A Project Report On

The Channel Management of

Gujarat Co-operative Milk and

Marketing Federation (GCMMF)

Under the Guidance Of: Submitted to:

Prof. Abhinava Singh Xcellon Institute

Prepared By:

Vasant Gajara (22)

Vishal Soni (57)

Jay Akhani (05)

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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.

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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.

Vasant Gajara

Vishal Soni

Jay Akhani

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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 Model……………………………………………………19

8. AMUL Parlors…………………………………………………………24

9. Selection, Motivation, and Evaluation of Channel Members………25

10. Conflicts and Co-operations Among Channel Members……………28

11. Distribution Channel………………………………………………….30

12. Observations, Comments and suggestions………………………......31

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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 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' 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, Gujarat‟s 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

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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)

No. of Producer Members: 3.03 million

No. of Village Societies: 15,712

Total Milk handling capacity: 13.67 million liters per day

Milk collection (Total - 2010-11): 3.45 billion liters

Milk collection (Daily Average 2010-11): 9.2 million liters

Milk Drying Capacity: 647 Mts. per day

Cattlefeed manufacturing Capacity:

Sales Turnover :

3690 Mts per day

Rs. 9774 Crores (USD 2.2 Billion)

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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 Gujarat‟s 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.

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PRODUCT MIX OF AMUL

Bread spreads:

Amul Butter

Amul Lite Low Fat Bread spread

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

Mithaee Range (Ethnic sweets):

Amul Shrikhand (Mango, Saffron, Almond Pistachio, Cardamom)

Amul Amrakhand

Amul Mithaee Gulabjamuns

Amul Mithaee Gulabjamun Mix

Amul Mithaee Kulfi Mix

UHT Milk Range:

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 Pure Ghee

Sagar Pure Ghee

Infant Milk Range:

Amul Infant Milk Formula 1 (0-6 months)

Amul Infant Milk Formula 2 ( 6 months above)

Amulspray Infant Milk Food

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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 3% fat

Amul Smart Double Toned Milk 1.5% fat

Curd Products:

Amul Masti Dahi (fresh curd)

Amul Butter Milk

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)

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Chocolate & Confectionery:

Amul Milk Chocolate

Amul Fruit & Nut Chocolate

Amul Eclairs

Brown Beverage:

Nutramul Malted Milk Food

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.

1. 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 & payment based on

quality & quantity

Providing support services to the members like Veterinary First Aid, Artificial

Insemination services, cattle-feed sales, mineral mixture sales, fodder & fodder seed

sales, conducting training on Animal Husbandry & 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.

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2. 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 & fodder seed sales, etc.

Conducting training on Cooperative Development, Animal Husbandry & Dairying for

milk producers and conducting specialised skill development & Leadership

Development training for VDCS staff & Management Committee members.

Providing management support to the VDCS along with regular supervision of its

activities.

Establish Chilling Centres & Dairy Plants for processing the milk received from the

villages.

Selling liquid milk & milk products within the District

Process milk into various milk & milk products as per the requirement of State

Marketing Federation.

Decide on the prices of milk to be paid to milk producers as well on the prices of

support services provided to members.

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3. 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 & milk products processed / manufactured by Milk Unions.

Establish distribution network for marketing of milk & milk products.

Arranging transportation of milk & milk products from the Milk Unions to the

market.

Creating & maintaining a brand for marketing of milk & milk products (brand

building).

Providing support services to the Milk Unions & members like Technical Inputs,

management support & advisory services.

Pooling surplus milk from the Milk Unions and supplying it to deficit Milk Unions.

Establish feeder-balancing Dairy Plants for processing the surplus milk of the Milk

Unions.

Arranging for common purchase of raw materials used in manufacture / packaging of

milk products.

Decide on the prices of milk & milk products to be paid to Milk Unions.

Decide on the products to be manufactured at various Milk Unions (product-mix) and

capacity required for the same.

Conduct long-term Milk Production, Procurement & Processing as well as Marketing

Planning.

Arranging Finance for the Milk Unions and providing them technical know-how.

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THE CHANNEL NETWORK

Distribution

GCMMF

Head office

MU…1 MU...n

VCS…1 VCS…n

Village…1 Village…n

Procurement Channel (Upstream flow)

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THE ANAND PATTERN

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Distribution channel (Downstream flow)

First leg (from manufacturing units)

GCMMF

Head office

Depot...1 Depot...n

WD…1 WD…n

Retail…1 Retail...n

Second leg

Third leg

Manufacturing

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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 -18˚C

• Dairy wet the temperature of these trucks is kept between 0-4˚C

• Second leg is from the depot to the WD‟s, this transport is carried out in insulated 3

and 5 MT TATA 407’s 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 WD‟s 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.

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SCM AND MARKET LOGISTICS

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THE BUSINESS MODEL

The strategy, design and practices in AMUL‟s network are strongly driven by the objective

of establishing and operating an efficient supply chain from milk production and

procurement to product delivery to customers. Management of this network is built around

two key elements –

1. Coordination of the diverse elements of the network and

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.

Managing Third Party Service Providers:

Well before the ideas of core competence and the role of third parties in managing the supply

chain were recognized and became fashionable, these concepts were practiced by GCMMF

and AMUL. From the beginning, it was recognized that the core activity for the Unions lay in

processing of milk and production of dairy products. Accordingly, the Unions focused efforts

on these activities and related technology development. Marketing efforts (including brand

development) were assumed by GCMMF. All other activities were entrusted to third party

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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.

Coordination for Competitiveness

Robust coordination is one of the key reasons for the success of operations involving such an

extensive network of producers and distributors at GCMMF. Some interesting mechanisms

exist for coordinating the supply chain at GCMMF. These range from ensuring fair share

allocation of benefits to various stakeholders in the chain to coordinated planning of

production and distribution. More importantly, the reason for setting up of this cooperative is

not amiss to anyone in this large network organization. Employees, third part service

providers, and distributors are constantly reminded that they work for the farmers and the

entire network strives to provide the best returns to the farmers, the real owners of the

cooperative. It may be remembered that coordination mechanisms have to link the lives and

activities of 2.12 million small suppliers and 0.5 million retailers!

There appear to be two critical mechanisms of coordination that ensure that decision making

is coherent and that the farmers gain the most from this effort.

These mechanisms are:

Inter-locking Control: - The objective for developing such an inter-locking control

mechanism is to ensure that the interest of the farmer is always kept at the top of the

agenda through its representatives who constitute the Boards of different entities that

comprise the supply chain. This form of direct representation also ensures that

professional managers and farmers work together as a team to strengthen the

cooperative. This helps in coordinating decisions across different entities as well as

speeding both the flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of Federation:- In addition to being the

marketing and distribution arm of the Unions, GCMMF plays the role of a

coordinator to the entire network within the State – coordinating procurement

requirements with other Federations (in other states), determining the best production

allocation for its product mix from amongst its Unions, managing inter-dairy

movements, etc. It works with two very clear objectives:

1. To ensure that all milk that the farmers produce gets sold in the market either

as milk or as value added products and

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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 VS‟s. 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.

AMUL‟s 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 member‟s 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 Amul‟s 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 seller‟s bank account. Distributors can place their orders on the website

www.amul2b.com especially meant for accepting orders from stockiest and promoting

Amul‟s 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 one‟s 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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AMUL PARLOURS (DIRECT DISTRIBUTION)

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.

Facts

– 6000 Exclusive Outlets

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Selection, Motivation & Evaluation of Channel Members

Selection:

The company takes into consideration a host of factors while selecting the channel members.

This is because GCMMF believes that selection of channel members is a long run decision &

the rest of the decision regarding the supply chain depends upon the efficiency & coverage

by the channel members. The following are the host of factors considered by the company in

selecting the channel members:

Authentication is required by the regarding the identity of the channel members, which

includes the name & address, photograph of the location.

Proof of solvency which requires name & address of the channel member‟s bankers

Safety of the inventory, which means that the distributor/ dealer should get the stock of

the company insured.

Inventory or the perishable goods kept by the distributor/ dealer should be in good

condition which means a detail of storage space & Refrigeration facility is to be

provided. Refrigeration system should have deep freezers, cold room & walk in coolers.

Details of the delivery vehicle, which includes Light Commercial Vehicles, Matador, 3

Wheeler Van, Tricycle Van & Hand/Push cart. The number & model of each of the

vehicle needs to be furnished to the company.

GCMMF acknowledges the fact that it needs to be sensitive to the market demands. For

this it requires that a number of salesmen needs to be present on the field. The salesmen

too are divided into various categories like the Field salesmen & Counter salesmen. Also

the details of Clerical Staff & Mazdoors are to be provided. The technical competence of

the salesmen needs to be mentioned

Details of the product kept of other companies have to be provided. The annual sales of

these products too have to be mentioned. Also details of complementary products &

product lines need to be mentioned.

Dealers of the company must carry a good reputation. This is due to the fact that the

company believes reputation of the dealer affects the clientele.

Market coverage by the distributors needs to be defined which includes details of

Geographic coverage & Outlets per market area.

The company also requires the dealers to furnish any Advertising & Sales initiative

undertaken by them on behalf of the company.

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Motivation of Channel Members

GCMMF strongly believes in maintaining a good relationship with the channel members so

that they are genuinely motivated to work for the company. Also if the channel members are

motivated, they can also initiate advertising & sales promotion schemes on behalf of the

company. However to keep the channel members motivated to work, the company has to

incur certain costs but the benefits of it are felt in the long run. The following are the

motivation programs run by the company:

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 Amul‟s 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 Amul‟s products have good

demand in the market motivates the distributors to stock it.

Amul being a cooperative cannot afford to give heavy monetary incentives. Amul‟s

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 company‟s 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 company‟s 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.

Evaluation of channel members

Beat plan: this plan is generated for the various product categories i.e. diary dry,

diary wet, Dhara and ice cream. A weekly schedule is prepared for various markets

and the retailers the turnover for each of the product is calculated for the wholesale

dealers.

Cumulative performance: the performance of the dealers is averaged out over a

period of three years where a comparison is made of the present performance vis-à-

vis the previous ones.

Target versus achievement: the performance and the targets are compared and

therefore the gaps are identified which help in evaluating the WD and planning for

the next year as well. This is done for each of the product category.

Other criterion

o Details of the bank guaranty

o Photographs of the offices

o Details of the WD salesmen and the product lines he deals in

o The computerization facility available

o The storage space

o Refrigeration facility with photograph

o Details of the delivery vehicle with photograph

o Summary of the monthly potential sales of markets

o Summary of the product wise monthly sales potential of institutions

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Conflicts And Co-Operation Among Channel Members

Conflicts

Ownership of assets: Previously the company used to give the cooling equipment on

lease to the retailers, when the company wanted the stuff back; the retailer disagreed

to comply and created issues of ownership.

Stocking issues: The company doesn‟t want the retailers to stock the competing

brand in the company leased fridges, which at times s hard to manage as retailers tend

to do it often.

Replacement of products: The deterioration in the product calls for fail in

replacement by the company this major issue of vertical conflict.

Credit policy: Compared to the market, the company‟s credit period is less that

specially incase of institutional sales is very important.

Packaging: The channel members for easy storing demand a better quality of

packaging.

Replenishment: The replenishment of the stocks is not prompt in case of amul

cheese and all hard selling items.

Margins: The Company provides least margins to all the channel members. For e.g.

The retailer’s margin in case of butter is 8% as compared to Britannia’s 12%

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Co-operation among channel members

Amul quality circles: The members of the local channel meet together every month

to share issues and the achievements of the channel members. This is an ongoing

activity facilitated by the company offices in different locations; this enables the

channel members to learn together and reduces the horizontal conflicts among the

WDs.

Pilot salesmen scheme: To reduce the financial burden of the distributors this

scheme is run whereby half the cost of the salesmen is born by the company and the

rest half by the distributor

Scheduling of sales: The WD‟s provides Schedule of the distributor‟s sales men to

the retailers so that the retailers can plan out and place the orders in advance.

Agreement defining rights: The company makes the distributors sign an agreement

where the areas of operation for each of the distributors are defined, therefore

avoiding any conflict amongst the distributors regarding their areas of operation.

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DISTRIBUTION CHANNEL

MANUFACTURED UNIT

PACKING AND LABELLING

DISTRIBUTORS

DEALERS

RETAILERS

CUSTOMERS

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OBSERVATION, COMMENTS AND SUGGESTION

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 doesn‟t 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.

Comments and Suggestion:

Amul should more focus on exclusive outlets in at least all the shopping malls and

any location where footfalls are large in number. The advantages of this channel will

be:

i. Full range display

ii. Easier to promote new products

iii. Easy to push impulse purchase products

iv. Brand building will be facilitated

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.

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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.