erp for dairy ind

7/24/2019 Erp for Dairy Ind.

1/18

1

Project on ERP in

Dairy Industry

Project By:- AASHISH TYAGI B-61

NISHIT SRIVASTAVA B-58


2/18


3/18

3

India is one of the largest producers of milk, and is now preparing to become the

largest food factory in the world. But in its course of journey to zenith, the Indian

dairy industry faces a multitude of challenges and opportunities in procurement of raw

milk and processing it into products such as consumer milk, butter, cheese, yoghurt,

condensed milk, dried milk (milk powder), ice cream etc., using varied processes such

as chilling, pasteurization, and homogenization et all. There is a clear demand supply

gap in the domestic milk scenario.

The focus of Dairies on increasing efficiencies, reducing costs, and ensuring

compliance with food regulations over the whole supply chain are hampered by a

number of non-integrated processes and system which is affecting the efficiency as

well as overall growth of the organization. To overcome these road blocks there is a

need to standardize all the scattered processes and information on a single platform.

For any entity dealing with this highly perishable animal produce, the procurement

and distribution process is of paramount importance. The quality requirement,

controls, and statutory regulations governing this process also tend to be stringent.

Organizations therefore need to adopt best practices to make profit in this highly

competitive market space. For this ERP is the best solution.

ERP for Dairy Procurement and Distribution comprises of industry leading

functionalities for Enterprise Resources Planning (ERP), Customer Relationship

Management (CRM), Supply Chain Management (SCM).


4/18

4

PROCESS OF DAIRY INDUSTRY:-

The normal process in a dairy is to first collect milk from various vendors and

farmers. After collecting milk they will pasteurize the milk so as to increase its life

and reduce its perishability to some extent. Then they will use milk for various other

by products of milk i.e, to make Butter, Cream, Ghee, Curd, Condensed Milk, Paneer,

Khoya, Ice cream, etc. the allocation of milk depends upon demand for every

individual by product.

The below mentioned diagram is an e.g. of that how traditionally a dairy works as the

procedure of only milk and its sales is shown which depicts that milk department is

working in isolation with other by products of milk. The dairy is not functioning as a

whole.

Fig 1.1


5/18

5

ERP IN DAIRY INDUSTRY PROCESS

ERP can easily help and channelize such activity by smooth functioning at every step

right from receiving milk up to channelizing it for various by products and its sales

and distribution along with financial management and less possible cost.

Fig 1.2

After the milk is ready it is sent either to make paneer or khoya and the process is linked

which is in fig 1.3. The process of separating cream is done along with pasteurization which

is depicted in fig 1.4. This is all connected to ERP and hence its input and output is recorded


6/18

6

at every step of by product preparation which will make it easy to know the pedagogy of

dairy as whole and not in isolation.

Fig 1.3


7/18

7

Fig 1.4


8/18

8

2. PRODUCT PLANNING

ERP also helps in product planning as it takes into consideration all the departments

information and has facts regarding which product of dairy is sold the most and

accordingly give rankings an importance to production of items in great demand.

Raw materials can be planned well in advance if the quantity and lot size of the

product is decided well in advance.

Fig 2.1


9/18


10/18

10

4. INVENTORY MANAGEMENT

ERP will enable smooth functioning of inventory because as all the departments

information are directly related to one another, the dispatch of one order will

automatically reduce stock and also add on to the requirements of purchase of rawmaterial.

Dairy industry is dealing with perishable product that is milk so it is foremost

necessary for them to maintain their inventory right from receiving raw materials,

managing work-in-progress products upto finished products ready to be sold in

market.

As all the products have very limited life a planned schedule is put in ERP and

accordingly all the departments will come to know where they are and where they

would reach in stipulated time and accordingly plan out their schedules to meet the

goal of the dairy and also with minimum blockage in stock.

Fig 4.1

ERP will reduce inventory management cost by 20%


11/18

11

ERP in dairy will help take better decisions regarding how much stock should be

maintained and in what time the finished stock should be sold at max.

ERP will automatically generate details on procurement of milk and also after it

pasteurises it moves to different department so again a note is taken in cream section,

ice cream section, butter section, paneer section, condensed milk section, milk powder

section that how much milk has been received and how much is pending work in each

department and what is the finished good stock received from each department.

ERP also is connected to the cold house in case of dairy where raw material as well as

finished goods are stored in cold storage as they are perishable in nature so a data

entry is even given there that how much stock is been dispatched as different serial

number coding are given to products and with help of software a laser on barcode

would make complete entry right from inventory register up to financial accounting

even.

ERP will help in reducing lead time or stock out and will help in taking better

decision for re-order level, Economic Order Size, safety stock level, buffer stock

level, minimum inventory level, maximum inventory level, etc. In case of milk we

definitely need to give more concern to availability of milk from various fixedvendors or farmers and also the perishable nature. As soon as the vendor sends milk

and is received in dairy it is checked in stock register and at the end of the day who

has supplied and who has not is also known and quality of milk is also checked so that

those who have supplied should be given money accordingly.


12/18

12

5. DISTRIBUTION

In diary industry with the use of ERP along with inventory management it also helps

and smoothens the distribution. It deals with the execution of the finished good to the

market. In terms of big dairies the dealers or whole sellers of the milk and dairyproducts are the customers. The track of the distribution of milk and by products is

also kept in ERP.

ERP provides a sophisticated solution to distribute milk and milk products to retail

outlets and also to end-customers.

Enable stores-based sales through bulk booking

Sell milk at specified times

Formulate route-based procurement plan

Pricing based on quality attributes of the product

Efficient handling of the product shelf-life

Provide quota-based sales to retail users and distributors

Expiry-based lot system

Returning of spoilt milk


13/18

13

6. ACCOUNTING & FINANCE

ERP software in dairy will make direct entries in accounting. The process goes as

soon as the order is placed the arrangement in finance department is done keeping a

check on materials.

As soon as the milk is received from the vendor entries are done in accounts in stock

as well as creditors both will increase, and on the other hand when milk or other by

products are sold the entries will be passed in stock directly and stock will reduce as

well as debtors will increase so we dont need to have havoc for preparing accounts.

Dairies can use a very important software application with application of joint

product and by product costing as well as process accounting.

Joint product and by product costing method using ERP will directly transfer the

cost of main product and consider it automatically with other by product costing. If it

is set properly it would be easy to find cost of milk, cheese, paneer, etc.

Process costing will automatically transfer the cost of one process to other and the

advantage is we can even transfer the mil to paneer or cheese after adding profit

margin at every processes. This would be the real integration of Technology,

Accounting and efficient management which is all because of ERP. So, it is very

advantageous in all senses in dairy industries.

Working Capital requirement can be easily traced out if every dairy product

departments are on ERP and every product earns what extent of revenue and needs

what extent of raw material and finance can also be planned out. As dairy maintains

everything with ERP it reduces its inventory management cost up to 20% which will

directly save cash and dairies will need to borrow less funds and so chances of

revenue will also increase.

ERP increase financial efficiency by 25-30%, it also improved profitability due to

integrated business planning and reduced time on report generation by 2-3%.


14/18

14

7. SALES & MARKETING

The sales are in batches in dairy industry or we can say lots. The bar code traces and

reduces the stock of finished good as soon as it goes out of the warehouse or cold

storage.

ERP helps in taking decisions as well.

We can see many transformations in monotonous dairy industries even as many out of

the competitiveness and also increasing demand of some specific food items like

Garlic Bread dairies took this concept and did some innovations by bringing in the

market garlic butter with herbsand oregano seasoning. All this is the advantage of

Social media and also the usage of technology in collecting reviews online. This

concept is very new and on such ground we can see many more marketing examples

and techniques.

Mayonnaise and cheese has grabbed up the sales of dairy industry because of

appreciated dishes using such ingredients in India so such type of surveys and market

research can be more efficient with the help of ERP.


15/18

15

8. SUPPLY CHAIN MANAGEMENT

As milk and milk products are highly perishable, it is important that the supply chain

(both inward and outward) is extremely responsive. ERP integrates the supply process

and distribution of milk.

Affords an integrated view of the financials

Provides margins across procurements and shipments

Enables bulk shipment across customers and dispatch routes

Associated statutory available as part of the standard solution

Complete stock position, along with the quality of the stock, lot-wise

Comprehensive, attribute-based stock and pricing

For Milk procurement which is the most complicated function in a dairy, one needs to

define Co-operative Societies (Suppliers) attached to a particular district or regions

Unions Dairy and details such as Address, Route, Collection time and society

information like date of registration, Membership, directors, Bank Accounts etc.

Routes can be defined on factors like Societies covered, Distances, Truck arrival time,

type of milk, Transporter and contract details.Details of Transporter including the

details of vehicle, the route which they cover, contact information etc.

Daily Milk Receipt quantity needs to be captured automatically from the Milk

Weighing machine with details like Fat and SNF contents etc.

Many Unions have Chilling plants in remote locations if distances are higher and milk

has chances of getting spoilt in the bargain. These chilling plants need to capture

similar data and work on-line or offer data upload at any given interval that can be

automated or done manually.

ERP reduces transportation and logistics expense by 1-2%, ERP reduces loss sale 30-

40%, reduced cold storage maintenance cost by 15-20% and reduced depot level

finished good inventory level by 3-5%.


16/18

16

9. HUMAN RESOURCE

The Dairy industry only need to take care in selecting good human resource to operate

ERP or else it might create problems in life of business like it happened in case of

Hershey foods.

In dairy industry ERP will be useful to every employee who uses it, e.g, store clerk

can keep access to inventory, production supervisor can plan his activities, allows

employees to apply for the leaves, loan, travel expenses, etc.

Training can be even provided to the existing employees and only the responsible and

employees who can actually work well with this software should be selected in team

of ERP.


17/18

17

10.CUSTOMER RELATIONSHIP MANAGEMENT

In dairy industries the dealers and whole sellers are its customers seemingly but its

end customers are consumers of the milk and by products at large. So in such a huge

cliental base dairy cannot maintain one to one relationship with its customers.

Quality Control Set of quality parameters can be defined for milk with basic

information like Cow milk, Buffalo milk or mixed milk, capture quality of milk from

individual societies for all parameters like Fat content and SNF. The data may be

entered manually or can be captured from the instruments directly if milk analyser

provides interface files. Raw milk procurement rates are linked to quality parameters

of milk for billing purpose.

So, ERP here can help in increasing the quality of the product which will directly

enhance its sales and its demand which is customer loyalty and its a reward in itself.


18/18

18

CONCLUSION

Being a perishable commodity and low margin activity due to nature of

business, the system would need to keep track on wastages due to spoilt milk

or other products that may turn sour due to limitations of expiry, returnedgoods. These critical issues can provide or take away hidden margins not

generally visible in normal operational data.

Packing material consumption, its rejection due to quality issues, spares

consumption that could indicate problems with any plant machinery also form

an integral part of ERP.

At macro-level an ERP for dairies would need to keep an eye on expected

production from given quantities of procurement, variance from the norms,thus provide indicators about the health of operations at procurement and

manufacturing levels, losses due to returns, tracking sources of such losses and

cost escalation can provide the right kind of controls required in dairy

industry.

Thus to manage the supply chain, logistics, milk procurement, payments,

cattle feed, veterinary and operation to cost controlling and corporate services,

an Integrated solution like ERP for dairy industry can provide a single

integrated platform. The ERP for dairy industry can greatly help improve

operational efficiencies specifically in the areas of milk procurement,

distribution, transactions with Co-operative societies and Manufacturing.

erp for dairy ind

Documents