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Prepared By: Vasant Gajara (22) Vishal Soni (57) Jay Akhani (05)
PREFACE
Channel Management is a business practice that aims to improve the way a business sources its raw materials, and delivers it to end users. For any product or service offered by any business, there are usually a number of different business entities involved in the various stages of the channel management, including manufacturers, wholesalers, distributors and retailers; the last group supply chain is consumers. SCM is important for modern businesses because it coordinates and synchronizes activities of partner businesses, giving efficiency.
ACKNOWLEDGEMENT
We think if any of us honestly reflects on who we are, how we got here, what we think we might do well, and so forth, we discover a debt to others that spans written history. The work of some unknown person makes our lives easier every day. We believe it's appropriate to acknowledge all of these unknown persons; but it is also necessary to acknowledge those people we know have directly shaped our lives and our work.
We would like to thank Prof. Abhinava Singh for his guidance throughout the semester and during course of the project.
We would also like to thank to all those who could not find a separate mention but have helped us directly/indirectly.
TABLE OF CONTENTS
1. Preface.02 2. Acknowledgement..03 3. Company Profile.05 4. Birth of AMUL...07 5. Product Mix of AMUL...08 6. The Three Tier Model of AMUL..11 7. The Business Model19 8. AMUL Parlors24 9. Selection, Motivation, and Evaluation of Channel Members25 10.Conflicts and Co-operations Among Channel Members28 11.Distribution Channel.30 12. Observations, Comments and suggestions......31
COMPANY PROFILE
AMUL means "priceless" in Sanskrit. A quality control expert in Anand suggested the brand name Amul, from the Sanskrit Amoolya, 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, Amul spray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India.. Today Amul is a symbol of many things. Of highquality 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' organization and have a proven model for dairy development.
GCMMF
The Gujarat Cooperative milk Marketing Federation Ltd, Anand (GCMMF) is the largest food products marketing organization of India. It is the apex organization of the Dairy Cooperatives of Gujarat. This State has been a pioneer in organizing dairy cooperatives and our success has not only been emulated in India but serves as a model for rest of the World. Over the last five and a half decades, Dairy Cooperatives in Gujarat have created an economic network that links more than 3.1 million village milk producers with millions of consumers in India These cooperatives collect on an average 9.4 million liters of milk per day from their producer members, more than 70% of whom are small, marginal farmers and landless laborers and include a sizeable population of tribal folk and people belonging to the scheduled castes. The turnover of GCMMF (AMUL) during 2010-11 was Rs. 97.74 billion. It markets the products, produced by the district milk unions in 30 dairy plants, The farmers of Gujarat own the largest state of the art dairy plant in Asia Mother Dairy, Gandhinagar, Gujarat which can handle 2.5 million liters of milk per day and process 100 MTs of milk powder daily.. GCMMF (AMUL)s Total Quality Management ensures the quality of products right from the starting point (milk producer) through the value chain until it reaches the consumer. Ever since the movement was launched fifty-five years ago, Gujarats Dairy Cooperatives have brought about a significant social and economic change to our rural people. The Dairy Cooperatives have helped in ending the exploitation of farmers and demonstrated that when our rural producers benefit, the community and nation benefits as well. The Gujarat Cooperative Milk Marketing Federation Ltd. cannot be viewed simply as a business enterprise. It is an institution created by the milk producers themselves to primarily safeguard their interest economically, socially as well as democratically. Business houses create profit in order to distribute it to the shareholders. In the case of GCMMF the surplus is ploughed back to farmers through the District Unions as well as the village societies. This circulation of capital with value addition within the structure not only benefits the final
beneficiary the farmer but eventually contributes to the development of the village community. This is the most significant contribution the Amul Model cooperatives have made in building the Nation.
GCMMF: An overview
Members: 17 district cooperative milk producers' Union (15 members & 2 Nominal Members) 3.03 million 15,712 13.67 million liters per day 3.45 billion liters 9.2 million liters 647 Mts. per day 3690 Mts per day Rs. 9774 Crores (USD 2.2 Billion)
No. of Producer Members: No. of Village Societies: Total Milk handling capacity: Milk collection (Total - 2010-11): Milk collection (Daily Average 2010-11): Milk Drying Capacity: Cattlefeed manufacturing Capacity: Sales Turnover :
BIRTH OF AMUL
The birth of Amul at Anand provided the impetus to the cooperative dairy movement in the country. The Kaira District Cooperative Milk Producers Union Limited was registered on December 14, 1946 as a response to exploitation of marginal milk producers by traders or agents of existing dairies in the small town named Anand (in Kaira District of Gujarat). Milk Producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand . Angered by the unfair and manipulative trade practices, the farmers of Kaira District approached Sardar Vallabhbhai Patel (who later became the first Deputy Prime Minister and Home Minister of free India) under the leadership of the local farmer leader Tribhuvandas Patel. Sardar Patel advised the farmers to form a Cooperative and supply milk directly to the Bombay Milk Scheme instead of selling it to Polson (who did the same but gave low prices to the producers). He sent Morarji Desai (who later became Prime Minister of India) to organize the farmers. In 1946, the farmers of the area went on a milk strike refusing to be further oppressed. Thus the Kaira District Cooperative was established to collect and process milk in the District of Kaira in 1946. Milk collection was also decentralized, as most producers were marginal farmers who were in a position to deliver 1-2 liters of milk per day. Village level cooperatives were established to organize the marginal milk producers in each of these villages. The Cooperative was further developed & managed by Dr. V Kurien along with Shri H M Dalaya, in 1973; the Gujarat Co-operative Milk Marketing Federation was established. The Kaira District Co-operative Milk Producers Union Ltd. which had established the brand name AMUL in 1955 decided to hand over the brand name to GCMMF (AMUL). With the creation of GCMMF (AMUL), we managed to eliminate competition between Gujarats cooperatives while competing with the private sector as a combined stronger force. GCMMF (AMUL) has ensured remunerative returns to the farmers while providing consumers with products under the brand name AMUL.
Cheese Range:
Amul Pasteurized Processed Cheddar Cheese Amul Processed Cheese Spread Amul Mozarella Cheese Amul Emmental Cheese Amul Gouda Cheese Amul Malai Paneer (cottage cheese) Utterly Delicious Pizza
Amul Shrikhand (Mango, Saffron, Almond Pistachio, Cardamom) Amul Amrakhand Amul Mithaee Gulabjamuns Amul Mithaee Gulabjamun Mix Amul Mithaee Kulfi Mix
Amul Taaza 3% fat Milk Amul Gold 4.5% fat Milk Amul Slim-n-Trim 0% fat milk Amul Chocolate Milk Amul Fresh Cream Amul Snowcap Softy Mix
Pure Ghee:
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
Fresh Milk:
Amul Taaza Toned Milk 3% fat Amul Gold Full Cream Milk 6% fat Amul Shakti Standardised Milk 3% fat Amul Smart Double Toned Milk 1.5% fat
Curd Products:
Amul Icecreams:
Royal Treat Range (Rajbhog, Cappuchino, Chocochips, Butterscotch, Tutti Frutti) Nut-o-mania range (Kaju Drakshi, Kesar Pista, Roasted Almond, Kesar Carnival, Badshahi Badam Kulfi, Shista Pista Kulfi) Utsav Range (Anjir, Roasted Almond) Simply Delicious Range (Vanilla, Strawberry, Pineapple, Rose, Chocolate) Nature's Treat (Alphanso Mango, Fresh Litchi, Anjir, Fresh Strawberry, Black Currant) Sundae Range (Mango, Black Currant, Chocolate, Strawberry) Millennium Icecream (Cheese with Almonds, Dates with Honey) Milk Bars (Chocobar, Mango Dolly, Raspberry Dolly, Shahi Badam Kulfi, Shahi Pista Kulfi, Mawa Malai Kulfi, Green Pista Kulfi) Cool Candies (Orange, Mango) Cassatta Tricone Cones (Butterscotch, Chocolate) Megabite Almond Cone Frostik - 3 layer chocolate Bar Fundoo Range - exclusively for kids SlimScoop Fat Free Frozen Dessert (Vanilla, Banana, Mango, Pineapple)
Amul Milk Chocolate Amul Fruit & Nut Chocolate Amul Eclairs
Brown Beverage:
AMUL PLANTS
1. First plant is at ANAND, which engaged in the manufacturing of milk, butter, ghee, milk powder, flavored milk and buttermilk. 2. Second plant is at MOGAR, which engaged in manufacturing chocolate, nutramul, Amul Ganthia and Amul lite. 3. Third plant is at Kanjari, which produces cattelfeed. 4. Fourth plant is at Khatraj, which engaged in producing cheese.
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THREE TIER MODEL OF AMUL The Amul Model is a three-tier cooperative structure. This structure consists of a Dairy Cooperative Society at the village level affiliated to a Milk Union at the District level which in turn is further federated into a Milk Federation at the State level. The above three-tier structure was set-up in order to delegate the various functions, milk collection is done at the Village Dairy Society, Milk Procurement & Processing at the District Milk Union and Milk & Milk Products Marketing at the State Milk Federation. This helps in eliminating not only internal competition but also ensuring that economies of scale is achieved. As the above structure was first evolved at Amul in Gujarat and thereafter replicated all over the country under the Operation Flood Programme, it is known as the Amul Model or Anand Pattern of Dairy Cooperatives. Responsible for Marketing of Milk & Milk Products Responsible for Procurement & Processing of Milk Responsible for Collection of Milk Responsible for Milk Production.
Thus, the VDCS in an independent entity managed locally by the milk producers and assisted by the District Milk Union.
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MU1
MU...n
VCS1
VCSn
Village1
Villagen
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Distribution channel
(Downstream flow)
Manufacturing
First leg
Depot...1
Depot...n
Second leg
WD1
WDn
Third leg
Retail1
Retail...n
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Downstream Channel, it is the distribution part of the supply chain, from the manufacturing units to the retailers. First leg of transport is from the manufacturing unit to the company depots. This is done using 9 and 18 MT trucks any lesser quantity will be uneconomical to the company there for is some time the quantity ordered is lesser then club loading is done which means that the product ordered is supplied with some other products. Frozen food the temperature of these trucks is kept below -18C Dairy wet the temperature of these trucks is kept between 0-4C Second leg is from the depot to the WDs, this transport is carried out in insulated 3 and 5 MT TATA 407s here a permanent dispatch plan (PDP) is prepared where the distributor plans out the quantity of various products to be ordered on a particular date. Third leg this is the flow of good from WDs to retailers, a beat plan is prepared and transportation is done on auto-rickshaws, rickshaws and bicycles.
Amul products are available in over 500,000 retail outlets across India through its network of over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products. GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This practice is consistent with GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it also minimizes dumping. All GCMMF branches engage in route scheduling and have dedicated vehicle operations Depots with dry and cold warehouses to buffer inventory of the entire range of products Wholesale dealers carry inventory that is just adequate to take care of the transit time from the branch warehouse to their premises. This just-in-time inventory strategy improves dealers' return on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated vehicle operations.
Policy regarding unsold/spoilt goods If product crosses the shelf life, the retailer bears the costs. If the product gets spoilt during the transportation or if there is any customer complaint, Amul bears costs. Unsold goods are not returned to the manufacturer. No reverse logistics. 17
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2. Use of appropriate technology that includes product, process and information technology and managerial practices and systems. Simultaneous Development of Suppliers and Customers: From the very early
stages of the formation of AMUL, the cooperative realized that sustained growth for the long-term was contingent on matching supply and demand. The member-suppliers were typically small and marginal farmers with severe liquidity problems, illiterate and untrained. AMUL and other cooperative Unions adopted a number of strategies to develop the supply of milk and assure steady growth. First, for the short term, the procurement prices were set so as to provide fair and reasonable return. Second, aware of the liquidity problems, cash payments for the milk supply was made with minimum of delay.
For the long-term, the Unions followed a multipronged strategy of education and support. Only part of the surplus generated by the Unions is paid to the members in the form of dividends. A substantial part of this surplus is used for activities that promote growth of milk supply and improve yields. These include provision of veterinary services, support for cold storage facilities at the village societies etc. In parallel, the Unions have put in place a number of initiatives to help educate the members.
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service providers. These include logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, some veterinary services etc.
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2. To ensure that milk is made available to increasingly large sections of the society at affordable prices.
Supplier Enhancement and Network servicing:- Their objective is to ensure that producers get maximum benefit and to resolve all their problems. They manage the procurement of milk that comes via trucks & tankers from the VSs. They negotiate annual contracts with truckers, ensure availability of trucks for procurement, establish truck routes, monitor truck movement and prevent stealing of milk while it is being transported.
Technology for Effectiveness:Technology or knowledge that was embodied in products, processes, and practices became an important factor in delivering effectiveness to the network of cooperatives. One distinguishing feature of AMUL (in comparison with other similar cooperatives globally) is the large variety in their product mix. Most of its plants are state of art and automated. AMULs innovations in the areas of energy conservation and recovery have also contributed to reduction in cost of its operations. AMUL also indigenously developed a low cost process for providing long shelf life to many of its perishable products. The extent of IT usage includes a B2C ordering portal, an ERP based supply chain planning system for the flow of material in the network, a net based dairy kiosk at some village societies (for dissemination of dairy related information), automated milk collection stations at village societies and a GIS based data network connecting villages societies to markets. Milk collection information at more than 10,000 villages is available to all dairies (or Unions) to enable them make faster decisions in terms of production & distribution planning, and disease control in more than 6,700,000 animals. This is linked with information at all 45 distribution offices and 3900 distributors. This network is being extended to cover all related field offices in the network. The GCMMF cyber store delivers AMUL products at the doorsteps of the consumers in 125 cities across the country. Now, going back to the supply chain of Amul, Amul has gone the e- commerce way. The 1st initiatives taken for an ERP system was in 94. Tata Consultancy Services was hired to guide in its implementation. The implementation project was named as Enterprise- wise Integrated Application System (EIAS). Automatic Milk Collection System units (AMCUS) at village societies were installed in the first phase to automate milk producers logistics. Amul also connected its zonal offices, regional offices and members dairies through VSATs for seamless exchange of information. Amul is also using Geographic Information Systems
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(GIS) for business planning and optimization of collection processes. Indian Institute of Management Ahmedabad supplemented Amuls IT strategy by providing an application software Dairy Information System Kiosk(DISK) to facilitate data analysis and decision support in improving milk collection. There are plans to introduce features like Internet banking services and ATMs which will enable the milk societies to credit payments directly to the sellers bank account. Distributors can place their orders on the website www.amul2b.com especially meant for accepting orders from stockiest and promoting Amuls products via e-commerce.
TQM (Total quality management) at the grassroots has been a strong movement to develop leadership, operational and strategic capabilities in the entire network farmers, village cooperatives, dairy plants, distributors and wholesalers and retailers. Key elements of this TQM movement have been: Friday Departmental Meetings : Each Friday, at a prescribed time, everyone in the network (from the farmers to the carry & forwarding agents) joins their respective departmental meeting to discuss quality initiatives and share policy related information. Training for Transformational Leadership so that individuals are able to control their thoughts, feelings and behavior and take more responsibility in ones life and surrounding environment. Application of Hoshin Kanri principles to bring about a bottom-up setting of objectives aligning policies for effective management of Unions & village societies on hand with those of channel member on the other hand. ISO/HACCP certification was obtained for all the Unions and each village society is in the process of obtaining the same. Training for farmers and their families emphasizing the need for good health care for not only cattle during its pregnancy and feeding but also for expecting and feeding mothers and the whole family. This effort has brought about a significant social change towards such issues in villages that have cooperative milk societies. Retail Census: GCMMF undertakes a census of all retail outlets (over 500,000) to evaluate customer perceptions and distribution efficacy of their network. This is being done by wholesalers in their respective territories at their own cost. This information is used for policy deployment exercise.
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THE NETWORK Milk is procured from the villages and collected at Village Cooperative Societies (VCS), from there the milk is taken to manufacturing units where the milk is processed into various products. The products are then transporters to the company Depots located in various parts of the country. The products are then sent to Wholesale Distributors (WD) and from there to the retailers. The fact sheet 9.4 million liters milk produce per day The payment is made under twelve hours of procurement There are 15712 village cooperative societies There are 5000 wholesale distributors in the country There are approximately 700,000 retailers spread all over India The peak processing till date has been 12 million liters per day These co operative societies are bound to supply there produce only to GCMMF 50 depots with dry and cold warehouses to buffer inventory of the entire range of products Export to 37 countries worth Rs. 150 Crores
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With products being highly perishable, the supply chain ought to have to maintain correct temperature, humidity etc and the chain should move fast. To reach out its consumers more directly and let them the total brand experience, Amul has come up with Amul parlors. These are called Utterly delicious parlors. They have come up in major cities like Ahmadabad, Bangalore, Baroda, Mumbai, Hyderabad and Surat already, and many more starting up real soon. These parlors are set at prominent locations such as campuses of Infosys, Wipro, IIM-A, IIT-B, temples, Metros etc.
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Distributors
One of the main factors, which keep the distributors motivated, is the margin. Usually the margins offered by the company are 8% & it is raised to 8.5%. Volume wise this comes out to be a big figure since Amuls product has a good demand in the market. However compared to the other companies the margins are still lower since the new players in the market offer a much higher margin. But the very fact that Amuls products have good demand in the market motivates the distributors to stock it. Amul being a cooperative cannot afford to give heavy monetary incentives. Amuls products are considered to be value for money since the company does not believe in charging high margins. In fact all monetary incentives are just the short run means to promote the companys product. In order to keep the Channel members motivated in the long run, Amul builds on the concept of Trade Marketing which makes the dealers & the distributors believe that the companys products are worthy of being pushed in the market. The company is organizing various Total Quality Management initiatives & workshops. Here various counseling measures are undertaken by the company to improve the overall working of the distribution network. Vision and mission statement: the company cascades down the vision to the various channel members, this is done through various events organized by the company at different locations where the values of the company are made clear and enforced to the channel members. Also the fact that Amul being a cooperative society cannot afford to spend exorbitantly on such events therefore it has a very traditional way of organizing these get together which leaves an impact on the members. Amul yatras: this includes taking the channel members on a guided tour of the manufacturing and procuring facilities in Gujarat. So that the channel members can have an experience of the working of the company and can pick up some quality measures that can help them to synchronize and improve their own functioning at various levels. This in turn help the company to co ordinate the entire value chain, as the channel members understand the various constraints and liberties the company goes through. The company has already got the Rajiv Gandhi award for quality.
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The Retailers
Trade schemes: these are undertaken by the company only for the hard selling items e.g. Ice creams, flavored milk etc. for these the company raises the margins by 2%, also schemes like good packaging incase of butter and cheese is undertaken by the company. However this is only a short-term initiative to push the products of the company. Glow boards: the company puts up glow boards at the retailer and pays the major portion of the cost. Schedule of the salesmen: they provide the retails with this schedule so the retailers can pre estimate the quantities of the various products needed. Infrastructure facilitation: the company facilitates the retailers to buy freezers and fridges by formulating an easy payment program and a commitment to buy back the equipment at a reasonable price when the value of the equipment has depreciated.
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DISTRIBUTION CHANNEL
MANUFACTURED UNIT
DISTRIBUTORS
DEALERS
RETAILERS
CUSTOMERS
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Observations
Amul has loyal cooperatives that provide milk only to them, over time the relationship of trust has built up with these people that Amul leverages now. Transport channel is strength as the transporters have grown with the company overtime the bonding with them enables the company to give least margins when it comes to the distributors in the industry, lowering the costs. The company believes that there is an ongoing demand in the market and therefore no promotions are needed to increase the sales, also the fact this would affect the cost of the product the company doesnt undertake many promotion schemes. The not being a profit driven organization, is able to provide products at the least price in the industry, and is able to give least channel margins as the channel members earn through volumes and not through high margins.
Trade promotion should be formulated for newly launched products instead of just tagging them onto best sellers. The company should start a home delivery where a particular household will order full range of products required by it over a period of time. For this the company could provide a deliveryman with cycle to reach the different houses. In order to motivate the channel members it is also very essential for the company to increase the margins for the hard selling items e.g. Amul dahi where it faces competition from Nestle & Mother dairy. 31
In order to remain sensitive to market demand, it is essential for the company to place additional salesmen on the field since the brand as such commands a high demand in the market but fails to match it with the supply.
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