Amul –
India’s White Revolution
Hi all !! It has been very
long since I updated this blog. Now am back.
When I browse through rediff, I
got to read a wonderful article related to AMUL. Am sure everyone of us knows about
this name. But I wanna know how many of us really knows the reason behind this
name.
- Some
People tells, AMUL is Derived from Sanskrit word – Amoolya , Which means
Invaluable.
- Other
view is, AMUL is the acronym of “
Anand Milk Union Limited “
Amul is Formed in 1946, it is
a brand managed by a cooperative body, the Gujarat Co-operative Milk Marketing
Federation Ltd. (GCMMF), which today is jointly owned by 3.03 million milk
producers in Gujarat.
Amul spurred India's White Revolution, which made the country the world's largest producer of milk and milk products.In the process Amul became the largest food brand in India and has also ventured into markets overseas.
Dr Verghese Kurien, founder-chairman of the GCMMF for more than 30 years (1973-2006), is credited with the success of Amul.
Here I am sharing what I read :
When we read the success story of an Indian brand built from
scratch by an unknown, struggling entrepreneur, we feel a sense of awe and
pride.
Surely then, those feelings should be magnified a hundredfold for
a brand that has provided 13 million such success stories.
That brand is Amul.
Every day Amul collects 447,000 litres of milk from 2.12 million
farmers (many illiterate), converts the milk into branded, packaged products,
and delivers goods worth Rs 6 crore (Rs 60 million) to over 500,000 retail
outlets across the country.
Its supply chain is easily one of the most complicated in the
world. How do managers at Amul prevent the milk from souring?
Walk in to any Amul or Gujarat Cooperative Milk Marketing
Federation (GCMMF) office, and you may or may not see a photograph of Mahatma
Gandhi , but you will certainly see one particular photograph. It shows a long
line of Gujarati women waiting patiently for a union truck to come and collect
the milk they have brought in shining brass matkas.
The picture is always prominently displayed. The message is clear:
never forget your primary customer. If you don't, success is certain. The
proof? A unique, Rs 2,200 crore (Rs 22 billion) enterprise.
Organisation structure
It all started in December 1946 with a group of farmers keen to
free themselves from intermediaries, gain access to markets and thereby ensure
maximum returns for their efforts.
Based in the village of Anand, the Kaira District Milk Cooperative
Union (better known as Amul) expanded exponentially. It joined hands with other
milk cooperatives, and the Gujarat network now covers 2.12 million farmers,
10,411 village level milk collection centers and fourteen district level plants
(unions) under the overall supervision of GCMMF.
There are similar federations in other states. Right from the
beginning, there was recognition that this initiative would directly benefit
and transform small farmers and contribute to the development of society.
Markets, then and even today, are primitive and poor in
infrastructure. Amul and GCMMF acknowledged that development and growth could
not be left to market forces and that proactive intervention was required. Two
key requirements were identified.
The first, that sustained growth for the long term would depend on
matching supply and demand. It would need heavy investment in the simultaneous
development of suppliers and consumers.
Second, that effective management of the network and commercial
viability would require professional managers and technocrats.
To implement their vision while retaining their focus on farmers,
a hierarchical network of cooperatives was developed, which today forms the
robust supply chain behind GCMMF's endeavors. The vast and complex supply chain
stretches from small suppliers to large fragmented markets.
Management of this network is made more complex by the fact that
GCMMF is directly responsible only for a small part of the chain, with a number
of third party players (distributors, retailers and logistics support
providers) playing large roles.
Managing this supply chain efficiently is critical as GCMMF's
competitive position is driven by low consumer prices supported by a low cost
system.
Developing demand
At the time Amul was formed, consumers had limited purchasing
power, and modest consumption levels of milk and other dairy products. Thus
Amul adopted a low-cost price strategy to make its products affordable and
attractive to consumers by guaranteeing them value for money.
Introducing higher value products
Beginning with liquid milk, GCMMF enhanced the product mix through
the progressive addition of higher value products while maintaining the desired
growth in existing products.
Despite competition in the high value dairy product segments from
firms such as Hindustan Lever , Nestle and Britannia GCMMF ensures that the
product mix and the sequence in which Amul introduces its products is
consistent with the core philosophy of providing milk at a basic, affordable
price.
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 GCMMF's philosophy of maintaining
cash transactions throughout the supply chain and it also minimizes dumping.
Wholesale dealers carry inventory that is just adequate to take
care of the transit time from the branch warehouse to their premises. This
just-in-time inventory strategy improves dealers' return on investment (ROI).
All GCMMF branches engage in route scheduling and have dedicated vehicle
operations.
Umbrella brand
The network follows an umbrella branding strategy. Amul is the
common brand for most product categories produced by various unions: liquid
milk, milk powders, butter, ghee, cheese, cocoa products, sweets, ice-cream and
condensed milk.
Amul's sub-brands include variants such as Amulspray, Amulspree,
Amulya and Nutramul. The edible oil products are grouped around Dhara and
Lokdhara, mineral water is sold under the Jal Dhara brand while fruit drinks
bear the Safal name.
By insisting on an umbrella brand, GCMMF not only skillfully
avoided inter-union conflicts but also created an opportunity for the union
members to cooperate in developing products.
Managing the supply chain
Even though the cooperative was formed to bring together farmers,
it was recognised that professional managers and technocrats would be required
to manage the network effectively and make it commercially viable.
Coordination
Given the large number of organisations and entities in the supply
chain and decentralised responsibility for various activities, effective
coordination is critical for efficiency and cost control. GCMMF and the unions
play a major role in this process and jointly achieve the desired degree of
control.
Buy-in from the unions is assured as the plans are approved by
GCMMF's board. The board is drawn from the heads of all the unions, and the
boards of the unions comprise of farmers elected through village societies,
thereby creating a situation of interlocking control.
The federation handles the distribution of end products and
coordination with retailers and the dealers. The unions coordinate the supply
side activities.
These include monitoring milk collection contractors, the supply
of animal feed and other supplies, provision of veterinary services, and
educational activities.
Managing third party service providers
From the beginning, it was recognised that the unions' core
activity lay in milk processing and the production of dairy products.
Accordingly, marketing efforts (including brand development) were assumed by
GCMMF. All other activities were entrusted to third parties. These include
logistics of milk collection, distribution of dairy products, sale of products
through dealers and retail stores, provision of animal feed, and veterinary
services.
It is worth noting that a number of these third parties are not in
the organized sector, and many are not professionally managed with little
regard for quality and service.
This is a particularly critical issue in the logistics and
transport of a perishable commodity where there are already weaknesses in the
basic infrastructure.
Establishing best practices
A key source of competitive advantage has been the enterprise's
ability to continuously implement best practices across all elements of the
network: the federation, the unions, the village societies and the distribution
channel.
In developing these practices, the federation and the unions have
adapted successful models from around the world. It could be the implementation
of small group activities or quality circles at the federation. Or a TQM
program at the unions. Or housekeeping and good accounting practices at the
village society level.
More important, the network has been able to regularly roll out
improvement programs across to a large number of members and the implementation
rate is consistently high.
For example, every Friday, without fail, between 10.00 a.m. and
11.00 a.m., all employees of GCMMF meet at the closest office, be it a department
or a branch or a depot to discuss their various quality concerns.
Each meeting has its pre-set format in terms of Purpose, Agenda
and Limit (PAL) with a process check at the end to record how the meeting was
conducted. Similar processes are in place at the village societies, the unions
and even at the wholesaler and C&F agent levels as well.
Examples of benefits from recent initiatives include reduction in
transportation time from the depots to the wholesale dealers, improvement in
ROI of wholesale dealers, implementation of Zero Stock Out through improved
availability of products at depots and also the implementation of Just-in-Time
in finance to reduce the float.
Kaizens at the unions have helped improve the quality of milk in
terms of acidity and sour milk. (Undertaken by multi-disciplined teams,
Kaizens are highly focussed projects, reliant on a structured approach based on
data gathering and analysis.) For example, Sabar Union's records show
a reduction from 2.0% to 0.5% in the amount of sour milk/curd received at the
union.
The most impressive aspect of this large-scale roll out is that
improvement processes are turning the village societies into individual
improvement centers.
Technology and e-initiatives
GCMMF's technology strategy is characterized by four distinct
components: new products, process technology, and complementary assets to
enhance milk production and e-commerce.
Few dairies of the world have the wide variety of products
produced by the GCMMF network. Village societies are encouraged through
subsidies to install chilling units. Automation in processing and packaging
areas is common, as is HACCP certification. Amul actively pursues developments
in embryo transfer and cattle breeding in order to improve cattle quality and
increases in milk yields.
GCMMF was one of the first FMCG (fast-moving consumer goods) firms
in India to employ Internet technologies to implement B2C commerce.
Today customers can order a variety of products through the
Internet and be assured of timely delivery with cash payment upon receipt.
Another e-initiative underway is to provide farmers access to
information relating to markets, technology and best practices in the dairy
industry through net enabled kiosks in the villages.
GCMMF has also implemented a Geographical Information System (GIS)
at both ends of the supply chain, i.e. milk collection as well as the marketing
process.
Farmers now have better access to information on the output as
well as support services while providing a better planning tool to marketing
personnel.
