E-SCM AT AMUL

E-SCM

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What is the fuss about?

SCM is the management of upstream and downstream relationships in order to deliver superior customer value at less cost to the supply chain as a whole

Supply Chain Management

E-SCM can be defined as the integrated management approach for planning and controlling the flow of materials from suppliers to the end users using IT and internet technologies.

E-Supply Chain Management

Eg: Walmart, Amul etc

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INDUSTRY OVERVIEWInsights into the Dairy Industry

India is the biggest producer, consumer and exporter of milk and milk products

In 2012-13, India exported 87,824.19 Metric tons of milk products worth 1412.09 crores

Growth Periods: Public companies 1971 onwards Private companies – 1991 onwards

Operations governed by Traditional methods. Plagued by problems such as low per cattle yield, shortage of fodder, inadequate transportation and Cold storage facilities.

Recently, transformations in the sector have been spearheaded by Amul’s adoption of IT services.

Major Players : Amul, Mother Dairy, Nestle and other regional players

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COMPANY OVERVIEWAmul’s Inception and Business Model

AMUL’s INCEPTION• Launched in 1946

• Prior to Amul’s launch, Indian Dairy industry was dominated British Polson Dairy• In the protest against Polson’s discriminatory policies, a non-cooperation movement was launched which eventually culminated in to the inception of Amul in late 1946

BUSINESS MODEL

• Eliminating the middlemen• Division of Procurement units on the basis of Societies (Amalgamation of villages)• On the Supply side, daily procurement of 3 million litres a day from 1.25 million milk suppliers, and thus in 1994, it implemented Automatic Milk Collection Units (AMCUS)• On the Demand side, GCMMF (Gujarat Co-operative Milk Manufacturing Federation) controls the manufacturing, distribution and marketing of milk and other related products• Low price strategy• Dual strategy of simultaneous development of the market and member farmers helped attain sustainable competitive advantage. IT and TQM have significantly optimized operations at Amul

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PROBLEM STATEMENT & GAP ANALYSISUnderstanding the Current Scenario

PROBLEM STATEMENT Maximizing the network surplus & maintaining equity among unions Matching demand and supply Milk collection and storage (perishable good)

GAP ANALYSISSTAGES AS-IS TO-BE

Process Analysis • Inflexible to expansion• Complex supply chain• weak infrastructure

• Smooth Expansion; flexible• Minimum Wastage• Instant payments

Product Analysis • Decentralized applications• No online access• Data discrepancies

• Easy information flow• Data analysis for decision support & productivity

IT infrastructure • Disparate systems• Unstructured data capturing

• Communication systems like e-mail, fax etc

Competitive analysis • Availability of branded milk • Increase availability; promotion

Strategic Analysis • Demand-supply mismatch • Match demand; expansion

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BUSINESS SOLUTIONE-SCM to Amul’s rescue

•In order to address the scalability and integration issues, Amul started implementing a collection of Technical and IT initiatives.•As a part of its E-SCM implementation, the following systems were introduced:

1. AMCUS 2. DISK 3. VSAT 4. GIS 5. Amul Cyber Store

Thus, over a period of 7 years, Amul introduced a variety of end-to-end IT solutions to tightly integrate the various components of its Supply Chain.

Supply Side -- Procurement

Milk Processing and Marketing

Demand Side - Distribution

Farmers

(Production)

Village Societies

(Procurement)

Milk Unions

(Milk Processing)

GCMMF

(Marketing)

Distributors

(Distribution)

Retailers

(Retailing)

IMPLEMENTATION METHODOLOGY

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How things changed at AMUL

1. PROJECT PLANNING

(a) SCOPE MANAGEMENT: • Location Scope• Business Scope• Process Scope• Application Scope• Report Scope• Data Migration Report• User Scope• Technology Scope

(c) TIME MANAGEMENT

(b) HUMAN RESOURCE MANAGEMENT

• Recruitment• On the job Training• Online Portal• Team

IMPLEMENTATION METHODOLOGYHow things changed

1. PROJECT PLANNING

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(d) TRAINING MANAGEMENT• ‘Chirag Banas Internet Seva’ in Gujarat• Infrastructure for training

(e) QUALITY MANAGEMENT• TQM- Internal Consultant Development• Developing internal competencies for technology

user community

(f) CHANGE MANAGEMENT• Free systems- diffused IT in villages• Empowered village cooperative societies

(g) RISK MANAGEMENT• Minimum delay in payments• Whole milk accepted• Surplus paid in the form of dividends

IMPLEMENTATION METHODOLOGYHow things changed

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2. IMPLEMENTATION STRATEGY

• Assigned the ERP software development project on a turnkey basis to TCS

• Phased transition• FIrst implemented AMCUS in Navali Village co-operative society

on a pilot basis in 1996

3. TEAM STRUCTURE

Retail B2B & B2C Portal Wholesale depots and Retailers

Connect with the Direct customer base

EIAS & GIS Internet GCMMF head office members and the distributors

Interface between the suppliers and the retailers

ERP DISK Union members, Head of the village society and suppliers

Connect with the farmers and village cooperative societies

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IMPACT ASSESSMENT (1/3)SWOT, PEST and Operational Impacts

Strengths Weaknesses

-Platform independent

-Supports exchange of real time information

-24/7 processing capability

-Open architecture that allows rapid deployment and scalability which permits almost unlimited users in a real time environment

-Incorporates broadcast and active messaging

-Inability to adapt to change, which could lead to inaccurate estimates

-Speed of underlying network could spell trouble for the company

-Amul no longer has total control over its operations as it partners with others

Threats Opportunities

-Loss of competitive advantage due to shared strategy

-True amount of information that can be shared with suppliers may hamper progress

-Suppliers who want to work with multiple companies would be reluctant to adopt this system

-Information security is a concern

-Creation of a massive supply chain that is tightly integrated with Amul’s processes and is able to adapt to continuously changing requirements and demands

-Expansion of this supply chain to other products would create a significant advantage for Amul

-Excellent platform to promote inter-departmental coordination

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IMPACT ASSESSMENT (2/3)SWOT, PEST and Operational Impacts

Political

-Strong support from Sardar Patel & Pandit Nehru helped initiate and develop the traditional Amul Business model-Reliance on state & district cooperatives to provide milk producers with:-Facilities and support services-Training programmes-Conflict resolution

Economical

-Cost of implementation of the system is high-Is the system adding significant value to the company?-Break even period for the investment?-Could this system create a monopoly for Amul? And would there be any regulatory consequences ?

Social

Parity between partners at three levels:-Village level-District level-State level

Technological

-The system would undergo continuous development in order to keep up with the latest technology-Extending the reach of the network to all villages and towns-Overcoming skeptics to drive system adoption among suppliers

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IMPACT ASSESSMENT (3/3)SWOT, PEST and Operational Impacts

Increase in Milk Collection - Post IT implementation in 1995

Increase in Total Revenue- Post IT implementation in 1995

Increase in Member Base- Post IT implementation in 1995

NOTE: Data till 2001 has been taken into account to reflect on the immediate impact(1995-2001) of IT implementation at AMUL.

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PROCESS MAPPINGBusiness Functions, Processes and KPIs at AMUL

Business Function Process KPI

PROCUREMENT

1. Milk Collection using AMCUS

i. Daily volume of Milk procuredii. Response Time for milk collection per supplieriii. Waiting time in the queueiv. Rise/change in average daily procurement

2. Value Determination i. Fat Content in the Milk

PRODUCTION AND PROCESSING 1. Milk processing and further processed goods

i. Shelf life of the processed productsii. Waste and Pilferage rate during production

RECORD KEEPING AND ACCOUNTING

1. Tracking individual Supplier records

i . Total milk supplied by individual farmersii. Consistency in the quality of Milk supplied

2. Tracking Payments and Disbursements

i. Payment Cycle of the farmers and milk suppliersii. Time lag in the payments (if any)

DISTRIBUTION AND LOGISTICS

1. Tracking Sales data geographically

i. Increase/Decrease in demand at a location

2. Tracking of Distribution Trucks

i. Cost effective route for deliveryii. Availability of trucksiii. Utilization of trucksiv. Number of distribution centers

STAFF TRAINING1. IT compatibility training of the employees

i. Time processing for Transactionsii. Volume of Daily/weekly/Periodic Transactionsiii. Error Rate

ORGANISATION METRICSHow effective is Amul and its supply chain

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(a) QUALITY MEASUREMENT ISSUES

METHOD USED: Kaizen Techniques of six sigma• Number of AMCUS installed• Satisfaction level of villagers is measured• Improvement in quality of milk (reduction in acidity and sour milk)• Planned activities for maintenance of machines

(b) COMMUNICATION EFFECTIVENESS

METHOD USED: INFORMATION COMMUNICATION TECHNIQUES• Reduced time delay in getting money.• Improved cash availability and reduced the need for loan.• Possibility of error was reduced.• Reduced Waiting time

(c) TRAINING AND SKILL DEVELOPMENT

• Procurement system- integrator and knowledge sharing platform• Trained 2 or 3 operators by system provider

BUSINESS PARTNERSWho contributed in the success story of Amul

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Helped implement SAP ERP system which enabled to have a complete view of supply chain and integrate GCMMF and district unions

Business intelligence system which gave them an insight on all its products all over the country and generated reports to manage the supply chain

To achieve the objective of C2C (cow to consumers), Amul laid down a five point agenda using ERP, which were:•ERP implementation for GCMMF•ERP implementation for member unions•a uniform and automated milk collection system covering all the villages in the Amul family•a distributor managed solution •a retail management solution for Amul Preferred Outlet

IBM is helping Amul in achieving all these objectives

CHALLENGESImplementation of IT in supply chain was not easy

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(a) Challenges faced by Management:

• Change Management • Scalability

(b) People/ Human Resources Related Challenges

• Training and Skill Re-orientation• Farmer Literacy and support

ADVANTAGESHas E-SCM been useful to Amul?

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After the implementation of AMCUS in 1995 and other IT initiatives, there have been a steady and a healthy increase in the procurement of milk

Demonstrated benefits of the ICT platform:• Reduction in lead time• Reduction of pilferage• Reduction in human errors• On the spot payment for farmers (from a

week to a couple of minutes)• Reduction in wastage• Transparency in operation• Integration in operation

After calculating the economic benefits it is found that the AMCUS benefits the farmer community by saving Rs. 1159.4 million per year.

CONCLUSION

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•E-SCM has helped Amul achieve better efficiency in terms of inventory management, reduce lead time, reduce processing time (by 90%) and better distribution and reach.•AMCUS has ensured transparency in the process, which has lead to better relations with stakeholders.

FUTURE SCOPE•Agreement with Walmart to export milk to 15 countries•Mission for 2020, whose objectives are:

• Turnover of Rs. 27,000 crores• Milk production of 33.1 million litres / day• Milk drying capacity of 200 m3 / day• Introduction of banking and ATM services to enable milk societies to credit payments

directly to a seller’s bank account• Replacement of plastic cards with smart cards that enable one to use banking & ATM

facilities• Strong e-commerce push - JIT supply chain, online selling & distribution via

amulb2b.com