INVENTORY STRATEGY FOR

PROCESSING INDEPENDENT DEMAND

(A Study on Amul)

SUBMITTED TO: MS. ROHINI ARORA

SUBMITTED BY: ISHA AGGARWAL
MBA 2ND SEM.
72013322
 INDEX
TOPICS Page no.
INTRODUCTION 6-7
Introduction of study 7
Objectives of study 7
Scope of study 7

CONCEPTUAL & THEORITICAL FRAME 8-19

Meaning & definition of inventory 9
Classification of inventory 9
Risk & cost associated with inventory 9
Understanding inventory management 11
Historical review of inventory management 12
Types of inventory 13
Inventory cost 14
Purpose of inventory management 15
Benefits of inventory management 15
Inventory control techniques 16

ORGANIZATION PROFILE 20-50

Introduction 21
Organization overview 25
Organization structure 28
Production function 30

4
Operation analysis 30
Amul supply chain 33
Plant 34
Amul products 36
Amul product history 49
Conclusion 50

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 INTRODUCTION OF THE STUDY
This study is about the inventory management of Amul in Silchar town. Every
enterprise needs inventory for smooth running of its activities. It serves as a link between
the production and distribution process. The greater a time lag, the higher the requirement
of inventory the unforeseen fluctuation of inventory demand and supply of goods,
fluctuating inventory prices, necessitate the need for inventory management.

The investment inventory constitutes the most significant part of the current
assets inventory of the under taking. Thus it is very essential to have a proper control and
management of inventory. Inventories cost account for nearly 55 percent of the cost of
production, as it is clear from an analysis of financial statements of large number of
private and public sector organizations. So, it essential to establish suitable procedures for
proper control of materials from the time of purchase order placed with supplier until
they have been consumed properly.

This study is about how the distributors are managing their inventory, what are
the problems they are facing and what are the inventory techniques they are using to
maintain the inventory level.

OBJECTIVE OF THE STYDY

 To understand the practical concept of Inventory Management &and analyze the

management technique used in managing the inventory.
 To find the problems faced by retailers & distributors in selling and storing.
 To collect the information about the movement of Inventory in the lower leg.

SCOPE OF THE STUDY

 The study carried out in Silchar city so its scope is mainly limited to Silchar city.
 It gives information about the size of the retail network.
 It gives information about the services given by distributor to their retailer
 It will served retailer & consumer in better manner.
 It provides suggestions to the company to improve their inventory strategy.

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 CONCEPTUAL & THEORITICAL FRAME

MEANING AND DEFINITION OF INVENTORY

The term inventory is originated from the French word Inventaire and the Latin
Inventariom which implies a list of things found. The term “inventory” has a wider
meaning then the term “Materials” or “store”.
According to the “Institute of Chartered Accountant of India” inventory means
“Tangible Property” held
a) For sale in the ordinary course of business.
b) In the process of production for sale.
c) For rendering of services.

The term inventory refers to the stockpile of the products a firm is offering for sales and
the components that make up the product. Inventories are the stocks of the product of a
company, manufacturing for sale and the components that make up the product.
The various forms in which inventories exist in manufacturing company are (1) raw
material (2) work-in process, (3) finish goods and (4) store and spares. However, in
commercial parlance, inventory usually includes store, raw material, work-in process and
finish goods. The term inventory includes – raw material, work-in process, finish goods
packaging, spares and others stocked in order to meet an unexpected demand or
distribution in the future.

CLASSIFICATION OF INVENTORIES

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 Classification of Inventory

Production Work-in Progress Finished goods MRO inventory

Inventory

1. Production Inventory
In production inventory there are two types of production inventory that are as follows:
a) Material, which are purchases from the market like raw material and readymade
Parts & components require for manufacturing of equipment.
b) Special part or component manufactured in once own company & kept in stock for
uses in manufacturing.
2. Maintenance Repair Operating supplies (MRO Inventory)
There are material purchase from vendor & require for Maintenance or production
process.
3. Work in progress
There are semi-finished products in various stages of production on the factory floor.
4. Finished goods inventory
These consist of manufactured kept in warehouses or retail outlets & are meet for sale.

RISKS & COST ASSOCIATED WITH INVENTORIES

Holding of inventories exposes the firm to a number of risks & costs. Risk of holding
inventories can be put as follows:-

i) Price decline
This may be due to increase in the market supply of the product, introduction of
a new competitive product price-cutting by the competitors etc.
ii) Product deterioration
This may be due to holding a product for too long a period for too long a period
or improper storages condition.
iii) Obsolescence
This may be due to change in customer’s taste, new production technique
improvements in the product design, specifications etc.

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THE COSTS OF HOLDING INVENTORY

i) Material costs
This includes the cost of purchasing the goods, transportation and handling
charges less any discount allowed by the supplier of goods.
ii) Ordering costs
This includes the variable cost associated with placing an order for the goods.
The fewer the orders lower will be the ordering costs for the firm.
iii) Carrying cost
This includes the exposes for storing the goods. It comprises storage costs,
insurance costs, spoilage costs, cost of funds tied up in inventory.

Understanding inventory management

Every management problem is a decision problem. Decision is an important task that all
organizations have to take. The allocation of resource is a common issue to all
organizations. Organizations have to acquire, allocate and control the factors of
production which are necessary for the achievement of the business’s objectives.
Inventory management as one of the key activities of business logistics, has always been
a major preoccupation for the company’s survival and growth.
The aim of inventory management is to hold inventories at the lowest possible cost, given
the objectives to ensure uninterrupted supplies for ongoing operations. When making
decisions on inventory, management has to find a compromise between the different cost
components, such as the costs of supplying inventory, inventory-holding costs and costs
resulting from insufficient inventories
According to Wild inventory control is the activity which organises the availability of
items to the customers. It coordinates the purchasing, manufacturing and distribution
functions to meet the marketing needs. This role includes the supply of current sales
items, new products, consumables; spare parts, obsolescent items and all other supplies.
Inventory enables a company to support the customer service, logistic or manufacturing
activities in situations where purchasing or manufacturing of the items is not able to
satisfy the demand. Lack of satisfaction could arise either because of the speed of
purchasing or manufacturing is too protracted, or because quantities cannot be provided
without stocks. Clodfelter adds that a good inventory control system offers the following
benefits:
a) The proper relationship between sales and inventory can better be well maintained.
Without inventory control procedures in place, the store or department can become
overstocked or under stocked.
b) Inventory control systems provide a business with information needed to take
markdowns by identifying slow-selling merchandise. Discovering such items early

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 in the season will allow a business to reduce prices or make a change in marketing
strategy before consumer demand completely disappears.
c) Merchandise control systems allow buyers to identify best-sellers early enough in
the season so that re-orders can be placed to increase total sales for the store or
department.
d) Merchandise shortages and shrinkage, can be identified using inventory control
systems. Excessive shrinkage will indicate that more effective merchandising
controls need to be implemented to reduce employee theft or shoplifting.
Emphasizing the pertinence of the topic, in 2001, Gourdin noted that ‘inventory is
one area of logistics that has received a great deal of management attention over
the past decade. Executives now realize that holding excessive stocks is simply too
expensive. Therefore, a great deal of effort has been expended to eliminate
unnecessary inventory without compromising customer service. However, there
are numerous situations where inventory simply must be held, particularly when
meeting the needs of global customers.
Management’s goal should be to hold only what is necessary to satisfy customer
requirements and manage it effectively’ (Gourdin 2001:82).
Inventory problems preoccupy profit- making organizations and nonprofit institutions as
well. Inventories are common to agriculture, manufacturers, wholesalers, retailers,
hospitals, churches, prisons, zoos, universities and national, state and local governments.
Indeed, inventories are also relevant to the family unit in relation to clothing,
pharmaceutical products, food and so forth. This indicates how inventories are important
and deserve a serious attention in order to achieve organizational objectives.

Historical review of inventory management

Historically, inventory management has often meant too much inventory and too little
management or too little inventory and too much management. There can be severe
penalties for excesses in either direction. Inventory problems have proliferated as
technological progress has increased the organization’s ability to produce goods in
greater quantities, faster and with multiple design variations. The public has compounded
the problem by its receptiveness to variations and frequent design changes . since the
mid-1980s the strategic benefits of inventory management and production planning and
scheduling have become obvious. The business press has highlighted the success of
Japanese, European, North American firms in achieving unparalleled effectiveness and
efficiency in manufacturing and distribution. In recent years, many of the firms have
‘raised the bar’, yet again by coordinating with other firms in their supply chains. For
instance, instead of responding to unknown and variable demand, they share information
so that the variability of the demand they observe is significantly lower
Silver, Pyke and Peterson continue arguing that in the United States of
America and other Western Countries, productivity improvement was pursued through
reducing the amount of direct manufacturing labour expended per unit of output. This
was a valid strategy because of the high labour content in many manufactured products.
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However, the proportion of unit cost due to labour has been steadily decreasing in recent
years. In fact, the ratio of purchased materials to sales (in dollars) reached 60 percent for
U.S. firms in 1985. Even large manufacturing firms, such as the U.S auto assemblers,
purchase up to 60 percent of the value of the product. This implies that management of
raw materials inventories is an area that shows great promise for productivity
improvement. Japanese firms received much deserved attention in the mid-to late 1980s
because of their remarkable performance on quality and inventory management. The
tremendous interest in Just-in-Time manufacturing (JIT) indicates that work-in-process
inventory management is also an area ripe for improvement.

Types of inventory

According to Stock and Lambert, inventories can be categorized into six distinct forms
that are:

a) Cycle stock. Cycle stock is inventory that results from the replenishment process
and is required in order to meet demand under conditions of certainty, that is,
when the firm can predict demand and replenishment times (lead times) almost
perfectly. For example, if the rate of sales for a constant 20 units per day and the
lead time is always 10 days, no inventory beyond the cycle stock would be
required. While assumptions of constant demand and lead time remove the
complexities involved in inventory management, let’s look at such an example to
clarify the basic inventory principles.

b) In-transit inventories. In-transit inventories are items that are en route from one
location to another. They may be considered part of cycle stock even though they
are not available for sale and /or shipment until after they arrive at the destination.
For the calculation of inventory carrying costs, in-transit inventories should be
considered as inventory at the place of shipment origin since the items are not
available for the buyer, sale, or subsequent reshipment.

c) Safety or buffer stock. Safety or buffer stock is held in excess of cycle stock
because of uncertainty in demand or lead time. The notion is that a portion of
average inventory should be devoted to cover short-range variations in demand
and lead time. Average inventory at a stock-keeping location that experiences
demand or lead time variability is equal to half the order quantity plus the safety
stock.

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 d) Speculation stock. Speculation stock is inventory held for reasons other than
satisfying current demand. For example, materials may be purchased in volumes
larger than necessary in order to receive quantity discounts, because of a
forecasted price increase or materials shortage, or to protect against the possibility
of a strike.

e) Seasonal stock. Seasonal stock is a form of speculative stock that involves the
accumulation of inventory before a season begins in order to maintain a stable
labour force and stable production runs or, in the case of agricultural products,
inventory accumulated as the result of a growing season that limits availability
throughout the year.

f) Dead stock is inventory that no one wants, at least immediately. The question is
why any organization would incur the costs associated with holding these items
rather than simply disposing of them. One reason might be that management
expects demand to resume at some point in the future. Alternatively, it may cost
more to get rid of an item that it does to keep it. But the most compelling reason
for maintaining these goods is customer service. Perhaps an important buyer has
an occasional need for some of these items, so management keeps them on hand as
a goodwill gesture.

Inventory costs

According to Gourdin there are three types of costs that must be considered in setting
inventory levels.

a) Holding (or carrying) costs are costs such as storage, handling, insurance, taxes,
obsolescence, theft and interest on funds financing the goods. These charges
increase as inventory levels rise. In order to minimize carrying costs, management
makes frequent orders of small quantities. Holding costs are commonly assessed
as a percentage of unit value, i.e. 15 percent, 20 percent, rather than attempting to
derive a monetary value for each of these costs individually. This practice is a
reflection of the difficulty inherent in deriving a specific per-unit cost for, for
example, obsolescence or theft.

b) Ordering costs are those costs associated with placing an order, including expenses
related to personnel in a purchasing department, communications and the handling
of the related paperwork. Lowering these costs would be accomplished by placing

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 a small number of orders, each for a large quantity. Unlike carrying costs, ordering
costs are generally expressed as a monetary value per order.

c) Stock-out costs include sales that are lost, both short and long term. These charges
are probably the most difficult to compute, but arguably the most important
because they represent the costs incurred by customers (internal or external) when
inventory policies falter. Failure to understand these costs can lead management to
maintain higher (or lower) inventory levels than customer requirements may
justify.

PURPOSE OF INVENTORY MANAGEMENT

1.To maintain independence of operations
 Provide “optimal” amount of cushion between work centers
 Ensure smooth work flow
2.To allow flexibility in production scheduling
3.To meet variation in product demand
4.To provide a safeguard for variation in raw material or parts delivery time
 Protect against supply delivery problems (strikes, weather, natural disasters, war,
etc.)
5.To take advantage of economic purchase-order size

BENEFITS OF INVENTORY MANAGEMENT

1. Reduced stocking costs resulting from efficient matching of requirements to stock
2. Re-order recommendations highlight urgent needs. Help prevent Stock-outs.
3. Instant access to 24 month usage pattern aids decision making reveals trends. Old
data easily purged.
4. Automatic capture on audit trail of all stock movement details helps resolve

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5. Instant month-end valuation of receipt, issues adjustment etc.
6. Rapid stock and work-in progress evaluation.
7. True multi-location without constraints.
8. Easy monitoring of slow moving stocks.
9. Automation of inventory checking cycles ensures that items are not forgotten.
Improves accuracy
10. Automatic tracking of scrap rates and recalculation of safety levels reduces effort,
improves control
11. ABC analysis system focused attention on high value stock holdings.

INVENTORY CONTROL TECHNIQUES

Inventory control techniques are employed by the inventory control organization within
the framework of one of the basic inventory models, viz. Fixed order quantity systems
or fixed order period system. Inventory control techniques represent the operational
aspect of inventory management and help realize the objectives inventory management
and control.
Several techniques of inventory control are in use and it depends on the
convenience of the firm to adopt of the techniques. What should be stressed,
however, is the need to cover all items of inventory and all stages, i.e. from the stage of
receipt from supplies to the stage of their use.
The techniques are most commonly used are the following,
 Economic Order Quantity (EOQ)
 Continuous Review
 Periodic Review Systems
 Hybrid system

Economic Order Quantity (EOQ)

How much to order –
Major decision area where focus on decision regarding how much Quantity to order at a
time is important case of inventory management. Number of techniques has been
developed to help managers in this decision. Most widely used technique is “Economic
order Quantity”. This represents the size of an order for which the total cost is
minimum economy in purchasing.
Total cost for this purpose consist 2 major costs –

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 a) Ordering cost or procurement cost.
b) Carrying / Holding cost. Where,

These two types of cost are opposed to one another. The ordering cost decrease
while carrying cost increases with every increase in Qty of purchase order. So the
management has to take decision that there will be balance between 2 opposing cost to
have EOQ with minimum total cost.

How to calculate EOQ:-

1) Mathematical approach – calculate by formula.
2 AB
EOQ = -------- (in units)
C ×S

Where,
A = Annual usage in units
B = Cost of placing an order
C = cost per unit
S = Carrying cost as a percentage of Aug inventory.
If EOQ determined in terms of rupees where annual usage expressed in rupees by
formula
Annual usage = annual usage unit × unit cost.

Continuous Review
A continuous review (Q) system, sometimes called a reorder point (ROP) system or
fixed order-quantity system, tracks the inventory of an item each time withdrawal is
made to determine whether it is time to reorder. In practice, these reviews are done are
done frequently and are often continuous. At each review, a decision is made about an
item’s inventory position. If it is judged to be too low, the system triggers a new order.
Inventory Position= On-Hand inventory + Scheduled receipt – Backorders
IP = OH + SR – BO
When demand is certain
When demand & lead time are constant. The downward-sloping line represents the on-
hand inventory, which is being depleted at a constant rate. When it reaches reorder
point, a new order is placed. The on-hand inventory continues to drop throughout lead
time until the order is received. At that time, this marks the end of the lead time, on

15

IP IP
IP
hand inventory jumps up. A new order arrives just when the inventory drops to 0. The
time between orders is the same for each cycle.

Order
received
On-hand inventory Q
Q Q

OH

Order
Placed

L L L
Time
TBO TBO TBO
L

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 When demand is uncertain
In reality demand & lead times are not always predictable. This system operates when
demand is variable and uncertain. We assume that the variability in lead times is
negligible and, therefore, can be treated as constant. The wavy downward-sloping line
indicates the demand varies from day to day. Its slope is steeper in the second cycle,
which means the demand rate is higher during this time period. The changing demand
rates means the time between order changes, so TBO1≠TBO2≠TBO3. Because of
uncertain demand, sales during lead time are unpredictable, and safety stock is added to
hedge against lost sales. This addition is why re-order level is higher in this than the re-
order level of certain demand.

Perio
dic review system
An alternative inventory control system is the periodic review (P) system, sometimes
called a fixed interval recorder system or periodic record system. In this system an
items inventory position is received periodically rather than continuously.

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Hybrid Systems
Various hybrid inventory control systems merge some but not all features of the P & Q
systems. There are two types

 Optional Replenishment System

 Base-stock system

Optional Replenishment System

It is used to review the inventory position at fixed time interval and, if the position has
dropped to (or below) a predetermined level, to place a variable size order to cover
expected needs.

Base-stock system

In this system replenishment order is issued each time when withdrawal is made, for the
same amount of withdrawal.

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 ORGANIZATION PROFILE

AMUL means "priceless" in Sanskrit. A quality control expert in Anand

suggested the brand 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 homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray,
Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, NutrAmul, Amul
Milk and Amulya have made Amul a leading food brand in India. Today Amul 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, of the marketing
savvy of a farmers' organization and have a proven model for dairy development.

Symbol of Amul is a ring of four hands, which are coordinated each other .The
actual meaning of this symbol is coordination of hand of different people by whom this
union is now at top.

 First hand is for the farmers (producers), without whom the organization would do not
existed. Farmers are the inspiration of the AMUL – the taste of India.

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 Second hand is for the representatives of processors by whom the raw milk processed
into different finished products.
 Third hand is for marketers without whom the product would have not been able to
reach to the customer.
 Fourth hand is for customers without whom the organization could not carry on because
they are the people who consume the product. The union of Amul would not have been
the second biggest successful company in the world without the coordination of the
above four hand

The Birth of Amul

Milk, The inspiration behind a revolution

Over six decades ago the life of a farmer in Kaira was very much like that
of farmers anywhere else in India. His income was derived almost
entirely from seasonal crops. Many poor farmers faced starvation during
off-seasons. Their income from milch buffaloes was undependable. The
milk marketing system was controlled by contractors and middlemen. As
milk is perishable, farmers were compelled to sell their milk for whatever
they were offered. Often they had to sell cream and ghee at a throwaway
price.

They were in general illiterate. But they could see that the
system under which contractors could buy their produce at a
low price and arrange to sell it at huge profits was just not fair.
This became more noticeable when the Government of Bombay
started the Bombay Milk Scheme in 1945. Milk had to be
transported 427 kilometers, from Anand to Bombay. This could
be done only if milk was pasteurized in Anand.
After preliminary trials, the Government of Bombay entered into an
agreement with Polsons Limited to supply milk from Anand to Bombay
on a regular basis. The arrangement was highly satisfactory to all
concerned – except the farmers. The Government found it profitable;
Polsons kept a good margin. Milk contractors took the biggest cut. No
one had taken the trouble to fix the price of milk to be paid to the
producers. Thus under the Bombay Milk Scheme the farmers of Kaira
District were no better off ever before. They were still at the mercy of
milk contractors. They had to sell their milk at a price the contractors
fixed. The discontent of the farmers grew. They went in deputation to
Sardar Patel, who had advocated farmers’ co-operatives as early as 1942.

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 Sardar Patel reiterated his advice that they should market their milk
through a co-operative society of their own. This co-operative
should have its own pasteurization plant. His advice was that the
farmers should demand permission to set up such a co-operative. If
their demand was rejected, they should refuse to sell their milk to
middlemen.

Sardar Patel pointed out that in undertaking such a strike there

should be some losses to the farmers as they would not be able to
sell their milk for some time. If they were prepared to put up with
the loss, he was prepared to lead them. The farmers’ deputation
readily accepted his proposal.

Sardar then sent his trusted deputy, Mr. Morarjibhai Desai, to

Kaira District to organize milk co-operative – and a milk
strike if necessary. Mr. Desai held a meeting in Samarkha
village on January 4, 1946. It was resolved that milk
producers’ co-operative societies should be organized in each
village of Kaira District to collect milk from their member-
farmers. All the milk societies would federate into a Union
which would own milk processing facilities. The Government
should undertake to buy milk from the Union. If this wasn’t
done, the farmers would refuse to sell milk to any milk
contractor in Kaira District.

The Government turned down the demand. The farmers called a

‘milk strike’. It lasted 15 days. Not a drop of milk was sold to the
milk merchants. No milk reached Bombay from Anand, and the
Bombay Milk Scheme almost collapsed. After 15 days the milk
commissioner of Bombay, an Englishman, and his deputy visited
Anand, assessed the situation and accepted the farmers’
demand.This marked the
beginning of the Kaira District
Co-operative Milk Producers’
Union Limited, Anand. It was
formally registered on December
14, 1946. Its objective was to
provide proper marketing
facilities for the milk producers of the district. The Union began
pasteurizing milk in June 1948, for the Bombay Milk Scheme –
just a handful of farmers in two village co-operative societies
producing about 250 liters a day.

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An assured market proved a great incentive to the milk
producers in the district. By the end of 1948, 432 farmers had
joined village societies, and the quantity of milk handled by the
Union had increased to 5000 liters a day.

In the early stages, rapid growth brought in its wake serious

problems. Their solution provided the stimulus for further
growth. For example, as the co-operative movement spread in
the district, it was found that the Bombay Milk Scheme could
not absorb the extra milk collected by the Union in winter,
when buffaloes yielded an average of 2.5 times their summer
yield. Thus by 1953, the farmer-members had no regular
market for the extra milk produced in winter. They were again
forced to sell a large surplus at low rate to middlemen.

The only remedy was to set up a plant to process the extra milk into products like butter and
milk powder. The logic of this step was readily accepted by the Government of Bombay and
the Government of India, except for a few doubting Thomases. The government of India
helped the Union to get financial help from UNICEF and assistance from the Government of
New Zealand under the Colombo Plan. Technical aid was provided by F.A.O. A Rs.50 –
lakh factory to process milk powder and butter was blueprinted. Its foundation stone was
laid by the then President of India the late Dr. Rajendra Prasad on November 15, 1954. The
project was completed by October 31, 1955, on which day the late Pandit Jawaharlal Nehru,
the then Prime Minister of India, declared it open. The new dairy provided a further fillip to
the co-operative movement among milk producers. The union was thus enabled to organize
more village co-operative societies and to handle more and more milk each year. This event
also brought a breakthrough in dairy technology as the products were made processing
buffalo milk for the first time in the world. Kaira Union introduced the brand “Amul” for
marketing its product range. The word “Amul” is derived from Sanskrit word ‘Amulya’
which means ‘priceless’ or precious’. In the subsequent years Amul made cheese and baby
food on a large commercial scale again processing buffalo milk creating a history in the
world.

1964 was the turning point in the history of dairy development

program in India. Late Shri Lal Bahadur Shastri, the then Prime
Minister of India who visited Anand on 31s October for
inauguration of Amul’s Cattle Feed Plant, having spent a night
with farmers of Kaira and experiencing the success wished and
expressed to Mr Kurien, then the General Manager of Amul that
replicating Amul model throughout our country will bring a
great change in the socio-economic conditions of the people. In
order to bring this dream into reality, 1965 The National Dairy
Development Board (NDDB) was established at Anand and by
1969-70 NDDB came out with the dairy development program
for India popularly known as “Operation Flood” or “White
Revolution”. The Operation Flood program, even today, stands

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 to be the largest dairy development program ever drawn in the
world. This saw Amul as model and this model is often referred
in the history of White Revolution as “Anand Pattern”.
Replication of “Anand Pattern” has helped India to emerge as
the largest milk producing nation in the world.

The Amul Model

The Amul Model of dairy development is a three-tiered structure with the dairy
cooperative societies at the village level federated under a milk union at the district level
and a federation of
 Establishment of a direct linkage between milk producers and consumers by
eliminating member unions at the state level. Middleman.

 Milk Producers (farmers) control procurement, processing and marketing

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The Amul model has helped India to emerge as the largest milk producer in the world.
More than 13 million milk producers pour their milk in 1, 28,799 dairy cooperative
societies across the country. Their milk is processed in 176 District Co-operative Unions
and marketed by 22 State Marketing Federations, ensuring a better life for millions.

The Organization – An Overview

GCMMF Overview:
Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food
products marketing organization. It is a state level apex body of milk cooperatives in Gujarat
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.

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 Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF) is the largest
Organization in FMCG industry engaged in marketing of milk & milk products under the brand
names of AMUL and SAGAR with an annual turnover exceeding Rs 5000 crores.
GCMMF is a unique organization. It's a body created by Farmers, managed by
competent professionals serving a very competitive and challenging consumer market. It is a true
testimony of synergistic national development through the practice of modern management
methods.

Vision:
GCMMF will be an outstanding marketing organization, with specialization in
marketing of food and dairy products both fresh and long life with customer focus and IT
integrated. The network would consist of over 100 offices, 7500 stockiest covering at least every
Taluka. Head quarter servicing nearly 10 lakhs outlets with a turnover of Rs.10, 000 Cr and
serving several co-operatives. GCMMF shall also create markets for its products in neighboring
countries.

Mission:
We at GCMMF endeavor to satisfy the taste and nutritional requirements of the
customer of the world through excellence in the marketing by our committed team. Through co-
operative networking, we are committed to offering quality product that provides best value for
money.

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Number of Producer Members 6,34,675

Number of Village Dairy Cooperative

1163
Societies

Total Milk Handling Capacity 2.4 Million liters per day

Milk Collection (Daily Average 2010-11) 1.5 Million liters

Milk Drying Capacity 100 Mts per day

Whey Drying Capacity 60 Mts per day

Cattle Feed Manufacturing Capacity 1100 Mts per day

Sales Turnover

Sales Turnover Rs (Million) US $ (in million)

2000-01 5090 113

2001-02 4690 100

2002-03 4880 102

2003-04 5460 116

2004-05 6000 138

2005-06 7090 160

2006-07 8220 202

2007-08 10770 272

2008-09 13780 310

2009-10 16950 360

2010-11 21110 469

26
 Organization Structure:

Organization Structure is divided into two parts:

 External Organization Structure

 Internal Organization Structure

 External Organization Structure

External Organization Structure is the organization structure that affects the organization
from the outside.

The following is internal organization chart of Amul.

State Level Marketing Federation

District Milk Product Union Ltd

Village Milk Product Union Ltd

Villagers

27
 As we know, GCMMF is unit of Gujarat Milk Marketing Federation, which is a co-
operative organization. The villagers of more than 10000 villages of Gujarat are the bases of
this structure. They all make village milk producers union, district level milk producers union
and then a state level marketing federation is established. The structure is line relationship,
which provides easy way to operation. It also provides better communication between two
stages
 Internal Organization Structure:

The following is internal organization chart of Amul:

Chairman

Managing Director

General Manager

Asst. General Manager

28
 Internal Organization Structure Chart

Production Function:
Expansion of the production technology and changes in technical field is going to bring
out revolution in the industry sector which eventually gives stand to study and favors the come
backing subject i.e. production and management.
Production and operation management is planning, organizing, staffing, directing and
controlling of all the production system that portion of organization that converts inputs into
products and services. In general production system takes raw material, personnel, machines,
buildings and other resources and produce products and services.
The core of production system is its conversion subsystem where in workers; raw
materials are used to convert inputs into products and services. This production department is at
heart of the firm, as it is able to produce low cost products and superior quality in timely
manners.

29
 Thus, there arises enormous need of giving due importance to this department as a
whole and a strong concrete base being foundation pillars of a manufacturing organization, if the
intention is to succeed domestically and globally.

Operating Analysis-

Amul’s only source of raw material is Village Milk societies. Milk is brought from such
village milk societies every morning and evening. This milk is then sent to the dairy plant. In the
dairy plant the milk is processed i.e. it is made free from germs.
·

Milk Processing
The entire process of milk can be divided into following steps:

30
Distribution Network:
Most producers work with marketing intermediaries to bring their products to market.
The marketing intermediaries make up a marketing channel also called distribution channel.
Distribution channels are sets of interdependent organizations involved in the process of making
a product or service available for use or consumption.
The Head Office of GCMMF is located at Anand. The entire market is divided in 5
zones. The zonal offices are located at Ahmadabad, Mumbai, New Delhi, Kolkata and Chennai.
Moreover there are 49 Depots located across the country and GCMMF caters to 13 Export
markets.
A zero level of channel also called a direct marketing channel consists of a manufacturer
selling directly to the final customers. A one level channel; contains one selling intermediary
such as retailer to the final customers. A two level channel two intermediaries are typically
wholesaler and retailer. A three level channel are typically wholesaler, retailer and jobber in
between.
GCMMF has an excellent distribution. It is its distribution channel, which has made it so
popular. GCMMF’s products like milk and milk products are perishable. It becomes that much
important for them to have a good distribution.

31
Distribution Chart
We can see from above figure that GCMMF distribution channel is simple and clear.
The products change hands for three times before it reaches to the final consumer. First of all the
products are stored at the Agents end who are mere facilitators in the network. Then the products
are sold to wholesale dealers who then sell to retailers and then the product finally reaches the
consumers.

Distribution Chart

32
Amul’s Supply Chain

33
 Farmers

Village Village Local Milk Sold to

Cooperative Cooperative Restaurants/Other Village &
Societies Societies (with Milk related Local Residents
(Without businesses
Chilling Units)
Chilling
Units)
Network Milk Processing
Chilling
Services Union &
Warehouses Plants
* Veterinary
Services
* Animal Warehouses
Husbandry
* Animal
Feed Factory
* Milk Can Wholesalers/C&S
Producers
* Agriculture
University Retailers Home Delivery
* Rural Contractors
Mgmt
Institute
* Trucking
Facilities CONSU CONSUM
MERS ERS
Plants

First plant is at ANAND, which engaged in the manufacturing of milk, butter, ghee, milk
powder, flavored milk and buttermilk.

34
Second plant is at MOGAR, which engaged in manufacturing chocolate, nutrAmul, Amul
Ganthia
and Amul
lite

Third plant is at Kanjari, which produces cattle feed.

35
Fourth plant is at Khatraj, which engaged in producing cheese.

Today, twelve dairies are producing different products under the brand name Amul. Today
Amul dairy is no. 1 dairy in Asia and no. 2 in the world, which is matter of proud for Gujarat

and whole India.

36
AMUL PRODUCTS

Product Name: Amul Gold

Packing: Poly Pack - 500ml, 1000ml, 5 Ltr

Shelf Life: 48 Hours from the date of packing

Storage condition: Under Refrigeration (Below 8°C)

Product Name: Amul Taaza

Packing: Poly Pack - 500ml, 1000ml, 200ml, 5 Ltr

Shelf Life: 48 Hours from the date of packing

Storage condition: Under Refrigeration (Below 8°C)

Product Name: Amul Butter

Packing: 100g, 500g, 50g, 20g, 8.1g

Shelf Life: Best before 12 months from packaging

Storage condition: At 4°C or below

Product Name: Amul Lite

Packing: 100g, 500g, 200g

Shelf Life: Best Before 6 months

Storage condition: Under Refrigeration below 10° C

37
Product Name: Delicious Table Margarine

Packing: 100g, 500g, 200g tub & Single serve pack

Shelf Life: 9 months under refrigeration

Storage condition: Store Under Refrigeration under 10°

C

Product Name: Amul Cooking Butter

Packing: 100g, 500g, 50g, 20g, 8.1g

Shelf Life: Best before 6 months from packaging

Storage condition: At 4°C or below

Product Name: Amul Processed Cheese

Packing: Cheese Block( 200g,400g, 1 kg)

Cheese Tins (400g NEOE,EOE),EOE tin has an easy open
end
Cheese Slices (200g,400g,750g), Amul A+ Cheese Slices
200g
Cheese Chiplets (200g, 500g and 1 kg)

Shelf Life: 9 Months for Cheese Tins and Cheese

Chiplets and 6 Months for Cheese Blocks and Cheese
Slices

Storage condition: Refrigerated at 4°C or below.

Product Name: Amul Emmental Cheese

Packing: Amul Emmental Cheese is available in a 400

gm pack for the comsumer and a large wheel (5.5 Kg) for
the institutional segments.

Shelf Life: 45 days from date of packaging

Storage condition: Refrigeration temperature i.e. 4°

Centigrade to 8° Centigrade

38
Product Name: Amul Gouda Cheese

Packing: Amul Gouda Cheese is available in a 250 gm

pack for the comsumer and a larger wheel of 1 Kg for the
institutional segments.

Shelf Life: 6 Months from date of packaging

Storage condition: Refrigeration temperature i.e. 4°

Centigrade to 8° Centigrade

Product Name: Amul Cheese Spread

Packing: Amul Cheese Spread Tub 200g (Plain, Pepper,

Garlic,)

Shelf Life:

Storage condition:

Product Name: Amul Pizza Mozarella Cheese

Packing: 1 kg Pack, 200g pack

Shelf Life: 6 Months from date of packaging

Storage condition: To be stored in the deep fridge

compartment of the refrigerator.

Product Name: Amul Gold

Packing: 1000 ml

Shelf Life: 180 days when stored in cool and dry place

Storage condition: Ambient

39
 Product Name: Amul Taaza

Packing: 1000 ml, 500 ml & 200 ml

Shelf Life: 180 days when stored in cool and dry place

Storage condition: Ambient

Product Name: Amul Calci+ Milk

Packing: 1000 ml & 200 ml

Shelf Life: 120 days when stored in cool and dry place

Storage condition: Ambient

Product Name: Amul Lite Milk

Packing: 1000 ml, 200 ml

Shelf Life: 180 days when stored in cool and dry place

Storage condition: Ambient

Product Name: Amul Kool Koko

Packing: 200 ml Glass Bottle, 250 ml Can & 200 ml

Tetra

Shelf Life: 180 days when stored in cool and dry place

Storage condition: Ambient

40
Product Name: Amul Kool Milk Shaake

Packing: Can: 220ml and Tetra: 180ml

Shelf Life: Best before 180 days from date of packing

Storage condition: Needs no refrigeration until opened

Product Name: Nutramul Energy Drink

Packing:

Shelf Life: Best before 180 days from date of packing

Storage condition: Needs no refrigeration until opened

Product Name: Amul Masti Spiced Butter Milk

Packing: 200 ml & 1 Litre in Tetrapak

Shelf Life: 180 days when stored in cool and dry place

Storage condition: Ambient

Product Name: Amul Kool Cafe

Packing: 200 ml Glass Bottle, 250 ml Can & 200 ml

Tetra

Shelf Life: 180 days when stored in cool and dry place

Storage condition: Ambient

41
Product Name: Amul Kool Lassee

Packing: 200 ml & 1 Litre in Tetrapak

Shelf Life: 120 days when stored in cool and dry place

Storage condition: Ambient

Product Name: Amul Prolife Probiotic Lassee

Packing: 200 ml Glass

Shelf Life: Best Before 10 days from Packaging

Storage condition: Keep Under Refrigeration below 8° C

Product Name: Amul Prolife Buttermilk

Packing: 1 Litre Plastic Bottle

Shelf Life: 7 days when stored below 8° Celsius

Storage condition: Chilled

Product Name: Amul Stamina

Packing: 200 ml Tetra Pack, 250 ml Can( Orange &

Lime)

Shelf Life: Best before 120 days from packaging 

Storage condition: Cool and dry place

42
Product Name: Amul PRO

Packing: 500g Glass Cube Jar & 500g Refill

Shelf Life:  Best before 12 months from the date of

manufacture

Storage condition: Ambient

Product Name: Amul Ice Cream

Packing:

Cone 120 ml, 100ml, 80 ml & 50 ml

Cup 125 ml, 100 ml, 80 ml, 90 ml & 40 ml

Plastic 1 litre, 750 ml, 500 ml, 125 ml, 100 ml, 80 ml
Container & 60 ml

Stick 70 ml, 60 ml, 40 ml

Bulk / catering packs (5 litre, 4 litre), take

Take home packs (2.2 litre, 1.5 litre, 1.25 litre, 1
Home litre), combo packs (750 ml+750ml Free) and
family packs (500 ml, 250 ml)

Shelf Life: Best before 12 months from the date of

manufacture

Storage condition: -18°C or below

Product Name: Amul Flaavyo

Packing: 125 ml, 500 ml cup, 5 ltr Bulk pack

Shelf Life: Best Before 6 months from Packaging

Storage condition: Keep Under -18°C

43
Product Name: Amul Malai Paneer

Packing: Diced Paneer - 100 g, 200 g & 1 kg , Block

Paneer - 200 g & 1 kg

Shelf Life: Best before 6 months

Storage condition: Stored Frozen

Product Name: Amul Masti Dahi

Packing: Poly Pack - 200 gm, 400 gm, 1 kg , PP Cup -

200 gm, 400 gm, 100 gm

Shelf Life: Best Poly Pack - 7 Days from the date of

packaging PP Cup - 15 Days

Storage condition: Under Refrigeration (Below 80C)

Product Name: Amul Probiotic Dahi

Packing: 200g & 400g

Shelf Life: Best before 6 months

Storage condition: Under Refrigeration (Below 8°C)

Product Name: Amul Flaavyo Yoghurt

Packing: 100 g Cup

Shelf Life: Best Before 15 days from Packaging

Storage condition: Under Refrigeration (Below 8°C)

Product Name: Amul Ghee

Packing: Pouch: 500 ml & 1 Ltr Tin: 44 200ml, 280ml,

500ml, 1Lrt, 2 Ltr and 5 Ltr Refill: 200ml, 500ml and 1
Ltr PET Jar: 200ml & 500 ml Bulk Pack :10 Kg Plastic
Bucket , 15 Kg Tin
Product Name: Sagar Ghee

Packing: Pouch: 500ml & 1 Ltr & Tin: 1 Ltr, 2Ltr & 5 Ltr

Shelf Life: Pouch Packing: 9 Months & Tin Packing: 12

Months

Storage condition: Dry and Cool place

Product Name: Amul Cow Ghee

Packing: Pouch: 500 ml & Tin: 1 Ltr

Shelf Life: Pouch Packing: 9 Months & Tin Packing: 12

Months

Storage condition: Dry and Cool place

Product Name: Amulspray

Packing: 1 Kg Pouch / Tin, 500g Pouch / Tin/ Refill,

200g Pouch / Refill, Rs 10 Pack, Rs 5 Pack

Shelf Life: 12 months

Storage condition: Ambient

45
Product Name: Amulya

Packing: 1 Kg Pouch, 500g Pouch / Refill, 200g Pouch /

Refill, Rs 10 Pack, Rs 5 Pack

Shelf Life: 12 months

Storage condition: Ambient

Product Name: Sagar Skimmed Milk Powder

Packing: 500g Pouch

Shelf Life: 12 months

Storage condition: Ambient

Product Name: Sagar Tea & Coffee Whitener

Packing: 42 g Pouch pack & 10 kg Jar

Shelf Life: 12 months

Storage condition: Ambient

Product Name: Amul Full Cream Milk Powder

Packing: 1 Kg Pouch / Tin, 500g Pouch / Tin/ Refill,

200g Pouch

Shelf Life: 12 months

Storage condition: Ambient

46
Product Name: Nutramul

Packing: 500g Refill

Shelf Life: 12 months

Storage condition: Ambient

Product Name: Amul Shrikhand

Packing: 100g, 200g, 500g, 1 Kg, 10 Kg, 20 Kg

Shelf Life: 6 months when stored at 0° C

Storage condition: Refrigerated

Product Name: Amul Gulab Jamun

Packing: 1 kg (26 units of Gulab Jamun), 500 g (13 units

of Gulab Jamun)

Shelf Life: Best before 9 months from packaging

Storage condition: Cool and dry place

Product Name: Amul Basundi

Packing: 500 ml Tetrapak, 1 Lit Tetrapak

Shelf Life: 180 days when stored in cool and dry place

Storage condition: Ambient

47
Product Name: Amul Avsar Ladoo

Packing: Each box contains 15 Ladoos, Net weight 500g

Shelf Life: 45 Days

Storage condition: Store in a cool and dry place

Product Name: Amul Mithai Mate

Packing: 400 g Tin: For Household Consumption. , 7.5

kg Tin: Bakery and Institutions, 280 kg Barrel : For
Industrial Use like Biscuit and Chocolate manufacturing
etc

Shelf Life: 400 g Tin : Best before 12 months, 7.5kgTin :

Best before 6 months, 280 kg Barrel : Best before 3
months

Storage condition: cool and dry place

Product Name: Amul Rejoice Assorted Chocolate Gift

Packs

Packing: Amul Rejoice assorted chocolate 135g, 173g,

and 412g

Shelf Life: 9 months

Storage condition: 15° C, dry place

Product Name: Amul Cooking Chocolate

Packing: 500g, 10 kg, 20 kg

Shelf Life: 12 months

Storage condition: 15° C, dry place

48
Product Name: Amul Chocolate

Packing: Milk Chocolate 12g, 22g, 35g

Fundoo Milk Chocolate 12g, 30g

Dark Chocolate 35g

Fruit & Nut 40g, 2x150g

Almondbar 35g

Shelf Life: 12 months

Storage condition: 15° C, dry place

Product Name: Amul Chocozoo

Packing: Chocozoo Tub : 500g, Chocomini Tub : 300g,

Chocozoo Tin : 232g, Chocozoo Birthday pack : 81g,
Chocozoo Elegant Pack : 93g, Chocozoo pack of three :
27g

Shelf Life: 12 months

Storage condition: 15° C, dry place

Product Name: Utterly Delicious Chocolate Syrup

Packing: Chocolate syrup 650g plastic bottle, Chocolate

syrup 3kg plastic Jar

Shelf Life: 6 months

Storage condition: Ambient, refrigerate after opening

49
 Product Name: Amul wafer chocolates

Packing: Amul Bindaaz wafer 15g (chocolate flavor).

Amul Bindaaz wafer 15g (strawberry flavor).

Shelf Life: 9 months

Storage condition: 15° C, dry place

Product Name: Amul Fresh Cream

Packing: 200 ml : For Household Consumption

1 Ltr : For Caterers, Hotels, Restaurants and Institutions.

Shelf Life: 200ml : Best before 120 days from packaging

when stored in a cool and dry place

1 Ltr : Best before 120 days from packaging when stored

in a cool and dry place

Storage condition: Cool and dry place

Product Name: Amul Pouch Butter Milk

Packing: Poly Pack - 500ml

Shelf Life: 48 Hours from the date of packing

Storage condition: Under Refrigeration (Below 8°C)

50
Amul product history

Milk
Ice cream Chocolates Shrikhand Fresh Milk Cheese Ghee
Power Breadspread
1996 1973 1980 1956 1962 1956
1958

Fat Free Cheese Cow

Nutrauamul Gulabjamun UHT Range Amulspray Amul Butter
Dessert Spread Ghee
1973 1997 1980/99 1968 1956
2002 1986 2002

Gulabjamun Condensed
Softy Mix Eclairs Amul WMP Paneer Amul Lite
mix Milk
2001 2001 1960 1997 1994
1999 1996

Amul Shakti Kulfi Mix Buttermilk Amulya pizza Cheese Margarine

2003 2001 1998 1987 1998 2004

Amul IMF Emmental

Chocozoo Laddoo fresh Curd
1&2 Cheese
2005 2004 1999
2001 1999

Flavoured Instant
Basundi Frozen Pizza
Milk FCMP
2005 2002
2001 2002

Khoa Fresh Cream Gouda Cheese

2006 2002 2002

Kool Cafe
2005
Amul 1956

51
Conclusion

Inventory is a quantity or store of goods that is held for some purpose or use (the term
may also be used as a verb, meaning to take inventory or to count all goods held in
inventory). Inaccurate inventory counts can cost you sales and delay shipments past the
promise date. Out-of stock items as well as overstocked items in inventory can be
devastating to your business. Additionally, an overstated or understated inventory
valuation can result in incorrectly reported assets within your financial statements.
Inventory Management offers comprehensive reporting capabilities to keep you on top of
inventory status. Centralized inventory management consolidates inventory information
by tracking lot numbers, on-hand levels and expiration dates, making the re-ordering
process more efficient. It also enables simultaneous tracking and documenting supplies
during studies to reduce redundant data entry and increase workflow efficiency. So the
biggest challenge Amul has to deal with was managing the continuous flow of all SKU’s
in the Silchar market to have competitive edge over the competitors.

52