Logistics and Supply Chain

Management
(Aavin case)
Introduction
 India was one of the largest milk producing countries, producing about 114.4 million metric
tons of milk, which was estimated to be 13% of the world’s total milk production.
 MAMD largest dairy in the Southern part of India
 MAMD was converted into a district cooperative unit. The members of this cooperative unit
constituted the Milk Producers’ Cooperative Society (MPCS) at the village level, situated
within a radius of 70 km.
 The procurement was carried out by forming village-level Milk Producers’ Cooperative
Societies (MPCS).
Challenges :
 Increasing gap between Demand & supply was almost 40% in 2010.
 The demand for milk was seasonal and the supply of raw milk was
uncertain.
 About 80% of the Indian dairy industry was unorganized, and the raw
milk market was dominated by the Local men.
 Difference in Financing system between Aavin & Private players.
 Make Or Buy ( Butter, SMP) during peak demand situations.
 Rising production costs and fierce competition in the local dairy market
 There is no direct flow between MAMD and the farmers, making the
supply chain become complex and insufficient
Recommendations :
 The direct flow between the MAMD and farmers will improve the efficiency and
also enhances the relationship between its vendors.
 Increase the supplier base by giving additional schemes to the farmers , so that
improve the supplier confidence towards the MAMD.
 During non peak times the excess milk can be converted to SMP or Butter and It
can be converted back when the demand is high.
 Since the shelf life of SMP(3 months) is less than Butter(6 months) it is better to
convert it as SMP within the MAMD and Butter can be bought outside.
 Butter will be having a inventory cost of 2500 INR per day(Cost of refrigeration is
high) compared to low inventory cost of SMP.
 During peak time the SMP produced during non peak seasons(within the MAMD)
could be utilized to meet the demand, If the demand is too high butter could be
bought from other regions and can be utilized within less span of time , so that the
inventory cost will be low.
From the Demand forecast for
April 2011, it is seen that the
demand is always higher than
the supply , The primary thing
need to be done is to increase
the supply are listed below
Options:
 Procure raw milk from other
regions.
 Use the exiting in stock butter
and SMP to convert it as milk
to meet the demand.
 To meet the excess demand
butter can be bought outside
since the cost of butter is
lower than SMP.
 Since demand is high the
butter which has been bought
will be fully utilized in short
span of time.
Thanks…