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    11/3/2011GROUP

    ASSIGNMENT

    AMUL

    A Study Of Distribution Channels &Strategies

    For Strengthening It.

    Submitted By:-SOLLETI V.MANOJ KISHAN (2011196)

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    THE COMPANY

    AMUL means "priceless" in Sanskrit. A quality control expert in Anand suggested thebrand name Amul, from the Sanskrit Amoolya, Variants, all meaning "priceless", are

    found in several Indian languages. Amul products have been in use in millions of homessince 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese,Amul Chocolates, AmulShrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya

    have made Amul a leading food brand in India. (Turnover: Rs. 25 billion in 2002). TodayAmul is a symbol of many things. Of high-quality products sold at reasonable prices, of

    the genesis of a vast co-operative network, of the triumph of indigenous technology, ofthe marketing savvy of a farmers' organization and have a proven model for dairy

    development.

    List of Products Marketed:

    Breadspreads:

    y Amul Buttery Amul Lite Low Fat Breadspread

    CheeseRange:

    y Amul Pasteurized Processed Cheddar Cheesey Amul Processed Cheese Spready AmulMozarella Cheesey AmulEmmental Cheesey Amul Gouda Cheesey AmulMalaiPaneer (cottage cheese)y Utterly Delicious Pizza

    MithaeeRange (Ethnic sweets):

    y AmulShrikhand (Mango, Saffron, Almond Pistachio, Cardamom)y AmulAmrakhandy AmulMithaeeGulabjamunsy AmulMithaeeGulabjamun Mixy AmulMithaeeKulfi Mix

    UHTMilkRange:

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    y AmulTaaza 3% fat Milky Amul Gold 4.5% fat Milky Amul Slim-n-Trim 0% fat milky Amul Chocolate Milky Amul Fresh Creamy

    Amul Snowcap Softy Mix

    Pure Ghee:

    y Amul Pure Gheey Sagar Pure Ghee

    InfantMilkRange:

    y Amul Infant Milk Formula 1 (0-6 months)y Amul Infant Milk Formula 2 ( 6 months above)y

    Amulspray Infant Milk Food

    Milk Powders:

    y Amul Full Cream Milk Powdery Amulya Dairy Whitenery Sagar Skimmed Milk Powdery Sagar Tea and Coffee Whitener

    Sweetened Condensed Milk:

    yAmulMithaimate Sweetened Condensed Milk

    Fresh Milk:

    y AmulTaaza Toned Milk 3% faty Amul Gold Full Cream Milk 6% faty Amul Shakti Standardised Milk 3% faty Amul Smart Double Toned Milk 1.5% fat

    Curd Products:

    yAmulMastiDahi (fresh curd)

    y Amul Butter Milk

    AmulIcecreams:

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    y Royal Treat Range (Rajbhog, Cappuchino, Chocochips, Butterscotch,TuttiFrutti)

    y Nut-o-mania range (KajuDrakshi, KesarPista, Roasted Almond, Kesar Carnival,BadshahiBadamKulfi, ShistaPistaKulfi)

    y Utsav Range (Anjir, Roasted Almond)y S

    imply Delicious Range (Vanilla, Strawberry, Pineapple, Rose, Chocolate)y Nature's Treat (Alphanso Mango, Fresh Litchi, Anjir, Fresh Strawberry, Black

    Currant)

    y SundaeRange (Mango, Black Currant, Chocolate, Strawberry)y Millennium Icecream (Cheese with Almonds, Dates with Honey)y Milk Bars (Chocobar, Mango Dolly, Raspberry Dolly, ShahiBadamKulfi,

    ShahiPistaKulfi, MawaMalaiKulfi, Green PistaKulfi)

    y Cool Candies (Orange, Mango)y Cassattay Tricone Cones (Butterscotch, Chocolate)y Megabite Almond Coney F

    rostik- 3 layer chocolate Bary FundooRange - exclusively for kidsy SlimScoop Fat Free Frozen Dessert (Vanilla, Banana, Mango, Pineapple)

    Chocolate & Confectionery:

    y Amul Milk Chocolatey Amul Fruit & Nut Chocolatey AmulEclairs

    Brown Beverage:

    y Nutramul Malted Milk Food

    THE CHANNEL NETWORK

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    Distribution channel

    First leg (from manufacturing units)

    GCMMF

    Head office

    Depot...1 Depot...n

    WD1 WDn

    Retail1 Retail...n

    Second leg

    Third leg

    Manufacturing

    Downstream flowProcurement Channel

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    Distribution

    SUPPLY CHAIN MANAGEMENT

    GCMMFHead office

    MU1 MU...n

    VCS1 VCSn

    Village1 Villagen

    Upstream flow

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    The network

    Milk is procured from the villages and collected at Village Cooperative Societies (VCS),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 Depots located in various parts of thecountry. The products are then sent to Wholesale Distributors (WD) and from there to the

    retailers.

    The fact sheet

    y Milk is procured twice a day from 2 million from Gujarat aloney The payment is made under twelve hours of procurementy There are 10000 village cooperative societiesy There are 3600 wholesale distributors in the countryy 45 depotsy The C&F agents are not fixed and are decided by the local company

    offices

    y There are aproxx. 4,50,000 retailers spread all over Indiay Total house hold consumers covered are 100,000y The milk procured per day is 5 million litersy Where the total capacity of operation is 7 million liters per dayy The peak processing till date has been 6 million liters per dayy These co operative societies are bound to supply there produce only to

    GCMMF

    Enterprise Resource Planning

    The company at has implemented an ERP program as low as Rs. 3 corers in collaborationwith TCS 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 thechannel members to use for the synchronized working and best possible utilization of the

    available resources maintains details regarding the inventory management.

    Market logistics deals with the implementation of the SCM of the company.

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    Upstream Channel in which milk is procured from the farmers to the manufacturingunits.

    1. In the first step, the milk is taken to the VCS by the farmers on foot orbicycles in small quantities

    2.

    The second step involves the transportation of milk from the co-operativesto the manufacturing units this is done in special trucks which areequipped with tankers to carry milk.

    Downstream Channel, it is the distribution part of the supply chain. From themanufacturing units to the retailers.

    1. First leg of transport is from the manufacturing unit to the companydepots. This is done using 9 and 18 MT trucks any lesser quantity will beuneconomical to the company there fore is some time the quantity ordered

    is lesser then club loading is done which means that the product ordered issupplied with some other products.

    a. Frozen food the temperature of these trucks is kept below -18C

    b. Dairy wet the temperature of these trucks is kept between 0-4C

    2. Second leg is from the depot to the WDs, this transport is carried out ininsulated 3 and 5 MT TATA 407s here a permanent dispatch plan(PDP) is prepared where the distributor plans out the quantity of variousproducts to be ordered on a particular date.

    3. Third leg this is the flow of good from WDs to retailers, a beat plan is prepared and transportation is done on auto-rickshaws, rickshaws andbicycles.

    SELECTION, MOTIVATION & EVALUATION OF

    CHANNEL MEMBERS

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    Selection:

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

    members. This is because GCMMF believes that selection of channel members is a longrun decision & the rest of the decision regarding the supply chain depends upon the

    efficiency & coverage by the channel members. The following are the host of factorsconsidered by the company in selecting the channel members:

    y Authentication is required by the regarding the identity of the channel members,which includes the name & address, photograph of the location.

    y Proof of solvency which requires name & address of the channel members bankersy Safety of the inventory, which means that the distributor/ dealer should get the stock

    of the company insured.

    y Inventory or the perishable goods kept by the distributor/ dealer should be in goodcondition which means a detail of storage space & Refrigeration facility is to be provided. Refrigeration system should have deep freezers, cold room & walk in

    coolers.

    y Details of the delivery vehicle, which includes Light Commercial Vehicles, Matador,3 Wheeler Van, Tricycle Van & Hand/Push cart. The number & model of each of thevehicle needs to be furnished to the company.

    y GCMMF acknowledges the fact that it needs to be sensitive to the market demands.For this it requires that a number of salesmen needs to be present on the field. Thesalesmen too are divided into various categories like the Field salesmen & Counter

    salesmen. Also the details of Clerical Staff &Mazdoors are to be provided. Thetechnical competence of the salesmen needs to be mentioned

    y Details of the product kept of other companies have to be provided. The annual salesof these products too have to be mentioned. Also details of complementary products

    & product lines need to be mentioned.

    y Dealers of the company must carry a good reputation. This is due to the fact that thecompany believes reputation of the dealer affects the clientele.

    y Market coverage by the distributors needs to be defined which includes details ofGeographic coverage & Outlets per market area.

    y The company also requires the dealers to furnish any Advertising & Sales initiativeundertaken by them on behalf of the company.

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    Motivation:

    GCMMF strongly believes in maintaining a good relationship with the channel members

    so that they are genuinely motivated to work for the company. Also if the channelmembers are motivated, they can also initiate advertising & sales promotion schemes onbehalf of the company. However 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. Thefollowing are the motivation programs run by the company:

    Distributors

    y One of the main factors, which keep the distributors motivated, is the margin. Usuallythe margins offered by the company are 8% & it is raised to 8.5%. Volume wise this

    comes out to be a big figure since Amuls product has a good demand in the market.

    However compared to the other companies the margins are still lower since the new players in the market offer a much higher margin. But the very fact that Amulsproducts have good demand in the market motivates the distributors to stock it.

    y Amul being a cooperative cannot afford to give heavy monetary incentives. Amulsproducts are considered to be value for money since the company does not believe in

    charging high margins. In fact all monetary incentives are just the short run means topromote the companys product. In order to keep the Channel members motivated in

    the long run, Amul builds on the concept of Trade Marketing which makes thedealers & the distributors believe that the companys products are worthy of being

    pushed in the market.

    y The company is organizing various Total Quality Management initiatives &workshops. Here various counseling measures are undertaken by the company toimprove the overall working of the distribution network.

    y Vision and mission statement: the company cascades down the vision to the variouschannel members, this is done through various events organized by the company at

    different locations where the values of the company are made clear and enforced tothe 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 way oforganizing these get together which leaves an impact on the members.

    y Amul yatras: this includes taking the channel members on a guided tour of themanufacturing and procuring facilities in Gujarat. So that the channel members can

    have an experience of the working of the company and can pick up some qualitymeasures that can help them to synchronize and improve their own functioning at

    various levels. This in turn help the company to co ordinate the entire value chain, asthe channel members understand the various constraints and liberties the company

    goes through. The company has already got the Rajiv Gandhi award for quality.

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    The Retailers

    y Trade schemes: these are undertaken by the company only for the hard selling itemse.g. Ice creams, flavored milk etc. for these the company raises the margins by 2%,also schemes like good packaging incase of butter and cheese is undertaken by the

    company. However this is only a short-term initiative to push the products of thecompany.

    y Glow boards: the company puts up glow boards at the retailer and pays the majorportion of the cost.

    y Schedule of the salesmen: they provide the retails with this schedule so the retailerscan pre estimate the quantities of the various products needed.

    y Infrastructure facilitation: the company facilitates the retailers to buy freezers andfridges by formulating an easy payment program and a commitment to buy back theequipment at a reasonable price when the value of the equipment has depreciated.

    Evaluation:

    y Beat plan: this plan is generated for the various product categories i.e. diary dry,diary wet, Dhara and ice cream. A weekly schedule is prepared for variousmarkets and the retailers the turnover for each of the product is calculated for the

    wholesale dealers.

    y Cumulative performance: the performance of the dealers is averaged out over aperiod of three years where a comparison is made of the present performance vis--vis the previous ones.

    y Target versus achievement: the performance and the targets are compared andtherefore the gaps are identified which help in evaluating the WD and planningfor the next year as well. This is done for each of the product category.

    y Other criterion

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    o Details of the bank guarantyo Photographs of the officeso Details of the WD salesmen and the product lines he deals ino The computerization facility availableo The storage spaceo

    Refrigeration facility with photographo Details of the delivery vehicle with photographo Summary of the monthly potential sales of marketso Summary of the product wise monthly sales potential of institutions

    CONFLICTS AND CO-OPERATION AMONGCHANNEL MEMBERS

    Conflictsy Ownership of assets: Previously the company used to give the cooling

    equipment on lease to the retailers, when the company wanted the stuff back; theretailer disagreed to comply and created issues of ownership.

    y Stocking issues: The company doesnt want the retailers to stock the competingbrand in the company leased fridges, which at times s hard to manage as retailers

    tend to do it often.

    y Replacement of products: The deterioration in the product calls for fail inreplacement by the company this major issue of vertical conflict.

    y Credit policy: Compared to the market, the companys credit period is less thatspecially incase of institutional sales is very important.

    y Packaging: The channel members for easy storing demand a better quality ofpackaging.

    y Replenishment: The replenishment of the stocks is not prompt in case of amulcheese and all hard selling items.

    y Margins: The Company provides least margins to all the channel members. Fore.g. The retailers margin in case of butter is 8% as compared to Britannias12%

    Co-operation among channel members

    y Amul quality circles: The members of the local channel meet together everymonth to share issues and the achievements of the channel members. This is an

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    ongoing activity facilitated by the company offices in different locations; thisenables the channel members to learn together and reduces the horizontal

    conflicts among the WDs.

    y Pilot salesmen scheme: To reduce the financial burden of the distributors thisscheme is run whereby half the cost of the salesmen is born by the company andthe rest half by the distributor

    y Scheduling of sales: The WDs provides Schedule of the distributors sales mento the retailers so that the retailers can plan out and place the orders in advance.

    y Agreement defining rights: The company makes the distributors sign anagreement where the areas of operation for each of the distributors are defined,therefore avoiding any conflict amongst the distributors regarding their areas of

    operation.

    OBSERVATION, COMMENTS AND SUGGESTION

    Observations :

    y The companys strength is in its procurement and not the distribution even theyknow this, as this is the industrys main problem. Other companies fail to

    replenish demand due to lack in procurement of raw milk.

    y Amul has loyal cooperatives that provide milk only to them, over time therelationship of trust has built up with these people that amul leverages now.

    y Transport channel is another strength as the transporters have grown with thecompany overtime the bonding with them enables the company to give least

    margins when it comes to the distributors in the industry, lowering the costs.

    y The company believes that there is an ongoing demand in the market andtherefore no promotions are needed to increase the sales, also the fact this would

    affect the cost of the product the company doesnt undertake many promotionschemes.

    y The not being a profit driven organization, is able to provide products at the least price in the industry, and is able to give least channel margins as the channelmembers earn through volumes and not through high margins.

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    y The company is enabled to push its new products into the market by hookingthem onto the fast moving products like Amul butter; they force the channel

    members to carry the new products as well.

    Comments and Suggestion:

    y Amul should go in for exclusive outlets in at least all the shopping malls comingup these days and any location where footfalls are large in number. The

    advantages of this channel will be:

    i. Full range displayii. Easier to promote new products

    iii. Easy to push impulse purchase productsiv. Brand building will be facilitated

    y Pushcarts should be increased in number in order to increase the market reachthis can provide with e very effective channel for ice creams and flavored milks.

    y Trade promotion should be formulated for newly launched products instead ofjust tagging them onto best sellers.

    y The company should start a home delivery where a particular household willorder full range of products required by itovera period of time. For this the

    company could provide a deliveryman with cycle to reach the different houses.

    y In order to motivate the channel members it is also very essential for the companyto increase the margins for the hard selling items e.g. Amuldahi where it facescompetition from Nestle & Mother dairy.

    y In order to remain sensitive to market demand, it is essential for the company toplace additional salesmen on the field since the brand as such commands a highdemand in the market but fails to match it with the supply.

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