The Transportation Model of Amul

Productions and Operations Management | ME315

Done by: -

Abhishek Kumar Tetarwal (B18ME001)

Abhishek Sharma (B18ME002)
Aman Kumar (B18ME005)
Ani Agrawal (B18ME008)
Ankit Mittal (B18ME010)
Pareekshit Singh Rawat (B17ME036)

PAGE 1
 Contents
Aim: - ............................................................................................ 4
About the Company: - ................................................................. 4
The Amul Model: - ...................................................................... 5
The Three Tier Amul Model:- ................................................................5
Supply Chain of Amul: - .............................................................. 6
Largest Cold Chain: - .............................................................................. 6
Farmers (The Suppliers): .........................................................................7
VCS:...........................................................................................................7
GCMMF: ...................................................................................................7
Customers: ................................................................................................7
The Supply Network: - ................................................................ 8
The two channels of this supply chain:- ................................................ 8
Upstream channel: - ............................................................................... 8
Downstream channel : - ......................................................................... 8
Technology Initiatives ................................................................. 9
Advertising Campaign: - ............................................................. 9
Amul Yearly Turnover: - ............................................................ 10
Navigating a lockdown:............................................................... 11
Problems faced during COVID-19 pandemic: ........................... 11
Some Solutions to the Problems faced during pandemic: - ... 12
Major Transportation Problems: ............................................... 12
Some Solution to transportation problems: ............................. 13

PAGE 2
Transportation Model: ............................................................... 14
Results and discussions: - .......................................................... 17
References: - ................................................................................ 18

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Aim: -
The motivation of this project is to explore the transportation model of Amul.
We will explore how AMUL products are transferred from one place to
another without getting any harm, how Amul gets Milk and transforms it into
various products.

About the Company: -

Anand Milk Union, limited known as Amul, is an Indian dairy co-
operative society based on Anand in Gujarat's Indian state. Amul was formed
in 1946. It is managed by a collective body, the Gujarat Co-operative Milk
Marketing Federation Ltd. (GCMMF). Amul encouraged India's White
Revolution, making the country the world's most gigantic milk and milk
product producer. In 1999, Amul received the "Best of all" Rajiv Gandhi
National Quality Award. In August 2019, Amul became the first Indian dairy
company to enter Rabobank's Global Top 20 Dairy Companies list.
In the current state, Ramsinh Parmar was elected as the new chairman of
Amul's marketing body. Anand Dairy chairman Ramsinh Parmar was today
unanimously elected as the chairman of Gujarat Cooperative Milk Marketing
Federation Limited (GCMMF), the 'Amul' brand of Milk and other dairy
products.
Amul is an "Amoolya" brand. "Amoolya" in Sanskrit means something
priceless. With a presence in almost every dairy product, Amul has become a
highly valued brand with an Indian origin. Amul was formed because of a
revolution of dairy farmers. Today, Amul is a brand against which companies
want to compete and come on top, but the same is not being allowed by Amul's
smart minds. The reason Amul is such a strong brand is because of
the marketing mix of Amul.

(Source: - www.wikipedia.org )

PAGE 4
The Amul Model: -
The Amul Model of dairy development is divided into three subparts.
First, the co-operative dairy societies at the village level. Second, united under
a milk union at the district level and third, a federation of member unions at
the state level.

• A direct connection between milk producers and consumers by

eliminating intermediaries.
• Milk Producers (farmers) control procurement, processing, and
marketing.
• Professional management.
(Source – www.amul.com)

The Three Tier Amul Model:-

DAIRY MILK MILK

COOPERA UNION FEDERATI
TIVE ON
MILK
SOCIETY
PROCURE MILK
MILK MENT AND PRODUCT
COLLECTI PROCESSI MARKETI
ON NG NG

VILLAGE LEVEL

STATE LEVEL
DISTRICT LEVEL

PAGE 5
Supply Chain of Amul: -

Farmers VCS Member GCMMF

Unions

Consumers Retailers Distributers

Today Amul has taken the form of a co-operative association. Amul has
developed in-house technology and methods to store extra stock of milk and
dairy products in powdered Milk to distribute products made from the
powdered Milk during seasons of the year when dairy farm produces less than
market demand. The milk ingredients are water, SNF (solids not fat consists
of everything except milk fat and water), and solids. Milk is a fresh product
because of that; it has to be consumed in 24 hours. To avoid milk wastage,
Amul converts the Milk into SNF and milk solids by evaporating the water
using some standard and in-house developed methods.
Every day, Amul collects 447,000 liters of Milk from 2.12 million farmers,
transforms this Milk into packaged products, and delivers the goods to about
500,000 retail outlets.

Largest Cold Chain: -

The cold chain is a storage system and transporting dairy products at optional
temperatures from the company to consumers.
Amul has the largest cold-chain network in India, having around 18000
refrigerators than any other dairy company.

PAGE 6
(Source: - General Internet searches)

Farmers (The Suppliers):

A majority of suppliers are small farmers from the villages who are poor,
illiterate, and livelihood problems.

VCS:
The farmers are organized into Village Cooperative Societies (VCS). From
these VCSs, Milk goes to thirteen different dairy co-operatives, called Unions.
Amul is one of them.

GCMMF:
The milk and milk products manufactured at these unions are then going to
the Gujarat Cooperative Milk Marketing Federation (GCMMF). The
GCMMF is a standard marketing entity for the products from all the
associations in Gujarat. GCMMF has 42 distribution centers in India. These
distribution centers serve over 500,000 retail outlets in India and exports to
more than 15 countries. All these organizations are independent legal entities.

Customers:
India is still in the growth stage with great potential for high-value products
such as spices and milk variants. The distribution network of Amul is quite
extensive, with access to rural areas.

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The Supply Network: -
Amul buys Milk from the village farmers and collects the Milk at
village co-operative societies (VCS). The Milk is taken to manufacturing
plants to process the Milk into various dairy products. These manufactured
products were then transported to the company depots located in different
parts of the country. These products then go to wholesale distributors and from
there to the retailers.

The two channels of this supply chain:-

Upstream channel: -
The procurement channel for Milk from the farmers to the manufacturing
units
• First, the Milk is taken to the VCS by the farmers on foot or
bicycles in small quantities.

• Then Milk is transported from co-operatives to the manufacturing

units via special trucks equipped with tankers to carry Milk once a
day. A milk tanker transports three to four societies' Milk together,
which helps in achieving economy in the transportation of Milk.
Downstream channel: -

The distribution channel from manufacturing units to retailers.

• First, the products are taken from manufacturing units to the
depots. This is done by using 9 to 18 trucks.
• The frozen food is kept at a temperature of -18° C.
• And then depots to distributors, transported through insulated
trucks.
• And then from distributors to retailers.
• Finally, we get the products from AMUL.

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Technology Initiatives: -
A programmed Milk Collection System is established that can identify and
test the quality/quantity of Milk. This leads to time-saving since over 1000
producers enter a village co-operative each day and improve transparency.

Enterprise-wide Integrated Application Systems were used to make even

various sub software systems in a place. A Geographic Information System
has also been established to view supply inequalities in real-time. Cyber stores
have also been recently launched as well.

Advertising Campaign: -

Amul's most exciting thing is how a dairy company evolved into a social
commentator through their advertisements. The cartoon usually has the (Amul
Girl) in an existing context with a catchy tagline. These ads now become a

PAGE 9
 trademark of their right, elevating Amul's brand image from just a dairy co-
operative to a household name outside the dairy products context.

Amul Yearly Turnover: -

Yearly Turnover
450000

400000 385500

331500
Turnover(in million Rs.)

350000
292250
300000 270850

250000 229720
207330
200000 181434

150000 137350
116680
97742
100000

50000

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
Year

The GCMMF said that they have a sales turnover of Rs 38,542crore in 2019-
20, which is 17 percent higher than the last economic year.
A quick expansion has helped Amul record a turnover almost five times higher
than Rs 8,005 crore in 2009-10, it said.
Daily milk procurement was 215.96 lakh liter per day in 2019-20, GCMMF
said.
"This mammoth growth was a result of the high milk procurement price paid
to the farmer -members which have increased, from Rs 337/kg, by 127 percent
fat in the year 2009-10 to Rs 765/kg fat in the year of 2019-20," the GCMMF
said."

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AMUL said that during the lockdown, when private milk firms stopped
procuring from farmers, Gujarat's milk unions procured an additional 35 lakh
liters of milk/day, giving around Rs.800 crore extra to the rural milk
producers.

Navigating a lockdown:

India broadcasted a total lockdown beginning from 25 March. Still, Amul was
already geared up to avoid any troubles to what Sodhi names its cow to
consumer and buffalo to the consumer's supply chain.
That chain is a mammoth one. The GCMMF, which sells its products under
the Amul brand, is owned by 3.6 million farmers. Of these, around 2.6 million
farmers bring their Milk twice daily to 18,600 village societies from where
chilled Milk is transported to district milk unions for processing into packaged
Milk and value-added products. The products then reach over a billion
consumers daily via 10,000 distributors and a million retailers.

Problems faced during COVID-19 pandemic:

❖ Amul faces glitches in inter-state transport with an initial 21-day

lockdown and continues until unlock.
❖ One major problem was packaging material.
❖ Workers being not able to reach factories due to lockdown.
❖ Health issues to the workers and the management team.
❖ Maintaining adequate social-distance while working.
❖ Sanitization of the working place and pre-checkup of workers working
over there.

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Some Solutions to the Problems faced during a pandemic: -

• GCMFF has made representations to relevant authorities to ensure the

operations of packaging factories and the free movement of
these factories' workers.

• More number of contract laborers can be hired so that they can

work whenever they are available. Factories can also arrange buses
to facilitate pickup and drop off of workers

• Give extra allowance to workers for sanitization and PPE kits.

• Setup liaison with the hospitals where factory workers will be given
priority for the treatment.

• Develop strict protocols to be followed in the workplace to

maintain social distancing and regular temperature checks in case
anyone is tested positive

• Include health insurance coverage to encourage workers to come to

work.

Major Transportation Problems:

❖ High transportation cost: As dairy products have a shorter life, they
should be transported on time, which costs much more.
❖ Reaching the poorly connected places: As India is a vast country and
still, we are in the developing phase because of that, we have many
areas of low connectivity. So, reaching out to people should be our
motto, which will prosper our country and AMUL.
❖ High transportation time-space: As a Supplier base of Milk to Amul is
very large. It takes so much time from the collection from all places as
the quality of all milk barrels is different from monitoring them and
using the appropriate Milk.

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Some Solution to transportation problems:

High Transportation cost can be reduced by using the railway as a

transportation medium rather than trucks for far distances: -
Liters of Milk from Manesar plant to Delhi Depot per day = 1,200,000
Distance between plant to depot = 68 Km
Number of delivery days per year for Milk = 365 days
Annual transportation cost (Road) = Rs. 400,000,000
Transportation cost per liter by road = Rs 0.91
Parcel rates in Indian railway for 68km = Rs 25.5 for 100 kg
Density of standard milk = 1.027 to 1.033 kg/liter
Transportation cost per liter by road = parcel rate * density/100= Rs. 0.263
At least saving per liter by rail = Rs 0.647
Total saving per year = Rs 283,386,000 from Manesar plant to Delhi
depot.
Data source: (Amul official website; indianrailways.gov.in)
So, if Amul contracts with Indian railways for the whole supply chain, they
can also get more benefits.
❖ For places that are poorly connected. We can tie-up with local people
and small localized companies to manage the cost of traveling. Places
like Leh-Ladakh, Northeastern region, have poor connectivity, but as a
company, our focus is to reach every potential buyer. If we tie-up with
local dealers, transportation costs can be divided, which will reduce
cost, even saving time as the local community knows more about the
routes than big corporates.

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 ❖ As Amul has a vast milk supplier base, the chances of mixing defecting
milk increases. The Amul is known for its quality, so testing every Milk
before integrating is very important. Testing every milk samples
increases the transportation time. So, a decentralization of testing can
be done, which will reduce the testing cost and transportation time.

❖ Using app-based testing can be done. An app can be created to check

the quality of milk-based on color, appearance, shine, and other factors.
This will further eliminate time wasted on testing and tracking of milk
samples can be done in this way.

Transportation Model:

To extract a useful transportation model, we have taken six production farms

of Amul firm Gandhinagar, Mehsana, Palanpur, Surat, Rajkot, and Godhara.
Their production capacities are 50 LLPD, 24 LLPD, 35 LLPD, 30 LLPD, 20
LLPD, 17 LLPD. These units are dispatched from here to fulfill Zone-I's
demands (Delhi/ Kundali/ Parwanoo/ Kanpur/ Ghaziabad/ Varanasi/ Jammu/
Ludhiana/ Dheradhun/ Chandigarh), Zone-V (Jaipur/ Udaipur),
Indore/Raipur, and rest of the India depots. The transportation costs (in
rupees) per unit QTL between the production farms and the demanding places
are given in the table:

Dispatches Zone-I, Raipur/ Rest of India Supply

From Zone-V Indore Depots (In Lakh
(in Rs/QTL) (in Rs/QTL) (in Rs/QTL) Liters Per
Day)

Gandhinagar 5 3 3 50

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 Mehsana 5 10 10 24

Palanpur 5 12 12 35

Surat 10 10 5 30

Rajkot 15 15 15 20

Godhara 3 3 3 17

Demand 78 43 55 176
(in Lakh
Liters Per
Day)

Table: Cost of transportation table

So, we can solve this transportation problem by using MODI (Modified

Distribution method). Upon solving, we get distribution as follows:

Dispatches Zone-I, Raipur/ Rest of India Supply

From Zone-V Indore Depots (In Lakh
(in Rs/QTL) (in Rs/QTL) (in Rs/QTL) Liters Per
Day)

Gandhinagar 0 43 7 50
Mehsana 24 0 0 24
Palanpur 35 0 0 35

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 Surat 0 0 30 30

Rajkot 2 0 18 20

Godhara 17 0 0 17
Demand 78 43 55 176
(in Lakh
Liters Per
Day)

Table: Optimal assignment using MODI Model

So total minimum cost of transportation = 3 × 43 + 3 × 7 + 5 × 24 + 5 ×

35 + 5 × 30 + 15 × 19 + 15 × 1 + 3 × 17 = 946 units

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Results and discussions: -
For Low Cost Transportation Model:-

• We can choose:-

• Medium :-
Using of railway as a medium which cuts down the cost.
• Involving local community:-
Involving the local small businesses and taking help of local
residents.
• Resource utilization:-
Having localized units for proper milk collection and testing.

• If Amul contracts with Indian railways for the whole supply chain, they
can generate more revenue.
• We have used the MODI(Modified Distribution method) to solve the
transportation problem.
• Equiping the new technologies as soon as they arrives in future to make
the production fast and reliable.

PAGE 17
References: -
• https://www.amul.com/m/organisation
• https://timesofindia.indiatimes.com/city/ahmedabad/Gandhin
agar-to-house-Asias-largest-dairy-plant-at-a-single-
location/articleshow/54812208.cms
• https://indianrailways.gov.in/
• www.wikipedia.org

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