Operations Management Project Report

MILMA
The goodness Kerala wakes up to

Kerala Co-operative Milk Marketing Federation

Group 5 Section A
Aniruddh Phukan (007)
Asif Shaikh (018)
Meera Baby (038)
Sidharth Ramachandran (048)
Sonam Bhargava (051)
Varun Murali (057)
Date : 08/12/2010

Executive Summary
Since its set up in 1990, the Malabar Regional Co-operative Milk Producer's Unions Limited
(MRCMPU) has seen tremendous growth. This is evident in the number of dairy and milk chilling
plants that the union owns today. Another proof of its success is the market share of MRCMPU in
retail milk segment. It ranks 9th in India in this segment and is the leader in the state of Kerala
covering 47% of the population and 45% of the geographical area.
Milk being a perishable good, operations management strategy is of prime importance for any player
in this sector. Operations management define the cost that the organization incurs and its
subsequent profitability. Along with this, processes for compliance with the regulatory environment
for ingredient and nutrition content, quality control and variety of products are vital for the success
in the dairy sector. With this in mind, MILMA to us represented a great learning opportunity about
the processes and organization in the dairy sector.
This report details an overview of MILMA, its growth over the last few years, objectives and the
process management that is followed. In order to have a better understanding of the operations, we
visited the MILMA factory at Kunnamangalam. A major part of the processes have been learning
from this visit.
On the basis of our study of the organization and processes, we have also tried to put forward a few
recommendations that we thought could augment its current position.

Table of Contents
Introduction ............................................................................................................................................ 4
MILMA Growth Story ........................................................................................................................... 4
MILMA Fact Sheet ............................................................................................................................ 4
MILMA Mission and Objectives ........................................................................................................... 5
Objectives ........................................................................................................................................... 5
Range Of Products from MILMA Dairy.................................................................................................... 5
Operations Overview .............................................................................................................................. 7
Raw Materials Procurement ............................................................................................................... 7
Milk Collection and Storage at the Plant ............................................................................................ 8
Pasteurization Process ...................................................................................................................... 10
Homogenization ................................................................................................................................ 11
Packaging Operations ....................................................................................................................... 12
Storage and Distribution ................................................................................................................... 14
Other Milma Products....................................................................................................................... 18
Operations strategy .............................................................................................................................. 18
Efficient Supply Chain ....................................................................................................................... 19
Support to Farmers and Co-operatives............................................................................................. 19
Wide-spread Sales and Distribution Network................................................................................... 20
Production of standardized and high-quality milk products ............................................................ 20
Optimized Milk Products Mix to enhance sales ................................................................................ 21
Cost Reduction Strategy.................................................................................................................... 21
Analysis and Learning............................................................................................................................ 22
Recommendations ................................................................................................................................ 22
Appendix ............................................................................................................................................... 25
References ............................................................................................................................................ 28

Introduction
In order to create a nationwide milk grid, National Dairy Development Board launched Operation
Flood in 1970. It was responsible for the White Revolution in India, making India the largest producer
of milk and milk products in the world. Following the success of Operation Flood, the Kerala Cooperative Milk Marketing Federation (KCMMF) or Milma, the milkman of Kerala as it is popularly
known started its operation in 1980 with its head office at Thiruvananthapuram.
MILMA Growth Story
Malabar Regional Co-operative Milk Producers Union (MRCMPU) Limited is a Union of more than
1000 village level dairy co-operative societies located in the six northern districts of Kerala State in
South India and it is owned by the dairy farmers who are members of each affiliated society and who
live in the area of operation of these societies. The societies function on the pattern of the societies
affiliated to the world famous Anand Milk Union Ltd. (AMUL) at Anand (Gujarat), India and hence are
also known as Anand Pattern Co-op Societies or APCOS.
The union was registered in 1989 and has been functioning since Jan, 1990. Until April 1993, the
organisation was governed by an Administrative Committee constituted by the Government.
However, today it is governed by an elected board of directors. Before the formation of MRCMPU,
the Kannur and Palakkad Dairies were managed by KCMMF. Kozhikode, Malappuram and Wayanad
milk Unions were functioning in the area of operation of MRCMPU. MRCMPU took over Kannur and
Palakkad dairies from KCMMF in 1990 and the three district milk unions were merged with MRCMPU
in the same year.
The area of operation of MRCMPU Ltd. comprises of the six revenue districts of North Kerala, viz
Kasaragod, Kannur, Wayanad, Kozhikode, Malappuram and Palakkad. Since the six districts included
in the area of operation of MRCMPU Ltd. were not included in the Operation Flood, initial funding
for the project on a part-loan and part-grant basis was provided by the Government of Switzerland
through the Swiss Agency for Development and Cooperation (SDC).Over time with MILMAs growth,
the SDC withdrew from the scene allowing the organization to grow and develop independently.
The Union is affiliated to the state level apex body-Kerala Co-operative Milk Marketing Federation
Ltd (Operating under the trade name MILMA) along with its sister Unions at Ernakulam and
Thiruvananthapuram. The head office of the Union is located at Peringolam under Kunnamangalam
post office near Kozhikode.
MILMA Fact Sheet
MRCMPU has grown over the years in terms of capacity and infrastructure. Today it operates 4 dairy
processing facilities in Kozhikode, Kannur, Palakkad and Kasaragod. It also has 5 milk chilling plants
(MCPs) situated in Attappady, Pattambi, Nilambur, Meenangadi and Mananthavady along with a
central products dairy. The installed capacities of various Dairies and Chilling Plants and their
average procurement and sales are given below (LPD). MRCMPU enjoys the distinction of being the
first dairy plant in Kerala to be ISO 9001-2004 certified. Refer Appendix for more facts around Milma

MILMA Mission and Objectives

Ever since its inception, MILMAs primary aim has been inclusive growth. This can be seen the
organizations mission statement which says Farmers prosperity through consumer satisfaction
Co-operation is the organizations motto which is seen in the three tier structure followed. The tiers
are organized at the village, regional and state level in the form of Village Milk Co-operative
societies, Regional Co-operative Milk Producers Union and la Co-operative Milk Marketing
Federation at the three levels respectively.
Objectives
The objective of the Union is to carry out activities conducive to the socio-economic development of
the dairy farmers. The primary objectives are as follows

To channelize marketable surplus milk from the rural areas to urban deficit areas to
maximize the returns to the producer and provide quality milk and milk products to the
consumers.
To carryout activities for promoting Production, Procurement, Processing and Marketing of
milk and milk products for economic development of the farming community.
To build up a viable dairy industry in the State.
To provide constant market and stable price to the dairy farmers for their produce.
(www.milma.com)

Range Of Products from MILMA Dairy

Milma Smart/ Toned Milk/ Homogenised Toned/ Rich
Milk
Milk is available in the above four variants. All the variants
are vitamin A enriched with the statutory SNF content.
These are available in packs of 500, 1000 and 5000 ml.

Skimmed Milk
Manufactured by processing skimmed milk, it is available in
sachets of 200 and 500 ml.

Milma Sambharam (Butter Milk)

A local delicacy in the southern part of India, it is prepared
by flavouring milk with sambharam ingredients with a
pungent taste. It is available in easy-to-use sachets of 200
ml.

Milma Ghee
Contains 96.5 percent milk fat. Manufactured by melting
fresh cream under hygienic conditions. It is available in
packets varying from 100 gm to 15 kg.

Milma Peda
A natural milk toffee manufactured by the heating and
removal of a major portion of the water content of fresh
milk and by the addition of sugar. Available in packs of 18
gm, 180 gm and 900 gm.

Milma Instant Palada Mix

Palada Payasam is a traditional delicacy of Kerala, the
preparation of which is laborious, time consuming and
requires professional skill. It is made by concentrating high
fat milk, rice granules and sugar. Milma has standardized
its own large scale production process for the instant
palada mix which is made available in dry powder form.
Available in 200 gm packs.
Milma Ice Cream
The production facility is hygienic as per ISO 9000 and
HACCP standards. It is the only ice-cream made from pure
milk cream unlike private manufacturers who provide
Frozen desserts, made from cheap vegetable fats in the
guise of Ice cream. These are available in multiple
flavours and sizes.
Milma Sip-up
It is an ice- lolly made available in two varieties Milk Sipup and Water Sip-up. Made by using pure milk, pasteurized
water, sugar and permitted flavours.

Milma
Plus
(Flavoured
Milk)
Manufactured by addition of sugar and flavour to skimmed
milk. The product is sterilized along with the glass
container by heating to a high temperature in specialized
ovens after which containers are stored in chilled condition
in outlets. Available in 200 ml containers and in a variety of
flavours.
(www.milma.com)

Operations Overview

The plant layout is given below:

Figure 1 Plant layout of Milma

Raw Materials Procurement
Milma is a cooperative organization of farmers in Kerala who in turn are members of Anand
Pattern Co-operative Societies (APCOS) spread throughout Kerala. Each society has a milk
procurement centre where farmers take milk every day. Test for quality is done while
collecting the milk itself and the farmers are paid according to the fat and SNF content of the
milk. Farmers are also paid bonuses based on the quantity of milk contributed by them.

Figure 2: Milk procurement at a registered milk society early in the morning. Source:
http://malabarmilma.com/milma_for_farmers.html

The procured milk is then sent to the district cooperative dairy union by trucks. The milk collection
trucks from Milma collect milk twice a day 7.30 AM and 4.30 PM. The Kozhikode Plant procures
milk from two districts Kozhikode and Malappuram and from 5 chilling centres located in Malabar
region.
Around 50,000 litres of milk are sourced from the co-operative societies and the rest 1,00,000 litres
are sourced from other Milma dairies, Milma unions at Thiruvananthapuram and Kochi or from
suppliers outside Kerala.
Milk Collection and Storage at the Plant
Once the trucks arrive at the plant, the milk is first checked for quality and then moved to the
storage units. A manual checking is done by observing and smelling the milk brought in to ensure
that it is not in a spoiled state. Further quality tests are done to ensure that milk is free of
contamination from physical, chemical or bacterial sources.

Figure 3: Milk arrival for processing

Lactometer reading
to check the density
of the milk

Measurement of SNF
(Solid Non-fats)

Centrifugal
seperation

Gerber method to
seperate milk fats
from protein by
adding sulphuric acid

Chilling process to
arrest further
bacterial growth

Milk transferred to
storage tanks

Chilling process is done to arrest any further growth of bacteria in the milk. Also, the milk will get
spoiled if it stays in room temperature for more than 4-5 hours. Hence after the different tests, milk
is dumped into a 1000 litres vessel from where it is sent to chillers through pumping. In one hour,
1000 litres of milk is chilled.
The chilled milk is transferred to the insulated stainless steel storage tanks known as silos. The plant
currently has around 5 silos, four with capacity of 30000 litres and one with capacity of 40000 litres.
Total fat and SNF composition of the stored milk is calculated.

Figure 4: Silos for storing milk

Pasteurization Process
In the pasteurizer unit, milk is heated to a temperature of 72.5oC (although theoretically the
temperature is 72.2oC, it is heated slightly higher to ensure that the pasteurization occurs) and is
held to 16 seconds. Then, it is immediately cooled to 5oC.
There are two pasteurizers currently operating at the plant with processing capacities of 12000 litres
of milk per hour and 10000 litres of milk per hour each. If the pasteurizers are alternately used, then
the total milk processing capacity of the plant is limited to 11000*16 = 1,76,000 litres / day (2 shifts
=> 16 hours). Since the current market demand is around 1.5 lakh litres of milk per day, the plant
operates well below its capacity. However, in case the demand increases in the near future, the
bottleneck of the plant is the pasteurizer and the capacity of the existing pasteurizers can be
increased by adding more coils to the pasteurizer.

Chilled
milk at
4OC

Regenerati
on unit
(heat to 40
50 OC)

Regenerati
on 2 (heat
to 40 50
O
C)

No
Fat >
3%

Homogeni
zation

No
Yes

Yes
Cream
separator

Ghee
production

Storage
tank

Homogeniz
ation
(Reduce
globule size
from 20 to
2 microns
Heat at
72.5 OC

The separation of fat is done because there are standards regarding the amount of permissible fat in
the milk. These are:

Toned milk Not less than 3% fat and 8% SNF

Double toned milk Not less than 1.5% fat and 9% SNF

Any quantity of fat above this quantity is removed and used for preparation of ghee.
Homogenization
Homogenization is a mechanical treatment that reduces the size of the globules from 20 microns to
2 microns. It aids in better digestion of milk. Homogenized milk also helps deal with an unwanted
result of pasteurization sometimes in which the white cells and bacteria collect on the bottom of the
milk, forming a thick layer. When homogenization is done, this bottom layer is mixed through the
milk. This milk is also longer lasting and hence can be transported higher distances.
There is also a Flow Diversion Device which is used to transfer back the milk back to the pasteurizer
in case the temperature falls below 68 OC at any point of time. This is done using a 3 way Flow
Diversion Valve which opens forward only if the temperature of the milk is above 72 OC.

Figure 5 Pasteurizer

Standards
specified

Fat
Content

SNF

Lactic
Acid

MBRT

Toned Milk

3.0

Double-Toned
Milk

Phosphates

8.6

0.153

5.30

-ve

1.8

9.0

0.153

5.30

-ve

Standardized
Milk

4.5

8.8

0.153

5.30

-ve

Skimmed Milk

0.5

8.5

0.153

5.30

-ve

(hrs)

Standards used by Milma for milk products

Packaging Operations

Packaging is done using 4 separate packaging machines with processing capacity 40 packets per
minute which are run in parallel and hence the rate of packaging is 160 packets per minute. The
different packet sizes supported are 500 ml, 1 litre and 5 litres.

Figure 6 Packaging of milk

Figure 7 Performance of packaging machinery

Storage and Distribution

Once the packaging is done, the milk packets are collected in plastic trays which
automatically move towards a cold storage unit which is kept at temperature of 4-6 OC. The
distribution trucks waiting at open space despatch dock start leaving the plant around 1.30
PM to distribute it to the retailers. The distribution is insulated to maintain the temperature.
For regular routes, the distribution is done twice a day and for the routes with more
demand, distribution is done thrice a day. Random samplings are regularly done before
transportation to ensure fat content, SNF and for checking if poisonous materials like
Arsenic are present.

Figure 8 Milk distribution trucks at the despatch dock

Figure 9 Insulated containers in the despatch truck

Figure 10 - Product Process Overview

Figure 11 Process Overview

Figure 12 Service Blueprint

INFORMATION FOR EXRA REQUIREMENT OF MILK

INFORMATION FOR EXRA REQUIREMENT OF MILK

OTHER
CO-OPERATIVE
SOCITIES

FARMERS

SUPPLIERS

KANNUR
DAIRY

PATTAMBI

KASARAGOD
DAIRY

NILAMBUR

PAY
ACCORDING
TO FAT AND
SNF CHART

REJECT
THE MILK

NO

CHECK FOR YES

CONSTANT SUPPPY
FAT AND
VARY AS PER SEASON
SNF
QUALITY MET

EXCESS SUPPLY TO OTHER DAIRIES

EXCESS SUPPLY

PALAKKAD
DAIRY

DAIRIES

ATTAPPADY

SUPPLY ( twice a day)

DEMAND FOR MILK

VARY AS PER
FESTIVALS AND SEASON

Normal demand

KOZHIKODE
MILMA
FACTORY

OFFICE

MANANTHAVADY

OTHER
STATES

FACTORY
CONVERTING
MILK TO
POWDER

SAY THANKS
AND
GOOD BYE

DELIVER
THE MILK
AND DAIRY
PRODUCT
& COLLECT
PAYMENT

YES

INQUIRY
ABOUT THE
MILK & MILK
PRODUCT

SHOPKEEPER
GREET THE
CUSTOMER

CUSTOMER

START

NO

YES

SUGGEST
OTHER
PRODUCT

NO

CUSTOMER INTERACTION ACTIVITY

EXCESS MILK SUPPLIED TO THE FACTORY

MEENANGADI

SUPPLY THROUGH TANKERS

CHILLING PLANTS

SERVICE BLUE PRINT FOR MILMA FACTORY

KOZHIKODE REGION

Other Milma Products

Curd/yoghurt is another important product of Milma. Milma plant at Kozhikode produces around
15,000 litres of curd daily. If the milk is intended for the production of curd, then it is heated to 90 OC
while pasteurizing rather than 72.5 OC. After heating, it is cooled to atmospheric temperature and
then aseptically prepared culture is added to it to initiate fermentation.
The Milma plant also produces ice-cream, ghee, dried products like peda etc. based on the market
demand and supply of milk. In case of ice-creams, Milma uses only natural vanilla for flavouring
compared to the competitors who use synthetic vanilla and restricts the air component to 44.5%.
This result in a higher cost compared to the other products in market.
Around 70 workers are involved in the whole operation in each shift. The plant is run for two shifts
daily. Earlier, they used to have overtime but now as a measure to control costs, Milma has
employed around 30 temporary workers and routinely outsource any additional work. Besides
labourers, the plant employs shop floor managers, one technical superintendent each for
Bacteriology, Lab and Plant, 2 maintenance engineers, 1 technical officer and administrative officers.
Milma is under the governance of Food & Civil Supplies Ministry of Government of Kerala.

Operations strategy

According to the book by Slack and Lewis, Operations strategy is the total pattern of decisions which
shape the long-term capabilities of any type of operations and their contribution to the overall
strategy, through the reconciliation of market requirements with operations resources. Basically it
means that the various steps taken by the organization in order to achieve the mission and
objectives while keeping in mind the resource and labor constraints form a part of the Operations
Strategy.
Milma defines its mission as Farmers prosperity through consumer satisfaction. This line aptly
summarizes the twin goals that Milma tries to achieve by acting as a change agent. It ensures that
the excess milk available with the farmers and rural people is made available to the urban areas
where there is unmet demand. During this process, fresh, hygienic and high-quality milk is made
available to customers while farmers are given access to a huge supply network and large customer
base for their milk produce.
The objectives of Milma as laid out on their website are as follows

To channelize marketable surplus milk from the rural areas to urban deficit areas to
maximize the returns to the producer and provide quality milk and milk products to the
consumers.
To carryout activities for promoting Production, Procurement, Processing and Marketing of
milk and milk products for economic development of the farming community.
To build up a viable dairy industry in the State.
To provide constant market and stable price to the dairy farmers for their produce.

The Operations Strategy for the MILMA co-operative is thus driven by the above stated
objectives and comprises of the following dedicated functions -

Efficient Supply Chain

Support to Farmers and Co-operatives
Wide-spread Sales and Distribution Network
Production of standardized and high-quality milk products
Optimized Milk Products Mix to enhance sales
Cost Reduction Strategy

We will now look at each of the functions in detail and analyze the steps taken by MILMA to
achieve their stated objectives.
Efficient Supply Chain
Being a perishable product, the main problem with milk production and distribution has always
been one of preservation and conservation. In the rural areas, most people still go early morning to
the local farmhouse/ stable where cows/buffaloes are milked and get it fresh. However in todays
urban society this is not possible because of the time constraints as well as the presence of such
farmhouses. Hence it is imperative to build an efficient supply chain originating in the village
farmhouses and ending in consumer households.
In the case of MILMA, the supply chain begins at the local co-operatives that have been initiated in
several villages and communities across Kerala. Excess milk that is produced by the farmers is
collected together by the co-operatives and pooled. There are specified collection times for this milk
that acts as the input to the MILMA factories situated across the state. MILMA often provides chiller
units to these co-operatives at subsidized rates or with rent agreement schemes that allows the milk
to stay fresh. The trucks that bring in the millk from various parts of the surrounding localities are
also cleaned and sterilized to ensure the highest quality right from the input stage.
In addition to the milk from local co-operatives, there is a lot of milk that is imported from
outside the state and outside the country as well. The quality of milk sold is always given by the level
of Solid Non-Fats (SNF) that is present in it. This level of SNF varies for every batch of milk that is
procured but in general it is not upto the mark that is prescribed by international standards. Hence
in order to prop up this value, high-quality milk from The Netherlands is imported and added in predetermined ratios in order to bump up the SNF level. Since the travel time from foreign countries is
very high, this milk is normally imported in the form of Skimmed Milk Powder (SMP). This is basically
the powdered form that lasts longer and can be directly added to the local milk. Since the local
production of Kerala is not sufficient to meet demand, milk is also imported from neighboring states.
The Kozhikode dairy being close to Tamil Nadu and Karnataka receives a lot of milk from these
states. However since the distances to be travelled by the supply trucks in this case are also very
large, milk might get spoilt on the way. Hence in most of these cases also, milk is imported in the
SMP form.

Support to Farmers and Co-operatives

Milk is procured from local villagers who have combined together to form co-operatives. Most of
these farmers are often not educated and not technically-minded. They are unaware of the various
steps to be taken to ensure high milk yields. Their knowledge is restricted to the traditional
information passed on over the ages and quite unmindful of the latest improvements in animal
husbandry as well as milk extraction. MILMA therefore organizes a number of information sessions

across the villages where sessions are conducted that tell the farmers how to best take care of the
animals as well as maintain the best quality of milk.
MILMA has also taken it upon itself to produce good quality cattle feed that is then supplied to
all the farmers within the co-operatives. This ensures that the milk producing cattle are well taken
care of which ensures a high quality of milk. It also brings in a level of standardization for the input
milk procured. In addition, veterinary services are also provided at highly subsidized rates to the
farmers to ensure that the cattle are healthy. They are the main source of livelihood for these
farmers and hence their care is of utmost importance to them. By providing such facilities, MILMA
ensures that it meets its objective and the farmers interests are met and fulfilled.
Wide-spread Sales and Distribution Network
MILMAs competitive advantage in the marketplace comes from its superior distribution and sales
network. Firstly, MILMA has opted for a distributed production strategy. It does not have a plant in
one particular location but they are located all over the country like - Trivandrum, Alleppey,
Ernakulam, Kozhikode etc. This serves two purposes - the input milk from the co-operatives situated
across the state can travel to the closest processing plant & the time to market for the milk
produced is the least as the plants are brought closer to the markets.
MILMA supplies to a large number of outlets and retail points across the geographical reach of
Kerala. Since the processing units are spread across Kerala, each unit serves a particular region. This
ensures that the supply of MILMA milk to the consumers is fast and fresh thus ensuring that quality
is always maintained. The kind of outlets that it supplies milk to is also different ranging from small
road-side dispensers to large retail shops located in big cities. Each plant uses a fleet of trucks and
small pick-ups in order to maintain the supply network.
MILMA also ensures the timely supply of milk with dispatches happening across the 24 hour period.
Demand for milk varies throughout the day but is the highest in the morning period. Hence, the
maximum number of dispatches occurs in this slot with most of the trucks being loaded and leaving
the plant by 4 a.m. This ensures that customers are delivered with freshly produced milk every
morning.

Production of standardized and high-quality milk products

Milk produced at MILMA plants adheres to the highest standards as prescribed by the rating
agencies and the Bureau of Indian Standards (BIS). The reduction in the adulteration of milk and milk
products is one of the stated aims of MILMA and we observed that this is strictly adhered to in every
stage of the plant. The plant makes use of sophisticated, imported equipment that comply with the
world standards for the production of milk and its products. This has also resulted in the plants being
certified with the ISO-9001:2008 standard. It shows the dedication to quality and process that is
found at MILMA.
During the plant visit, we also observed the level of care and safety maintained by the employees. All
the machines were operated with gloves and the chilling and cooling areas were maintained at predetermined temperatures. In the functions that required handling by employees, all the employees
wore sterilized gowns, gloves and caps to ensure that no contamination is caused. All the processes

with regard to the processing of the milk are automated and there is no manual intervention thus
removing the possibility of any contamination.
MILMA also follows a policy of strict quality control. Milk is always processed in batches of 30,000
liters. Sampling of the milk is done at the beginning and end of each stage of milk processing like
input, pasteurization, cooling, storage etc. and these samples are continuously tested to ensure that
there is no adulteration or contamination. In addition, MILMA also tests random samples that are
picked up from the market and retail outlets to ensure that quality is maintained across the supply
chain.
Optimized Milk Products Mix to enhance sales

MILMA had realized a long time ago that in order to increase the milk consumption, growth would
have to be driven to other by-products of milk as well instead of just concentrating on milk alone.
Though milk still accounts for about 85% of the total sales, the share of other products is growing
and presents a huge opportunity. Because a lot of the other products like Curd, Ice Cream etc. are
natural by-products of milk, it was a strategic decision by MILMA to diversify into these items as
well. The raw material being the same, it was only a matter of adding further refinement processes
to the existing production line. Therefore, there wasnt much change in the plant layout and hence it
could be easily incorporated.
Some of these products that are popular include ghee, ice-cream, peda, cream-rolls that have found
acceptance in the market. These products are also different from the regular milk that is low value
focused as a result of which MILMA cannot charge high prices. The newer products on the other
hand are more sophisticated and of higher value and hence could command premium prices. So
while MILMA maintained the low prices of milk and became a leader in that category, it was able to
derive higher profits from the new line of products because this was normally purchased by the
higher income group of the population. This diversification helps the company to derive profits from
volume growth in the milk segment and from value growth in the milk products segment.
Cost Reduction Strategy
One of the chief drivers of cost in MILMAs operation cycle is the transport costs. Transportation
includes the procurement and delivery of milk to the plant from the co-operatives and the supply of
finished milk and milk products to the retail markets. This is not a core competency for MILMA and
in order to drive efficiencies, this function has been outsourced to third party contractors. They
provide the fleet of trucks, small pick-ups and cargo three wheelers that are used to transport the
products. However this is also a stage where the maximum chance of spoilage can occur. MILMA did
not want to lose control over this essential function. Hence it supplies to the contractors, the
insulated and temperature controlled boxes that are used to store the milk products. Therefore
while the underlying chassis and vehicle belong to the contractors, the boxes and containers used to
transport the product belong to MILMA. This way the quality of milk products is ensured while
reducing costs at the same time. Since these boxes are supplied by MILMA they are also free to do
the branding and hence we are able to see so many of the MILMA trucks even though they are not
directly owned.
Another important cost driver for MILMA is the labor force. Since it a milk plant, it is operated at all
times of the day. There is a 24/7/365 operation which has a lot of costs associated with it. This
means that the plant will need to maintain electricity at all times and there should be a labor force

also that can work in three shifts of eight hours each. Maintaining such high levels of workforce may
prove to be costly and hence a small part of the labor is also contracted out to third-party vendors.
These vendors have a contract for a particular duration during which they are able to supply labor as
and when required by the plant. This takes away the responsibility of labor planning and supply from
MILMA and whenever it requires additional labor, it can ask the contractor for the same. Hence,
instead of employing full-time employees which is cost-intensive, MILMA has opted for contracted
labor. These are some ways in which MILMA reduces its cost and optimizes utilization of resources.
Analysis and Learning
Four key parameters of Milma are: affordability, hygiene, shelf life and packaging.

As milk is associated with high nutritional value and the fact that usually it is a part of the
diet of the children in the family, Quality is the key factor at Milma. People do not want any
adulteration in the milk and are willing to pay more for quality.

The perish ability of the product makes speed of delivery a critical factor. Ensuring fast
distribution of this staple product is a major challenge for the dairy marketing companies.
Other key issue for Milma is the competition from unorganized players who manufacture
fresh products and sell them quickly while most packaged dairy products are bulk
manufactured and have a limited shelf life.
Milk collection process is becoming completely automated with immediate sampling and
quality check. The price of the milk is determined immediately as per the quality of the milk
and cash payments are made.
Huge demand for milk is there from 4.00 pm to 9.00 pm. Milma responded to this change by
appropriately altering its distribution schedule to dispatch trucks now at 2.00pm in the
afternoon to meet the peak demand.
Milma uses a proven methodology after the inspiration from Amul, whereby excess local
supply of milk is procured and distributed where it is required.

Recommendations
The critical success factors in the industry are the ability to give a highly perishable
commodity a longer life, market it as a lifestyle product, differentiating it from other
products available in the market through product introductions, make it as affordable as the
plastic pouch or the milkman, and tempt sales through cut-throat pricing.
To increase shelf life ultra high temperature (UHT) packs that have a shelf life of almost
three months are being marketed. Introduction of tetrafino packaging allows the milk to stay

good for 60 days. Attempts should be made to increase shelf life for milk products up to 6
months.
Proper training to be given to the employees based on the scope of improvement. Field staff
and plant workers need to be trained in the handling and quality control aspects of the
procurement and production process.
Another challenge would be to develop managerial expertise at the village society level so
that livestock and inputs improvement can be managed by the producers as the dairy
cooperatives do not own their livestock and milk production.
Modified process technology should ensure adequate quality enhancing processing of the
milk, in the form of efficient pasteurization and other processing techniques. Adequate
checks and balances should be put in place to ensure employee commitment to quality.
Safety and health are important qualifying criteria to perform in the industry and have to be
given due importance.
Variety is a very important factor to be worked on. Competitors are gradually shifting
towards providing higher value products like ghee, milk with higher fat content, yoghurt etc.
Also, customer preferences are also gradually shifting towards these products. Milma should
consciously work towards development of markets in Kerala for these products and raise
their bottom-line.
Milma needs to improve the visibility of its lesser-known products through its retail outlets.
Thus, Milma would be able to attract customers who are currently purchasing products of
other local competition.
Dependability is affected by the fact that whether the company has an adequate supplier
base and other provisions to even supply milk in conditions of scarcity. Thus by securing
their supplier base, Milma can ensure dependable supplies, thus inspiring customer
confidence

Appendix

A brief fact sheet for MILMA is as below Date of starting operation

No. of Dairy Plants
Central Products Dairy
No. of Milk Chilling Plants
No. of Procurement and Input Centres
No. of Human Resource Development Centre
Turnover (2009-2010)
Paid up share capital (2009-2010)
Average daily procurement of raw milk (2009-2010)
Average daily sale of processed liquid milk (2009-2010)
Average daily sale of Skimmed Milk Curd (2009-2010)
No. of farmers supplying milk to the Union (2009-2010)

15.01.1990
5
1
5
7
1
Rs 3562 Million
Rs 80.2 Million
3,86,073 Litres
3,61,989 Litres
38,982 Litres.
79,039

Dairy Plants

No

Unit

Commissio
ned In

Processing
Capacity/Day

Procurement
(in lts)

Kozhikode Dairy

1995

125000

54000

Palakkad Dairy

2000

100000

92100

Kasaragod dairy

2002

30000

Kannur Dairy

2003

100000

Wayanad Dairy

2009

50000

Central
dairy

2009

82800

Products

Milk Chilling Plants

No
1
2
3
4

Unit
Attappady MCP
Pattambi MCP
Nilambur MCP
Meenangadi MCP

Processing lts
Capacity/Day
30,000
15,000
30,000
60,000

Procurement in
lts
12700
7000
21100
40100

Market Area
Palakkad
Palakkad
Malappuram
Wynad

Revenue in Market
Rs million
Area
Kozhikode
1180
District
Palakkad
880
District
Kasaragod
360
District
Kannur
950
District
Wayanad
District
Entire area
of
operation
of
MRCMPU
Ltd.

5
6

Mananthavady MCP
Kasaragod Dairy

10,000
30,000

12900

Wynad
Kasargod

India Milk Retail Brand Market Shares 2005-2009

Brand
Gujarat Co-operative Milk
Marketing Federation Ltd
National Dairy Development
Board
Karnataka Cooperative Milk
Producers Federation Ltd
Tamil Nadu Cooperative Milk
Producers Federation Ltd
GlaxoSmithKline Plc
Andhra Pradesh Dairy
Development Cooperative
Federation Ltd
Rajasthan Co-operative Dairy
Federation Ltd

2001 2002 2003 2004 2005 2006 2007 2008 2009

9

8.9

10

11.4

12.6

13.6

14

14.8

14.6

8.7

8.6

8.6

8.5

8.9

9.6

10.2

10.9

11.4

6.6

5.7

6.4

6.6

7.3

7.6

5
7.4

5
7.1

5
7.3

5.5
7.1

5.5
7

5.9
6.8

6.1
6.1

6.1
5.5

6.2
5.1

3.3

3.3

3.3

3.3

3.3

3.2

3.2

3.3

3.3

2.4

2.7

2.9

3.1

3.4

3.4

2.8

3.1

Maharashtra Rajya Sahakari Dudh

Mahasangh Maryadit

3.1

3.1

2.8

2.8

2.8

2.9

Kerala Cooperative Milk

Marketing Federation Ltd

2.8

2.9

2.7

2.7

2.7

2.8

2.6

2.6

2.7

Bihar State Co-operative Milk

Producers Federation Ltd

1.7
1.7
1.7
1.7
1.7
1.8
1.9
2.1
2
Hatsun Agro Products Ltd
0.9
1.4
1.5
1.7
1.9
1.7
1.8
1.8
1.9
Nestl SA
1.9
2.3
2.4
2.4
2.4
2.4
2.3
2.3
1.8
Others
47.1 47.1 45.7 43.5 41.5 39.2 38.5 36.9 37.3
Total
100 100 100 100 100 100 100 100 100
Source: Euromonitor International from official statistics, trade associations, trade press, company
research, store checks, trade interviews, trade sources

Yoghurt Company Shares India 2005-2009

% Retail Value rsp

2005

2006

2007

2008

2009

Karnataka Cooperative Milk Producers Federation Ltd

16.00

16.00

16.00

16.45

17.91

Gujarat Co-operative Milk Marketing Federation Ltd

7.79

10.00

12.00

15.46

16.92

Mother Dairy Fruit & Vegetable Ltd

5.00

5.50

7.50

9.53

12.04

Nestl India Ltd

5.30

5.50

6.00

6.98

6.97

Tamil Nadu Cooperative Milk Producers Federation

Ltd

5.50

5.50

5.50

4.99

4.98

Kerala Cooperative Milk Marketing Federation Ltd

4.99

4.98

4.52

3.98

3.98

Britannia Dairy Pvt Ltd

2.49

Orissa State Cooperative Milk Producers Federation

Ltd, The

2.45

2.45

2.45

2.19

2.24

Heritage Foods (India) Ltd

1.25

1.12

1.30

1.60

1.74

Andhra Pradesh Dairy Development Cooperative

Federation Ltd

1.25

1.24

1.20

1.13

1.00

Bihar State Co-operative Milk Producers Federation

Ltd

1.00

1.06

1.02

0.96

1.00

Yakult Danone India Pvt Ltd

0.22

0.38

Britannia New Zealand Foods Pvt Ltd

1.50

1.99

Others

49.48

46.65

41.00

34.53

28.36

Total

100.00 100.00 100.00 100.00 100.00

Source: Euromonitor International from official statistics, trade associations, trade press, company
research, store checks, trade interviews, trade sources
Yoghurt Brand Shares 2006-2009
% retail value
rsp

Company

2006

2007

2008

2009

Nandini

Karnataka Cooperative Milk Producers

Federation Ltd

16.00

16.00

16.45

17.91

Amul

Gujarat Co-operative Milk Marketing

Federation Ltd

10.00

12.00

15.46

16.92

Mother Dairy

Mother Dairy Fruit & Vegetable Ltd

5.50

7.50

9.47

11.94

Fresh'n Natural
Dahi

Nestl India Ltd

5.50

6.00

6.98

6.97

Aavin

Tamil Nadu Cooperative Milk Producers

Federation Ltd

5.50

5.50

4.99

4.98

Milma

Kerala Cooperative Milk Marketing

4.98

4.52

3.98

3.98

Federation Ltd
Britannia

Britannia Dairy Pvt Ltd

2.49

Omfed

Orissa State Cooperative Milk Producers

Federation Ltd, The

2.45

2.45

2.19

2.24

Heritage

Heritage Foods (India) Ltd

1.12

1.30

1.60

1.74

Vijaya

Andhra Pradesh Dairy Development

Cooperative Federation Ltd

1.24

1.20

1.13

1.00

Sudha

Bihar State Co-operative Milk Producers

Federation Ltd

1.06

1.02

0.96

1.00

Yakult

Yakult Danone India Pvt Ltd

0.22

0.38

Britannia

Britannia New Zealand Foods Pvt Ltd

1.50

1.99

Dahi

Nestl India Ltd

Others

Others

46.65

41.00

34.58

28.46

Total

Total

100.00 100.00 100.00 100.00

Source: Euromonitor International from official statistics, trade associations, trade press, company
research, store checks, trade interviews, trade sources

References

www.malabarmilma.com - Website of Malabar Union of Milma

http://www.nddb.org - National Dairy Development Board
www.milma.com - Milma Website
http://www.indiaenvironmentportal.org.in/content/whats-show