254 Global Logistics Value Chain Management
LPI
4
Timelimess Customs
Tracking & Tracing Infrastructure
Logistics Competence International Shipments
Germany 2018 China 2018 India 2018
Figure 9.3 India against Global Indicators of Logistics Infrastructure
Table 9.2 Logistics Performance Index of India, China and Germany on Select Parameters1
Germany 2018 China 2018 India 2018
Country Parameter Germany China India
LPI Rank 1 26 44
Customs 1 31 40
Infrastructure 1 20 52
International shipments 4 18 44
Logistics competence 1 27 42
Tracking & tracing 2 27 38
Timeliness 3 27 52
Case Study: Anand Milk Producers Union Limited (AMUL)
AMUL means priceless in Sanskrit ‘Amoolya’. Brand name managed by an apex cooperative
organisation – GCMMF (Gujarat Cooperative Milk Marketing Federation) producer of the World’s
biggest vegetarian cheese brand, world’s largest pouched milk brand. AMUL, which is also the
largest food brand in India, spurred the white revolution in India. It has accreditation with 9001 and
HACCP certification by QAS, Australia.
The AMUL is a cooperative dairy founded in 1946 having annual revenue of INR 292.25 billion
or USD 4.1 billion in 2017–2018. AMUL is the world’s largest milk producer in the world. More
Global Logistics Value Chain Management 255
Farmers Village Member GCMHFL Distributors Retailers
Cooperative Units
Societies
10,675 12 Units
2.2 Million
Cooperative 10,000 700 EMP 3,000 500,000 Consumers
Numbers
Societies EMP
Production Milk Milk Marketing Distribution Retailing
of Milk Collection Processing
End-to-End Value Chain of Amul
Figure 9.4 AMUL Value Chain
than 15 million milk producers pour their milk in 144,500 dairy cooperative societies across the
country. One hundred and eighty-four district cooperative unions marketed by 22 state marketing
federations and 18544 village societies. Total milk handling capacity of AMUL is 32 million litres
per day. AMUL manufactures a wide range of milk, milk powder, health beverages, cheese, ghee,
butter, ice cream and traditional Indian sweets and milk products as well as chocolates. It operates
through 56 sales offices, having a dealers network of 10,000 and directly servicing one million retail
outlets (Figure 9.4).
Logistics Challenge of AMUL
Procurement Logistics
• Handling of 32 million litres of milk per day
• From about 18,544 separate village cooperative societies
• Approximately 15 million milk-producing member
• 144,500 dairy cooperative societies across the country, 184 district cooperative unions marketed by
22 state marketing federation and 18,544 village societies
Logistics/Coordination
• Storing and transportation of the milk from collection centres to production centres and then to
consumers
• Distributing milk and milk products through 10,000 distributors and more than 1 million retailers
Coordination between Participating Entities
The participating entities on the inbound side are as follows:
• Village Dairy Cooperative Society (VDCS)
• State Cooperative Milk Federation
256 Global Logistics Value Chain Management
GCMMF Supply Chain
Farmers
Village Cooperative Village Cooperative Local Restaurants/ Milk Sold to
Societies (With Societies (Without Other Milk related Village & Local
Chilling Units Chilling Units business Residents
Chilling Plants
Network Services Milk Processing
Union & Warehouse
! Veterinary Services
! Animal Husbandry
! Animal Feed GCMMF
Factory Warehouses
! Milk Can Producers
! Agriculture Wholesalers/C&S
University
! Rural Management Home Delivery
Retailers
Contractors
Institute
! Trucking Facilities CONSUMERS CONSUMERS
Figure 9.5 Supply Chain Network of AMUL
LEVEL MEMBER DECISION-MAKING
District level
Price paid to district
State Chairpersons, Register of
Co-operatives, NDDB unions (fixed across
Federation
Representative, Technical unions)
Expert, CEO
Product mix and
quantity
Chairpersons of Village
Dairy Co-operative Societies, Price paid to village
District
BOD, MD
co-operative societies
Membership
Price paid to milk
Milk Producers, suppliers
Village Managing Committee
Figure 9.6 Decentralised Organisation Structure of AMUL at Different Levels
Global Logistics Value Chain Management 257
Main Function of VDCS
• Collection of surplus milk and payment based on quality and quantity
• Providing support services to the members
• Selling liquid milk for local consumers of the village
• Supplying milk to the District Milk Union
State Cooperative Milk Federation – Main Function
• Marketing of milk and milk products processed/manufactured by milk unions
• Establish a distribution network for marketing of milk and milk products
• Arranging transportation of milk and milk products from the milk unions to the market
• Creating and maintaining a brand for marketing of milk and milk products
• Providing support services to the milk unions and members like technical inputs, management sup-
port and advisory services
• Pooling surplus milk from the milk unions and supplying it to deficit milk unions
• Establish feeder-balancing dairy plants for processing the surplus milk of the milk unions
• Arranging for common purchase of raw materials used in manufacture/packaging of milk products
• Decide on the prices of milk and milk products to be paid to milk unions
• Decide on the products to be manufactured at milk unions and capacity required for the same
• Conduct long-term milk production, procurement and processing as well as marketing planning
• Arranging finance for the milk unions and providing them technical know-how
• Designing and providing training in cooperative development and technical and marketing functions
• Conflict resolution and keeping the entire structure intact
Upstream Procurement
• Activities at the village level comprise developing and servicing the DCSs.
• Increasing milk collection, procuring milk, and transporting it to the chilling and processing units
twice a day.
• The DCSs provide the farmers with good quality animal feed, fodder and other services like veteri-
nary first aid.
• On an average around a thousand farmers come to sell milk at their local cooperative milk collection
centre.
• Each farmer has been given a plastic card for identification.
• At the milk collection counter, the farmer drops the card into a box and the identification number is
transmitted to a personal computer attached to the machine.
• The milk is then weighed and the fat content of the milk is measured by an electronic fat testing
machine.
• Both these details are recorded on the PC. The computer then calculates the amount due to farmer
on the basis of the fat content.
• The value of the milk is then printed out on a slip and handed over to farmers who collect the pay-
ment at adjacent window. Now farmers get direct credit to their account and get paid for their milk
supplies. Payment information comes on their mobile.
Cold Storage Network
• Chillers in proximity of villages
• Prompt transport to district facilities for further dispatch to consumers/processing units
• Chilled trucks to transport processed products
• Delivery to local chillers by insulated rail tankers and chilled trucks
• Refrigerators and freezers with retailers and departmental stores to retain freshness
258 Global Logistics Value Chain Management
Distribution Downstream
• GCMMF coordinated with various unions to get a regular supply of milk and dairy products.
• The processed milk and dairy products were procured from district dairy unions and distributed
through third-party distributors.
• To ensure quality and timely deliveries, GCMMF and the district unions had several mechanisms in
place.
• The unions monitored the supplies of milk and the distribution of finished products.
Complexity of Distribution Operation
• First leg: Manufacturing units to company depots using 9 and 18 MT trucks
• Frozen food – below 18°C, Dairy wet – 0–4°C
• Second leg: Depots to WDs, transport through insulated 3 and 5 MT TATA 407s
• Third leg: WDs to retailers, transport through rickshaws according to the beat plan
Technology to the Rescue
• Amul started implementation of ERP in phases.
• Automatic milk collection system units (AMCUS) at the village society were installed in the first
phase to automate milk production logistics.
• AMCUS facilities to capture member information, milk fat content, volume collected and amount
payable to each member electronically.
Automatic Milk Collection System
The benefits of the AMCUS system are as follows:
• Time reduction
• Reduction of pilferage
• Reduced human errors
• On the spot payments for farmers
• Wastage is reduced
• Transparency of operation
• Operational integration
Transformation
• Radical changes in business processes – eliminating middlemen.
• Improved delivery mechanisms and transparency of business operations.
• Due to this process, AMUL is able to collect 6 million litres of milk per day.
• Huge reduction in processing time for effecting payments to the farmers from a week to a couple of
minutes.
• Processing of ten million payments daily, amounting to transactions worth USD 3.78 million in cash.
• Amul also connected its zonal offices, regional offices and member’s dairies through VSATs.
• The customised ERP-EIAS has been implemented across the organisation integrating various oper-
ational departments.
• Amul is also using Geographic Information Systems (GIS) for business planning and optimisation
of collection processes.
• Indian Institute of Management – Ahmedabad supplemented Amul’s IT strategy by providing an
application software – Dairy Information System Kiosk (DISK) to facilitate data analysis and deci-
sion support in improving milk collection.
Global Logistics Value Chain Management 259
• The kiosk would also contain an extensive database on the history of cattle owned by the farmers
medical history of the cattle, reproductive cycle and history of diseases.
• Farmers can have access to information related to milk production, including best practices in
breeding and rearing cattle.
• As a large amount of detailed history on milk production is available in the database, the system can
be used to forecast milk collection and monitor the produce from individual sellers.
• Movement of 5000 trucks to 200 dairy processing plants twice a day in the most optimum manner.
• Practising just-in-time supply chain management with six-sigma accuracy.
• Online order placements of Amul’s products on the web.
• Distributors can place their orders on the website.
• Amul exports products worth around USD 25 million to countries in West Asia, Africa and the USA.
Sources: Baisya, R.K., Amul Emerging as a Giant in Processed Food Industry. Processed Food Industry,
Vol. 4 Issue 12, October 2001, pp 10–12.
Baisya, R.K., New Chapter to Begin with the Proposed Joint Ventures Between Dairy Co-operatives and
MNCs. Processed Food Industry, Vol. 6 Issue 6, April 2003, pp 8–10.
Baisya, R.K., Interim Budget and Food Processing Industry. Processed Food Industry, Vol. 7 Issue 5,
March 2004, pp 13–14.
Baisya, R.K., Amul will face Competition from other Milk Producing Countries, Processed Food Industry,
Vol. 18, No 8, June 2015, pp 10–13.
2. Baisya, R.K., ‘Amul vs Nandini’ battle heats up in poll-bound Karnataka. Processed Food Industry,
Volume 26, Number 7, May 2023, pp. 8–10.
Case Questions:
1 Discuss the complexity of the logistics task in the corporation.
2 How did management attempt to find unorthodox solutions to the problems?
3 What are the various operational constraints in managing the logistics task?
4 What are the key performance indicators which you find have improved?
5 What are failure risks that an organisation is taking and what are their consequences?
6 What are the possible improvement areas?
7 Discuss supply chain network of Amul.
8 How Amul is managing the decentralised organisational structure?
Chapter Summary
Value chain is another name for end-to-end supply chain. In global business environment, large
companies manage their supply chain in a networked environment sourcing input material
from many countries wherever they are available at best price and quality meeting required
delivery schedule and producing or assembling it at yet another country capturing value at
each stage of interface through effective logistics management were elaborately discussed.
Key drivers as well as tools and methods that facilitate international logistics were discussed.
Current scenario with respect to international trade and how companies are going for acquisi-
tions to acquire critical mass and competitive edge in terms of managing international logistics
challenges are also discussed. Several terminologies used in international logistics trade are
defined with examples. Logistics management and cargo handling efficiency issues are also
discussed. The value chain analyses and strategies for competitive advantage have been cov-
ered in detail.
