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INDEX

CHAPTER TOPIC PAGE NO

1 Introduction to logistics

Definition and meaning

Types of logistics

alue c!ain acti"ities

Impact of logistics

Acti"ities

# Introduction to supply c!ainmanagement

$eaning% definition and

o&'ecti"es

Decision p!ase

Process "ie( of supply c!ain

)unctions

* Dri"ers of supply c!ain management

+ Introduction to A$,-

. /upply c!ain of A$,-0 /upply c!ain management and mar1et

logistics of A$,-

2 Issues and recommendation for

A$,- supply c!ain

34 )inancial implications of

recommendations

5 Anne6ure

78 )indings and conclusion

77 -imitation

7# 9i&liograp!y

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CHAPTER 7?INTROD,CTION

Logistics is concerned with getting the products and services where they are needed

when they are desired. It is difficult to accomplish any marketing or manufacturing

without logistical support. It involves the integration of information, transportation,

inventory, warehousing, material handling, and packaging. The operating responsibility

of logistics is the geographical repositioning of raw materials, work in process, and

finished inventories where required at the lowest cost possible. Within the firm the

challenge is to coordinate individual ob e!pertise into an integrated competency

focused on servicing customers. In most situations the desired scope of suchcoordination transcends the individual enterprise, reaching out to include customers as

well as material and service suppliers. Ina strategic sense, the senior logistics officer

leads a boundary spanning initiative to facilitate effective supply chain relationships.

The e!citement of contemporary logistics is found in making the combined results of

internal and e!ternal integration one of the core competencies of an enterprise.

Throughout the history of mankind wars have been won and lost through logistical

strengths and capabilities or the lack of them. "ven though the generals of the past have

understood the critical role of logistics it only in the recent past that the big

organi#ations have reali#ed its role in the achievement of competitive advantage. $rth

%haw in 1&1' pointed out that( the relations between the activities of demand creation

and physical supply) illustrate the e!istence of the * principles of interdependence and

balance. +ailure to coordinate any one of these activities with its groupfellows and also

with those in the other group, or undue emphasis or outlay put upon any one of these

activities, it is certain to upset the equilibrium of forces which mean efficient

distribution. The physical distribution of the goods is a problem distinct from the

creation of demand. There are many ways of defining logistics but the underlying

concept might be defined as follows( -Logistics is the process of strategically managing

the procurement, movement and storage of materials, parts and finished inventory

through the organi#ation and its marketing channels in such a way that current and

future profitability are ma!imi#ed through the costeffective fulfillment of orders.

5



7<7 DE)INITION

The word logistic has originated from reek word -Logistikos/ and the Latin word

-Logisticus/ which means science of computing 0 calculating

In ancient times it was used more in connection with moving armies, the supplies of food

0 armaments to the war front.

uring World War II logistics gained importance in army operations covering the

movement of supplies , men 0 equipment across the border

Today

It has acquired the wider meaning and is used in the business for the movement of

material from suppliers to the manufacturer and finally the finished goods to the

consumers

L2I%TI3%

7<#T>PE/ O) -OGI/TIC/

1 ) Inbound logistics

6



*4 2utbound logistics

54 Third party logistics

64 +ourth party logistics

'4 7everse logistics

In&ound logistics?

$ctivities associated with receiving, storing and disseminating inputs to the product such

as inputs to the product such as material handling, warehousing, inventory control, vehicle

scheduling and returns to suppliers.

7

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Out&ound logistics?

$ctivities associated with collecting, storing and physically distributing the product to the

buyers. It includes distribution of finished goods, order processing, warehousing, material

handling, delivery vehicle operations, scheduling, shipping, etc.

T!ird Party -ogistics(

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

istribution. $ third party logistics firm may be defined as an e!ternal supplier which

performs all or part of the company/s logistics functions.

!



)ourt! Party -ogistics?

+ourth party logistics provider is a supply chain integrator that assembles and manages the

resources, capabilities and technology of its own organi#ations with those of

complementary service providers to deliver a comprehensive supply chain solution to the

client.

Re"erse -ogistics?

7everse logistic deals with product that flow to the opposite direction as against standard

logistic channels. It include backward flow of ha#ardous and non ha#ardous waste,

recycling materials, reuse of product, damaged product etc.

9



Integrated -ogistics?

The management 0 technical process through which supportability 0 logistic supportconsideration are integrated into the design 0 taken into account throughout The life cycle

of system8equipment 0 by which all element of logistic support are planned, acquired,

tested, 0 provided in a timely 0 cost effective manner.

7<* A-,E CHAIN ACTIITIE/

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9 :rimary activities represent the functional areas like arranging inputs for

transforming them into output, and managing distribution, marketing, sales, and

services.

9 The secondary activities facilitate the integration of all the functions across the

entire organi#ation.

9 The companies can achieve competitive advantage and create differentiation by

organi#ing and performing these activities more efficiently or in a unique manner

than their competitors.

Ho( do (e define logistics management=

$ process of satisfying customer needs through coordination of materials and

information flows that e!tend from the market through the firm/s operation and

beyond that to the suppliers.$ shift to an integrated orientation from the

conventional manufacturing or marketing orientation.Traditionally, manufacturing11



and marketing have been considered as separate activities each having different

priorities.;anufacturing priorities and obectives are concerned with achieving

operating efficiencies based on long production runs, minimi#ed set ups and

changeovers, and product standardi#ation.;arketing priorities and obectives areconcerned with achieving competitive advantage based on varieties, high service

levels, and frequent product changes.3ustomer orientation and cost

competitiveness has been integrated by introducing fle!ible manufacturing

systems, practicing inventory management policies based on manufacturing

requirement planning and ustintime inventory policy, laying sustained emphasis

on quality and integrating supply side issues in strategic plans.

7<+I$PACT O) -OGI/TIC/ ON $AR@ETING

Traditionally, marketing has focused on endcustomer or consumer, seeking to

promote brand values and to generate a -demand pull/ in the market place for

company/s products.ue to shift in power in marketing channels, companies are

reali#ing to develop strong relations with such intermediaries like large retail

outlets to create a customer franchise as well as consumer franchise.The impact of

both strong consumer franchise and customer franchise can be enhanced or

diminished by effectiveness of suppliers/ logistics system.

7<.ACTIITIE/ INC-,DED IN -OGI/TIC/

Logistics competency is achieved by coordinating the following functional areas.

Net(or1 design

12



Information

Transportation

In"entory

:are!ousing% material !andling and pac1aging<

Net(or1 Design?

<etwork design is the prime responsibility of logistics managers since a firm/facilities and structure is used to provide products and materials to the customers.

Logistics facilities typically include manufacturing plants, warehouses, crossdock

operations, and retail stores. etermining the number and type of facility required,

their geographic locations, and the work to be performed at each is an important

part of network design. In certain situations, some of the facility operations may be

outsourced to service specialists. <etwork design determines the type of the

inventory and the quantity to be stocked at each facility, and the assigning of

customer orders for shipment. <etwork of facilities also includes information and

transportation as a part of entire structure from where logistical operations such as

processing of customer orders, maintaining inventory and material handling are

performed. The network design must consider geographical variations.

The factors influencing modifications of network design are(

9 3hange in demand and supply

9 :roduct assortments

9 3hanges in suppliers/ source of supplies.

9 ;anufacturing requirements.

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The first step towards achieving competitive advantage lies in superior network

design, as the real competition is not between two companies but between

efficiency and effectiveness in managing their supply chain.

Information?

+orecasting and order management are the two areas of logistical work that

depend on information. +orecasting enables to decide on positioning of inventory

to satisfy anticipated customer requirements. 2rder management involves handling

of specific customer/s requirements, both e!ternal as well internal. "!ternal

customers are those that consume the product or service, or trading partners that

purchase the products or services for resale. Internal customers are organi#ational

units within a firm that require logistical support to perform their designated work.

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The process of order management involves

9 7eceipt of an initial order

9 Invoicing

9 elivery, and

9 3ollection.

Incorrect information and delays in order processing can cripple the logistics

performance= thus quality and timeliness are the key issues in logistical

operations.

Transportation?

Transportation is the operational area of logistics that geographically positions the

inventory i.e. provides for place utility. 3ompanies accomplish transportation in three

different ways( $ private fleet of vehicles may be operated. 3ontracts may be entered into

with transport companies. The service of different transport companies may be engaged

on an individual shipment basis.

+actors affecting transportation performance(

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$. 3ost of transportation

The payment for movement between two geographical locations and e!penses

related to administration and maintaining intransit inventory.

>. %peed of transportation

The time required to complete a specific movement. Transport firms capable of

providing faster services normally charge higher rate. The faster the transportation

services, shorter is the time interval during which the inventory is in transit and

unavailable.

3. 3onsistency of transportation

7efers to variations in time required to perform a specific movement over a

number of shipments. 3onsistency is a measure of dependability of transportation.

Inconsistency in transportation leads to inventory safety stocks required to protect

against unpredictable service breakdowns. %peed and consistency combine to

create quality aspect of transportation.

In"entory?

The obective is to achieve the desired customer service with minimum inventory

commitment, consistent with lowest total cost. "!cessive inventories may be16



helpful in compensating for deficiencies in network design but ultimately result

into higher total logistics cost. The best practice of inventory management is to

achieve ma!imum turnover while satisfying customer commitments.

:are!ousing% $aterial Handling% And Pac1aging(

;erchandise needs to be warehoused at selected times, transport vehicles material

handling for efficient loading and unloading and goods are most efficiently

handled when packaged together into shipping cartons or other type of containers.

The logistical activities carried out in warehouse are sorting, sequencing, order

selection, transport consolidation and sometimes product modification and

assembly. Within the warehouse, products must be received, moved, sorted, and

assembled to meet customer order requirements and for these activities material

handling becomes significant. :roducts packed in cans, bottles or bo!es are

handled more efficiently when combined into larger units such as ;aster 3artons.

;aster units can further be consolidated into large units such as pallets, containers

etc.

CHAPTER #?INTROD,CTION TO /,PP-> CHAIN

$ANAGE$ENT

17



$ supply chain is the system of organi#ations, people, activities, information and

resources involved in moving a product or service from supplier to customer. $n

integrated group of processes to ?source,@ ?make,@ and ?deliver@ products .%upply

chain activities transform raw materials and components into a finished product

that is delivered to the end customer.

It consists of all parties involved directly or indirectly in fulfilling a customerAs

request

#<7 $EANING O) /,PP-> CHAIN $ANAGE$ENT

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

supply chain with the purpose to satisfy customer requirements as efficiently as

possible. %upply chain management manages all movement and storage of rawmaterials, workinprocess inventory, and finished goods from pointof origin to

pointofconsumption.

#<# DE)INITION O) /,PP-> CHAIN

1!



Manufacture

& Raw Materials

Export &

ImportActivities

Primary

Movement

Distribution

Centres

Secondary

Movement

! & !C

Distribution

After"Sales

Services

Reverse Logistics

After SalesLogistics

SuppliersProductionDistributionSales ChannelValue-Added

ServicesEnd UserDistribution

DistributionLogistics

ManufacturingLogistics

nboundLogistics

Suppl!Logistics

?a supply chain is a network of facilities 0 distribution options that performs the

functions of procurement of materials transformation of these materials into

intermediate 0 finished products 0 distribution of these finished products to

customers )

B

#<# DE)INITION O) /,PP-> CHAIN $ANAGE$ENT

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

involving procurement of raw materials, manufacturing and distribution

management of +inished oods.

%3; is also called the art of management of providing the 7ight :roduct, $t the

7ight Time, 7ight :lace and at the 7ight 3ost to the 3ustomer.

#<* O9BECTIE/ O) /,PP-> CHAIN $ANAGE$ENT

9 ;a!imi#e the overall value generated is the difference between what the final product

is worth to the customer and the effort the supply chains e!pends in filling the request of

the customer

9 %upply chain profitability is the difference between the revenue generated from the

customer and the overall cost across the supply chain

9 It is the total profit to be shared across all supply chain stages

9 %upply chain success is measured in terms of supply chain profitability and not in

terms of the profits at an individual stage

9 7evenue is from customer positive cash flow9 $ll other cash flows are simply fund e!changes that occur within the supply chain

given that different stages have different owners

9 $ll flows of information, product or funds generates costs within the supply chain

9 %upply chain management involves the management of flows between and among

stages in a supply chain to ma!imi#e total supply chain profitability.

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#<+ DECI/ION PHA/E IN /,PP-> CHAIN $ANAGE$ENT

%uccessful supply chain management requires many decisions relating to the flow of

information, product,0 funds

These decision falls into 5 categories8phases depending on the frequency of each

decisions 0 timeframe

9 %upply chain strategy or design

9 %upply chain planning

9 %upply chain operation

/upply c!ain strategy or design?

uring this phase ,$ company decides how to structure the supply chain over the ne!t

several years it decides the supply chain configuration will be, how resources will be allocated

ecision includes whether to perform or outsource functions ecisions regards to warehousing

facilities 0 modes of the transportation 0 types of information utili#ed. ecision regarding

products to be manufactured or stored at various location.

/upply c!ain planning?

In this phase decision includes

9 efinition of a set of policies that govern shortterm operations

9 %tarts with a forecast of demand in the coming year

9 The inventory policies to be followed

9 Timing 0 si#e of marketing promotion

9 The subcontracting of manufacturing

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9 The goal of planning to ma!imi#e supply chain surplus

9 In this phase, companies must include uncertainty in demands, e!change rate 0

competition

/upply c!ain operation?

9 Time hori#on is weekly or daily

9 ecisions regarding individual customer orders

9 %upply chain configuration is fi!ed and operating policies are determined

9 oal is to implement the operating policies as effectively as possible

9 $llocate orders to inventory or production, set order due dates, generate pick lists at a

warehouse, allocate an order to a particular shipment, set delivery schedules, place

replenishment orders ;uch less uncertainty Cshort time hori#on4

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#<* PROCE// IE: O) /,PP-> CHAIN

Cycle "ie( processes in a supply chain are divided into a series of cycles, each

performed at the interfaces between two successive supply chain stages

Pus!pull "ie( processes in a supply chain are divided into two categories depending on

whether they are e!ecuted in response to a customer order Cpull4 or in anticipation of a

customer order Cpush4.

Cycle ie( of a /upply C!ain

"ach cycle occurs at the interface between two successive stages

3ustomer order cycle Ccustomerretailer4

7eplenishment cycle Cretailerdistributor4

;anufacturing cycle Cdistributormanufacturer4

:rocurement cycle Cmanufacturersupplier4

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Supplier



3ycle view clearly defines processes involved and the owners of each process. %pecifies

the roles and responsibilities of each member and the desired outcome of each process.

Pus!Pull ie( of /upply C!ains

Pus!Pull ie( of /upply C!ain Processes

%upply chain processes fall into one of two categories depending on the timing of their

e!ecution relative to customer demand

Pull?

In this e!ecution is initiated in response to a customer order Creactive4

It operate in an environment in which customer demand is known. Therefore, at time of

e!ecution of a pull process ,demand is known with certainty

Pus!?

In this e!ecution is initiated in anticipation of customer orders Cspeculative or forecast4

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PULL PROCESSES



In this e!ecution process ,customer demand is not yet known 0 must be forecast

:ush8pull boundary separates push processes from pull processes. The relative proportion

of push and pull processes can have an impact on supply chain performance

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#<+ ),NCTION/ O) /,PP-> CHAIN $ANAGE$ENT

/trategic

Tactical

Operational

/trategic

%trategic network optimi#ation, including the number, location, and si#e of warehouses

.distribution centers and facilities.

%trategic partnership with suppliers, distributors, and customers

:roduct design coordination so that new and e!isting products can be optimally integrated into

the supply chain, load management

Information Technology infrastructure to support supply chain operations.

WhereDtoDmake and whatDtoDmakeDorDbuy decisions

$ligning overall organi#ational strategy with supply strategy.

Tactical

%ourcing contracts and other purchasing

decisions .:roduction decisions including contracting, locations, scheduling, and planning

process

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

Transportation strategy including frequency routes, and contracting.

>enchmarking of all operations ;ilestone payments

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Operational

aily production and distribution planning :roduction scheduling for each manufacturing

facility in the supply chain Cminute by minute4.

emand planning and forecasting coordinating the demand forecast of all customers and

sharing the forecast with all suppliers.

%ourcing planning including current inventory and forecast demand, in collaboration with all

suppliers.

Inbound operations transportation from suppliers and receiving inventory.

:roduction operations 2utbound operations fulfillment activities and transportation to

customers.

2rder promising, accounting for all constraints in the supply chain, including all suppliers,

manufacturing facilities, distribution centers, and other customers.

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CHAPTER *?DRIER/ O) /,PP-> CHAIN

$ANAGE$ENT

7 In"entory

# $aterial !andling

* Information

+ Transportation

$odes of transportation

. :are!ousing

E4 Pac1aging

7 In"entory?

Inventory encompasses all the raw materials, work in process, and finished goods within

a supply chain. 3hanging inventory policies can dramatically alter the supply chain/s

efficiency 0 responsiveness.

There are three basic decisions to make regarding the creation and holding of inventory(

1. 3ycle Inventory( This is the amount of inventory needed to satisfy demand for the

product in the period between purchases of the product.

*. %afety Inventory( inventory that is held as a buffer against uncertainty. If demand

forecasting could be done with perfect accuracy, then the only inventory that would be

needed would be cycle inventory.

5. %easonal Inventory( This is inventory that is built up in anticipation of predictable

increases in demand that occur at certain times of the year.

# $aterial Handling?

9 The primary material handling obective is to efficiently move large quantities of

inventory into and specific customers orders out of the warehouse.2!



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

storage.

9 Fandling is divided into

7eceiving

In storage handling , and

%hipping

$n e!tremely important aspect of logistics is the productivity potential that can be

reali#ed from capital investment in materialhandling equipment.

%peciali#ed handling equipment is required for unloading bulk materials such as for

solids, fluids, or gaseous materials.

The guidelines suggested in designing the material handling systems are(

"quipment for handling and storage should be as standardi#ed as possible.

When in motion, the system should provide ma!imum continuous flow.

Investment should be made in handling rather than stationery equipment.

Cd4 Fandling equipment should be utili#ed to the ma!imum e!tent possible.

Ce4 In selecting handling equipment, the ratio of deadweight to payload should be minimi#ed.

Cf4 Whenever possible, gravity flow should be incorporated in the system design.

Time>ased 7equirement(

Ca4 Timebased arrangements reduce the overall inventories by developing the capability to

respond rapidly to e!act to e!act manufacturing or retail customers.

Cb4 If the products8materials can be delivered quickly, it may not be necessary to maintain

inventories at manufacturing plants8 retail stores.

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Cc4 If replenishment can be achieved rapidly less safety stock will be required and instead of

stockpiling and holding safety stock the requirement will be to receive the e!act quantity

of inventory at the time required.

Cd4 Timebased programs tend to reduce shipment si#es, which in turn increases the number,

frequency, cost of shipments and hence higher transportation cost.

Ce4 $n effective logistical arrangement will be to achieve a tradeoff resulting into desired

customer service at the lowest total cost.

* Information?

Information serves as the connection between various stages of a supply chain, allowing

them to coordinate 0 ma!imi#e total supply chain profitability. It is also crucial to the

daily operations of each stage in a supply chain for e.g a production scheduling system.

Information is used for the following purpose in a supply chain(

1. 3oordinating daily activities related to the functioning of other supply chain drivers(

facility, inventory 0 transportation.

*. +orecasting 0 planning to anticipate0 meet future demands. $vailable information is

used to make tactical forecasts to guide the setting of monthly 0 quarterly production

schedules 0 time table

5. "nabling technologies( many technologies e!ist to share 0 analy#e information in the

supply chain. ;anagers must decide which technologies to use 0 how to integrate these

technologies into their companies like internet, "7:, 7+I.

+ Transportation?

Transportation decisions are more strategic ones closely linked with inventory decisions.

ecisions are based on tradeoff between the cost of using a particular mode of transport

with the cost of inventory associated with that mode.

30



+or instance, air shipments may be fast, reliable , and warrant less safety stocks= they are

e!pensive whereas shipping by sea or rail may be much cheaper but they necessitate

holding relatively large amount of inventory to protect against the inherent uncertainty

associated with them. 3ustomer service levels and geographic locations are important

aspects in transportation decisions. Transportation accounts for roughly 5GH of the

logistics costs and therefore operating efficiencies become important aspects .%hipment

si#es i.e. consolidated bulk shipments versus smaller lot si#es= routing and scheduling of

vehicles become important part of company/s transport strategy. Transportation is one of

the most visible elements in the logistics operation.

$. Product $o"ement

:rimary function is the movement up and down the value chain. $s transportation uses

temporal, financial and environmental resources, the movement of materials should take

31

:roduct %torage



place only when it enhances the product value. ses temporal resources because the

product is inaccessible while in transit. ue to JIT strategies transit inventories are

becoming more significant thereby reducing manufacturing and distribution centre

inventories.

Cb4"!penses incurred internally for private fleet of vehicles or e!ternally for commercial or

public transportation constitute financial resources.

Cc4 Transportation consumes fuel and oil and also creates environmental e!penses through

congestion, air pollution and noise pollution.

>< Product /torage

Temporary storage through vehicles becomes e!pensive as intransit storage is required to

be moved again in a short duration of time. %ometimes temporary storage becomes

advantageous as the cost of unloading and reloading the product in a warehouse may

e!ceed the daily charge of storage in transportation vehicles. ;any times where the

warehouse space is limited, utili#ing transportation vehicles becomes a viable option.

The options available to a transporter in case of warehouse space constraints are Instruct

driver to take a circuitous or indirect route to its destination, as the transit time would be

greater as compared to direct route. Thus transport vehicle is used as temporary storage

option. 3hange the shipment destination i.e. temporary storage is achieved through

diversion.

+or instance, product that is, say, scheduled initially from ;umbai to Fyderabad gets

diverted mid way to Kishakhapatnam CKisage4 as Kisage warehouse may be in greater

need of product and has the storage capacity. Traditionally, the telephone was used to

direct diversion but nowadays satellite communications between headquarters and

vehicle handle such tasks more efficiently.

Though product storage in vehicles can be costly, it can be ustified from a total cost

perspective when loading, unloading costs, or capacity constraints are considered.

32



$odes of Transportation(

A< Rail

3apability to transport large shipments economically with more frequency .Figh fi!edcosts because of e!pensive equipment, right of way, switching yards, and terminals.

Kariable cost per kg8km has been considerably reduced by electrification. >ulk industries

and heavy manufacturing use railways more frequently.

3an improve effectiveness of transportation by having alliances with other modes.

>. Hig!(ay

rowth of motor carrier industry has resulted into doortodoor operating fle!ibility andspeed of intercity movement. 3ompared to railways, motor carriers have relatively small

fi!ed investments in terminal facilities and operate on publicly maintained highways.

Kariable cost per kilometer is high because a separate driver and cleaner are required for

each vehicle. Labour cost is also high because of the need for substantial dock labour .

33

$ir



;otor carriers are best suited to handle small shipments moving short distances. +avour

light manufacturing and distributive traders, short distances and high value products.Fave

captured significant market share of railways in medium and light manufacturing

industries.>ecause of delivery fle!ibility, motor transport has captured almost all freight

moving from wholesalers or warehouses to retail stores.Figher cost in replacing

equipment, higher wages to driver and other dock labour .

C< :ater

3apacity to move e!tremely large shipments.+i!ed costs are somewhere between rail and

motor carriers.Though water carriers have to develop and operate their own terminals, the

rightofway is developed and maintained by the government, resulting into moderate

fi!ed costs compared to rail and highways.Low variable cost makes this an attractive

mode when low freight rates are desired and speed is secondary consideration.Typically

bulk commodities such as mining , chemicals, cement, and certain selected agricultural

products are transported by ocean going vessel.nless the point of origin and point of

destination are adacent to a waterway, it needs to be supplemented by rail or trucks.

< Pipelines

sed for transporting natural gas, manufactured chemicals, pulveri#ed dry bulk materials

such as cement and flour via hydraulic suspensions, sewage and water within the cities and

municipalities.2perate on *6! basis are limited only by commodity changeover and

34

Kariable costssuch as driver,fuel, tyres and

repairs arehigh relativeTo railways.



maintenance.<o empty container or vehicle that must be returned.Fighest fi!ed cost an

lowest variable cost.

Figh fi!ed costs due to rightofway, construction and requirements for control station

and pumping capacity.

$s pipelines are not labour intensive, variable operating cost is e!tremely low once the

pipeline is constructed.

Infle!ible and limited to products in the form of gas, liquid or slurry.

"< Air

%ignificant advantage lies in the speed with which a shipment can be transported.Though

the freight cost is very high, the same may be tradeoff with reduced warehousing or

inventory.3haracteri#ed by load si#e constraints and aircraft availability. +i!ed cost

associated with aircraft purchase and requirements for speciali#ed handling systems is

low as compared to rail, water and pipeline.$irways and airports are generally developed

and maintained with public funds.$irfreight variable cost is e!tremely high as a result of

fuel,maintenance and intensity of inflight and ground crew.

$irfreight is ustified in following situations(

$. Figh value products

>. :erishables

3. Limited marketing period.

. "mergency.

35



ContaineriFation?

3ontainer is large rectangular bo! into which a firm places commodities to be

shipped.$fter initial loading, the commodities themselves are not rehandled until they

are unloaded at their final destinations.Throughout the movement, the carrier handles the

container, not the commodities.The shipper can transfer the container from one mode to

another, eliminating the need to handle the commodities each time thus reducing handling

costs, damage costs, theft, pilferage and the time required to complete the modal transfer.

;any firms that modify their material handling systems to include cranes, forklift trucks,

and other equipment capable of handling large, heavy containers have found

containeri#ation to be desirable avenues for increasing productivity and controlling

material handling costs, especially in periods of continually increasing labour costs.$s

the obective of intermodal transport system is to provide virtually seamless ourney, the

best way to achieve same is to use modular or uniti#ed loads.

Piggy&ac1 Trailer on )lat Car?

T2+3 is a speciali#ed form of containeri#ation in which rail and motor transport coordinate.

3arrier places motor carrier trailer on a rail flatcar, which moves the trailer by rail for long

distance.$ motor carrier then moves the trailer for short distance pickups and deliveries.This

36

C"#$ S$%&'$&%(

"% E*'+ M",(" T%*-#."%$*$/"-



service combines the longhaul, low cost advantage of rail with accessibility of motor.:iggyback

services mostly move under contract.

. Pac1aging?

:ackaging can be categori#ed into two types vi#.

Ca4 3onsumer packaging, which has a marketing emphasis, and

Cb4 Industrial packaging, which has more of logistics emphasis.

9 3onsumer :ackaging C;arketing "mphasis4

9 3onsumer packaging design focuses on customer convenience, market appeal, retail shelf

utili#ation, and product protection.

9 Large containers and odd si#es may increase the consumer visibility but make poor

logistical packaging.

9 +or e!ample, shipping products fully assembled such as motorcycles results in substantial

reduction in density.

9 $ low density package would mean higher transportation costs and greater warehousing

requirements.

>. Industrial :ackaging CIndustrial emphasis4

Individual products or parts are normally grouped into cartons, bags, bins, or barrels for

handling efficiency. These containers are used to group individual products and are

referred to as master cartons. When master cartons are grouped into larger units for

handling, the combination is referred to as containeri#ation or uniti#ation.The master

carton and the uniti#ed load provide the basic handling unit in the logistics channel.The

weight, volume, and fragility of the master carton in an overall product line determines

transportation and material handing requirements.If the package is not designed for

efficient logistical processing, overall performance of the system would suffer.

%tandardi#ation of master carton facilitates material handling and

transportation.%tandardi#ation of master carton is beneficial even in conte!t of retail

backend operations.

37



Ca4 +or instance, in case of shoe store as the contents of each master carton are known, it is

not necessary to search through many cartons for a particular style or si#e of shoe.

$llows master cartons to be more efficiently stacked, resulting in to less backroom

congestion.

Cb4 3omplete identification of master carton contents facilitates completion of retail

inventory and merchandise reorder.%tandardi#ed cartons are selected to achieve

ma!imum conformity in increasing the density in the trailer thereby eliminating dead

space in stacking.The end result of standardi#ed master carton usage is substantial

reduction in total cost combined with an effective material handling system at both

warehouse and the retail store .In situations, when master cartons of more than one si#e

are required, e!treme care should be taken to arrive at an assortment of compatible

units.These different si#es of master cartons should result into modular compatibility.

/crap:aste Disposal?

3!

isposal



/crap

%crap is a waste created while processing the materials.The process scrap is unavoidable

e!tra material removed from the stock of material while generating a component.+or

e!ample, while making a machined component some material has to be removed in the

form of chips.Muite often, while manufacturing any component some dimensions are not

maintained and the lot is scrapped as these cannot be used in the assembly of the

product.

/urplus

When the proect or product needs a specific quantity of the item, e!tra leftover cannot be

used and this quantity is called surplus.The surplus quantity has to be disposed off.

< O&solete

When the item cannot be used in the product8 proect due to changes that might have

taken place in respect of dimensions, shape, colour etc, these are called obsolete

items.3hanges may occur due to defect in product design, or shelf life etc.These

components have to be scrapped8 disposed off.

0 :are!ousing

The primary purpose of a warehouse management is to control the movement and storage

of materials within an operation.Warehousing can be viewed as a place to store inventory

as well as a facility for switching the inventory.

Warehousing is becoming significant to achieve the following obectives(

To reduce inventory

To reduced costs

To increase storage capacity

To increase customer service

To increase inventory accuracy.

39



Typically, the warehouses received merchandise by rail or road and the materials were

moved manually to a storage area within the warehouse and piled up on the floor in

stacks manually.ue to above, though different products were stored in the same

warehouse it was difficult to identify the merchandise with respect to a particular order.

2n the receipt of the customer orders, products were handpicked and placed on the

wagons and these wagons were pushed out of shipping area. $s the was ine!pensive,

human resources were used e!tensively and no consideration was given to efficiency

utili#ation, work methods, or material handling.Inspite of poor efficiency, warehouses

continued to provide a necessary bridge between production and marketing. With the

improved techniques of forecasting and production scheduling the need to build up

inventory was considerably reduced.$lso, delays during manufacturing process reduced

as the production became more coordinated.%easonal products continue to require

warehousing.The overall need to store materials to support manufacturing has been

reduced. In conte!t of retailing, the department stores face the necessity of stocking an

increased variety of products and are unable to order in sufficient quantities from a single

supplier to enoy the benefits of consolidated shipment.irect ordering from

manufacturers becomes prohibitively e!pensive due to high cost of transporting small

shipments.This necessitates the need for warehousing to provide timely and economical

inventory assortments.$t wholesale level, the warehouse becomes a support unit for

retailing. In conte!t of manufacturing, companies producing products at multiple

locations, efficient warehousing becomes a method for reducing material and partsstorage and handling costs while optimi#ing production.

+or implementing JIT and stockless production strategies warehousing becomes an

integral part of entire value chain.$s the basic obective of JIT is to reduce workin

process inventory, manufacturing needs to supported by highly dependable delivery. In a

country as large as India, this is possible only by having strategically located warehouses.

The stocks can be held at a central warehouse thereby reducing the need to maintain

inventory at each assembly plant.sing consolidated shipments, materials are purchasedand transported to the supply warehouse and then distributed to manufacturing plants as

and when needed.$ fully integrated warehouse is a vital e!tension of manufacturing. In

conte!t of outbound logistics, warehouses have made possible the direct shipment of

mi!ed8 assorted products to the customers thereby enhancing the service capabilities.The

direct assorted shipments have two advantages, namely,7educed logistical cost because

40



the full product assortment can be delivered while taking the advantage of benefits

obtained through consolidated transportation.;ore competitive advantage for the

manufacturers due to speedier shipments and mi!ed lots.7ecently, warehouses have been

able to increase productivity due to effective use of Information Technology.

:are!ouse strategies?

:rivate Warehouses

2perated by the firm owning the product i.e. facility may either be owned or leased.Muite often

the warehouses requiring specific material handling activities designed to fit e!act needs of the

firm may not be available on hire.enerally efficient warehouse should be planned around a

material handling system in order to encourage ma!imum efficiency of product flow. +irms with

speciali#ed customers or products often develop their own warehouse.

:ublic Warehouses(

3lassified on the basis of range of speciali#ed operations performed, as under eneral

merchandise e.g. paper, small home appliances and household maintenance goods.7efrigeration

facilities to preserve food products, pharmaceutical medicines and certain chemicals requiring

specific ambient temperature.>ulk commodities requiring speciali#ed material handling systems

such as liquid chemicals, tress, and te!tile fabrics. >onded, licensed by the government to store

goods prior to payment of custom duties, ta!es etc.+urniture requiring special handling systems.

:rovide greater fle!ibility in operations since warehousing becomes the core business. ue to

high volume operations., fi!ed costs get spread over and ustify more efficient handling

41

3ontract



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

customers. :ublic warehouses charge a client a basic fee for handling and storage based on

number of cases or the weight handled. When economies of scale are not possible in a private

warehouse, public warehousing may be a low cost alternative.

3ontract Warehouses(

9 3ontract warehouses provide all logistics activities such as

9 Transportation

9 Inventory control

9 2rder processing

9 3ustomer services, and

9 7eturns

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

Fow firm utili#e warehousing facilitiesN

$ private or contract facility may be used to cover regular year round requirements.:ublic

facilities are used to handle peak season.In many cases central warehouse may be private,

while market or field warehouse are public warehouse.Where the warehouse space is

fully utili#ed at least 'OGH of the time, private facility may be more efficient.$ firm

may find private warehousing to be more ustified at certain locations on the basis of

distribution volume, while in other cases public warehousing may be the least cost

option. %ome customer groups may be served better from a private warehouse, while a

public warehouse may be appropriate for others.Where the customers can be served

better by local presence of the products, private or contract facility may be useful.:ublic

and contract warehousing increases the potential for industry synergy.

♦+or e!ample, firms in grocery business share public warehousing facilities with other suppliers

serving the same industry.

♦The benefit is the reduced transportation cost due to oint use of same public warehouse

allowing for frequent delivery of consolidated loads from multiple suppliers.

42



Ca4 :ublic and contract warehouses demonstrate more responsiveness as they offer location

fle!ibility. +or e!ample, inseason demand for agricultural chemicals require warehouses

to be located near markets to serve customers better. $fter growing season, local

warehouse become unnecessary.

Cb4 :ublic and contract warehouses generally offer better economies of scale, as they are able

to design operations and facilities to meet higher volumes of multiple clients.

Cc4 3ontract warehousing facilities can provide complete logistical support such as

transportation, order processing, inventory control, storage and other administrative

assistance in an integrated manner.

:are!ouse functions

:are!ouse functions

C$4;ovement(

7eceiving, Instorage handling and shipping.

Ca4 7eceiving

$ctivities involved ares nloading the transportation vehicle, which in most cases is done

manually.In Indian conte!t, limited automated and mechani#ed methods have been developed

that are suitable to varying product characteristics.The product is handstacked on pallets to

form unit load for movement efficiency.

43

"!tendedstorage



Cb4 Instorage handling

2n receipt of the product, the merchandise is transferred within the warehouse to position for

storage or order selection. 2n receipt of order, the required products are accumulated and

transported to a shipping area. The entire operation helps in selection process for grouping

materials, parts, and products into customers/ orders.

Cc4 %hipping

Involves checking and loading orders onto transportation vehicles.%hipping in unit loads leads to

considerable saving of time in loading the vehicle.3hecking is important at a point when

merchandise changes ownership as a result of shipment.

>P%torage( can be either planned or e!tended.

Ca4 :lanned storage

%torage for basic inventory replenishment is referred to as a planned storage.uration varies

depending on the performance cycle length.

Cb4 "!tended storage

%ometimes storage may be required for several months prior to customer shipment.%easonal

items require storage to wait for demand or to spread supply across time."rratic demand, product

conditioning, speculative purchases and discounts call for e!tended storage.

44



CHAPTER +?INTROD,CTION TO A$,-

In the year 1&6E, the first milk union was established. This union was started with *'G litres

of milk per day. In the year 1&'', $;L was established. In the year 1&6E, the union was known

as Q$I7$ I%T7I3T 322:"7$TIK" ;ILQ :723"7%/ <I2<. This union selected the

brand name $;L in 1&''.

The brand name $mul means ?$;LR$@. This word derived from the %anskrit word

?$;LR$@. $ quality control e!pert in $nand had suggested the brand name ?$;L@. $mul

products have been in use in millions of homes since 1&6E. $mul >utter, $mul ;ilk :owder,

$mul hee, $mul spray, $mul 3heese, $mul ;unch Times, $mul %hrikhand, $mul Ice 3ream,

<uramul, $mul ;ilk, $mul ;ilk rinks and $mulya have made $mul a leading food brand inIndia. Today $mul is a symbol of many things like of the high quality products sold at

reasonable prices, of the genesis of a vast cooperative network, of the triumph of indigenous

technology of the marketing savvy of a farmers organi#ation. $nd have a proven moldel for dairy

development.

T$ LI<"(T$%T" 2+ I<I$

45



Professional management

46



GC$$)

uarat 3ooperative ;ilk ;arketing +ederation C3;;+4 is IndiaAs largest food products

marketing

organisation. It is a state level ape! body of milk cooperatives in uarat which aims to provide

remunerative returns to the farmers and also serve the interest of consumers by providing quality

products which are good value for money.

;embers( 15 district cooperative milk producersAnion

<o. of :roducer ;embers( *.E million

<o. of Killage %ocieties( 1*,&*

Total ;ilk handling capacity( 1G.1E million litres per day;ilk collection CTotal *GGEG4( *.5O billion litres

;ilk collection Caily $verage *GGEG4 E.' million litres

;ilk rying 3apacity( '&6 ;ts. per day

3attlefeed manufacturing 3apacity( *E6G ;ts per day

47



%ales Turnover 7sCmillion4 % S Cin millions4

1&&6&' 1116G 5''

1&&'&E 15&G 6GG

1&&E& 1''6G 6'G

1&&&O 1OO6G 6''

1&&O&& **1&* 6&5

1&&&GG **1O' 6&5

*GGGG1 **'OO 'GG

*GG1G* *55E' 'GG

*GG*G5 *6' ''

*GG5G6 *O&61 E1E

*GG6G' *&**' E*

4!



Product Portfolio($mul has got a diverse portfolio and thus follows umbrella branding strategy

through this vast network. The range of products is similar in production by the various unions it

handles. Thus with umbrella branding, $mul avoided interunion conflicts and increased co

operation in developing products) +ollowing are the varieties of products(

7 )res! $il1

This is the most basic product by $mul. There are around & further subproducts available in

various flavors.

# $il1 Products

This segment is the largest and most selling product for $mul. The company has added further

variety by providing them in various flavors and packaging.

* Po(der $il1

This includes varieties like Tea83offee whitener and milk for infants. There are around ' sub

brands including $mul %pray, $mul +ull 3ream ;ilk and $mulya.

+ C!eese

It has various subproducts and caters mostly to TierI cities.

. 9read /preads

$mul butter is the most famous subbrand in this category and has almost O'H market share.

49



Ad"ertising Tec!niues of Amul

The advertising techniques of $mul are very eyecatching. Without depending on any celebrity

for promotion, $mul took the help of an imaginary cartoon character, popularly known as the

$mul irl.

In the year 1&EE, $mul hired %ylvester da3unha, then managing director of the advertising

agency $%: to design an ad campaign for $mul >utter. da3unha designed a campaign as series

of hoardings with topical ads, relating to daytoday issues. The campaign turned out to be so

famous that it grabbed a uinness World 7ecord. It earned the record for being the longest

running ad campaign ever.

The $mul irl has turned into an iconic character who dresses herself in polka dotted attire.

+or $mul irl, no subect is taboo and she ovially comments on various current affairs topics

with her tongueincheek. To sum up from catchy billboards to being an ecommerce success

story, $mul is indeed rural Indias flag bearer in the IT revolution.

50



$ar1et s!are of amul

CHAPTER .?/,PP-> CHAIN O) A$,-

T!e distri&ution net(or1

$mul products are available in over 'GG,GGG retail outlets across India through its network of

5,'GG distributors. There are 6 depots with dry and cold warehouses to buffer inventory of the

entire range of products.

3;;+ transacts on an advance demand draft basis from its wholesale dealers instead of the

cheque system adopted by other +;3 companies. This practice is consistent with 3;;+/s

philosophy of maintaining cash transactions throughout the supply chain and it also minimi#es

51

3ategory ;arket share ;arket position>utter O'H 1

;ilk powder 6GH 1

3heese 'GH 1

Ice cream *6.' *

%weets 'GH 1

3hocolate drinks &GH 1

3hocolates 1GH 5



dumping. Wholesale dealers carry inventory that is ust adequate to take care of the transit time

from the branch warehouse to their premises. This ust in time inventory strategy improves

dealer/s 72I. $ll the branches of 3;;+ are engaged in route scheduling and have dedicated

vehicle operations.

-argest Cold C!ain?

$;L has the largest cold chain network in India C1OGGG refrigerators4 as compared to any

other company. The chemical components of milk are water, %<+ and solids. It is a perishable

product so it has to be consumed within *6 hours. In order to avoid wastage $;L converts the

milk into %<+ C%olids not fats4 and milk solids by evaporating the water, which comprises of EG

GH of the milk contents.

Customers?

India is still in the evolutionary stage with tremendous potential for high value products such as

variants of milk. The distribution network is quite reasonable with access to metros as well as

rural areas.

/uppliers?

$ maority of suppliers are small or marginal farmers who are illiterate, poor and with liquidity

problems.

T!ird party logistics ser"ice?

There are ample deficiencies in the current infrastructure and the outbound logistics is taken care

by 3;;+ coordinating with distributors. It also connects with unions for product mi!, product

allocations and in developing production plans.

The key lies in matching supply and demand as the demand outstrips supply by a big margin.

52



Interloc1ing control?

The obective of interlocking mechanism is to ensure that the interest of the farmer is always

kept at the top of the agenda through representatives who constitute the >oards of different

entities that compromise the supply chain. :rofessional managers and farmers work together as a

team to strengthen the cooperative.

Coordination agency(

2bective of such an agency is to ensure the milk produced by the farmer is sold in the market

either as milk or as value added product.

E6isting /upply C!ain of Amul?

53



CHAPTER 0?/C$ AND $AR@ET -OGI/TIC/

T!e net(or1

54



;ilk is procured from the villages and collected at Killage 3ooperative %ocieties CK3%4= from

there the milk is taken to manufacturing units where the milk is processed into various products.

The products are then transporters to the company epots located in various parts of the country.

The products are then sent to Wholesale istributors CW4 and from there to the retailers.

The fact sheet

;ilk is procured twice a day from * million from uarat alone

The payment is made under twelve hours of procurement

There are 1GGGG village cooperative societies

There are 5EGG wholesale distributors in the country

6' depots

The 30+ agents are not fi!ed and are decided by the local company offices

There are appro!imately 6,'G,GGG retailers spread all over India

Total house hold consumers covered are 1GG,GGG

The milk procured per day is ' million liters

Where the total capacity of operation is million liters per day

The peak processing till date has been E million liters per day

These co operative societies are bound to supply there produce only to 3;;+.

/C$ and $ar1et -ogistics

"nterprise resource planning( the company at has implemented an "7: program as low as 7s. 5

corers in collaboration with T3% ltd. The company uses it= the data right from the procurement

from the farmers till the delivery of goods to the retailers is fed into the system. The software

enabling the channel members to use for the synchroni#ed working and best possible utili#ation

of the available resources maintains details regarding the inventory management.

;arket logistics deals with the implementation of the %3; of the company. pstream 3hannel

in which milk is procured from the farmers to the manufacturing units.

1. In the first step, the milk is taken to the K3% by the farmers on foot or bicycles in small

quantities

55



*. The second step involves the transportation of milk from the cooperatives to the

manufacturing units this is done in special trucks which are equipped with tankers to carry milk.

Do(nstream C!annel

It is the distribution part of the supply chain. +rom the manufacturing units to the retailers. +irst

leg of transport is from the manufacturing unit to the company depots. This is done using & and

1O ;T trucks any lesser quantity will be uneconomical to the company there for is some time the

quantity ordered is lesser then club loading is done which means that the product ordered is

supplied with some other products.

+ro#en food the temperature of these trucks is kept below 1OU3

airy wet the temperature of these trucks is kept between G6U3

%econd leg is from the depot to the W/s, this transport is carried out in insulated 5 and ' ;T

T$T$ 6G/s here a permanent dispatch plan C::4 is prepared where the distributor plans out the

quantity of various products to be ordered on a particular date.

Third leg this is the flow of good from W/s to retailers, a beat plan is prepared and

transportation is done on autorickshaws, rickshaws and bicycles.

/E-ECTION $OTIATION O) CHANNE- $E$9ER/

/election?

The company takes into consideration a host of factors while selecting the channel members.

This is because 3;;+ believes that selection of channel members is a long run decision 0 the

rest of the decision regarding the supply chain depends upon the efficiency 0 coverage by the

channel members. The following are the host of factors considered by the company in selecting

the channel members(

$uthentication is required by the regarding the identity of the channel members, which

includes the name 0 address, photograph of the location.

:roof of solvency which requires name 0 address of the channel member/s bankers.

%afety of the inventory, which means that the distributor8 dealer should get the stock of the

company insured.

56



Inventory or the perishable goods kept by the distributor8 dealer should be in good condition

which means a detail of storage space 0 7efrigeration facility is to be provided. 7efrigeration

system should have deep free#ers, cold room 0 walk in coolers.

etails of the delivery vehicle, which includes Light 3ommercial Kehicles, ;atador, 5

Wheeler Kan, Tricycle Kan 0 Fand8:ush cart. The number 0 model of each of the vehicle needs

to be furnished to the company.

3;;+ acknowledges the fact that it needs to be sensitive to the market demands. +or this it

requires that a number of salesmen needs to be present on the field. The salesmen too are divided

into various categories like the +ield salesmen 0 3ounter salesmen. $lso the details of 3lerical

%taff 0 ;a#doors are to be provided. The technical competence of the salesmen needs to be

mentioned

etails of the product kept of other companies have to be provided. The annual sales of these

products too have to be mentioned. $lso details of complementary products 0 product lines need

to be mentioned.

ealers of the company must carry a good reputation. This is due to the fact that the company

believes reputation of the dealer affects the clientele.

;arket coverage by the distributors needs to be defined which includes details of eographic

coverage 0 2utlets per market area.

The company also requires the dealers to furnish any $dvertising 0 %ales initiative

undertaken by them on behalf of the company.

$oti"ation of C!annel $em&ers

3;;+ strongly believes in maintaining a good relationship with the channel members so that

they are genuinely motivated to work for the company. $lso if the channel members are

motivated, they can also initiate advertising 0 sales promotion schemes on behalf of the

company. Fowever to keep the channel members motivated to work, the company has to incur

certain costs but the benefits of it are felt in the long run. The following are the motivation

programs run by the company(

Distri&utors

57



2ne of the main factors, which keep the distributors motivated, is the margin. sually the

margins offered by the company are OH 0 it is raised to O.'H. Kolume wise this comes out to be

a big figure since $mul/s product has a good demand in the market. Fowever compared to the

other companies the margins are still lower since the new players in the market offer a much

higher margin. >ut the very fact that $mul/s products have good demand in the market motivates

the distributors to stock it.

$mul being a cooperative cannot afford to give heavy monetary incentives. $mul/s products

are considered to be value for money since the company does not believe in charging high

margins. In fact all monetary incentives are ust the short run means to promote the company/s

product. In order to keep the 3hannel members motivated in the long run, $mul builds on the

concept of ?Trade ;arketing@ which makes the dealers 0 the distributors believe that the

company/s products are worthy of being pushed in the market.

The company is organi#ing various Total Muality ;anagement initiatives 0 workshops. Fere

various counseling measures are undertaken by the company to improve the overall working of

the distribution network.

Kision and mission statement( the company cascades down the vision to the various channel

members= this is done through various events organi#ed by the company at different locations

where the values of the company are made clear and enforced to the channel members. $lso the

fact that $mul being a cooperative society cannot afford to spend e!orbitantly on such events

therefore it has a very traditional way of organi#ing these get together which leaves an impact on

the members.

$mul yatras( this includes taking the channel members on a guided tour of the manufacturing

and procuring facilities in uarat. %o that the channel members can have an e!perience of the

working of the company and can pick up some quality measures that can help them to

synchroni#e and improve their own functioning at various levels. This in turn help the company

to co ordinate the entire value chain, as the channel members understand the various constraints

and liberties the company goes through.

T!e Retailers

5!



Trade schemes( these are undertaken by the company only for the hard selling items e.g. Ice

creams, flavored milk etc. for these the company raises the margins by *H, also schemes like

good packaging incase of butter and cheese is undertaken by the company. Fowever this is only

a shortterm initiative to push the products of the company.

low boards( the company puts up glow boards at the retailer and pays the maor portion of

the cost

.

%chedule of the salesmen( they provide the retails with this schedule so the retailers can pre

estimate the quantities of the various products needed.

Infrastructure facilitation( the company facilitates the retailers to buy free#ers and fridges by

formulating an easy payment program and a commitment to buy back the equipment at a

reasonable price when the value of the equipment has depreciated.

TJ$ in Amul?

$mul has benefitted at all levels due to TM;, to develop leadership, operational and strategic

capabilities in entire network.

+riday epartmental meetings( "very +riday the network organi#es departmental meetings to

discuss issues related to quality and policy.

Training for transformational leadership so that individuals are able to coordinate in a better

way a carry out their responsibilities in one/s life and surrounding environment

7etail 3ensus( 3;;+ undertakes a census of all retail outlets Cover 'GG,GGG4 to evaluate

customer perceptions and distribution efficacy of their network. Interestingly, this is being done

by wholesalers in their respective territories at their own cost. This information is used for policy

deployment e!ercise.

59



Einitiati"e(

The 3;;+ V $mul has taken the initiative of installing the $;3% V $utomatic ;ilk

3ollection nit %ystems at village societies to enhance the transparency of transaction between

the farmer and the 3o2perative %ociety. These systems not only ensured the transparency but

also gave 3o2perative societies a unique advantage by reducing the processing time to 1G

percent of what it used to be prior to this.

The success of $;3% prompted the 3;;+ to aggressively go on using Information

Technology to capture the endtoend data. 3;;+ planned to cover all aspects of the value

chain. The airy Information and %ervices Qiosk CI%Q4 is another initiative that is started with

the help of II; C$4 by 3;;+L.

Karious things like "nterprise wide Integrated $pplication %ystems C"I$%4 to integrate the

istribution side of the %upply chain, I%Q V to upgrade the application at the ;ilk 3ollection

3enters and to connect them to the Internet to access a speciali#ed dairy portal with content

delivered in the local language have already started giving the fruits to the rural poor, which has

persuaded the rural folks to actively participate in IT 7evolution of the dairy industry.

60



CHAPTER 0?I//,E/ AND RECO$$ENDATION A$,-

/,PP-> CHAIN

1. %tock outs and huge gap in %upply emand of pouched milk(

$s we have seen over the past decade that the demand for +I certified pouched milk has

increased significantly in India due to adulteration and mi!ing of harmful agents in locally

supplied open milk, there is an increasing gap between the supply and demand of milk in bigger

cities of India. :eople tend to buy more pouched milk in large cities due to time constraints,

convenience and lack of local dairy operators.

$;L has been unable to achieve a #ero stock out strategy for its pouched milk retailers. 2ne of

the reasons for this is its high brand equity as it is the topmost brand on consumers mind when

you talk about Muality and healthy milk. +or e!ample, in <ational capital region people buy

$;L and other pouched milk like ;other dairy from retail stores. ;other airy has captured

maor share in <37/s market due to large number of franchised retail outlets as compared to

$;L which helps them proect the demand and improvise on their supply accordingly. $lso

this has to do with the ease of local procurement of ;other dairy over $;L. The consequence

is that customers who are willing to buy $;L milk are unable to make the purchase since it

goes out of stock by (GG pm in the evening. While ;other dairy retailers keep the adequate

stock to be last till late in night.

+orward integration by twin model approach for increasing distribution(

We recommend that $;L should aggressively open more retail stores inside big residential

societies and also more outlets per locality8area to cater to increasing demand. $lso, they need to

understand the importance of <37 market as it is the largest consumer of pouched milk in India

due to its population strength. $;L also needs to tie up with other retail stores, multi stores

and superstores like >ig >a#aar, "asy day, etc. to improve demand proection and volume

selling.

*. Increasing the production and local procurement of milk to provide an adequate supply(

The above issue of a significant gap between supply and demand is very much related to the

limitations $;L faces in terms of procuring milk from areas surrounding <37 due to which it

has to depend heavily on supply from uarat milk unions of 3;;+. This comes with huge

61



transportation costs and wastage of milk due to reduced shelf life. We recommend $;L to

work on the backward integration for this problem.

Initially we thought to recommend $;L to tie up with local suppliers8farmers and implement a

similar model as 3;;+ in elhi region. The issue with this approach is that it defeats the

purpose of local cooperatives of uarat and they have to start sharing their profit with other

unions too for which the stakeholder/s approval is hard to achieve. $lso, ;other dairy has

already developed strong ties with the local milk producers and farmers in this region= and

$;L has to offer an incentive premium for acquiring these producer/s milk. This will result in

significant increase in prices of $;L milk. Looking at a different perspective we would

recommend $;L to set up its self funded Cowned by 3;;+4 dairy in <37 region to boost

the supply in the high demand region and target achieving a #ero stock out supply.

%ome of the issues with this approach are vested interest of uarat farmers who are heavily

dependent on daily income and would not encourage and agree to the returns to come after sales

of elhi dairy products and thus it would be very hard for 3;;+ to cohesively coordinate the

sentiments of its various incorporated unions.

Looking at the positive side of this move, $;L will be able to cater to EG H more demand and

also reduce wastage due to souring of milk as a result of longer transportation route from

uarat.

5. Investing in high yield cows8buffalos for e!isting farmers using a ;icro finance model(

$nother issue which $;L has faced over decades and which is also inherent in dairy farming

in India is the yield per cow. The yield per buffalo for Indian cows is almost 185 times lower than

that of any Fybrid or $merican cows like Jersey. +ocusing on another backward integration

technique, we will suggest improving the quality of buffalos by either introducing hybrid or pure

breed, speciali#ed technological equipment. +actors such as fodder, environment, space

available8head of cattle etc. you need to mention that too as it may be less e!pensive for the

farmers or for the $;L owned dairy to keep. We suggest use of another option too by the

farmers who cannot afford to go commercial dairy farming instead of the present village dairy

farming for milking higher yields. %ince a maority of sourcing is done by marginal farmers who

lack the capital for acquiring the costlier Fybrid breeds, $;L could look at provision of micro

financing to these farmers. We keep in mind that the farmers will resist to any such move and

think that as a cannibali#ation effort of their current supply and burden on themselves, but with

62



$;L/s highly competent training centers and $nand Institute of ;anagement set up by

$;L, educating these farmers and unions would not be a difficult task.

63



CHAPTER 3?)INANCIA- I$P-ICATION/ ON

RECO$$ENDATION/

1. Improve Logistics in Transportation through Integration with the 7ailway %ystem

$side from having its own dedicated fleet of trucks in transporting milk, $mulhas already

considered integrating their transport system with railway cooling units to improve transport cost

and its supply to elhi. It has tied up with $dani Logistics to have a dedicated train to transport

milk daily from udhsagar airy of ;ehsana to the city. The annual transport cost of

;ehsanaairy is 7s. 6G crore via road tankers for 1*G,GGG liters of milk daily from

udhmansagar plant in ;anesarto elhi. $ccording to ;ehsana airyAs chairman Kipul

3haudhary, with the milk train transport system which would use 'G wagons with a capacity of

*6,GGG liters each to cater to the same volume, 'GH would be saved on transport

cost.13omputing for the cost savings would give us 7s. G.6E per liter.

Liters of milk per day 1,*GG,GGG

C;anesar to elhi4

<umber of elivery

per year

5E'

$nnual Transport cost

via 7oad C7s.4

6GG,GGG,GGG

Transport 3ost via

7oad C7s.4 per liter

G.&1

%avings via 7ailway 'GH3ost %avings C7s.4 per

liter

G.6E

$ssuming milk train system is applicable throughout $mul supply chain and ratio of

transportation cost to liters is the same, then the company could save 7s. 1,GGG,GGG,GGG per year

which is .H of its e!pected revenue of 7s. 1'G bn for *G1**G15.

64



Total liters of milk

collected per day

E,GGG,GGG

Total $nnual

Transportation cost

savings C7s.4

1,GGG,GGG,GGG

In addition, if we consider 3;;+ e!pansion plans to set up two milk processing plants in

elhi, one each in Qolkata and ;umbai, and four in uarat, to boost milk processing capacity

from 16.' to *G million liters per dayii and apply the milk train system, then total transportation

cost savings assuming $mul can utili#e ma!imum capacity would be as follows(

;a! liters of milk

processing per day

*G,GGG,GGG

Total $nnual

Transportation cost

savings C7s.4

5,555,555,555

Therefore, if $mul can implement this transport system throughout applicable dairy plants in

India, then the company/s billion savings in 7upees may be used to invest in their e!pansion to

increase the supply and their distribution network, or to lessen the 7s. 1* price hikes by *''GH

due to

transportation cost. With either of these moves, $mul would benefit inrevenue and increase in

market share over other competitors especially in elhi and <37 region.

65



$side from the above mentioned, using the railway cooling units can prevent the risk of

accidents on the road. Therefore, this can reduce wastage, vehicle maintenance cost, and

hospitali#ation e!pense. This alternative can also avoid delays in transportation due to traffic on

roads which is very crucial for $mul/s business since goods are perishable. *. 7educe

transportation time by choosing nearer dairy sites in their e!pansion plans 3urrently, $mul/s

plant in ;anesar is around 6& kilometers Cor 6& minutes drive4 away from elhi. $mul/s maor

competitor which is leading in the region, ;other airy, also sources nearby but from more than

one plant. airy plants they source from are <oida, ha#iabad, and ;eerut which are 5G, 6E,

and &1 minutes away respectively. Therefore, $mul/s plan in opening * more plants in elhi

would be best since it could be more responsive because it would have more lead time in

catering to the demand in the region. $lso, if we have our source of raw milk nearby, then

transportation from the source would decrease drastically because in their current setup, tankers

would have to travel GG kilometers from uarat. Therefore, $mul should consider creating

farmer cooperatives near elhi. This will make 3;;+/s daily procurement of 1*1' lac kilo

liters outside uaratiii to increase to an additional of 1* lac liters per day if thinking of

increasing current market share in elhi to EGH.Faving this plan, #ero stockout in stores can be

maintained because delivery of goods can be done immediately. With its pro!imity to the dairy

plant, the distributors will be able to maintain ustintime practices with their inventory thereby

reducing costs and improving return on investment.

5. Improve istribution <etwork in 7etail 2utlets, %upermarkets to Increase 7each

3urrently, out of the demand of 11' lac liters of milk per day in India/s national capital and

adoining areas, $mul supplies *G lac liters of milk per day, Muality airy about 1.*' lac liters

per dayiv, and ;other airy supplies around 5G lac liters per day.vIn order to take the lead over

;other airy, $mul has to increase its distribution network after increasing its supply by more

than 'GH. If $mul increases its reach now to elhi and <37, say by EGH to ensure lead in

market share, then a portion of ;other airy/s current market share may be eaten up since the

brand is said to be top of mind in India and probably also eat up a large chunk in the other dairy

brands.

With the e!pansion plan of $mul for the ne!t ' years, the two plants which it will add in elhi

could increase their supply by an additional of 6G lacs per day. Fence, $mul should already start

increasing its retail outlets, and supermarkets to increase reach and utili#e their plants/ capacity

increase and dominate the market.

66



67



CHAPTER 5?ANNEX,RE

M"%TI2<<$I7"

32<%;"7 <$;"(

1. o you know about ?+lavoured ;ilkN

C$4 Res P

C>4 <o P

*. o you know about ?$mul Qool +lavor ;ilk@NB

C$4 Res P

C>4 <o P

5. Fow did you come to know about ?$mul Qool +lavoured ;ilk@N

C$4 >y friends P

C>4 >y relatives P

C34 >y shopkeepers

P C4 >y advertisement

C"4 2thers P

6. >y which media of advertisement you knew about ?$mul Qool +lavored

;ilk@N

C$4 <ewspaper PC>4 Television PC34 ;aga#ine PC4 2thers P

'. o you buy ?$mul Qool +lavoured ;ilk@N

C$4 Res P

C>4 <o P

E. Why do you buy ?$mul Qool +lavoured ;ilk@N

6!



C$4 ood quality P

C>4 ood taste P

C34 3heaper than other products P

C4 >randed company P

C"4 2ther reasons P

. Which flavor do you like most in the ?$mul Qool +lavoured ;ilk@N

C$4 7ose P

C>4 ;ango P

C34 "laichi P

C4 Qesar P

O. Why do you not buy ?$mul Qool +lavoured ;ilk@N

C$4 nawareness P

C>4 on/t like taste P

C34 Figher price P

C4 2ther reasons P

&. id you buy ?$mul Qool +lavoured ;ilk@N

C$4 Res PC>4 <o P

1G. Which other brands do you buyN

C$4 $mul Qool P

C>4 $mul Qool Thandai P

C34 $mul Qool 3hocolate ;ilk P

C4 2ther product P

11. Which brand do you like mostN

C$4 $mul Qool 3hocolate ;ilk P

C>4 $mul Qool +lavoured ;ilk P

C34 $mul Qool P

69



CHAPTER78?)INDING/ AND CONC-,/ION

uring the survey, it was found that still there 1GH ofretailers are unaware about the ?$mul

Qool +lavor ;ilk.@

+rom the survey it was found that mostly people come to know about amul cool favor milk by

advertisement

The price of the product is very high as compare to its quantity of the product.

7ose is the most popular flavor in the ?$mul Qool +lavor ;ilk.@

enerally people buy the product because of better quality and brand name.

$dvertisement should be given to increase the level of awareness and sale of the product.

+rom the awareness level, more than &GH people buy this product.

+rom the consumers view, more than GH people buy this product because of good taste.

CONC-,/ION

Fereby, I conclude my proect that logistic management is related to types of transportation and

supply chain management is related to modes of transportation and is world wide.

ue to constraints of time and resources, the study is likely to suffer from certain limitations.%ome of these are mentioned here under so that the findings of the study may be understood in a

proper prospective.

The study is based on the secondary data and the limitation of using secondary data may affect

the results and also :rimary data has been collected in form of questionnaire.

70



CHAPTER 77?-I$ITATION/

• Limited time available for interviewing the respondents. $s a result of this it was not

possible

• To gather full information about the respondents.

• The respondents were not very comfortable while revealing their correct usage pattern, no

3ause they may feel that they would be called or visited again and again.

• <oncooperative approach and rude behaviour of the respondents.

• If the respondents answer does not falls between amongst the options given then it will turn

upto be a biased answer.

CHAPTER 7#?9I9-IOGRAPH>

71



• Tybms "lements of logistics and supply chain management

• www.amul.com

• www.google.com

http://www.amul.com/

http://www.google.com/

http://www.google.com/

http://www.amul.com/

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