Amul Dairy Project By Vipul Vyas

Project Report: Amul Dairy From: Vipul Vyas Sub: Resource and value chain

Introduction: THE TASTE OF INDIA, AMUL comes from the Sanskrit word Amoolya, means priceless. It was suggested by a quality control expert in Anand and it was chosen because it was a perfect acronym for Anand Milk Union Limited . AMUL was formed under the dairy cooperative movement in India in 1946. Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food products marketing organisation. It is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money. AMUL is the brand under this organization.

Amul is the largest food brand in India and world's Largest Pouched Milk Brand with an annual turnover of US $1050 million (2006-07). Currently Amul has 2.6 million producer members with milk collection average of 10.16 million litres per day. Besides India, Amul has entered overseas markets such as Mauritius, UAE, USA, Bangladesh, Australia, China, Singapore, Hong Kong and a few South African countries. Its bid to enter Japanese market in 1994 had not succeeded, but now it has fresh plans of flooding the Japanese markets .Other potential markets being considered include Sri Lanka. Dr Verghese Kurien, former chairman of the GCMMF, is recognised as the man behind the success of Amul. On 10 Aug 2006 Parthi G Bhatol, chairman of the Banaskantha Union, was elected chairman of GCMMF.

1.

Discuss Amul's Umbrella Branding and Distribution network strategy. An umbrella brand is a brand that covers diverse kinds of products which are more or less related. It applies also to any company that is identified only by its brand and history. It is contrasted with individual branding in which each product in a portfolio is given a unique identity and brand name. Amul has high brand equity and umbrella branding of Amul has helped the company in bigger sense. Amuls’s brand name has helped its other brands also like Mitahi made, Amul Ice creams, chocolates, Amul Kool etc. So umbrella Brand, Amul is used to build and offer value to customers in bigger sense. In literal sense, a company has high brand equity if it has multi dimensions. Amul has explored various available opportunities to reach to mass customers. It has opened a community on public forums like orkut, sponsored events like Amul voice of India etc. The brand value of Amul will surely help company to maintain the status of largest food brand in India at least for sometime in future.

Amul’s strategy of using “umbrella branding” has really paid off. Amul’s advertising and marketing spend has never exceeded 1% of its revenues.

Amul’s creatives—in the form of billboards or the Taste of India campaign—have always managed to evoke a larger-than-life brand feel, consistency and spirit of Indian culture in a contemporary way.

Distribution Network Consumers expect marketers to deliver products in the locations and forms they require. To meet expectations of such demanding consumers, alignments of our four Distribution Highways of Fresh, Chilled, Frozen and Ambient products were already made by introducing Project DIL. Subsequently, a major initiative was taken to enhance distribution network to smaller towns. About 1200 distributors in small towns across India were added during this initiative. Today about 3000 Distributors ensure availability of our products across India, whether it is in Leh or Lakshadweep, in Kutch or Arunachal. Simultaneously, to augment fresh milk distribution in various markets of India, approximately 1400 exclusive Milk Distributors have been inducted.

Distribution Process Company Dealer

Franchisee

Wholesaler Retailer Shopkeeper Consumers

GCMMF’s Supply Chain

***Source: IIM(A), Working Paper No. 2002-05-06

AMUL has the largest cold chain network in India (i.e. 18000 refrigerators) as compared to any other company. The chemical components of milk are water, SNF and solids. Milk is very perishable product so it has to be consumed within 24 hours. In order to avoid wastage AMUL converts the milk in to SNF and milk solids by evaporating the water, which comprises up to 60-70% of milk contents. This is possible only if the distribution channel right from the producer to the consumer is well organized. It will be surprising to know that AMUL makes even the ‘Sarpanch’ to eat pizza i.e. it supplies pizzas even to rural market.

Last year, theye divided the retail market into 14 specific segments to achieve further distribution efficiency. This year our focus was on inducting distributors having expertise in servicing such specific market segments. This initiative is yielding results by way of ensuring wider availability of our product range. The role of distributors in our business process has never been more diverse or more important, as it is today. As a matter of fact, we consider our Distributor to be the real “Marketing Manager” of our organization. To enhance business performance of our Distributors, a workshop on Marketing and Sales Management was designed in collaboration with a premier business school. The objective of the entire initiative was to upgrade the knowledge of our Distributors in terms of contemporary Business Management Practices, so that they can perform well not only as our business partner but also as Marketing Managers. During the year, 659 Distributors have undergone this programme in 39 locations. Cold Storage is an extremely essential component in the Federation’s distribution process. Unfortunately, availability of efficient cold storage facilities is grossly inadequate in our country. To cope up with the increasing need of suitable cold stores closer to our markets, we have continued our endeavour of creating the Federation’s own cold stores this year in various locations across the country. We now own 24 stateof- the art cold rooms of different sizes. To get an exposure to our cooperative structure, our culture as well as operational systems and processes, every year we invite our distributors, major retailers and other business partners to Anand, for Amul Yatra. So far, about 7000 Distributors and other business partners have participated in this Amul Yatra.

Over recent years, the Federation has successfully introduced new product lines. This year, in order to leverage their distribution network strengths, to optimize market supervision expenditures, to achieve increasing efficiency while keeping the distribution infrastructure lean, focused and productive, the Federation amalgamated its different distribution networks. Today, they operate an efficient distribution infrastructure consisting of 46 sales offices, catering to 3,000 distributors and five lac retailers. Almost every Federation stockist has visited Anand to participate in a unique programme called 'Amul Yatra'. During this programme, stockists are exposed to the Federation Philosophy, the culture of Cooperation, as well as operational Systems and Processes. The Federation has also invited distributor's salesmen from all over the country to Anand for a

training program focused on the Federation's philosophy and developing their selling skills.

2.

How do you spell out the importance of establishing the Best Practices by Amul to have competitive advantage?

Amul has Competitive sustainable advantage (CSA) over its competitors. Amul’s CSA lies in its procurement part ,the ability to collect 447,000 litres of milk every day from 2.12 million farmers ,convert them into goods worth Rs 6 crore and distribute them to 5,00,000 retailers across country ,is not easy. No other dairy in India has such a sustainable procurement network.

Managing the large scale supply chain of Amul which begins from milk producer and ends with supply to customer from retailer is very critical job. It requires lot of dedication and hard work from all members of the corporation and also distributors and retailers across country It is not that Amul had a successful campaign, many of its ads backfired. One ad meant to target Marathi segment during Ganpati festival had to be removed under political pressure. In another incident on advertisement in which Amul girl was wearing Gandhi cap had to be again removed. In one another incident Amul had aired an ad portraying Hussain as “Heroine addiction”, for this Amul was taken to court. Most of Amul’s communication is based on latest happenings in the country. That is why its ads are termed different from what is that of its nearest rival, Mother dairy. Most of Mother dairy ads are directly targeted to children where as Amul’s ad are on current affairs, in which adults are also involved. The key to retaining their competitive advantage lies in keeping focused on the basic business principles: •

Be Customer-Driven

•

Adapt quickly to the changing environment.

•

Anticipate change and act today to meet tomorrow's challenges.

The Federation has invested substantially over the last few years in improving the quality of its products and services, keeping in mind the emerging challenges of globalization. In recognition of its achievements in Quality Management Initiatives. Their core business is marketing branded food products to household consumers. Their success has been grounded in two strengths :• Distribution network, serving more than five lac retail outlets. •

Superior product quality - 'Value for money'

The key to maintaining these two competitive advantages rests on their ability to attract and retain the very best manpower. In this age of intensive competition, only dedicated and committed professionals can successfully manage their business.

3. What is the role and importance of Technology and E- Initiatives by GCMMF?

Amul assigned the ERP software development project named as Enterprisewide integrated application system (EIAS), on a turnkey basis to Tata Consultancy Services. At present, the EIAS system covers a plethora of operations like market planning, advertising and promotion, distribution network planning, stock control, sales and accounting, budgetary control, quality control management and co-operative service management. Amul has also connected all its zonal offices, regional offices and members dairies through VSATs for seamless exchange of information. Each of Amul’s offices is connected by e-mail and all of them send a daily report on sales and inventory to the main system at Anand. Also, sales offices, C&F points and wholesale distributors of GCMMF have been connected through the Internet for timely exchange of information. The customised ERP EIAS is designed in such a way that it can be plugged into various points of the supply chain and external system. Moreover, the software is platform independent and can work on any operating system. Amul is also in the process of Web-enabling the entire supply chain so that it can capture key information at the source, and use the same for decision-making. This would include the likes of transporters, member-manufacturing units, oil packing stations, suppliers, depots and the entire field force.

The federation has now integrated it's country-wide operations through successful implementation of the "Enterprise-wide Integrated Application System". They believe that introduction of similar integrated ERP systems at their Member Unions will help them ensure that the IT revolution serves their members better. The Federation is among the Top 100 IT Users in the country.

Currently, there are more than 3,000 computers installed in their village societies, which support the Automated Milk Collection System. Their goal is to install computers in all their village societies and to integrate them with their respective unions. On the market side, their distributors have responded enthusiastically to their suggestion of computerizing their operations and getting email connectivity for better communication with their sales offices. The distributors can now place their orders on our internet website www.Amulb2b.com. They continue to receive a good consumer response to their website www.Amul.com which is noted for its distinct features like cyberstore for ice-cream and other milk products, cricket rankings and the recently launched e-greetings site. To strengthen business linkages with the business partners, GCMMF has enhanced its “Amul e-Groupware System” by adding more features like emailing the invoices and ledgers to business partners, announcing various schemes online, calendar facility etc. “Video conferencing” is rapidly gaining in popularity, which provides business with the ability to meet and to work with others over a distance. For real time communication, better brainstorming, knowledge sharing and information gathering, we have installed and implemented Video conferencing System at our Head Office, Zonal Offices and a few Sales Offices. The world is moving towards virtual reality by creating virtual world on the Internet. Our Federation has taken the initiatives towards virtual commerce by creating an online virtual Amul Parlor in the Second Life, an online virtual world. GCMMF has further advanced the use of Geographical Information systems by implementing GIS based Sales Analytics solution across various offices. The history of Amul shows that it radically changed the way business was done—by eliminating the middleman and bringing the producer closer to the consumer—resulting in benefits for both. Incidentally, it was also one of the first Indian companies to have a Web presence. Today, Amul’s cyberstore gifting service is capable of servicing consumers in more than 125 cities. Says Hegde, “We have also linked our distributors to our network and also incorporated Web pages of top retailers in our site, amul.com, as part of our B2B initiatives.” Distributors can place their orders on the website, amulb2b.com, especially meant for accepting orders from stockists and promoting Amul’s products via e-commerce. Currently, the company receives queries from overseas agents for distributing its products in countries like the

US, Britain, New Zealand, Singapore and Thailand. As a result of the online initiatives, today, Amul exports products worth around Rs 100 crore, to countries in West Asia, Africa and the US. Amul has also launched sites like amulgreetings.com and amulkids.com to extend the brand identity to kids and teenagers who are its target market for its ice-cream and chocolates products. Also, as a strategy, Amul has a customer feedback channel which uses e-mail like [email protected] for cheese products and [email protected] for butter products.

In addition, the organisation’s corporate intranet site contains all the company’s updates including policies, procedures, functional role and responsibilities of each person in the organisation. Another example that puts Amul in a league of its own, is its recruitment policy. For instance, for any new requirement in different functional areas, candidates have to compulsorily undergo a computer literacy test, where the minimum passing mark is 80 percent. Explains Vyas, “Our main emphasis is to increase competency at the end user level with the help of IT. All our employees have undergone computer training according to the departmental needs so that they can take charge of their responsibilities in an effective way at the respective supply points.”

Amul’s success in leveraging IT to its advantage lies in the simple fact that the organisation has a clear IT vision. For example, after a top-level domain cooperative was made available, Amul embraced it with gusto. Hegde says that by developing the ‘Amul.coop’ Web portal, the organisation will be in a position to communicate with other similar co-operative movements. As cooperatives can interact with each other with similar organisations sharing this domain, knowledge can be shared on a pro-active basis, which can lead to further productivity benefits.

While it has always been argued that investments related to information technology made in rural India are a disaster, the case of Amul proves that where there is a will, there is a way. From catchy billboards to being a e-commerce success story, Amul is truly rural India’s flag-bearer in the IT revolution.