DISTRIBUTION PROCESS OF AMUL

The company: Amul is a quality control expert in Anand suggested the brand name Amul,.Amul products have been in use in millions of homes since 194 . Amul !utter, Amul "il# $o%der, Amul &hee, Amulspray, Amul 'heese, Amul 'hocolates, Amul (hri#hand, Amul )ce cream, *utramul, Amul "il# and Amulya have made Amul a leading food brand in )ndia. +oday Amul is a symbol of many things. ,f high-quality products sold at reasonable prices, of the genesis of a vast co-operative net%or#, of the triumph of indigenous technology, of the mar#eting savvy of a farmers. organi/ation and have a proven model for dairy development. The channel networ : 0istribution channel (CMMF )ea* o%%!ce Man&%act&r!n#

F!r"t le#

$%rom man&%act&r!n# &n!t"'

Depot+++,

Depot+++n

Secon* le# -D., -D.n

Th!r* le# Reta!l., Reta!l+++n

Proc&rement Channel

Down"tream %low

Up "tream %low

D!"tr!/&t!on

(CMMF )ea* o%%!ce

MU.,

MU+++n

0CS.,

0CS.n

0!lla#e.,

0!lla#e.n

Up"tream %low

The networ "il# is procured from the villages and collected at 2illage 'ooperative (ocieties 32'(4, from there the mil# is ta#en to manufacturing units %here the mil# is processed into various products. +he products are then transporters to the company 0epots located in various parts of the country. +he products are then sent to 5holesale 0istributors 3504 and from there to the retailers. The %act "heet "il# is procured t%ice a day from 1 million from &u6arat alone +he payment is made under t%elve hours of procurement +here are 17777 village cooperative societies +here are 8 77 %holesale distributors in the country 49 depots +he ':; agents are not fixed and are decided by the local company offices +here are approximately 4,97,777 retailers spread all over )ndia +otal house hold consumers covered are 177,777 +he mil# procured per day is 9 million liters 5here the total capacity of operation is < million liters per day +he pea# processing till date has been million liters per day

+hese co operative societies are bound to supply there produce only to &'"";

Enterpr!"e re"o&rce plann!n#: the company at has implemented an =>$ program as lo% as >s. 8 corers in collaboration %ith +'( ltd. +he 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. +he soft%are enabling the channel members to use for the synchroni/ed %or#ing and best possible utili/ation of the available resources maintains details regarding the inventory management.

Mar et lo#!"t!c" deals %ith the implementation of the ('" of the company. Up"tream Channel in %hich mil# is procured from the farmers to the manufacturing units. )n the first step, the mil# is ta#en to the 2'( by the farmers on foot or bicycles in small quantities +he second step involves the transportation of mil# from the co-operatives to the manufacturing units this is done in special truc#s %hich are equipped %ith tan#ers to carry mil#. Down"tream Channel1 it is the distribution part of the supply chain. ;rom the manufacturing units to the retailers. F!r"t le# of transport is from the manufacturing unit to the company depots. +his is done using 2 an* ,3 MT truc#s any lesser quantity %ill be uneconomical to the company there fore is some time the quantity ordered is lesser then club loading is done %hich means that the product ordered is supplied %ith some other products. Fro4en %oo* the temperature of these truc#s is #ept belo% -1?@' Da!ry wet the temperature of these truc#s is #ept bet%een 7-4@'

Secon* le# is from the depot to the 50As, this transport is carried out in insulated 8 and 9 "+ +A+A 47<As here a permanent dispatch plan 3$0$4 is prepared %here the distributor plans out the quantity of various products to be ordered on a particular date. Th!r* le# this is the flo% of good from 50As to retailers, a beat plan is prepared and transportation is done on auto-ric#sha%s, ric#sha%s and bicycles.

Select!on1 mot!5at!on 6 e5al&at!on o% channel mem/er"

Select!on: +he company ta#es into consideration a host of factors %hile selecting the channel members. +his is because &'""; believes that selection of channel members is a long run decision : the rest of the decision regarding the supply chain depends upon the efficiency : coverage by the channel members. +he follo%ing are the host of factors considered by the company in selecting the channel membersB

Authentication is required by the regarding the identity of the channel members, %hich includes the name : address, photograph of the location.

$roof of solvency %hich requires name : address of the channel memberAs ban#ers

(afety of the inventory, %hich means that the distributorC dealer should get the stoc# of the company insured.

)nventory or the perishable goods #ept by the distributorC dealer should be in good condition %hich means a detail of storage space : >efrigeration facility is to be provided. >efrigeration system should have deep free/ers, cold room : %al# in coolers.

0etails of the delivery vehicle, %hich includes Dight 'ommercial 2ehicles, "atador, 8 5heeler 2an, +ricycle 2an : EandC$ush cart. +he number : model of each of the vehicle needs to be furnished to the company.

&'""; ac#no%ledges the fact that it needs to be sensitive to the mar#et demands. ;or this it requires that a number of salesmen needs to be present on the field. +he salesmen too are divided into various categories li#e the ;ield salesmen : 'ounter salesmen. Also the details of 'lerical (taff : "a/doors are to be provided. +he technical competence of the salesmen needs to be mentioned

0etails of the product #ept of other companies have to be provided. +he annual sales of these products too have to be mentioned. Also details of complementary products : product lines need to be mentioned.

0ealers of the company must carry a good reputation. +his is due to the fact that the company believes reputation of the dealer affects the clientele.

"ar#et coverage by the distributors needs to be defined %hich includes details of &eographic coverage : ,utlets per mar#et area.

+he company also requires the dealers to furnish any Advertising : (ales initiative underta#en by them on behalf of the company.

Mot!5at!on o% Channel Mem/er" &'""; strongly believes in maintaining a good relationship %ith the channel members so that they are genuinely motivated to %or# for the company. Also if the channel members are motivated, they can also initiate advertising : sales promotion schemes on behalf of the company. Eo%ever to #eep the channel members motivated to %or#, the company has to incur certain costs but the benefits of it are felt in the long run. +he follo%ing are the motivation programs run by the companyB D!"tr!/&tor" ,ne of the main factors, %hich #eep the distributors motivated, is the margin. Fsually the margins offered by the company are ?G : it is raised to ?.9G. 2olume %ise this comes out to be a big figure since AmulAs product has a good demand in the mar#et. Eo%ever compared to the other companies the margins are still lo%er since the ne% players in the mar#et offer a much higher margin. !ut the very fact that AmulAs products have good demand in the mar#et motivates the distributors to stoc# it. Amul being a cooperative cannot afford to give heavy monetary incentives. AmulAs products are considered to be value for money since the company does not believe in charging high margins. )n fact all monetary incentives are 6ust the short run means to promote the companyAs product. )n order to #eep the 'hannel members motivated in the long run, Amul builds on the concept of +rade "ar#eting %hich ma#es the

dealers : the distributors believe that the companyAs products are %orthy of being pushed in the mar#et. +he company is organi/ing various +otal Huality "anagement initiatives : %or#shops. Eere various counseling measures are underta#en by the company to improve the overall %or#ing of the distribution net%or#. 0!"!on an* m!""!on statementB the company cascades do%n the vision to the various channel members, this is done through various events organi/ed by the company at different locations %here the values of the company are made clear and enforced to the channel members. Also the fact that Amul being a cooperative society cannot afford to spend exorbitantly on such events therefore it has a very traditional %ay of organi/ing these get together %hich leaves an impact on the members. Am&l yatra": this includes ta#ing the channel members on a guided tour of the manufacturing and procuring facilities in &u6arat. (o that the channel members can have an experience of the %or#ing of the company and can pic# up some quality measures that can help them to synchroni/e and improve their o%n functioning at various levels. +his 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. +he company has already got the >a6iv &andhi a%ard for quality. The Reta!ler" Tra*e "cheme": these are underta#en by the company only for the hard selling items e.g. )ce creams, flavored mil# etc. for these the company raises the margins by 1G, also schemes li#e good pac#aging incase of butter and cheese is underta#en by the company. Eo%ever this is only a short-term initiative to push the products of the company. (low /oar*": the company puts up glo% boards at the retailer and pays the ma6or portion of the cost. Sche*&le o% the "ale"men: they provide the retails %ith this schedule so the retailers can pre estimate the quantities of the various products needed. <

In%ra"tr&ct&re %ac!l!tat!on: the company facilitates the retailers to buy free/ers and fridges by formulating an easy payment program and a commitment to buy bac# the equipment at a reasonable price %hen the value of the equipment has depreciated.

E5al&at!on o% channel mem/er" Beat plan: this plan is generated for the various product categories i.e. diary dry, diary %et, 0hara and ice cream. A %ee#ly schedule is prepared for various mar#ets and the retailers the turnover for each of the product is calculated for the %holesale dealers. C&m&lat!5e per%ormance: the performance of the dealers is averaged out over a period of three years %here a comparison is made of the present performance visI-vis the previous ones. Tar#et 5er"&" ach!e5ement: the performance and the targets are compared and therefore the gaps are identified %hich help in evaluating the 50 and planning for the next year as %ell. +his is done for each of the product category. Other cr!ter!on 0etails of the ban# guaranty $hotographs of the offices 0etails of the 50 salesmen and the product lines he deals in +he computeri/ation facility available +he storage space >efrigeration facility %ith photograph 0etails of the delivery vehicle %ith photograph (ummary of the monthly potential sales of mar#ets (ummary of the product %ise monthly sales potential of institutions

Con%l!ct" an* co7operat!on amon# channel mem/er"

Con%l!ct" Owner"h!p o% a""et": $reviously the company used to give the cooling equipment on lease to the retailers, %hen the company %anted the stuff bac#J the retailer disagreed to comply and created issues of o%nership. Stoc !n# !""&e": +he company doesnAt %ant the retailers to stoc# the competing brand in the company leased fridges, %hich at times s hard to manage as retailers tend to do it often. Replacement o% pro*&ct": +he deterioration in the product calls for fail in replacement by the company this ma6or issue of vertical conflict. Cre*!t pol!cy: 'ompared to the mar#et, the companyAs credit period is less that specially incase of institutional sales is very important. Pac a#!n#: +he channel members for easy storing demand a better quality of pac#aging. Replen!"hment: +he replenishment of the stoc#s is not prompt in case of amul cheese and all hard selling items. Mar#!n": +he 'ompany provides least margins to all the channel members. ;or e.g. the retailerAs margin in case of butter is ?G as compared to !ritanniaAs 11G 'o-operation among channel members Am&l 8&al!ty c!rcle": +he members of the local channel meet together every month to share issues and the achievements of the channel members. +his is an ongoing activity facilitated by the company offices in different locationsJ this enables the channel members to learn together and reduces the hori/ontal conflicts among the 50s. P!lot "ale"men "cheme: +o reduce the financial burden of the distributors this scheme is run %hereby half the cost of the salesmen is born by the company and the rest half by the distributor Sche*&l!n# o% "ale": +he 50As provides (chedule of the distributorAs sales men to the retailers so that the retailers can plan out and place the orders in advance.

A#reement *e%!n!n# r!#ht": +he company ma#es the distributors sign an agreement %here the areas of operation for each of the distributors are defined, therefore avoiding any conflict amongst the distributors regarding their areas of operation.

O/"er5at!on1 comment" an* "&##e"t!on

O/"er5at!on" +he companyAs strength is in its procurement and not the distribution even they #no% this, as this is the industryAs main problem. ,ther companies fail to replenish demand due to lac# in procurement of ra% mil#. Amul has loyal cooperatives that provide mil# only to them, over time the relationship of trust has built up %ith these people that amul leverages no%. +ransport channel is another strength as the transporters have gro%n %ith the company overtime the bonding %ith them enables the company to give least margins %hen it comes to the distributors in the industry, lo%ering the costs. +he company believes that there is an ongoing demand in the mar#et and therefore no promotions are needed to increase the sales, also the fact this %ould affect the cost of the product the company doesnAt underta#e many promotion schemes. +he not being a profit driven organi/ation, is able to provide products at the least price in the industry, and is able to give least channel margins as the channel members earn through volumes and not through high margins. +he company is enabled to push its ne% products into the mar#et by hoo#ing them onto the fast moving products li#e Amul butterJ they force the channel members to carry the ne% products as %ell.

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Comment" an* S&##e"t!on: Am&l "ho&l* #o !n %or e9cl&"!5e o&tlet" in at least all the shopping malls coming up these days and any location %here footfalls are large in number. +he advantages of this channel %ill beB ;ull range display =asier to promote ne% products =asy to push impulse purchase products !rand building %ill be facilitated

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A termpaper O% S&pply Cha!n Mana#ement on D!"tr!/&t!on proce"" !n Am&l

(ubmitted toB $rof. $.>.(.(harma (ubmitted byB !.$a%an $utra

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