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Executive summary:

Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat, India. The word
amul () is derived from the Sanskrit word amulya (), meaning rare, valuable. The co
operative was initially referred to as Anand Milk Federation Union Limited hence the name
Formed in 1946, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk
Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3 million milk producers
in Gujarat. Amul spurred India's White Revolution, which made the country the world's largest
producer of milk and milk products. In the process Amul became the largest food brand in India
and has ventured into markets overseas. Dr Verghese Kurien, founder-chairman of the GCMMF
for more than 30 years (19732006), is credited with the success of Amul.

Amul the co-operative registered on 1 December 1946 as a response to the exploitation of
marginal milk producers by traders or agents of the only existing dairy, the Polson dairy, in the
small city distances to deliver milk, which often went sour in summer, to Polson. The prices of
milk were arbitrarily determined. Moreover, the government had given monopoly rights to
Polson to collect milk from mikka and supply it to Bombay city.
Angered by the unfair trade practices, the farmers of Kaira approached Sardar Vallabhbhai Patel
under the leadership of local farmer leader Tribhuvandas K. Patel. He advised them to form a
cooperative and supply milk directly to the Bombay Milk Scheme instead of Polson (who did the
same but gave them low prices). He sent Morarji Desai to organise the farmers. In 1946, the milk
farmers of the area went on a strike which led to the setting up of the cooperative to collect and
process milk. Milk collection was decentralized, as most producers were marginal farmers who
could deliver, at most, 12 litres of milk per day. Cooperatives were formed for each village, too.
The cooperative was further developed and managed by Dr.Verghese Kurien with H.M. Dalaya.
Dalaya's innovation of making skim milk powder from buffalo milk (for the first time in the
world) and a little later, with Kurien's help, making it on a commercial scale, led to the first
modern dairy of the cooperative at Anand, which would compete against established players in
the market. Kurien's brother-in-law K.M. Philip sensitized Kurien to the needs of of attending to
the finer points of marketing, including the creation and popularization of a brand. This led to the
search for an attractive brand name. In a brainstorming session, a chemist who worked in the
dairy laboratory suggested Amul, which came from the Sanskrit word "amulya", which means
"priceless" and "denoted and symbolised the pride of swadeshi production."

The trio's (T. K. Patel, Kurien and Dalaya's) success at the cooperative's dairy soon spread to
Anand's neighbourhood in Gujarat. Within a short span, five unions in other districts Mehsana,
Banaskantha, Baroda, Sabarkantha and Surat were set up. To combine forces and expand the
market while saving on advertising and avoid competing against each other, the GCMMF, an
apex marketing body of these district cooperatives, was set up in 1973. The Kaira Union, which
had the brand name Amul with it since 1955, transferred it to GCMMF.
In 1999, it was awarded the "Best of all" Rajiv Gandhi National Quality Award.
Adding to the success, Dr. Madan Mohan Kashyap (faculty Agricultural and Engineering
Department, Punjab Agricultural University Ludhiana), Dr. Bondurant (visiting faculty) and Dr
Feryll (former student of Dr Verghese Kurien), visited the Amul factory in Gujarat as a research
team headed by Dr. Bheemsen. Shivdayal Pathak (ex-director of the Sardar Patel Renewable
Energy Research Institute) in the 1960s. A milk pasteurization system at the Research Centre of
Punjab Agricultural University (PAU) Ludhiana was then formed under the guidance of

The GCMMF is the largest food products marketing organisation of India. It is the apex
organisation of the dairy cooperatives of Gujarat. It is the exclusive marketing organisation for
products under the brand name of Amul and Sagar. Over the last five and a half decades, dairy
cooperatives in Gujarat have created an economic network that links more than 3.1 million
village milk products with millions of consumers in India.[citation needed] The daily milk
procurement of GCMMF is around 13 million liters per day. It collects milk from about 16914
village milk cooperative societies, 17 member unions and 24 districts covering about 3.18
million milk producer members. More than 70% of the members are small or marginal farmers
and landless labourers including a sizeable population of tribal folk and people belonging to the
scheduled castes.

The three-tier "Amul Model"

The Amul Model is a three-tier cooperative structure. This structure consists of a dairy
cooperative society at the village level affiliated to a milk union at the district level which in turn
is federated into a milk federation at the state level. Milk collection is done at the village dairy
society, milk procurement and processing at the District Milk Union and milk products
marketing at the state milk federation. The structure was evolved at Amul in Gujarat and
thereafter replicated all over the country under the Operation Flood programme. It is known as
the 'Amul Model' or 'Anand Pattern' of dairy cooperatives.

The main functions of the VDCS are:

Collection of surplus milk from the producers of the village and payment based on
quality and quantity,
Providing support services to the members like veterinary first aid, artificial insemination
services, cattle-feed sales, mineral mixture sales, fodder and fodder seed sales,
conducting training on animal husbandry and dairying,
Selling liquid milk for local consumers of the village,
Supplying milk to the District Milk Union.

Internal Organization Structure:

The following is internal organization chart of Amul:

Strategy of Amul

Amuls strategy is broadly divided into two components:

The first one is the collection chain and the second one is the Supply chain. The collection chain
starts from weighing the milk to determination of the fat content in the milk to finally calculation
of the purchase price. While the supply chain starts from storing the milk to processing the milk
to finally distributing the milk.

Supply chain management of Amul

Any dairy is able to survive if the amount of milkprocurement increases. For this various aids
have been better breeding of the cattle they have artificial insemination. It has been found that all
these inputs haeve helped in the production of milk. The procurement at Amul has increased
from 41.42 lakh kg to 64.38 lakh kg resulting a growth of 55.42% in last 10yrs . In Gujrat, the
village societies have got so much profit that they have a fund from which they are able to
contribute some money for the upliftment of their village like opening a school, building a
hospital etc. These village societies are a link between the members and the union. The cooperative helps the farmers to get remunerative price as well as continuous market for the milk.
In addition to the price of the milk they also get a bonus at the end of the year from the profit of
the organization. The professionals utilize it by diversifying the products and finding suitable
market. To further improve the efficiency of the procurement the organization has used the
technology for this. Every society has its own computerized system where the testing of milk is
done and payment is made according to the quantity and quality. Milk being a perishable
commodity it is necessary to preserve it properly. To maintain its quality the society maintains a
Bulk Milk Cooling system which preserves the milk below 40oC. This also reduces the expenses
of the transportation as the society which has this unit the van goes only once a day to collect the
milk. Further to prevent the sourage of the milk the union has its own chilling centers which help
in preserving the milk procured from the far off societies.

Six million litres of milk per day from about 10,675 separate village cooperative
societies Storing, processing and producing of milk products at the 12 district
dairy societies
3,000 Automatic Milk Collection System Units (AMCUS) at village societies
10 million payments daily Rs 17 crores paid in cash, everyday
More than 5,000 trucks move the milk from the villages to 200 dairy
processing plants twice a day
Just-in-Time supply chain management with Six Sigma accuracy.

Amul supply chain management practices

AMUL is a dairy cooperative in the western India that has been primarily responsible, through its
innovative practices, for India to become the worlds largest milk producer. The distinctive
features of this paradigm involves managing a large decentralized network of suppliers and
producers, simultaneous development of markets and suppliers, lean and efficient supply chain,
and breakthrough leadership.

Every day Amul collects 447,000 litres of milk from 2.12 million farmers , converts the milk into
branded, packaged products, and delivers goods worth Rs 6 crore (Rs 60 million) to over
500,000 retail outlets across the country.
To implement their vision while retaining their focus on farmers, a hierarchical network of
cooperatives was developed, this today forms the robust supply chain behind GCMMFs
endeavors. The vast and complex supply chain stretches from small suppliers to large fragmented
Management of this network is made more complex by the fact that GCMMF is directly
responsible only for a small part of the chain, with a number of third party players (distributors,
retailers and logistics support providers) playing large roles. Managing this supply chain

efficiently is critical as GCMMF's competitive position is driven by low consumer prices

supported by a low cost system of providing milk at a basic, affordable price.

Amul makes over 10 million payment transactions daily. On the logistics more than 5000 trucks
move milk from the villages to 200 dairy processing plants twice a day according to a carefully
planned schedule. Its ERP software named as Enterprise Wide Integrated Application
System(EIAS) covers a plethora of operations like market planning advertising and promotion,
distribution network planning. Each of amul offices are connected via internet and all of them
send daily reports on sales and inventory to the main system at Anand. Has also connected all
zonal, regional & member dairies through VSAT Supply management through internet



Logistics in collection

6 million liters of milk per day

From about 10,600 separate village cooperative societies.

Approximately 2.8 million milk producing member.

Logistics in coordination of

Storing the milk.

Processing the milk.

Distributing the milk.

Supplier logistics

Weighing the milk.

Determining of fat content.

Calculation of the purchase price.

Reverse Logistic

Amul is not a food company, it is an IT company in the food business " - B M Vyas, Chief
Executive Officer
The evolution of IT in AMUL was took place in the guidance of DR.B.M Vyas.
The milk collection center at village cooperative societies, were first automated.

Data analysis software utilization for milk production estimation and increasing
VATS network between all the level of distribution network and GCMMF.

The distribution network

Amul products are available in over 500,000 retail outlets across India through its network of
over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of
the entire range of products.
GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the
cheque system adopted by other major FMCG companies. This practice is consistent with
GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it also
minimizes dumping.
Wholesale dealers carry inventory that is just adequate to take care of the transit time from the
branch warehouse to their premises. This just-in-time inventory strategy improves dealers' return
on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated
vehicle operations.

Benefits of IT
AMUL is the first company in the co-operative form to adopt the e-revolution. In this
informationcommunication-Entertainment age, the barriers between the business organization
and consumers, between manufacturers and end-users are all breaking down. This is what was
started fifty years back by AMUL by eliminating the middlemen and bringing the producers
closer to the consumers. The organization believes in innovations in product as well as process.
For rapid communication access to Veterinary Health Assistance they have introduced the GIS
facility. The adoption of the electronic milk testers to ensure efficient testing and measurement of
milk constituents is a step in this direction. This is first organization to have its own website
9 They have nationwide cyberstores, functioning in some 120 cities, and an
AMUL cyber stores gifting service capable of serving consumers in more than 220 cities, on
special occasions. This has been possible by creating an IT network, which links the production,
centres with sales offices and dealers by VSAT and e-mail connectivity.
Processing of 10 Million payments daily, amounting to transactions worth USD 3.78
million in cash.
Radical changes in business processes - eliminating middlemen.
Improved delivery mechanisms and transparency of business operations.
Due to this process, AMUL is able to collect six million litres of milk per day.
Huge reduction in processing time for effecting payments to the farmers from a week to
couple of minute.
Movement of 5000 trucks to 200 dairy processing plants twice a day in a most optimum
Practicing just in time supply chain management with six sigma accuracy.
Online order placements of Amuls products on the web.
Distributors can place their orders on the website.
Amul exports products worth around US$ 25 million to countries in West Asia, Africa
and USA.

Automatic milk collection unit system:

Amul has installed over 3000 Automatic milk collection

system units(AMCUS) at village societies to capture member information, milk fat content,
volume collected and amount payable to each member. Each farmer is given a plastic card for
identification Computer calculates amount due to farmer on the basis of fat content The value of
the milk is then printed out on slip & handed over to the farmer, who collects the payment from
adjacent window With the help of IT farmers receive their payment within minutes How
AMCUS work


Total quality management

Quality is very important for any food industry. Quality implies maintenance of functional values
of the product as well as improving the style of management by keeping customer in focus. The
milk producers of the member unions have a commitment to achieve quality in basically six
priority areas Cleanliness of the dairy cooperative societies, Planning and Budgeting of the
Dairy Society, Artificial Insemination Service, Quality Testing and Milk measurement at Dairy
co-operative Societies and Management Practices and Self-leadership Development. This TQM
movement has also been extended to the wholesale dealers by organizing workshops for them.
Quality circles that work in tandem with the sales force . This movement also involves the
process of policy deployment known as Hoshin Kangri. This involves strategy formulation and
implementation, involving every member of the value chain
There is improvement in quality of milk in term of acidity and sour milk
Milk union records show 2% reduction in the amount of the sour milk received from the
Improved microbiological quality of upcoming raw milk in the form of methylene blue
This gives better shelf life to the product
Friday Departmental meetings: to disscuss issues related to quality.

The business model

From the very beginning, in the early 1950s, AMUL adopted the network as the basic model for
long-term growth.
The network explicitly includes secondary services to the farmer-suppliers.
Several of the entities in the network are organized as cooperatives linked in a
hierarchical fashion.
Customers: In comparison with developed economies, the market for dairy products in
India is still in an evolutionary stage with tremendous potential for high value products such as
ice cream, cheese etc. The distribution network, on the other hand, is quite reasonable with

access to rural areas of the country. Traditional methods practiced in western economies are not
adequate to realize the market potential and alternative approaches are necessary to tap this
Suppliers: A majority of the suppliers are small or marginal farmers who are often illiterate,
poor, and with liquidity problems as they lack direct access to financial institutions. Again,
traditional market mechanisms are not adequate to assure sustenance and growth of these
Third Party Logistics Services: In addition to the weaknesses in the basic infrastructure,
logistics and transportation services are typically not professionally managed, with little regard
for quality and service. In addition to outbound logistics, GCMMF takes responsibility for
coordinating with the distributors to assure adequate and timely supply of products. It also works
with the Unions in determining product mix, product allocations and in developing production
plans. The Unions, on the other hand, coordinate collection logistics and support services to the
member-farmers. In what follows we elaborate on these aspects in more detail and provide a
rationale for the model and strategies adopted by GCMMF.
Simultaneous Development of Suppliers and Customers: From the very early stages of the
formation of AMUL, the cooperative realized that sustained growth for the long-term was
contingent on matching supply and demand. The member-suppliers were typically small and
marginal farmers with severe liquidity problems, illiterate and untrained. AMUL and other
cooperative Unions adopted a number of strategies to develop the supply of milk and assure
steady growth. First, for the short term, the procurement prices were set so as to provide fair and
reasonable return. Second, aware of the liquidity problems, cash payments for the milk supply
was made with minimum of delay. This practice continues today with many village societies
making payments upon the receipt of milk. For the long-term, the Unions followed a multipronged strategy of education and support. For example, only part of the surplus generated by
the Unions is paid to the members in the form of dividends
Managing Third Party Service Providers:

Unions focused efforts on these activities and related technology development . The marketing
efforts were assumed by GCMMF. All other activities were entrusted to third parties. These
include logistics of milk collection, distribution of dairy products, sale of products through
dealers and retail stores, some veterinary services etc. It is worth noting that a number of these
third parties are not in the organized sector, and many are not professionally managed. Hence,
while third parties perform the activities, the Unions and GCMMF have developed a number of
mechanisms to retain control and assure quality and timely deliveries. This is particularly critical
for a perishable product such as liquid milk.

Coordination for Competitiveness

Coordination is one of the key reasons for the success of operations involving such an
extensive network of producers and distributors at GCMMF. Some interesting mechanisms exist
for coordinating the supply chain at GCMMF.
These mechanisms are:

Inter-locking Control
The objective for developing such an inter-locking control mechanism is to ensure that the
interest of the farmer is always kept at the top of the agenda through its representatives who
constitute the Boards of different entities that comprise the supply chain. This form of direct
representation also ensures that professional managers and farmers work together as a team to
strengthen the cooperative. This helps in coordinating decisions across different entities as well
as speeding both the flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of Federation

Its objective is to ensure that all milk that the farmers produce gets sold in the market either as
milk or as value added products and to ensure that milk is made available to an increasingly large
sections of the society at affordable prices


Supplier Enhancement and Network servicing

Their objective is to ensure that producers get maximum benefit and to resolve all their
problems. They manage the procurement of milk that comes via trucks & tankers from the VSs.
They negotiate annual contracts with truckers, ensure availability of trucks for procurement,
establish truck routes, monitor truck movement and prevent stealing of milk while it is being

GCMMFs supply chain


E- supply chain management of amul

E-SCM may be described as the integrated management approach for planning and

the flow of materials from suppliers to the end users using internet

E-SCM refers to the complex network of relationship that organizations maintain with
trading partner to source, manufacture and deliver the products.


Components of E-SCM







e-scm diagram of amul


Working of E-SCM
Amul has installed over 3000 automatic milk collection system units (AMCUS) at village
societies to capture member information, milk fat content and amount payable to each
Each member is given plastic card for indentification
Computer calculate amount due to the farmer on the basis of the fat content
The value of the milk is printed out on the slip and handed over to the farmer ,who
collects the payment from the adjacent window
Thus with the help of it farmer gets the payment within the minutes
On the logistic more than 5000 trucks move milk from the villages to 200 dairy
processing plants twice a day according to a carefully planned scheduled
Every day Amul collects 7 million liters of milk from 2.6 million farmers (many
illiterate), converts the milk into branded, packaged products, and delivers goods to over
500,000 retail outlets across the country
ERP software named as enterprise wide integrated application system covers a operation
like planning advertisement and promotion and distribution network planning.
Each Amul office are connected via internet and all of them send daily reports on sales
and inventory to the main system at Anand,

Supply & Distribution

At the supply end a computerized database has been setup of all suppliers & their cattle.
Computer equipment measures & records qualities & quantities collected.
At the distribution end stockists have been provided with basic computer skills. Amul
experts assist them in building promotional web pages.


Amul Cyber stores have been setup in India, USA, Singapore and Dubai

Amul cyber store

Strong initiatives in e-commerce

Amul has linked distributors to the network & also incorporated web pages of top
retailers on their website

Distributors can place their order on website

Automated supply & delivery chain
Practices just in time supply chain management with six sigma accuracy

Benefits of E-SCM
Supports exchange of real time information
Platform independent
Web visibility & processing capability 24/7
Return on investment
It has open internet application architecture which allows for Rapid deployment &
scalability combining unlimited users in real time environment
Incorporates broadcast & active messaging