INDEX

CHAPTER
1

3
4
5
6
7
8`
9
10
11
12

TOPIC
Introduction to logistics
Definition and meaning
Types of logistics
Value chain activities
Impact of logistics
Activities
Introduction
to
supply
chain
management
Meaning,
definition
and
objectives
Decision phase
Process view of supply chain
Functions
Drivers of supply chain management
Introduction to AMUL
Supply chain of AMUL
Supply chain management and market
logistics of AMUL
Issues and recommendation for
AMUL supply chain
Financial
implications
of
recommendations
Annexure
Findings and conclusion
Limitation
Bibliography

PAGE NO

WELL..IS THIS LOGISTICS?

ACTUALLY THIS IS LOGISTICS

CHAPTER 1:INTRODUCTION
Logistics is concerned with getting the products and services where they are needed
when they are desired. It is difficult to accomplish any marketing or manufacturing
without logistical support. It involves the integration of information, transportation,
inventory, warehousing, material handling, and packaging. The operating responsibility
of logistics is the geographical repositioning of raw materials, work in process, and
finished inventories where required at the lowest cost possible. Within the firm the
challenge is to coordinate individual job expertise into an integrated competency
focused on servicing customers. In most situations the desired scope of such
coordination transcends the individual enterprise, reaching out to include customers as
well as material and service suppliers. Ina strategic sense, the senior logistics officer
leads a boundary spanning initiative to facilitate effective supply chain relationships.
The excitement of contemporary logistics is found in making the combined results of
internal and external integration one of the core competencies of an enterprise.
Throughout the history of mankind wars have been won and lost through logistical
strengths and capabilities or the lack of them. Even though the generals of the past have
understood the critical role of logistics it only in the recent past that the big
organizations have realized its role in the achievement of competitive advantage. Arth
Shaw in 1915 pointed out that: the relations between the activities of demand creation
and physical supply illustrate the existence of the 2 principles of interdependence and
balance. Failure to co-ordinate any one of these activities with its group-fellows and also
with those in the other group, or undue emphasis or outlay put upon any one of these
activities, it is certain to upset the equilibrium of forces which mean efficient
distribution. The physical distribution of the goods is a problem distinct from the
creation of demand. There are many ways of defining logistics but the underlying
concept might be defined as follows: Logistics is the process of strategically managing
the procurement, movement and storage of materials, parts and finished inventory
through the organization and its marketing channels in such a way that current and
future profitability are maximized through the cost-effective fulfillment of orders.
5

1.1 DEFINITION
The word logistic has originated from Greek word Logistikos and the Latin word
Logisticus which means science of computing & calculating
In ancient times it was used more in connection with moving armies, the supplies of food
& armaments to the war front.
During World War II

logistics gained importance in army operations covering the

movement of supplies , men & equipment across the border

Today
It has acquired the wider meaning and is used in the business for the movement of
material from suppliers to the manufacturer and finally the finished goods to the
consumers

LOGISTICS

1.2TYPES OF LOGISTICS
1) Inbound logistics
6

2) Outbound logistics
3) Third party logistics
4) Fourth party logistics
5) Reverse logistics

NAME POOJA PATEL

CLASS T.Y.B.M.S
ROLL NO 09
SUBMITED TO PROF
KARUNANIDHI

Inbound logistics:
Activities associated with receiving, storing and disseminating inputs to the product such
as inputs to the product such as material handling, warehousing, inventory control, vehicle
scheduling and returns to suppliers.
7

Outbound logistics:
Activities associated with collecting, storing and physically distributing the product to the
buyers. It includes distribution of finished goods, order processing, warehousing, material
handling, delivery vehicle operations, scheduling, shipping, etc.

Third Party Logistics:

Third party logistics is the activity of outsourcing activities related to Logistics and
Distribution.

A third party logistics firm may be defined as an external supplier which

performs all or part of the companys logistics functions.

Fourth Party Logistics:

Fourth party logistics provider is a supply chain integrator that assembles and manages the
resources, capabilities and technology of its own organizations with those of
complementary service providers to deliver a comprehensive supply chain solution to the
client.

Reverse Logistics:
Reverse logistic deals with product that flow to the opposite direction as against standard
logistic channels. It include backward flow of hazardous and non hazardous waste,
recycling materials, reuse of product, damaged product etc.

Integrated Logistics:
The management & technical process through which supportability & logistic support
consideration are integrated into the design & taken into account throughout The life cycle
of system/equipment & by which all element of logistic support are planned, acquired,
tested, & provided in a timely & cost effective manner.

1.3 VALUE CHAIN ACTIVITIES

10

Primary activities represent the functional areas like arranging inputs for
transforming them into output, and managing distribution, marketing, sales, and
services.

The secondary activities facilitate the integration of all the functions across the
entire organization.

The companies can achieve competitive advantage and create differentiation by

organizing and performing these activities more efficiently or in a unique manner
than their competitors.

How do we define logistics management?

A process of satisfying customer needs through coordination of materials and
information flows that extend from the market through the firms operation and
beyond that to the suppliers.A shift to an integrated orientation from the
conventional manufacturing or marketing orientation.Traditionally, manufacturing
11

and marketing have been considered as separate activities each having different
priorities.Manufacturing priorities and objectives are concerned with achieving
operating efficiencies based on long production runs, minimized set ups and
changeovers, and product standardization.Marketing priorities and objectives are
concerned with achieving competitive advantage based on varieties, high service
levels,

and

frequent

product

changes.Customer

orientation

and

cost

competitiveness has been integrated by introducing flexible manufacturing

systems, practicing inventory management policies based on manufacturing
requirement planning and just-in-time inventory policy, laying sustained emphasis
on quality and integrating supply side issues in strategic plans.

1.4IMPACT OF LOGISTICS ON MARKETING

Traditionally, marketing has focused on end-customer or consumer, seeking to

promote brand values and to generate a demand pull in the market place for
companys products.Due to shift in power in marketing channels, companies are
realizing to develop strong relations with such intermediaries like large retail
outlets to create a customer franchise as well as consumer franchise.The impact of
both strong consumer franchise and customer franchise can be enhanced or
diminished by effectiveness of suppliers logistics system.

1.5ACTIVITIES INCLUDED IN LOGISTICS

Logistics competency is achieved by coordinating the following functional areas.

Network design
12

Information

Transportation

Inventory

Warehousing, material handling and packaging.

Network Design:
Network design is the prime responsibility of logistics managers since a firm
facilities and structure is used to provide products and materials to the customers.
Logistics facilities typically include manufacturing plants, warehouses, cross-dock
operations, and retail stores. Determining the number and type of facility required,
their geographic locations, and the work to be performed at each is an important
part of network design. In certain situations, some of the facility operations may be
outsourced to service specialists. Network design determines the type of the
inventory and the quantity to be stocked at each facility, and the assigning of
customer orders for shipment. Network of facilities also includes information and
transportation as a part of entire structure from where logistical operations such as
processing of customer orders, maintaining inventory and material handling are
performed. The network design must consider geographical variations.
The factors influencing modifications of network design are:

Change in demand and supply

Product assortments

Changes in suppliers source of supplies.

Manufacturing requirements.

13

The first step towards achieving competitive advantage lies in superior network
design, as the real competition is not between two companies but between
efficiency and effectiveness in managing their supply chain.

Information:

Forecasting and order management are the two areas of logistical work that
depend on information. Forecasting enables to decide on positioning of inventory
to satisfy anticipated customer requirements. Order management involves handling
of specific customers requirements, both external as well internal. External
customers are those that consume the product or service, or trading partners that
purchase the products or services for resale. Internal customers are organizational
units within a firm that require logistical support to perform their designated work.
14

The process of order management involves

Receipt of an initial order

Invoicing

Delivery, and

Collection.
Incorrect information and delays in order processing can cripple the logistics
performance; thus quality

and timeliness are the key issues in logistical

operations.

Transportation:
Transportation is the operational area of logistics that geographically positions the
inventory i.e. provides for place utility. Companies accomplish transportation in three
different ways: A private fleet of vehicles may be operated. Contracts may be entered into
with transport companies. The service of different transport companies may be engaged
on an individual shipment basis.

Factors affecting transportation performance:

15

A. Cost of transportation
The payment for movement between two geographical locations and expenses
related to administration and maintaining in-transit inventory.
B. Speed of transportation
The time required to complete a specific movement. Transport firms capable of
providing faster services normally charge higher rate. The faster the transportation
services, shorter is the time interval during which the inventory is in transit and
unavailable.
C. Consistency of transportation
Refers to variations in time required to perform a specific movement over a
number of shipments. Consistency is a measure of dependability of transportation.
Inconsistency in transportation leads to inventory safety stocks required to protect
against unpredictable service breakdowns. Speed and consistency combine to
create quality aspect of transportation.

Inventory:
The objective is to achieve the desired customer service with minimum inventory
commitment, consistent with lowest total cost. Excessive inventories may be
16

helpful in compensating for deficiencies in network design but ultimately result

into higher total logistics cost. The best practice of inventory management is to
achieve maximum turnover while satisfying customer commitments.

Warehousing, Material Handling, And Packaging:

Merchandise needs to be warehoused at selected times, transport vehicles material
handling for efficient loading and unloading and goods are most efficiently
handled when packaged together into shipping cartons or other type of containers.
The logistical activities carried out in warehouse are sorting, sequencing, order
selection, transport consolidation and sometimes product modification and
assembly. Within the warehouse, products must be received, moved, sorted, and
assembled to meet customer order requirements and for these activities material
handling becomes significant. Products packed in cans, bottles or boxes are
handled more efficiently when combined into larger units such as Master Cartons.
Master units can further be consolidated into large units such as pallets, containers
etc.

CHAPTER 2:INTRODUCTION TO SUPPLY CHAIN

MANAGEMENT
17

A supply chain is the system of organizations, people, activities, information and

resources involved in moving a product or service from supplier to customer. An
integrated group of processes to source, make, and deliver products .Supply
chain activities transform raw materials and components into a finished product
that is delivered to the end customer.
It consists of all parties involved directly or indirectly in fulfilling a customer's
request

2.1 MEANING OF SUPPLY CHAIN MANAGEMENT

It is the process of planning, implementing and controlling the operations of the

supply chain with the purpose to satisfy customer requirements as efficiently as
possible. Supply chain management manages all movement and storage of raw
materials, work-in-process inventory, and finished goods from point-of origin to
point-of-consumption.

2.2 DEFINITION OF SUPPLY CHAIN

18

a supply chain is a network of facilities & distribution options that performs the
functions of procurement of materials transformation of these materials into
intermediate & finished products & distribution of these finished products to
customers

Export &
Manufacture
Primary
Distribution
Secondary
B2BAfter-Sales
& B2C
Import
& Raw Materials
Movement
Centres
Movement
Distribution
Services
Activities

Value-Added
Suppliers
Distribution
Production
Distribution
Sales ChannelEnd User
Services
Inbound
Manufacturing
Supply
Distribution
After Sales
LogisticsLogistics
LogisticsLogistics
Logistics

Reverse Logistics

2.2 DEFINITION OF SUPPLY CHAIN MANAGEMENT

19

It is the management of a network of all business processes and activities

involving procurement of raw materials, manufacturing and distribution
management of Finished Goods.
SCM is also called the art of management of providing the Right Product, At the
Right Time, Right Place and at the Right Cost to the Customer.

2.3 OBJECTIVES OF SUPPLY CHAIN MANAGEMENT

Maximize the overall value generated - is the difference between what the final product
is worth to the customer and the effort the supply chains expends in filling the request of
the customer
Supply chain profitability is the difference between the revenue generated from the
customer and the overall cost across the supply chain
It is the total profit to be shared across all supply chain stages
Supply chain success is measured in terms of supply chain profitability and not in
terms of the profits at an individual stage
Revenue is from customer - positive cash flow
All other cash flows are simply fund exchanges that occur within the supply chain
given that different stages have different owners
All flows of information, product or funds generates costs within the supply chain
Supply chain management involves the management of flows between and among
stages in a supply chain to maximize total supply chain profitability.
20

2.4 DECISION PHASE IN SUPPLY CHAIN MANAGEMENT

-

Successful supply chain management requires many decisions relating to the flow of
information, product,& funds

These decision falls into 3 categories/phases depending on the frequency of each

decisions & timeframe

Supply chain strategy or design

Supply chain planning

Supply chain operation

Supply chain strategy or design:

During this phase ,A company decides how to structure the supply chain over the next
several years it decides the supply chain configuration will be, how resources will be allocated
Decision includes whether to perform or outsource functions Decisions regards to warehousing
facilities & modes of the transportation & types of information utilized. Decision regarding
products to be manufactured or stored at various location.

Supply chain planning:

In this phase decision includes

Definition of a set of policies that govern short-term operations

Starts with a forecast of demand in the coming year

The inventory policies to be followed

Timing & size of marketing promotion

The subcontracting of manufacturing

21

The goal of planning to maximize supply chain surplus

In this phase, companies must include uncertainty in demands, exchange rate &
competition

Supply chain operation:

Time horizon is weekly or daily

Decisions regarding individual customer orders

Supply chain configuration is fixed and operating policies are determined

Goal is to implement the operating policies as effectively as possible

Allocate orders to inventory or production, set order due dates,

warehouse,

allocate an order to a particular shipment,

generate pick lists at a

set delivery schedules, place

replenishment orders Much less uncertainty (short time horizon)

22

2.3 PROCESS VIEW OF SUPPLY CHAIN

Cycle view processes in a supply chain are divided into a series of cycles, each
performed at the interfaces between two successive supply chain stages
Push/pull view processes in a supply chain are divided into two categories depending on
whether they are executed in response to a customer order (pull) or in anticipation of a
customer order (push).

Supplier

Cycle View of a Supply Chain

Each cycle occurs at the interface between two successive stages
-

Customer order cycle (customer-retailer)

Replenishment cycle (retailer-distributor)

Manufacturing cycle (distributor-manufacturer)

Procurement cycle (manufacturer-supplier)

23

Cycle view clearly defines processes involved and the owners of each process. Specifies
the roles and responsibilities of each member and the desired outcome of each process.

Push/Pull View of Supply Chains

PULL PROCESSES

Push/Pull View of Supply Chain Processes

Supply chain processes fall into one of two categories depending on the timing of their
execution relative to customer demand
Pull:
In this execution is initiated in response to a customer order (reactive)
It operate in an environment in which customer demand is known. Therefore, at time of
execution of a pull process ,demand is known with certainty
-

Push:

In this execution is initiated in anticipation of customer orders (speculative or forecast)

24

In this execution process ,customer demand is not yet known & must be forecast
Push/pull boundary separates push processes from pull processes. The relative proportion
of push and pull processes can have an impact on supply chain performance

25

2.4 FUNCTIONS OF SUPPLY CHAIN MANAGEMENT

Strategic
Tactical
Operational

Strategic
Strategic network optimization, including the number, location, and size of warehouses
.distribution centers and facilities.
Strategic partnership with suppliers, distributors, and customers
Product design coordination so that new and existing products can be optimally integrated into
the supply chain, load management
Information Technology infrastructure to support supply chain operations.
Where*to*make and what*to*make*or*buy decisions
Aligning overall organizational strategy with supply strategy.
Tactical
Sourcing contracts and other purchasing
decisions .Production decisions including contracting, locations, scheduling, and planning
process

definition. Inventory decisions including quantity, location, and quality of inventory

Transportation strategy including frequency routes, and contracting.
Benchmarking of all operations Milestone payments
26

Operational
Daily production and distribution planning Production scheduling for each manufacturing
facility in the supply chain (minute by minute).
Demand planning and forecasting coordinating the demand forecast of all customers and
sharing the forecast with all suppliers.
Sourcing planning including current inventory and forecast demand, in collaboration with all
suppliers.
Inbound operations transportation from suppliers and receiving inventory.
Production operations Outbound operations fulfillment activities and transportation to
customers.
Order promising, accounting for all constraints in the supply chain, including all suppliers,
manufacturing facilities, distribution centers, and other customers.

27

CHAPTER 3:DRIVERS OF SUPPLY CHAIN

MANAGEMENT

1)
2)
3)
4)

Inventory
Material handling
Information
Transportation
Modes of transportation
5) Warehousing
6) Packaging

1) Inventory:
Inventory encompasses all the raw materials, work in process, and finished goods within
a supply chain. Changing inventory policies can dramatically alter the supply chains
efficiency & responsiveness.
There are three basic decisions to make regarding the creation and holding of inventory:
1. Cycle Inventory: This is the amount of inventory needed to satisfy demand for the
product in the period between purchases of the product.
2. Safety Inventory: inventory that is held as a buffer against uncertainty. If demand
forecasting could be done with perfect accuracy, then the only inventory that would be
needed would be cycle inventory.
3. Seasonal Inventory: This is inventory that is built up in anticipation of predictable
increases in demand that occur at certain times of the year.

2) Material Handling:

The primary material handling objective is to efficiently move large quantities of

inventory into and specific customers orders out of the warehouse.
28

The functions performed in a warehouse are classified as movement or Handling and

storage.

Handling is divided into

Receiving

In storage handling , and

Shipping

An extremely important aspect of logistics is the productivity potential that can be

realized from capital investment in material-handling equipment.

Specialized handling equipment is required for unloading bulk materials such as for
solids, fluids, or gaseous materials.

The guidelines suggested in designing the material handling systems are:

Equipment for handling and storage should be as standardized as possible.

When in motion, the system should provide maximum continuous flow.

Investment should be made in handling rather than stationery equipment.

(d) Handling equipment should be utilized to the maximum extent possible.

(e) In selecting handling equipment, the ratio of deadweight to payload should be minimized.
(f) Whenever possible, gravity flow should be incorporated in the system design.

Time-Based Requirement:
(a) Time-based arrangements reduce the overall inventories by developing the capability to
respond rapidly to exact to exact manufacturing or retail customers.
(b) If the products/materials can be delivered quickly, it may not be necessary to maintain
inventories at manufacturing plants/ retail stores.
29

(c) If replenishment can be achieved rapidly less safety stock will be required and instead of
stockpiling and holding safety stock the requirement will be to receive the exact quantity
of inventory at the time required.
(d) Time-based programs tend to reduce shipment sizes, which in turn increases the number,
frequency, cost of shipments and hence higher transportation cost.
(e) An effective logistical arrangement will be to achieve a trade-off resulting into desired
customer service at the lowest total cost.
3) Information:
Information serves as the connection between various stages of a supply chain, allowing
them to coordinate & maximize total supply chain profitability. It is also crucial to the
daily operations of each stage in a supply chain for e.g a production scheduling system.
Information is used for the following purpose in a supply chain:
1. Coordinating daily activities related to the functioning of other supply chain drivers:
facility, inventory & transportation.
2. Forecasting & planning to anticipate& meet future demands. Available information is
used to make tactical forecasts to guide the setting of monthly & quarterly production
schedules & time table
3. Enabling technologies: many technologies exist to share & analyze information in the
supply chain. Managers must decide which technologies to use & how to integrate these
technologies into their companies like internet, ERP, RFID.

4) Transportation:
Transportation decisions are more strategic ones closely linked with inventory decisions.
Decisions are based on trade-off between the cost of using a particular mode of transport
with the cost of inventory associated with that mode.
30

For instance, air shipments may be fast, reliable , and warrant less safety stocks; they are
expensive whereas shipping by sea or rail may be much cheaper but they necessitate
holding relatively large amount of inventory to protect against the inherent uncertainty
associated with them. Customer service levels and geographic locations are important
aspects in transportation decisions. Transportation accounts for roughly 30% of the
logistics costs and therefore operating efficiencies become important aspects .Shipment
sizes i.e. consolidated bulk shipments versus smaller lot sizes; routing and scheduling of
vehicles become important part of companys transport strategy. Transportation is one of
the most visible elements in the logistics operation.

Product Storage

A. Product Movement
Primary function is the movement up and down the value chain. As transportation uses
temporal, financial and environmental resources, the movement of materials should take

31

place only when it enhances the product value. Uses temporal resources because the
product is inaccessible while in transit. Due to JIT strategies transit inventories are
becoming more significant thereby reducing manufacturing and distribution centre
inventories.
(b)Expenses incurred internally for private fleet of vehicles or externally for commercial or
public transportation constitute financial resources.
(c) Transportation consumes fuel and oil and also creates environmental expenses through
congestion, air pollution and noise pollution.
B. Product Storage
Temporary storage through vehicles becomes expensive as in-transit storage is required to
be moved again in a short duration of time. Sometimes temporary storage becomes
advantageous as the cost of unloading and reloading the product in a warehouse may
exceed the daily charge of storage in transportation vehicles. Many times where the
warehouse space is limited, utilizing transportation vehicles becomes a viable option.
The options available to a transporter in case of warehouse space constraints are Instruct
driver to take a circuitous or indirect route to its destination, as the transit time would be
greater as compared to direct route. Thus transport vehicle is used as temporary storage
option. Change the shipment destination i.e. temporary storage is achieved through
diversion.
For instance, product that is, say, scheduled initially from Mumbai to Hyderabad gets
diverted mid way to Vishakhapatnam (Visage) as Visage warehouse may be in greater
need of product and has the storage capacity. Traditionally, the telephone was used to
direct diversion but nowadays satellite communications between headquarters and
vehicle handle such tasks more efficiently.
Though product storage in vehicles can be costly, it can be justified from a total cost
perspective when loading, unloading costs, or capacity constraints are considered.

32

Modes of Transportation:

Air

A. Rail
Capability to transport large shipments economically with more frequency .High fixed
costs because of expensive equipment, right of way, switching yards, and terminals.
Variable cost per kg/km has been considerably reduced by electrification. Bulk industries
and heavy manufacturing use railways more frequently.
-

Can improve effectiveness of transportation by having alliances with other modes.

B. Highway
Growth of motor carrier industry has resulted into door-to-door operating flexibility and
speed of inter-city movement. Compared to railways, motor carriers have relatively small
fixed investments in terminal facilities and operate on publicly maintained highways.
Variable cost per kilometer is high because a separate driver and cleaner are required for
each vehicle. Labour cost is also high because of the need for substantial dock labour .

33

Variable costs
such as driver,
fuel, tyres and
repairs are
high relative
To railways.
Motor carriers are best suited to handle small shipments moving short distances. Favour
light manufacturing and distributive traders, short distances and high value products.Have
captured significant market share of railways in medium and light manufacturing
industries.Because of delivery flexibility, motor transport has captured almost all freight
moving from wholesalers or warehouses to retail stores.Higher cost in replacing
equipment, higher wages to driver and other dock labour .
C. Water
Capacity to move extremely large shipments.Fixed costs are somewhere between rail and
motor carriers.Though water carriers have to develop and operate their own terminals, the
right-of-way is developed and maintained by the government, resulting into moderate
fixed costs compared to rail and highways.Low variable cost makes this an attractive
mode when low freight rates are desired and speed is secondary consideration.Typically
bulk commodities such as mining , chemicals, cement, and certain selected agricultural
products are transported by ocean going vessel.Unless the point of origin and point of
destination are adjacent to a waterway, it needs to be supplemented by rail or trucks.
D. Pipelines
Used for transporting natural gas, manufactured chemicals, pulverized dry bulk materials
such as cement and flour via hydraulic suspensions, sewage and water within the cities and
municipalities.Operate on 24x7 basis are limited only by commodity changeover and
34

maintenance.No empty container or vehicle that must be returned.Highest fixed cost an

lowest variable cost.
High fixed costs due to right-of-way, construction and requirements for control station
and pumping capacity.
-

As pipelines are not labour intensive, variable operating cost is extremely low once the
pipeline is constructed.

Inflexible and limited to products in the form of gas, liquid or slurry.

E. Air
Significant advantage lies in the speed with which a shipment can be transported.Though
the freight cost is very high, the same may be trade-off with reduced warehousing or
inventory.Characterized by load size constraints and aircraft availability. Fixed cost
associated with aircraft purchase and requirements for specialized handling systems is
low as compared to rail, water and pipeline.Airways and airports are generally developed
and maintained with public funds.Airfreight variable cost is extremely high as a result of
fuel,maintenance and intensity of in-flight and ground crew.
Airfreight is justified in following situations:
A. High value products
B. Perishables
C. Limited marketing period.
D. Emergency.

35

Cost Structure
for Each Mode
of
Transportation
Containerization:
Container is large rectangular box into which a firm places commodities to be
shipped.After initial loading, the commodities themselves are not rehandled until they
are unloaded at their final destinations.Throughout the movement, the carrier handles the
container, not the commodities.The shipper can transfer the container from one mode to
another, eliminating the need to handle the commodities each time thus reducing handling
costs, damage costs, theft, pilferage and the time required to complete the modal transfer.
Many firms that modify their material handling systems to include cranes, forklift trucks,
and other equipment capable of handling large, heavy containers have found
containerization to be desirable avenues for increasing productivity and controlling
material handling costs, especially in periods of continually increasing labour

costs.As

the objective of intermodal transport system is to provide virtually seamless journey, the
best way to achieve same is to use modular or unitized loads.
Piggyback Trailer on Flat Car:
TOFC is a specialized form of containerization in which rail and motor transport coordinate.
Carrier places motor carrier trailer on a rail flatcar, which moves the trailer by rail for long
distance.A motor carrier then moves the trailer for short distance pickups and deliveries.This
36

service combines the long-haul, low cost advantage of rail with accessibility of motor.Piggyback
services mostly move under contract.
5) Packaging:
-

Packaging can be categorized into two types viz.

(a) Consumer packaging, which has a marketing emphasis, and

(b) Industrial packaging, which has more of logistics emphasis.

Consumer Packaging (Marketing Emphasis)

Consumer packaging design focuses on customer convenience, market appeal, retail shelf
utilization, and product protection.

Large containers and odd sizes may increase the consumer visibility but make poor
logistical packaging.

For example, shipping products fully assembled such as motorcycles results in substantial
reduction in density.

A low density package would mean higher transportation costs and greater warehousing
requirements.

B. Industrial Packaging (Industrial emphasis)

Individual products or parts are normally grouped into cartons, bags, bins, or barrels for
handling efficiency. These containers are used to group individual products and are
referred to as master cartons. When master cartons are grouped into larger units for
handling, the combination is referred to as containerization or unitization.The master
carton and the unitized load provide the basic handling unit in the logistics channel.The
weight, volume, and fragility of the master carton in an overall product line determines
transportation and material handing requirements.If the package is not designed for
efficient logistical processing, overall performance of the system would suffer.
Standardization of master carton facilitates material handling and
transportation.Standardization of master carton is beneficial even in context of retail
backend operations.

37

(a) For instance, in case of shoe store as the contents of each master carton are known, it is
not necessary to search through many cartons for a particular style or size of shoe.
Allows master cartons to be more efficiently stacked, resulting in to less backroom
congestion.
(b) Complete identification of master carton contents facilitates completion of retail
inventory and merchandise reorder.Standardized cartons are selected to achieve
maximum conformity in increasing the density in the trailer thereby eliminating dead
space in stacking.The end result of standardized master carton usage is substantial
reduction in total cost combined with an effective material handling system at both
warehouse and the retail store .In situations, when master cartons of more than one size
are required, extreme care should be taken to arrive at an assortment of compatible
units.These different sizes of master cartons should result into modular compatibility.

Scrap/Waste Disposal:

Disposal

38

Scrap

Scrap is a waste created while processing the materials.The process scrap is unavoidable
extra material removed from the stock of material while generating a component.For
example, while making a machined component some material has to be removed in the
form of chips.Quite often, while manufacturing any component some dimensions are not
maintained and the lot is scrapped as these cannot be used in the assembly of the
product.

Surplus
When the project or product needs a specific quantity of the item, extra leftover cannot be
used and this quantity is called surplus.The surplus quantity has to be disposed off.
. Obsolete
When the item cannot be used in the product/ project due to changes that might have
taken place in respect of dimensions, shape, colour etc, these are called obsolete
items.Changes may occur due to defect in product design, or shelf life etc.These
components have to be scrapped/ disposed off.
6) Warehousing
The primary purpose of a warehouse management is to control the movement and storage
of materials within an operation.Warehousing can be viewed as a place to store inventory
as well as a facility for switching the inventory.
Warehousing is becoming significant to achieve the following objectives:
-

To reduce inventory

To reduced costs

To increase storage capacity

To increase customer service

To increase inventory accuracy.

39

Typically, the warehouses received merchandise by rail or road and the materials were
moved manually to a storage area within the warehouse and piled up on the floor in
stacks manually.Due to above, though different products were stored in the same
warehouse it was difficult to identify the merchandise with respect to a particular order.
On the receipt of the customer orders, products were handpicked and placed on the
wagons and these wagons were pushed out of shipping area. As the was inexpensive,
human resources were used extensively and no consideration was given to efficiency
utilization, work methods, or material handling.Inspite of poor efficiency, warehouses
continued to provide a necessary bridge between production and marketing. With the
improved techniques of forecasting and production scheduling the need to build up
inventory was considerably reduced.Also, delays during manufacturing process reduced
as the production became more coordinated.Seasonal products continue to require
warehousing.The overall need to store materials to support manufacturing has been
reduced. In context of retailing, the department stores face the necessity of stocking an
increased variety of products and are unable to order in sufficient quantities from a single
supplier to enjoy the benefits of consolidated shipment.Direct ordering from
manufacturers becomes prohibitively expensive due to high cost of transporting small
shipments.This necessitates the need for warehousing to provide timely and economical
inventory assortments.At wholesale level, the warehouse becomes a support unit for
retailing. In context of manufacturing, companies producing products at multiple
locations, efficient warehousing becomes a method for reducing material and parts
storage and handling costs while optimizing production.
For implementing JIT and stockless production strategies warehousing becomes an
integral part of entire value chain.As the basic objective of JIT is to reduce work-inprocess inventory, manufacturing needs to supported by highly dependable delivery. In a
country as large as India, this is possible only by having strategically located warehouses.
The stocks can be held at a central warehouse thereby reducing the need to maintain
inventory at each assembly plant.Using consolidated shipments, materials are purchased
and transported to the supply warehouse and then distributed to manufacturing plants as
and when needed.A fully integrated warehouse is a vital extension of manufacturing. In
context of outbound logistics, warehouses have made possible the direct shipment of
mixed/ assorted products to the customers thereby enhancing the service capabilities.The
direct assorted shipments have two advantages, namely,Reduced logistical cost because
40

the full product assortment can be delivered while taking the advantage of benefits
obtained through consolidated transportation.More competitive advantage for the
manufacturers due to speedier shipments and mixed lots.Recently, warehouses have been
able to increase productivity due to effective use of Information Technology.

Warehouse strategies:

Contract

Private Warehouses
Operated by the firm owning the product i.e. facility may either be owned or leased.Quite often
the warehouses requiring specific material handling activities designed to fit exact needs of the
firm may not be available on hire.Generally efficient warehouse should be planned around a
material handling system in order to encourage maximum efficiency of product flow. Firms with
specialized customers or products often develop their own warehouse.

Public Warehouses:
Classified on the basis of range of specialized operations performed, as under General
merchandise e.g. paper, small home appliances and household maintenance goods.Refrigeration
facilities to preserve food products, pharmaceutical medicines and certain chemicals requiring
specific ambient temperature.Bulk commodities requiring specialized material handling systems
such as liquid chemicals, tress, and textile fabrics. Bonded, licensed by the government to store
goods prior to payment of custom duties, taxes etc.Furniture requiring special handling systems.
Provide greater flexibility in operations since warehousing becomes the core business. Due to
high volume operations., fixed costs get spread over and justify more efficient handling
41

operations. Transportation economies are leveraged by delivery of loads representing various

customers. Public warehouses charge a client a basic fee for handling and storage based on
number of cases or the weight handled. When economies of scale are not possible in a private
warehouse, public warehousing may be a low cost alternative.
Contract Warehouses:

Contract warehouses provide all logistics activities such as

Transportation

Inventory control

Order processing

Customer services, and

Returns

Assume total responsibility for enterprises that desire only to manufacture and market.

How firm utilize warehousing facilities?

A private or contract facility may be used to cover regular year round requirements.Public
facilities are used to handle peak season.In many cases central warehouse may be private,
while market or field warehouse are public warehouse.Where the warehouse space is
fully utilized at least 75-80% of the time, private facility may be more efficient.A firm
may find private warehousing to be more justified at certain locations on the basis of
distribution volume, while in other cases public warehousing may be the least cost
option. Some customer groups may be served better from a private warehouse, while a
public warehouse may be appropriate for others.Where the customers can be served
better by local presence of the products, private or contract facility may be useful.Public
and contract warehousing increases the potential for industry synergy.
For example, firms in grocery business share public warehousing facilities with other suppliers
serving the same industry.
The benefit is the reduced transportation cost due to joint use of same public warehouse
allowing for frequent delivery of consolidated loads from multiple suppliers.
42

(a) Public and contract warehouses demonstrate more responsiveness as they offer location
flexibility. For example, in-season demand for agricultural chemicals require warehouses
to be located near markets to serve customers better. After growing season, local
warehouse become unnecessary.
(b) Public and contract warehouses generally offer better economies of scale, as they are able
to design operations and facilities to meet higher volumes of multiple clients.
(c) Contract warehousing facilities can provide complete logistical support such as
transportation, order processing, inventory control, storage and other administrative
assistance in an integrated manner.

Warehouse functions

Warehouse functions

Extended
storage

(A)Movement:
Receiving, In-storage handling and shipping.
(a) ReceivingActivities involved ares Unloading the transportation vehicle, which in most cases

is done

manually.In Indian context, limited automated and mechanized methods have been developed
that are suitable to varying product characteristics.The product is hand-stacked on pallets to
form unit load for movement efficiency.
43

(b) In-storage handling

On receipt of the product, the merchandise is transferred within the warehouse to position for
storage or order selection. On receipt of order, the required products are accumulated and
transported to a shipping area. The entire operation helps in selection process for grouping
materials, parts, and products into customers orders.
(c) Shipping
Involves checking and loading orders onto transportation vehicles.Shipping in unit loads leads to
considerable saving of time in loading the vehicle.Checking is important at a point when
merchandise changes ownership as a result of shipment.
B]Storage: can be either planned or extended.
(a) Planned storage
Storage for basic inventory replenishment is referred to as a planned storage.Duration varies
depending on the performance cycle length.
(b) Extended storage
Sometimes storage may be required for several months prior to customer shipment.Seasonal
items require storage to wait for demand or to spread supply across time.Erratic demand, product
conditioning, speculative purchases and discounts call for extended storage.

44

CHAPTER 4:INTRODUCTION TO AMUL

In the year 1946, the first milk union was established. This union was started with 250 litres
of milk per day. In the year 1955, AMUL was established. In the year 1946, the union was known
as KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION. This union selected the
brand name AMUL in 1955.
The brand name Amul means AMULYA. This word derived from the Sanskrit word
AMULYA. A quality control expert in Anand had suggested the brand name AMUL. Amul
products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder,
Amul Ghee, Amul spray, Amul Cheese, Amul Munch Times, Amul Shrikhand, Amul Ice Cream,
Nuramul, Amul Milk, Amul Milk Drinks and Amulya have made Amul a leading food brand in
India. Today Amul is a symbol of many things like of the 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 moldel for dairy
development.
TAG LINE:TASTE OF INDIA

45

Professional management

46

GCMMF
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.
Members:
No. of Producer Members:
No. of Village Societies:
Total Milk handling capacity:

13 district cooperative milk producers'Union

2.6 million
12,792
10.16 million litres per day

Milk collection (Total - 2006-07):

2.38 billion litres

Milk collection (Daily Average 2006-07)

6.5 million litres

Milk Drying Capacity:

594 Mts. per day

Cattlefeed manufacturing Capacity:

2640 Mts per day

47

Sales Turnover

Rs(million)

US $ (in millions)

1994-95

11140

355

1995-96

13790

400

1996-97

15540

450

1997-98

18840

455

1998-99

22192

493

1999-00

22185

493

2000-01

22588

500

2001-02

23365

500

2002-03

27457

575

2003-04

28941

616

2004-05

29225

672

48

Product Portfolio:Amul has got a diverse portfolio and thus follows umbrella branding strategy
through this vast network. The range of products is similar in production by the various unions it
handles. Thus with umbrella branding, Amul avoided inter-union conflicts and increased cooperation in developing products Following are the varieties of products:
1) Fresh Milk
This is the most basic product by Amul. There are around 9 further sub-products available in
various flavors.
2) Milk Products
This segment is the largest and most selling product for Amul. The company has added further
variety by providing them in various flavors and packaging.
3) Powder Milk
This includes varieties like Tea/Coffee whitener and milk for infants. There are around 5 subbrands including Amul Spray, Amul Full Cream Milk and Amulya.
4) Cheese
It has various sub-products and caters mostly to Tier-I cities.
5) Bread Spreads
Amul butter is the most famous sub-brand in this category and has almost 85% market share.

49

Advertising Techniques of Amul

The advertising techniques of Amul are very eye-catching. Without depending on any celebrity
for promotion, Amul took the help of an imaginary cartoon character, popularly known as the
`Amul Girl`.
In the year 1966, Amul hired Sylvester daCunha, then managing director of the advertising
agency ASP to design an ad campaign for Amul Butter. daCunha designed a campaign as series
of hoardings with topical ads, relating to day-to-day issues. The campaign turned out to be so
famous that it grabbed a Guinness World Record. It earned the record for being the longest
running ad campaign ever.
The `Amul Girl` has turned into an iconic character who dresses herself in polka dotted attire.
For Amul Girl, no subject is taboo and she jovially comments on various current affairs topics
with her tongue-in-cheek. To sum up from catchy billboards to being an e-commerce success
story, Amul is indeed rural India`s flag bearer in the IT revolution.

50

Market share of amul

Category

Market share

Market position

Butter

85%

Milk powder

40%

Cheese

50%

Ice- cream

24.75

Sweets

50%

Chocolate drinks

90%

Chocolates

10%

CHAPTER 5:SUPPLY CHAIN OF AMUL

The distribution network
Amul products are available in over 500,000 retail outlets across India through its network of
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 FMCG companies. This practice is consistent with GCMMFs
philosophy of maintaining cash transactions throughout the supply chain and it also minimizes
51

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 ROI. All the branches of GCMMF are engaged in route scheduling and have dedicated
vehicle operations.
Largest Cold Chain:
AMUL has the largest cold chain network in India (18000 refrigerators) as compared to any
other company. The chemical components of milk are water, SNF and solids. It is a perishable
product so it has to be consumed within 24 hours. In order to avoid wastage AMUL converts the
milk into SNF (Solids not fats) and milk solids by evaporating the water, which comprises of 6070% of the milk contents.
Customers:
India is still in the evolutionary stage with tremendous potential for high value products such as
variants of milk. The distribution network is quite reasonable with access to metros as well as
rural areas.

Suppliers:
A majority of suppliers are small or marginal farmers who are illiterate, poor and with liquidity
problems.
Third party logistics service:
There are ample deficiencies in the current infrastructure and the outbound logistics is taken care
by GCMMF coordinating with distributors. It also connects with unions for product mix, product
allocations and in developing production plans.
The key lies in matching supply and demand as the demand outstrips supply by a big margin.
52

Interlocking control:
The objective of interlocking mechanism is to ensure that the interest of the farmer is always
kept at the top of the agenda through representatives who constitute the Boards of different
entities that compromise the supply chain. Professional managers and farmers work together as a
team to strengthen the cooperative.
Coordination agency:
Objective of such an agency is to ensure the milk produced by the farmer is sold in the market
either as milk or as value added product.

Existing Supply Chain of Amul:

53

CHAPTER 6:SCM AND MARKET LOGISTICS

The network
54

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
Milk is procured twice a day from 2 million from Gujarat alone

The payment is made under twelve hours of procurement

There are 10000 village cooperative societies
There are 3600 wholesale distributors in the country
45 depots
The C&F agents are not fixed and are decided by the local company offices
There are approximately 4,50,000 retailers spread all over India
Total house hold consumers covered are 100,000
The milk procured per day is 5 million liters
Where the total capacity of operation is 7 million liters per day
The peak processing till date has been 6 million liters per day
These co operative societies are bound to supply there produce only to GCMMF.
SCM and Market Logistics
Enterprise resource planning: the company at has implemented an ERP program as low as Rs. 3
corers in collaboration with TCS ltd. The company uses it; the data right from the procurement
from the farmers till the delivery of goods to the retailers is fed into the system. The software
enabling the channel members to use for the synchronized working and best possible utilization
of the available resources maintains details regarding the inventory management.
Market logistics deals with the implementation of the SCM of the company. Upstream Channel
in which milk is procured from the farmers to the manufacturing units.
1. In the first step, the milk is taken to the VCS by the farmers on foot or bicycles in small
quantities

55

2. The second step involves the transportation of milk from the co-operatives to the
manufacturing units this is done in special trucks which are equipped with tankers to carry milk.
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 -18C
Dairy wet the temperature of these trucks is kept between 0-4C
Second leg is from the depot to the WDs, this transport is carried out in insulated 3 and 5 MT
TATA 407s 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 WDs to retailers, a beat plan is prepared and
transportation is done on auto-rickshaws, rickshaws and bicycles.
SELECTION & MOTIVATION 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 members bankers.
Safety of the inventory, which means that the distributor/ dealer should get the stock of the
company insured.
56

 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.
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
57

 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 Amuls 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 Amuls products have good demand in the market motivates
the distributors to stock it.

Amul being a cooperative cannot afford to give heavy monetary incentives. Amuls 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 companys
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
companys 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 Retailers
58

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.

TQM in Amul:
Amul has benefitted at all levels due to TQM, to develop leadership, operational and strategic
capabilities in entire network.
Friday Departmental meetings: Every Friday the network organizes departmental meetings to
discuss issues related to quality and policy.
Training for transformational leadership so that individuals are able to coordinate in a better
way a carry out their responsibilities in ones life and surrounding environment
Retail Census: GCMMF undertakes a census of all retail outlets (over 500,000) to evaluate
customer perceptions and distribution efficacy of their network. Interestingly, this is being done
by wholesalers in their respective territories at their own cost. This information is used for policy
deployment exercise.
59

E-initiative:
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.
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. The Dairy Information and Services Kiosk (DISK) is another initiative that is started with
the help of IIM (A) by GCMMFL.
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.

60

CHAPTER 6:ISSUES AND RECOMMENDATION AMUL

SUPPLY CHAIN
1. Stock outs and huge gap in Supply- Demand of pouched milk:
As we have seen over the past decade that the demand for FDI certified pouched milk has
increased significantly in India due to adulteration and mixing of harmful agents in locally
supplied open milk, there is an increasing gap between the supply and demand of milk in bigger
cities of India. People tend to buy more pouched milk in large cities due to time constraints,
convenience and lack of local dairy operators.
AMUL has been unable to achieve a zero stock out strategy for its pouched milk retailers. One of
the reasons for this is its high brand equity as it is the topmost brand on consumers mind when
you talk about Quality and healthy milk. For example, in National capital region people buy
AMUL and other pouched milk like Mother dairy from retail stores. Mother Dairy has captured
major share in NCRs market due to large number of franchised retail outlets as compared to
AMUL which helps them project the demand and improvise on their supply accordingly. Also
this has to do with the ease of local procurement of Mother dairy over AMUL. The consequence
is that customers who are willing to buy AMUL milk are unable to make the purchase since it
goes out of stock by 7:00 pm in the evening. While Mother dairy retailers keep the adequate
stock to be last till late in night.
Forward integration by twin model approach for increasing distribution:
We recommend that AMUL should aggressively open more retail stores inside big residential
societies and also more outlets per locality/area to cater to increasing demand. Also, they need to
understand the importance of NCR market as it is the largest consumer of pouched milk in India
due to its population strength. AMUL also needs to tie up with other retail stores, multi stores
and superstores like Big Bazaar, Easy day, etc. to improve demand projection and volume
selling.
2. Increasing the production and local procurement of milk to provide an adequate supply:
The above issue of a significant gap between supply and demand is very much related to the
limitations AMUL faces in terms of procuring milk from areas surrounding NCR due to which it
has to depend heavily on supply from Gujarat milk unions of GCMMF. This comes with huge
61

transportation costs and wastage of milk due to reduced shelf life. We recommend AMUL to
work on the backward integration for this problem.
Initially we thought to recommend AMUL to tie up with local suppliers/farmers and implement a
similar model as GCMMF in Delhi region. The issue with this approach is that it defeats the
purpose of local cooperatives of Gujarat and they have to start sharing their profit with other
unions too for which the stakeholders approval is hard to achieve. Also, Mother dairy has
already developed strong ties with the local milk producers and farmers in this region; and
AMUL has to offer an incentive premium for acquiring these producers milk. This will result in
significant increase in prices of AMUL milk. Looking at a different perspective we would
recommend AMUL to set up its self funded (owned by GCMMF) dairy in NCR region to boost
the supply in the high demand region and target achieving a zero stock out supply.
Some of the issues with this approach are vested interest of Gujarat farmers who are heavily
dependent on daily income and would not encourage and agree to the returns to come after sales
of Delhi dairy products and thus it would be very hard for GCMMF to cohesively coordinate the
sentiments of its various incorporated unions.
Looking at the positive side of this move, AMUL will be able to cater to 60 % more demand and
also reduce wastage due to souring of milk as a result of longer transportation route from
Gujarat.
3. Investing in high yield cows/buffalos for existing farmers using a Micro finance model:
Another issue which AMUL has faced over decades and which is also inherent in dairy farming
in India is the yield per cow. The yield per buffalo for Indian cows is almost 1/3 times lower than
that of any Hybrid or American cows like Jersey. Focusing on another backward integration
technique, we will suggest improving the quality of buffalos by either introducing hybrid or pure
breed, specialized technological equipment. Factors such as fodder, environment, space
available/head of cattle etc. you need to mention that too as it may be less expensive for the
farmers or for the AMUL owned dairy to keep. We suggest use of another option too by the
farmers who cannot afford to go commercial dairy farming instead of the present village dairy
farming for milking higher yields. Since a majority of sourcing is done by marginal farmers who
lack the capital for acquiring the costlier Hybrid breeds, AMUL could look at provision of microfinancing to these farmers. We keep in mind that the farmers will resist to any such move and
think that as a cannibalization effort of their current supply and burden on themselves, but with
62

AMULs highly competent training centers and Anand Institute of Management set up by
AMUL, educating these farmers and unions would not be a difficult task.

63

CHAPTER 8:FINANCIAL IMPLICATIONS ON

RECOMMENDATIONS
1. Improve Logistics in Transportation through Integration with the Railway System
Aside from having its own dedicated fleet of trucks in transporting milk, Amulhas already
considered integrating their transport system with railway cooling units to improve transport cost
and its supply to Delhi. It has tied up with Adani Logistics to have a dedicated train to transport
milk daily from Dudhsagar Dairy of Mehsana to the city. The annual transport cost of
MehsanaDairy is Rs. 40 crore via road tankers for 120,000 liters of milk daily from
Dudhmansagar plant in Manesarto Delhi. According to Mehsana Dairy's chairman Vipul
Chaudhary, with the milk train transport system which would use 50 wagons with a capacity of
24,000 liters each to cater to the same volume, 50% would be saved on transport
cost.1Computing for the cost savings would give us Rs. 0.46 per liter.

Liters of milk per day

1,200,000

(Manesar to Delhi)

Number of Delivery

365

per year
Annual Transport cost

400,000,000

via Road (Rs.)

Transport Cost via

0.91

Road (Rs.) per liter

Savings via Railway
Cost Savings (Rs.) per

50%
0.46

liter

Assuming milk train system is applicable throughout Amul supply chain and ratio of
transportation cost to liters is the same, then the company could save Rs. 1,000,000,000 per year
which is .7% of its expected revenue of Rs. 150 bn for 2012-2013.

64

Total liters of milk

6,000,000

collected per day

Total Annual

1,000,000,000

Transportation cost
savings (Rs.)

In addition, if we consider GCMMF expansion plans to set up two milk processing plants in
Delhi, one each in Kolkata and Mumbai, and four in Gujarat, to boost milk processing capacity
from 14.5 to 20 million liters per dayii and apply the milk train system, then total transportation
cost savings assuming Amul can utilize maximum capacity would be as follows:

Max liters of milk

20,000,000

processing per day

Total Annual

3,333,333,333

Transportation cost
savings (Rs.)

Therefore, if Amul can implement this transport system throughout applicable dairy plants in
India, then the companys billion savings in Rupees may be used to invest in their expansion to
increase the supply and their distribution network, or to lessen the Rs. 1-2 price hikes by 25-50%
due to
transportation cost. With either of these moves, Amul would benefit inrevenue and increase in
market share over other competitors especially in Delhi and NCR region.

65

Aside from the above mentioned, using the railway cooling units can prevent the risk of
accidents on the road. Therefore, this can reduce wastage, vehicle maintenance cost, and
hospitalization expense. This alternative can also avoid delays in transportation due to traffic on
roads which is very crucial for Amuls business since goods are perishable. 2. Reduce
transportation time by choosing nearer dairy sites in their expansion plans Currently, Amuls
plant in Manesar is around 49 kilometers (or 49 minutes drive) away from Delhi. Amuls major
competitor which is leading in the region, Mother Dairy, also sources nearby but from more than
one plant. Dairy plants they source from are Noida, Ghaziabad, and Meerut which are 30, 46,
and 91 minutes away respectively. Therefore, Amuls plan in opening 2 more plants in Delhi
would be best since it could be more responsive because it would have more lead time in
catering to the demand in the region. Also, if we have our source of raw milk nearby, then
transportation from the source would decrease drastically because in their current set-up, tankers
would have to travel 700 kilometers from Gujarat. Therefore, Amul should consider creating
farmer cooperatives near Delhi. This will make GCMMFs daily procurement of 12-15 lac kilo
liters outside Gujaratiii to increase to an additional of 12 lac liters per day if thinking of
increasing current market share in Delhi to 60%.Having this plan, zero stock-out in stores can be
maintained because delivery of goods can be done immediately. With its proximity to the dairy
plant, the distributors will be able to maintain just-in-time practices with their inventory thereby
reducing costs and improving return on investment.
3. Improve Distribution Network in Retail Outlets, Supermarkets to Increase Reach
Currently, out of the demand of 115 lac liters of milk per day in Indias national capital and
adjoining areas, Amul supplies 20 lac liters of milk per day, Quality Dairy about 1.25 lac liters
per dayiv, and Mother Dairy supplies around 30 lac liters per day.vIn order to take the lead over
Mother Dairy, Amul has to increase its distribution network after increasing its supply by more
than 50%. If Amul increases its reach now to Delhi and NCR, say by 60% to ensure lead in
market share, then a portion of Mother Dairys current market share may be eaten up since the
brand is said to be top of mind in India and probably also eat up a large chunk in the other dairy
brands.
With the expansion plan of Amul for the next 5 years, the two plants which it will add in Delhi
could increase their supply by an additional of 40 lacs per day. Hence, Amul should already start
increasing its retail outlets, and supermarkets to increase reach and utilize their plants capacity
increase and dominate the market.
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CHAPTER 9:ANNEXURE
QUESTIONNAIRE
CONSUMER NAME:
1. Do you know about Flavoured Milk?
(A) Yes [ ]
(B) No [ ]
2. Do you know about Amul Kool Flavor Milk?\
(A) Yes [ ]
(B) No [ ]
3. How did you come to know about Amul Kool Flavoured Milk?
(A) By friends [ ]
(B) By relatives [ ]
(C) By shopkeepers
[ ] (D) By advertisement
(E) Others [ ]
4. By which media of advertisement you knew about Amul Kool Flavored
Milk?
(A)
(B)
(C)
(D)

Newspaper [ ]
Television [ ]
Magazine [ ]
Others [ ]

5. Do you buy Amul Kool Flavoured Milk?

(A) Yes [ ]
(B) No [ ]
6. Why do you buy Amul Kool Flavoured Milk?
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(A) Good quality [ ]

(B) Good taste [ ]
(C) Cheaper than other products [ ]
(D) Branded company [ ]
(E) Other reasons [ ]
7. Which flavor do you like most in the Amul Kool Flavoured Milk?
(A) Rose [ ]
(B) Mango [ ]
(C) Elaichi [ ]
(D) Kesar [ ]
8. Why do you not buy Amul Kool Flavoured Milk?
(A) Unawareness [ ]
(B) Dont like taste [ ]
(C) Higher price [ ]
(D) Other reasons [ ]
9. Did you buy Amul Kool Flavoured Milk?
(A) Yes [ ]
(B) No [ ]
10. Which other brands do you buy?
(A) Amul Kool [ ]
(B) Amul Kool Thandai [ ]
(C) Amul Kool Chocolate Milk [ ]
(D) Other product [ ]
11. Which brand do you like most?
(A) Amul Kool Chocolate Milk [ ]
(B) Amul Kool Flavoured Milk [ ]
(C) Amul Kool [ ]
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CHAPTER10:FINDINGS AND CONCLUSION

During the survey, it was found that still there 10% ofretailers are unaware about the Amul
Kool Flavor Milk.
From the survey it was found that mostly people come to know about amul cool favor milk by
advertisement
The price of the product is very high as compare to its quantity of the product.
Rose is the most popular flavor in the Amul Kool Flavor Milk.
Generally people buy the product because of better quality and brand name.
Advertisement should be given to increase the level of awareness and sale of the product.
From the awareness level, more than 90% people buy this product.
From the consumers view, more than 70% people buy this product because of good taste.

CONCLUSION
Hereby, I conclude my project that logistic management is related to types of transportation and
supply chain management is related to modes of transportation and is world wide.
Due to constraints of time and resources, the study is likely to suffer from certain limitations.
Some of these are mentioned here under so that the findings of the study may be understood in a
proper prospective.
The study is based on the secondary data and the limitation of using secondary data may affect
the results and also Primary data has been collected in form of questionnaire.

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CHAPTER 11:LIMITATIONS

Limited time available for interviewing the respondents. As a result of this it was not

possible
To gather full information about the respondents.
The respondents were not very comfortable while revealing their correct usage pattern, no

Cause they may feel that they would be called or visited again and again.
Non-cooperative approach and rude behaviour of the respondents.
If the respondents answer does not falls between amongst the options given then it will turn
upto be a biased answer.

CHAPTER 12:BIBLIOGRAPHY

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Tybms Elements of logistics and supply chain management

www.amul.com
www.google.com

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