immediately. (iii) Speculative Motive

Speculative motive is a motive for holding cash/near cash to quickly take advantage of opportunities typically outside the normal

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course of business. While the precautionary motive is defensive in nature in that firms must make provisions to tide over unexpected contingencies.

Objectives of Cash Management can be listed as under: 1] Meeting payment schedules 2] Minimising funds committed to cash balances Determining Cash Needs Two models are available to determine cash requirement by a firm: 1] Baumol Model 2] Miller-Orr Model Briefly explaining them 1] Baumol Model The purpose of this model is to determine the cost-efficient transactional balances and assumes that the demand for cash can be predicted with certainty and determines the optimal conversion lot. The model keeps two costs in mind: (i) Conversion cost (ii) Opportunity Cost Conversion Costs are incurred each time marketable securities are converted into cash. Opportunity costs are derived from the loss that could have been earned on the investment of cash balances. 2] Miller & Orr Model Miller & Orr Model is a model that provides for cost-efficient transactional balances and assumes uncertain cash flows and determines an upper limit and return point for cash balances. As against the assumption of uniform and certain levels of cash balances in Baumol model, the Miller & Orr Model assumes that cash balances randomly fluctuate between an upper bound and a lower bound. When the cash balances hit the upper bound, the firm has too much cash and should buy enough marketable securities to bring the cash balances back to the optimal bound. When the cash balances hit zero, the finance manager must return them by selling/converting securities into cash.

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Funds Flow Statement

To understand the importance of Funds Flow Statement (FFS) it is necessary to clearly understand the meaning of the word fund. For a common layman, fund means only cash i.e. liquid cash. But it is actually a wrong understanding. Fund is not affected by changes in cash only; it also changes with any transaction that takes place. For example, when goods are sold on credit to any debtor then cash is not increased or decreased but yes the funds would increase. Similarly, when we purchase goods and pay cash, our cash balance would definitely get reduced. But when we avail credit from creditors we dont have to pay immediately. Hence funds are affected in this case. Increase in creditors has thus become a source of funds and in the same way increase in debtor would result into decrease in funds. In short: When liabilities increase, it is a Source of Funds; When assets increase, it is an Application of Funds. A summarized list of source and application of funds is given below: A] Sources of Funds: (i) (ii) (iii) (iv) Increase in capital (by way of issuing shares) Borrowing or incurring any liability Profit from operation of business Sale of fixed assets or investments

B] Application of Funds: (i) (ii) (iii) (iv) (v) Purchase of fixed assets Purchase of investments Repayment of Capital (eg. Redemption of preference shares) Repayment of loans or debentures Payment of cash dividends

The list reveals that funds would increase with any increase in assets or when there is any decrease in liability and vice versa.

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Cash Flow Statement

Cash is the most liquid asset of a business. All business transactions ultimately result into cash inflow or outflow. Hence, a statement that shows cash flow is considered to be an important one. The business should have sufficient cash on hand, so that the liabilities can be paid as and when they become due. Cash on hand should not be excessive; otherwise it would remain idle, reducing the overall profitability. Looking to the importance of liquidity, the cash statement assumes more significance for management Cash Flow Statement is a historical statement that shows cash inflows and outflows only. The statement shows the amount of cash received and cash paid due to each transaction of business. The total cash inflow is added to the opening balance of cash and the total cash outflow deducted there from. This gives the final cash balance. We may say that Cash flow decreases due to increase in current assets Cash flow increases due to decrease in current assets That is, there is an inverse relationship between current assets and cash flow.

As such there is no well defined policy for management of cash at Amul. They have only defined the upper limit which is of Rs. One Lac. If the Senior Executive of the Finance Department has got a cash balance exceeding Rs. 1 lac on one single day he has to take permission from the AGM regarding it. He also has to give valid reasons for supporting the cash balance.

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Receivables Management
The term receivable is defined as debt owned to the firm by customers arising from sale of goods or services in the ordinary course of businesses. Receivables management is also called trade credit management. Thus, accounts receivables represent an extension of credit to customers, allowing them a reasonable period of time in which to pay for the goods received. Sale of goods on credit is an essential part of todays modern competitive systems. They are in-fact, treated as a marketing tool or aid to attract and hold customers from buying competitors products. However, extension of credit involves risk and cost. Management should weigh benefits as well as costs while extending credit to any customer. The objective of Receivables Management is to promote sales and profit until that point is reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that additional credit. Two major customers of Amul are GCMMF i.e. Gujarat Co-operative Milk Marketing Federation and the Indian Army. 95% of Nutramul is sold to the Army. Most of the sales to Army is done on credit basis. Amul also holds fixed deposits in several banks like the Axis Bank as well as KDCC Bank, mainly. Amul receives nearly Rs. 1 crore daily from GCMMF, against the sales made to it. Still efficient management of receivables is necessary.

Determination of Credit Policy at AMUL

Determining a sound credit policy is very much important for every organisation. It is the base for its receiving cash, which is the blood of its activities. Although rigidly following a credit policy is not possible in real sense. Hence some liberty along with strictness is required.

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In case of Amul, The case is same. There is a credit policy framed by them, but it is very difficult to implement it. The major debtors of Amul are GCMMF and Army. GCMMF makes daily payment to Amul. When transactions are made with Army, it takes much time to receive payment. It has to undergo a very rigorous procedure. Several documents have to be prepared keeping in mind all minute details. It needs very much checking. Hence as such seeing in a broad manner, there are other debtors of Amul, but they bear very negligible outstanding amount.

Credit Terms Credit Policy of any organization helps in attracting debtors for the organization. This also includes providing cash discount as well as giving long credit period. It is because it determines whether people are interested in buying on credit or paying out in cash. The general notion of a person is that if he can get goods on credit he will first rush there to grab the opportunity. No one likes to part with his money. But on the contrary organizations do not like to allow more funds to be outstanding and hence they would thrive to collect money faster. Credit terms at Amul are not hard rigid. They generally allow credit for a month but for genuine cases they can stretch it long up to reasonable period. On the other hand the collection costs are also to be kept in mind. In the greed of attracting more and more customers one should not forget that allowing long credit period might also increase the risk of bad debts. Many a times, allowing cash discount is a better option than giving credit to certain customers.

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Inventory Management
Inventory is composed of assets that will be sold in future in the normal course of business operations. The assets which firms store as inventory in anticipation of need are (i) (ii) (iii) Raw materials Work-in-progress (semi-finished goods) Finished goods

The raw material inventory contains items that are purchased by the firm from others and are converted into finished goods through the manufacturing process. The firm it-self might be producing the raw material. The work-in-progress inventory consists of items currently being used in the production process. They are normally semi-finished goods that are at various stages of production process in a multi-stage production process. Finished goods represent final or completed products, which are available for sale. The inventory of such goods consists of items that have been produced but are yet to be sold. The views concerning the appropriate level of inventory would differ among the different functional areas. The job of the financial manager is to reconcile the conflicting viewpoints of the various functional areas regarding the appropriate inventory levels in order to fulfill the overall objective of maximizing the owners wealth. Objectives of Inventory Management can be explained as follows: The basic responsibility of the financial manager is to make sure the firms cash flows are managed efficiently. Efficient management of inventory should ultimately result in the maximization of the owners wealth. In order to minimize cash requirements, inventory should be turned over as quickly as possible, avoiding stock-outs that might result in closing down the production line or lead to a loss of sales. It implies that while the management should try to pursue the financial objective of turning inventory as quickly as possible at the same time not affecting its production activities.

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Since the production runs 24x7 it is necessary to have enough stock on hand so as to not to adversely affect the production process. Various costs involved in inventory management are (i) (ii) Ordering costs Carrying costs

The term ordering cost is used in case of raw material and includes the entire costs of acquiring raw material. They include cost include in the following activities: Requisition purchase, ordering transporting, receiving inspecting, and storing. The ordering costs increase in proportion to the number of order placed, thus the more frequently the inventory is acquired the higher the firms ordering cost. On the other hand, if the firm maintain large inventory levels there will be few order placed and ordering cost will be relatively small. Thus the ordering cost decrease with increasing size of inventory. The term carrying cost means the costs which are incurred for holding the level of inventory. They include the opportunity cost of funds invested in inventories, storage cost, insurance, taxes, and cost in the deterioration and obsolescence. Opportunity costs are the earning foregone on the other best available investment opportunity. The carrying costs move in direct proportion to inventory size. Higher the inventory sizes, higher the carrying cost and lower the inventory size, lower the inventory costs.

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Inventory Management at Amul

Amul follows FIFO controlling inventory and stores. method for maintaining and

FIFO method means FIRST IN FIRST OUT method. The method implies that the goods that are produced first are issued first. It means all those products that are first brought into the store house will be dispatched first. The concept is true for raw materials as well as finished goods. Raw materials that are received first form the relevant Purchase Order will be dispatched first to the corresponding production department as when required. Similarly, for the finished goods, the goods that are produced first will be dispatched to GCMMF as per the order placed by them. The stores department has got a specific material receipt and issue system through which they maintain their inventory. Up till now they were just maintaining the inventory but now they have also started initializing the activity of controlling their inventory. Minimum Stock Level and Maximum Stock Level are freezed so as to have only the required quantity of stock. ABC control system is also tried to be implemented so as to know the critical items and to have only the necessary and sufficient quantity of each of them.

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Working Capital Management Calculations

Calculating Per Unit Cost
1] Raw material cost = Milk Purchased ---------------------Total Milk Received 2010-11 = 144763.65 -------------------4279.43 = Rs. 18.2187 /liter

2009-10 = 111402.36 -------------------3245.50 = Rs.16.12 /liter 2008-09 = 94284.94 --------------------2974.19 = Rs. 15.66 /liter

2] Labor Cost = Total Labor Cost (Salary + Pf & Gratuity) ---------------------Total Milk Receipt

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2010-11 = 2460.52 -----------------------4279.43 = Rs. 0.5040/ liter 2009-10 = 3272.42 ------------------------3245.50 = Rs. 0.5671/ liter 2008-09 = 2351.44 ------------------------2374.19 = Rs. 0.6255/ liter 3] Administrative Cost = Total Administrative Cost -----------------------------Total Milk Receipts 2010-11 = 355.79 ------------4279.43 = Rs. 1.2003/ liter 2009-10 = 255.16 -----------3245.50 = Rs. 1.3492/ liter 2008-09 = 198.96 -----------2974.19

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= Rs. 1.6805/ liter 4] Packing Cost = Total Packing Cost ---------------------Total Milk Receipts 2010-11 = 12935.08 -----------4279.43 = Rs. 1.9544/ liter 2009-10 = 10946.73 -----------3245.50 = Rs. 1.9838/ liter 2008-09 = 10477.46 -----------2974.19 = Rs. 1.7712/ liter

5] Selling & Distribution Expenses = Total S & D Expenses -------------------------Total Milk Receipts

2010-11 = 149.36 -----------4279.43 = Rs. 0.0257/ liter

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2009-10 = 136.06 ---------3245.50 = Rs. 0.0327/ liter 2008-09 = 125.87 --------2974.19 = Rs. 0.0195/ liter

Certain Assumptions and understanding regarding Working Capital Calculation: 1) Cost of Raw material includes only per unit cost incurred for purchase of milk. 2) Cost for Work in progress includes per unit cost incurred for purchase of milk. 3) Cost for Finished Goods includes per unit cost incurred for milk purchase, labour cost, and administrative cost and packing cost. 4) Cost for Debtors includes all, cost incurred for milk purchase, labour cost, administrative cost, packing cost and selling and distribution cost. 5) Cash Balance is taken at its present value. 6) Per unit cost for creditors includes only per unit cost for milk purchase, because all creditors are assumed to be for milk.

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Calculating WORKING CAPITAL REQUIREMENT

For the Year 2007 08 (Rs. In lacs)
A] Current Assets: Stock in TradeRaw Materials (144763.65*1/365) Work-in-progress (1902.08*18.22*1/365) Finished Goods (15,737.88*21.88*1/12) Debtors (9946.80*21.91*1/12) Cash Balance = = = = = 396.61 94.95 28,695.40 18,157.63 3311.22 -----------------A] B] Current Liabilities: Creditors (13,572.51*18.22*1/12) Provisions = = 20,607.59 319.90 ------------------B] 20927.49 50,472.32

Net Working Capital Requirement

29,544.83

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For the Year 2006 07 (Rs. In lacs)

A] Current Assets: Stock in TradeRaw Materials (3245.50*16.12*1/365) Work-in-progress (1821.55*16.12*1/365) Finished Goods (9077.90*20.02*1/12) Debtors (7068.20*20.05*1/12) Cash Balance = = = = = 143.33 80.45 15,144.96 11,811.37 3728.11 -----------------A] B] Current Liabilities: Creditors (11,432.71*16.12*1/12) Provisions = = 15,357.94 673.83 ------------------B] 16,031.77 30,908.22

Net Working Capital Requirement

14,876.45

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For the Year 2005 06 (Rs. In lacs)

A] Current Assets: Stock in TradeRaw Materials (2974.19*15.66*1/365) Work-in-progress (1179.10*15.66*1/365) Finished Goods (9671.26*19.7372*1/12) Debtors (7923.99*19.7567*1/12) Cash Balance = = = = = 127.60 50.59 15,906.97 13,045.99 1395.69 -----------------A] B] Current Liabilities: Creditors (8891.59*15.66*1/12) Provisions = = 11,603.52 69.20 ------------------B] 16,031.77 30,526.84

Net Working Capital Requirement

18,854.11

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INTERPRETATION

Looking at the working capital calculations of past 3 financial years, it can be easily understood that the requirement for working capital has increased tremendously. Although it reduced a bit in 2006-07 but again shot up in the last financial year. Following are the feasible reasons for the working capital requirement pattern: j The basic reason behind the increase in working capital requirement in the previous year was the set up of two satellite dairies each at Pune and Kolkata. This increased the over all expenses. j Also the other valid reason is the tremendous increase in milk receipts. j Due to the increase in milk receipts it led to a chain reaction wherein expenses raised to a great extent. Expenses like processing costs, research & development costs, etc. also increased up to a certain level. j Sales turnover also increased but not up to the extent to which the expenses had increased. j The amount of debtors has increased in the previous year. It means more money is blocked up in debtors and thus more working capital is required. j Packing costs also increased, contributing to higher per unit costs. j Overall milk purchase also increased. j It is from this year that the firm has decided to pay a constant price to its milk suppliers. Earlier, it used to pay them on a seasonal basis, but now they pay the same rate, due to increasing competition. j Provision for bad and doubtful debts has increased in the year 2007-08. It needs to be checked. j Finished products produced during the year 2007-08 were very high. The inventory stocked was nearly one and a half times the inventory stocked during the previous year.

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Future Prospects
j Since the world dairy market is developing, we can see better prospects for Amul to develop at the global arena. Amul is the second largest dairy in the world. j As mentioned in the annual report of Amul, growth of world dairy market is 2 %. Following data makes the picture more clear, how Amul is fast developing its exports.

EXPORT DETAILS FOR THE PERIOD OF APRIL 07 TO MARCH 08

Product Exported Amul Ghee Amul Butter SFM Cheese Amul Lite TOTAL QTY. FOB (K.G.) VALUE (Rs. In lacs) 846338.00 1504.13768 565016.00 705.03778 59885.00 36.26661 189597.00 306.03388 301619.00 395.32372 2946.79969

EXPORT DETAILS FOR THE PERIOD OF APRIL 06 TO MARCH 07

Product QTY. FOB Exported (K.G.) VALUE (Rs. In lacs) Amul Ghee 456505 761.32792 Amul Butter 391502 427.58727 SFM 39422 21.89911 Cheese 111351 168.14467 Amul Lite 3098 2.97545 TOTAL 1381.9344

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PERCENTAGE INCEREASE AND GROWTH CHART FOR THE EXPORTS QUANTITY (K.G.) Product Exported 2006-07 Amul Ghee Amul Butter SFM Cheese Amul Lite 456505 391502 39422 111351 3098 2007-08 846338.00 565016.00 59885.00 189597.00 301619.00 % Increase 85.40 44.32 51.91 70.27 9635.93

FOB (FREE ON BOARD) VALUE (Rs. In lacs) Product Exported 2006-07 2007-08 % Increase Amul Ghee 76132792.94 150.41376 97.57 Amul Butter 42758727.88 705.0377 64.89 SFM 2189911.40 36.2666 65.61 Cheese 16814467.69 306.03388 82.20 Amul Lite 297545.75 395.32372 13186.149

j Amul is also expanding its plant. j It has been diversifying itself into many other related fields. j In certain third world countries where milk is not available in this much quantity, Amul can export milk products like milk powder and other dairy products to such countries. j Many countries have now started importing milk products from India. Amul has great prospects to supply its products to these countries. j Amul has now very well established its name in Indian as well as international markets and thus it can now appropriately use its brand equity in marketing activities. j As told above, it can also convince financial institutions in giving finance to Amul for expansion as well as research purpose.

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Growth Chart For Quantity

900000 800000 700000 600000 Quantity 500000 400000 300000 200000 100000 0 2006-07 2007-08 Year
Amul Ghee Amul Butter SFM Cheese

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Suggestions & Recommendations

j The first and foremost recommendation to be made is to have a proper and well defined inventory management procedure and process. j There is lot of undue wastage of raw materials as well as packing materials, which can be minimized if proper supervision and control is there. j Proper ABC classification would help in reducing the cash expenses also sufficient goods would be bought under each category. j On the other hand, the required storage facility can be set up for different materials as required by them. j A minimum stock level should be set up so that the firm does not run out of stock or do not have to handle the surplus stock. j Many consumers are not aware of some of the very nutritious products produced by Amul like the skimmed milk powder or the spray powder or the infant milk powder. Certain steps are needed to be taken on the marketing front regarding these products. j Since Amuls chocolates are good in taste and also with high nutrition value, due to lack of marketing people get diverted to the competitors brands rather than buying Amuls chocolates. j Lots of packing materials are wasted and no account of such looses is maintained, this makes people working there to resort to undue use and hence wasting the materials.

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Conclusion
Amul has developed itself to a great extent since its establishment. Still it has been trying hard to expand its activities and also to diversify itself. There are very good opportunities lying ahead for Amul not only at the domestic level but also at the international front. Since India is the largest producer of milk it can export its milk and dairy products to other countries and can help them nurture their nation with more nutritious food. There are certain points where the firm needs to take steps to check undue activities and wastages made by its employees. Its working capital management is not as efficient as it should be. They have no well defined principles and policies through which they can manage their working capital, so they can have policies for inventory management like ABC classification, EOQ level, Miller & Orr Model for cash management. They can co-ordinate their receivables and payables standards so as to efficiently utilize cash and hence save interest paid on Cash Credit taken form various banks. There are loopholes where the organisation itself can get stuck up if not taken care of. But since last 60 years it has been working making profits all the way. The year 2007-08, Amul has out performed in terms of milk receipts, sales turn over and profits. I expect the same trend would continue for years to come. And this project would help Amul a lot. In all, my experience at Amul was very good. I have learnt many practical things at Amul and how actually real time people work in organisations.

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List of References
j Annual Reports of KDCMPU Ltd. Books: j Financial Management by Khan & Jain. j Financial Management by Sharma. j Financial Management by I.M.Pandey. j Other Reports at Amul.

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