AMUL - How do they do it?

Amul is not just a dairy products brand but a supply-chain company that connects 3.6 million milk producers in India to 135 crore Indians. The co-operative was initially referred to as Anand Milk Federation Union Limited and hence the name AMUL. What interested me to write this blog about Amul is that it is an organization that achieves economies of scale through its simple supply chain while it aims to redistribute wealth in the society and creates many opportunities for the rural and weaker sections of India.

So how did all this start? Initially, the producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand – often the milk went sour, especially in the summer season, as producers had to physically carry milk in individual containers. These agents decided the prices and the off-take from the farmers by the season. In winter, the producer was either left with surplus unsold milk or had to sell it at very low prices. So how did AMUL resolve this ? 

Step 1: Village Cooperative Society

As the producers were increasing by the day, and the difficulty level to deliver wasn't easy due to the perishable nature of the product.The concept of Village cooperative society(VCS) started to pave its entry into the AMUL's supply chain. Dairy cooperative societies were available at the village level, where these organisations collected milk from the farmers. Each VCS consists of 110 farmers, equipped with an automatic milk collection unit. All the VCS's together handle 18 million kg milk a day. 

Step 2: District Cooperative Union

They process the milk ,butter ,ghee ,milk powder ,cheese and ice cream. Eg: Banaskantha District Cooperative Milk Producers Union Limited known as Banas Dairy. They produce large number of dairy products under the name AMUL and BANAS. Usually "BANAS" products are sold locally, and AMUL products are sent to other states. These unions can sell their products under the name AMUL as long as they meet the requirements of GCMMF. Example of a requirement could be, they must collect 30,000 litres of milk daily for a period of three years. 

Step 3: State Milk Cooperative Federation - Gujarat Cooperative Milk Marketing Federation. 

The milk or milk products made at the unions are supplied to the Gujarat Cooperative Milk Marketing Federation (GCMMF). The GCMMF is the marketing entity for the products of all the unions in the state of Gujarat. GCMMF has 42 regional distribution centers in India, serves over 500,000 retail outlets and exports to more than 15 countries. All these organizations are independent legal entities yet loosely tied together with a common destiny! 

The success of Amul can be attributed to the quality of products, the economic pricing, 

effective supply chain and the belief that it has instilled in all its stakeholders, 

starting from the farmers to the end consumers!