Every day Amul collects 447,000 liters 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 India .Its supply chain is easily one of the most complicated in the world. Its motto is never forget your 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.
Markets 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.
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.
Umbrella brand
The network follows an umbrella branding strategy.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.
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.Kaizens at the unionave 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.) .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.
The author is Professor at the Indian Institute of Management, Ahmedabad and Devnath Tripati, Editor of the Asian Journal of Operations Management.