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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 amp; Milk Products Responsible for Procurement amp; Processing of Milk Responsible for Collection of Milk Responsible for Milk Production. State Marketing Federation GCMMF District Milk Processing Unions 16 Village Co-operative Societies 16,117 Milk Producers [All milk producers in a village] 3. 18 Million State Marketing Federation GCMMF District Milk Processing Unions 16 Village Co-operative Societies 16,117 Milk Producers [All milk producers in a village] 3. 18 Million Village Dairy Cooperative Society (VDCS) The milk producers of a village, having surplus milk after own consumption, come together and form a Village Dairy Cooperative Society (VDCS). The Village Dairy Cooperative is the primary society under the three-tier structure. It has membership of milk producers of the village and is governed by an elected Management Committee consisting of 9 to 12 elected representatives of the milk producers based on the principle of one member, one vote. The village society further appoints a Secretary (a paid employee and member secretary of the Management Committee) for management of the day-to-day functions. It also employs various people for assisting the Secretary in accomplishing his / her daily duties. The main functions of the VDCS are as follows: * Collection of surplus milk from the milk producers of the village amp; payment based on quality amp; quantity * Providing support services to the members like Veterinary First Aid, Artificial Insemination services, cattle-feed sales, mineral mixture sales, fodder amp; fodder seed sales, conducting training on Animal Husbandry amp; Dairying, etc * Selling liquid milk for local consumers of the village * Supplying milk to the District Milk Union Thus, the VDCS in an independent entity managed locally by the milk producers and assisted by the District Milk Union. District Cooperative Milk Producers’ Union (Milk Union) The Village Societies of a District (ranging from 75 to 1653 per Milk Union in Gujarat) having surplus milk after local sales come together and form a District Milk Union. The Milk Union is the second tier under the three-tier structure. It has membership of Village Dairy Societies of the District and is governed by a Board of Directors consisting of 9 to 18 elected representatives of the Village Societies. The Milk Union further appoints a professional Managing Director (paid employee and member secretary of the Board) for management of the day-to-day functions. It also employs various people for assisting the Managing Director in accomplishing his / her daily duties. The main functions of the Milk Union are as follows: * Procurement of milk from the Village Dairy Societies of the District * Arranging transportation of raw milk from the VDCS to the Milk Union * Providing input services to the producers like Veterinary Care, Artificial Insemination services, cattle-feed sales, mineral mixture sales, fodder amp; fodder seed sales, etc * Conducting training on Cooperative Development, Animal Husbandry amp; Dairying for milk producers and conducting specialised skill development amp; Leadership Development training for VDCS staff amp; Management Committee members * Providing management support to the VDCS along with regular supervision of its activities State Cooperative Milk Federation (Federation) The Milk Unions of a State are federated into a State Cooperative Milk Federation. The Federation is the apex tier under the three-tier structure. It has membership of all the cooperative Milk Unions of the State and is governed by a Board of Directors consisting of one elected representative of each Milk Union. The State Federation further appoints a Managing Director (paid employee and member secretary of the Board) for management of the day-to-day functions. It also employs various people for assisting the Managing Director in accomplishing his daily duties. The main functions of the Federation are as follows: * Marketing of milk amp; milk products processed / manufactured by Milk Unions * Establish distribution network for marketing of milk amp; milk products * Arranging transportation of milk amp; milk products from the Milk Unions to the market * Creating amp; maintaining a brand for marketing of milk amp; milk products (brand building) * Providing support services to the Milk Unions amp; members like Technical Inputs, management support amp; advisory services * Pooling surplus milk from the Milk Unions and supplying it to deficit Milk Unions Amul’s Supply Chain Model Suppliers A majority of the suppliers are small or marginal farmers who are often illiterate, poor, and with liquidity problems as they lack direct access to financial institutions. Again, traditional market mechanisms are not adequate to assure sustenance and growth of these suppliers. Logistics Milk and other dairy products are highly perishable. Significant logistics problems arise both in collection of the milk from farm and the distribution of varieties of milk products to retailers and customers. Milk and milk products are affected by temperature variation, humidity, other environmental conditions and transportation time. Therefore, it is extremely important that transportation time, handling, storage and other requirements are well planned in order to maintain the product characteristics till they reach to the customers. Customer service management requires logistic management flexibility at supply, production and distribution levels. In co-operative dairy environment, increasing levels of product variety and customization and the ability to respond to customer orders in a timely fashion can provide a critical competitive advantage. Co-operative dairies are indicating that responsiveness and flexibility are the keys to responding to markets, which are rapidly changing and require a range of products and services for customers. Most of co-operative dairies operating in India have contractual relationships with third party logistics service providers (3PLSPs). The outsourcing decision is influenced by firm’s (co-operative dairies’) perception of 3PLSP’s abilities, the way in which 3PLSP’s job functions are defined and their capabilities are perceived, based on the firm’s (co-operative dairies’) underlying reasons for outsourcing. The nature of the outsourcing contract and firm’s perception of 3PLSP’s role is largely driven by the underlying factors which influence the original decision to outsource. Organization Structure of GCMMF GCMMF was a lean organization, which their executives believed led to a cost advantage. At its headquarters in the town of Anand, three General Managers and two assistant General Managers assisted the Managing Director (or the Chief Executive). The three General Managers looked after the functions of Marketing, Human Resource Development (HRD) and Quality Assurance. The General Manager (Marketing) was in charge of the whole marketing operation of the dairy products, liquid milk and ice cream. This General Manager was assisted by one Assistant General Manager (Marketing, Dairy Products) and Managers (Commercial), (Exports) and (Liquid Milk). The General Manager (HRD) also looked after edible oils, administration, legal matters and new opportunities. The whole country was divided into five zones, each headed by a Zonal Manager responsible for the sales of all the products under his zone. They reported to the Chief Executive (Managing Director), but functionally each reported also to the various Assistant General Managers/General Managers at the headquarters. Under the zonal managers were the branch managers. Generally there were three product managers in each branch reporting to the branch manager: one each for the edible oil, dairy products and ice cream. They were assisted by sales officers and field salespersons. There were 48 sales offices spread over the country (of which only two were in Gujarat). The entire country had been represented in this structure. GCMMF had one overseas office, at Dubai. Quality Policy GCMMF’s TQM activities undertaken include: †¢ Small Group Activities (SGA) †¢ Kaizen recording †¢ Other related TQM activities co-ordinate through HRD Department Annual management activities undertaken include: †¢ NPD Launch Plan †¢ Annual Trade Scheme/BTL/POP Calendar Annual Advertising Plan †¢ Annual Marketing Plan †¢ Fixing Annual Sales Targets †¢ Hoshin Kanri Preparation every six months Note on Hoshin Kanri: Hoshin Kanri provides an opportunity to continually improve performance by disseminating and deploying the vision, direction, targets, and plans of corporate management to top management and to all employees so that people at all job levels can continually act on the p lans, and evaluate, study, and provide feedback results as a part of a continual improvement process. The intention is that, in companies using Hoshin Kanri, everybody is aware of theirs and managements Critical Success Factors (CSF’s) and Key Performance Indicators (KPI’s), departments do not compete against each other, projects run to successful conclusions, and business is seen as a set of coordinated processes. GCMMF and Its Programme for Management of Change The Government of India liberalized its dairy sector in 1991, making it possible for private players to enter this industry (it was hitherto reserved for the co-operative sector). Based on this stimulus, GCMMF looked at all its operations, strengths and weaknesses as well as opportunities available, and came to the conclusion that it had to become more customer centred (rather than merely being farmer or supplier centred, as was the case hitherto). This required paying close attention to the customer needs and quality. GCMMF realized that it was not enough that GCMMF itself was wedded to these ideas; the entire supply chain had to conform. Hence it launched a â€Å"Total Quality Management† or TQM to ensure the high quality of the products from the starting point (the village farmer who supplied milk) right through the value chain until it reached the consumer. This meant the need for the involvement of farmers, transporters, factory personnel, wholesalers and retailers, each of whom had a role to play. For example, if the retailer did not take care with his refrigeration, the product could deteriorate, leading to a bad name for GCMMF and for its brand Amul. What began as a TQM movement gradually became a movement for management of change in the entire value chain. GCMMF’s Management of Change (MOC) initiative was launched in six areas: cleanliness of the dairy co-operative societies, planning and budgeting of the dairy cooperative society, artificial insemination service, quality testing and milk measurement by the dairy co-operatives, animal feeding and management practices and self leadership development. The distribution network Amul products are available in over 500,000 retail outlets across India through its network of over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products. GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This practice is consistent with GCMMFs philosophy of maintaining cash transactions throughout the supply chain and it also minimizes dumping. Wholesale dealers carry inventory that is just adequate to take care of the transit time from the branch warehouse to their premises. This just-in-time inventory strategy improves dealers return on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated vehicle operations. IT at Amul Notwithstanding the traditional nature of its business, the management decided to adopt â€Å"Information technology integration† as a strategic thrust in 1995. The objective was to create new efficiencies in all aspects of the business, to enhance competitiveness, and to extend the market reach. Since that time, all of 650 staff has received computer and e-commerce training. Ecompetencies have been established at the supply and distribution ends of Amul’s business value chain. The GCMMF – Amul has taken the initiative of installing the AMCUS – Automatic Milk Collection Unit Systems at village societies to enhance the transparency of transaction between the farmer and the Co-Operative Society. These systems not only ensured the transparency but also gave Co-Operative societies a unique advantage by reducing the processing time to 10 percent of what it used to be prior to this. GCMMF indeed got the entire supplier nformation through the systems integration. The information related to members, fat content, volume of the milk procured and the amount payable to the member are accessible to the Co-Operative Society in the form of a database. There are 10755 village co-operatives in Gujarat that are now able to collect 6. 1 million litres of milk from 2 million members. Thanks to the use of IT, both transparency and trust have been enhanced . The success of AMCUS prompted the GCMMF to aggressively go on using Information Technology to capture the end-to-end data. GCMMF planned to cover all aspects of the value chain. These plans supports integration of the value chain activities destined towards the â€Å"Better Management Practices†. These efforts of GCMMF triggered the changes in the Villages; farmers kept themselves open for the changes. One of the Co-Operative unions â€Å"Banas dairy† started with educating the rural about the cattle, cleanliness and so on because of the systems that are already in place at AMCUS. The Dairy Information and Services Kiosk (DISK) is another initiative that is started with the help of IIM(A) by GCMMFL. There are many more in the pipeline of GCMMFL IT Initiatives. Various things like Enterprise wide Integrated Application Systems (EIAS) to integrate the Distribution side of the Supply chain, DISK – to upgrade the application at the Milk Collection Centers and to connect them to the Internet to access a specialized dairy portal with content delivered in the local language have already started giving the fruits to the rural poor, which has persuaded the rural folks to actively participate in IT Revolution of the dairy industry. Changes at Amul due to its IT revolution The time that is being taken to collect the milk in a society ranges from 5 to 6 hrs averaging at about 5 minutes per member after installing AMCUS. There is a comparative reduction of more than 75% of time that’s spent on each deal. Each farmer is getting paid for his milk deposited in society’s counter in another counter immediately on a real time basis. Now villagers were able to send their emails from AMCUS to anywhere in the world and DISK is expected to arrive at the village cooperatives this year enabling the villagers to learn from the net and connecting with enterprise systems of GCMMF. The DISK project conceptualized by IIM–A will have the interconnectivity to a dairy portal at a district levels, that serves the information for village cooperative society members. The application software provide to cooperatives will include: * Data analysis and decision support to help rural milk collection society in improving its performance * Data analysis to improve productivity the yield from cattle * Farmers with facilities to place orders for goods and service offered by different agencies in the dairying sector and collaborates on subjects of interest The services to be offered at this center are: * Information service related to dairying * Access to multimedia database on innovations captured by SRISHTI (NGO working IIMA) from all the villages over Gujarat * Communication facilities such as e-mail, fax, net phone * Banking centers for payment for the farmers by using the milk cards which are already in place The basic requirements of DISK are already met by the village cooperatives. There might be an upgrade required for the software and hardware in place and an Internet connection would be required. For the portal at the unions, a small server and a leased line would be needed. The union portal can be implemented at a central location at one of the NDDB servers. Projects such as decision support systems and e-experience of Amul data mining packages are in pipeline of GCMMF action plan. IT Implementation Milk is collected at the co-operative milk collection centers located within 5-10 km of the villages supplying the milk. The number of farmers selling milk to these centers varies from 100 to 1000. The daily milk collection varies from 1000 to 10,000 litres. Each farmers is given plastic identity card. At the counter he drops the card into a box that reads it electronically and transmits the identification number to the PC. The milk is emptied into a steel can kept over the weighing scale. Instantly the weight of the milk is displayed to the farmer and communicated to a PC. The can is connected by tube to a big can, which transports milk to the dairy. One operator is required to fill the can. Another operator sitting next to the can takes a 5-ml, sample of milk and holds it up to a tube of an Electronic Milk-tester (a fat testing machine, which is a local adaptation of an expensive and sophisticated tester made by M/S. ASN Foss Electric, Denmark). The fat content is displayed to the farmer and communicated to the PC, which calculates the amount to be paid to the farmer based on the fat content of the milk. The total value of the milk is printed on a pay slip and given to the farmer who collects the payment from the adjoining window. The payment is automatically rounded to the nearest rupee and the balance due to the farmer is stored so it can be added to the farmer’s payout for the next day. In many centers the above transaction takes only 20 seconds. The system costs around $2000 and is currently being supplied by at least two private companies. There are 70,000 village societies in India, of which 2500 have been computerized. The farmers benefit as payment is now based on a quick and accurate measurement of fat content and weight and is not subject to the individual methods. Traditional methods require hours to calculate the fat content, as the measurement process (the conventional Gerber method requires laboratory equipment and corrosive chemicals) is cumbersome, and payment to farmers is made every ten days due to the time required by the collection centers to calculate the amount due. The IT system enables prompt, accurate, and immediate payment. The queues at the centers are short despite the number of people selling their milk being quite large. As 2500 centers receive milk from 400,000 farmers daily, the ten-minute savings comes to 180,000 man-days per month. The system also reduces the requirement of employees and makes the accounting a real time based one. The profit is calculated on the basis of data received from the dairy regarding the payment made by the dairy to the society for the previous day’s collection. The software can incorporate the revenue from daily milk sales to the local villagers and expenditure ncurred by the society. Since the accounts are kept accurate and up-to-date there is less likelihood of reducing corrupt practices. The IIMA E-Governance Centre has built upon the existing application by expanding the database at the milk societies to include a complete history of every cattle owned by the farmers. The basic details of breed and a history of disease, inoculations, artificial insemination and pregnancy are maintained in the system. The data history on milk production by individual farmers is also available in the database at the collection centers. EIAS, GIS and the websites The main benefit of Information and communications technology (ICT) has the power of integration and amenability to centralized monitoring. All the units are networked. GCMMF has connected its Zonal Offices, Guwahati Regional Office as well as Member Dairies, Milk Unions and its own Unit-Mother Dairy through VSAT for seamless exchange of â€Å"Online† information. All Sales Offices, Camp;F points amp; Wholesale distributors of GCMMF have been connected through TCP/IP Internet Mail Account for exchange of information. In addition to the above, GCMMF is using Geographical Information System (GIS) at its Head Office and key Marketing Offices. Using the All India Map in GIS, they are in position to plot zone/depot boundary as well as pointer for zone, depot amp; distributor locations, which are superimposed by product-wise sales data. The same is being used for sales amp; distribution planning and review. Moreover, GIS is being used for business planning activity at milk centres and it covers animal census data. This has helped them to know average milk production and productivity of cows and buffaloes in Gujarat and track the animals and trend analysis etc. The EIAS customized ERP packages of GCMMF is designed in such a way that is can be plugged into various points of supply chain. GCMMF is one among the first Indian corporate on the Web since 1996 and we have put Amul Cyber store as a first step towards e-commerce activity in India. This has helped us to interact directly with the consumers and delighting them with our values added services. GCMMF has linked under www. amul. com as a part of our amulb2b initiative. Today Amul’s Cyber Store offers its services in more than 120 cities. In order to attract more customers, GCMMF launched amulgreetings. om and amulkids. com to extend the brand identity to kids and teenagers who are increasing its target market for its ice creams and chocolates. By attempting to identify itself with every segment, GCMMF ensure that the brand was on top-of-the-mind of customers. The recipe section in amul. com site has also helping GCMMF to strengthen their position as ‘The Taste of Indiaâ€℠¢. By allowing the customers to directly interact and give their feedback using product names, which will be answered by the respective product manager will make customer happy.