“I am of the firm belief that this is the time to build and maintain relationship with the supply chain partners. You should involve them right from the planning stage. Speedy communication is the key so that everyone is on the same page. You need to treat your supply chain partners as your family members. You shouldn’t stop communicating with them because they are under distress or you are under distress,” highlights RS Sodhi, MD, Gujarat Cooperative Milk Marketing Federation (GCMMF), during an exclusive interview.
As you are aware that the dairy supply chain is C – C (Cow to Consumer). There are no holidays in the dairy business. The supply chain of milk cannot stop unless you tell the cattle to stop producing milk. From day one of the lockdown, milk was given the status of an essential product. If you are unable to provide food and essential items to people during lockdown, then the whole efficacy and intention of the lockdown goes waste and there can be food riots. More importantly, we have no option or rather intent to stop our supply chain in times of crisis because firstly we are dealing with a perishable product which is a source of livelihood from 3.6 million landless and marginal farmers, which has a shelf life of 4-5 hours and this is also an undeniable fact that milk and milk products such as Dahi or buttermilk are essential parts of every households’ daily diet in our country.
Right from the start of the value chain – be it Cows or buffalos producing milk daily to the last mile distributor who is ready to go that extra mile to serve the end consumer – our supply chain can’t stop at any time. We must ensure that our supply chain from Cow to Consumers functions uninterrupted. Rather, in such times, the capacities have been quickly ramped up to serve a greater number of people as within a few days of the lockdown, we realized the demand of such products have risen substantially. In turn, this had put tremendous pressure on our supply chains as the volumes increased.
In the initial phases, there was panic buying. Sales increased for the first three-four days of the lockdown and on the fourth-day fresh milk sales declined by 30%. However, now the consumption of dairy and value-added dairy products has increased by 20-50%. Within a few days of the lockdown, we realized that the demand for our products such as Butter, Ghee, Cheese, etc., increased by 15 – 40%. On the contrary, ice cream demands witnessed dip because of sheer inertia. In order to cater to the growing demand of other products, we made a conscious decision of stopping the ice cream production lines and scaled up operations of other products.
During Covid-19, everyone is talking about supply chain as this is the only sector which is moving albeit with its own set of challenges to bring essential products to the last mile. To tell you the fact, the vehicle movement for essential services faced problems only during the first week of the lockdown. Having said that Milk was the only commodity, which didn’t face any trouble in the movement right from the day One. Yes, there were certain challenges in some parts of the country, but they were also resolved with the help of the local authorities in no time.
You need to understand that the lockdown was an Emergency situation and one can’t plan for such unforeseen situations. For instance, if some emergency comes in your family, you simply cannot take a day or two to plan things. You have to immediately attend to the medical needs to curtail the problem. What we did was we communicated with all our supply chain partners right from farmers, transporters, dealers, C&Fs, employees, drivers, etc., and asked them one single question that what’s the purpose for which we all are working.
On March 25, we communicated to everyone in our system that their job is not just a job but is a national cause. I spoke to them and informed them the brevity of the situation as any person would really not want to put ones’ life into danger. We made sure that they are rewarded for their performance in such times and immediately announced 15-40% hardship allowance over their salaries. We also empowered them with all the safety measures, be it procuring masks, PPEs, gloves, sanitizers, etc. Simultaneously we also took care of their food requirements as nobody can work hungry. We made sure all our drivers are given food packets and milk bottles for their voyage as none of the highway dhabas were functioning. We have ongoing langar for everybody associated with us, which serves three meals daily to everyone. We announced incentive schemes for all our supply chain partners and everyone involved in the seamless functioning of the value chain.
There were implementational challenges at the ground level as someone allowed Milk but they didn’t allow Dahi or buttermilk. At some places, Butter was allowed but not cheese. We had to really explain them the importance of the seamless supply, but in the end, all went well. It was our duty to take everyone in the loop. You must understand in business such things are normal and one must carry on their businesses by outpacing such minor issues. I would also like to bring to your notice that in these three months of crisis, ie., March, April, May 2020, we didn’t experience degrowth. In fact, some of our SKUs registered higher sales. These are challenging times and we must prepare ourselves to sustain the changing dynamics.
Amul managed almost seamlessly to continue pick-up twice a day from its 3.6 million dairy farmers across 18,700 village cooperatives and supply to its eventual users in 1,000 cities and towns. New protocols had to be followed: of washing hands and social distancing for the dairy farmers, of sanitizing trucks for the drivers, and of sorting out the curfew passes especially for inter-state travel. Who’s been in Amul for 38 years, we are used to working in curfews during riots and natural disasters, especially in Gujarat. Just the scale of it was nationwide this time.
Amul, with the huge network of around 5000 tanker drivers, is collecting over 25 million litres of milk per day from the villages and transporting it to over a thousand cities and towns across the country. Right from milk collection to the delivery of milk, we are taking all the precautionary sanitation measures in the wake of Covid 19. To ensure the milk provided to people is hygienic and uncontaminated, all the farmers and workers have been instructed to wear masks and sanitize their hands frequently. All the workers are also checked by the doctors while entering the Amul premises.
We implemented social distancing measures at all our plants, milk collection centres, etc. Health hygiene, masks and every desired safety measure was followed right from the word go. Our drivers were well trained to ensure there is no lapse in hygiene. Our tankers are being sanitized before and after the movement. Thermal screening is being done for our workers at our plants. We have also deployed sanitizing tunnels to ensure safety of every employee. Our dairy plants are mostly automated. There are very few places where we have to deploy human labor such as packaging line. With a view to maintain social distancing in the packaging line, we had to slow down the speed of the line.
We also made sure that our truck trailers have Essential Product Delivery stickers on all the sides of the vehicles so that there’s no unnecessary stoppages on the way. Technology played a tremendous role in seeing us through this crisis as GPS-enabled trucks could show us in real-time as to which truck is being halted where and we could immediately take that matter to the concerned officials and get the delivery channel going unstopped. Additionally, our milk collection societies are connected with the automatic milk collection platform where we get the real-time information on the quantity of milk being procured and consumed by the respective societies and that’s how we could map the demand pattern.
Well, there were many challenges to start with. While our onward movement had hardly faced any travel issues, we realized that the empty trucks coming back to the plants were being stopped initially. We approached the Ministry of Home Affairs to allow plying of empty Amul trucks and they immediately passed the directive to not halt the movement of empty trucks. Another issue that we faced was of packaging material as we only keep 7-day inventory of packaging materials. As per the directives of the government, the packaging plants were closed. We again took up the matters with the Ministry of Animal Husbandry and Ministry of Home Affairs. They immediately issued the directive that the packaging material required for essential services should be allowed to function. Similarly plant maintenance services needed to be allowed to operate as we can’t operate a plant without frequent and timely maintenance. Container movement wasn’t allowed for exports initially.
We requested Ministry of Commerce, APEDA as well as other supportive ministries to provide us relaxation for the exports of perishable food products. We realized that Customs Houses Agents (CHA) were not functioning, so whatever online permissions we could have procured, we did that. I would like to bring to your notice that it’s wrong perception that the exports of goods was completely on halt. It was not the case. In fact, barring few container ships, everything started within a week or 10-days of the lockdown. In some parts of the country, we realized that not more than 20 workers were allowed to work at a time in a factory of essential products and we were unable to run our operations in those areas, so we again contacted the respective authorities and got the operations running without any delay.
On 25th March when the first lockdown started, I myself received calls from the office of Ministry of Home Affairs, Chief Minister of Gujarat, Chief Secretaries, Ministry of Animal Husbandry, etc., to request me that the Milk & milk products supplies shouldn’t get hampered during lockdown and wherever there is any challenge faced, don’t hesitate to call. You wouldn’t believe that within a week, I had spoken to almost 200 officials to manage the challenges faced.
Let me explain this to you with an example. In the late 80s and early 90s, I was posted in Ahmedabad. At that point in time, the city was under curfew for months because of ongoing riots. Those experiences helped us sail through times like these. In the early 90s, we never used to have mobiles and it was only one landline with which we used to operate. There were no high-end computers. Today at least, most of the people can work from home. So, you can imagine the tumultuous times we have sailed through. The only difference was at that time, Section 144 was imposed only in Ahmedabad, but today the entire nation is under lockdown.
Having said that, bad times prepare you for the worst and we have been witness to such days, which really made us more resilient and stronger to surmount such challenging times. Additionally, the implementation of latest technology also aided in ensuring a seamless supply chain.
Technology has enabled us to monitor milk supplies — sitting in our homes or offices – (we could monitor the) amount of milk supplied at 18,500 milk collection centres, which village is supplying how much milk and we are able to evaluate the reason behind the rise and drop in milk supply. Moreover, a technology like GPS has enabled us to track the movement of 20,000 trucks that carry Amul products. It has helped us to monitor supplies at the retail level as well.
Let me explain this to you briefly, we are managing three different types of supply chains. One is of perishable products such as Milk, dahi, paneer, etc. The second is of milk products such as butter, cheese and ghee. The third one is of frozen goods such as ice creams. The biggest challenge in front of us was that the shops across the country were merely opening for 3-4 hours a day. It was practically impossible for us to supply all these products in different vehicles at the same time at all the shops as all these products require varied transport vehicles. We also realized that our ice cream infrastructure was lying idle. We spoke to our ice cream and hotel distributors where the supply was shelved during the crisis, as they were not having any business due to demand drops, we asked them to utilize their idle manpower and vehicles to transport dairy products so that we could service our retailers within that short window. Our distributors were happy with this alternate arrangement as they started getting some monies in their hands and we were happy as we could reach out to our customers. So, it was a win-win situation for both of us.
In this arrangement, we also met with challenges as certain shops were not allowed to open due to containment areas. With the view to service all the demands in the same window, we came up with the idea of selling milk products directly to Resident Welfare Associations (RWAs) of residential societies in various cities of the country. We told the society secretaries that they would get 8-10% margin on the products they sell. This way they also started earning some money and there were many volunteers who came on-board as all of the people were working from home. Direct supply of milk and milk products to residents proved to be a profitable business model. Today we supply to over 500 residential societies in Mumbai, Pune, Delhi, Ahmedabad and some other cities.
For us at Amul, it is imperative that the entire supply chain is efficiently working to ensure uninterrupted supply of products across the country. To give you sense of our operations, we procure, on an average, 25 million litres of milk daily from 3.6 million farmers across 18,500 villages of Gujarat. This milk is processed into packaged milk and almost 750 SKUs of a wide range of products (fresh, ambient, chilled and frozen) at our 82 plant locations across India, and supplied to million-plus outlets through a network of 68 branch offices, 250 warehouses and 10,000 distributors.
Amul has been able to service all our markets efficiently because all supply chain members have been working with commitment, as well as safety, to ensure that the consumers get their favorite brand, every morning. The important aspects where technology helped us immensely included:
Milk is the source of livelihood for 100 million people of the country. We have seen most of migrants coming back to their villages. My suggestion to the government would be to create opportunities for these migrants in their respective villages and towns. Rural India has the potential to drive Indian economy at a fast pace and the government, I am sure, has been taking right steps through the reform measures announced just recently to address their concerns. Dairy and animal husbandry are some of the biggest employment generators in the country as you can’t deploy resources on the already overloaded agriculture sector.
We need to be agile enough in efficiently managing our supply chains with or without crisis. In achieving this, supply chain needs to be technology driven to start with. Everyone understands the importance of supply chain today. We need to quickly bridge the technological gaps in our supply chain. Secondly, our supply chains shouldn’t be dependent on one product or one business or one big buyer. It should be driven on the basis of multi-segments, multi-channels, multi-products, etc. Lastly, you need to be ready for any eventualities coming your way so that the planning becomes easier in trying times.
In India, milk production is growing at the rate of 5%. Meanwhile, the organized sector is growing at a rate of 9-10%. Organized sector will grow further, post Coronavirus. Due to the crisis, farmers and customers have realized that they can rely on the organized sector compared to the unorganized sector. All cooperatives across India purchased 20-50% more milk from farmers, during this lockdown period. This procurement didn't impact milk prices at all. Meanwhile, Amul has seen a 15% increase in procurement during this time. We are indeed the blessed lot as not only have our procurement registered an appreciable increase but also the farmers are getting better rates for their produce. Amul collects milk from 18700 village cooperative societies and brings them to 82 dairy plants spread across the country. Last year, Amul procured 23 million litres per day milk but in the span of next five years, we are planning to enhance our milk procurement to 32 million liters per day. Our milk procurement registered 9% growth in the last 10 years and we will continue it in the coming years. Besides, Amul is investing in making sweets like Pedha, Barfi and other items.
For the last ten years, Amul has been growing at a CAGR of 17-18% and it hopes to grow further. We are confident that we will grow by 15% this fiscal despite the problems caused by the corona pandemic. As I said earlier, household consumption of milk and other dairy products will increase and making up the losses of sales caused by closure of hotels, restaurants and cafeterias during lockdown period. The company’s ‘multi-pronged’ approach –multiple production bases, multiple brands, multiple products for varied consumer segments and multiple distribution channels will ensure that steady supply of products are maintained.
I am of the firm belief that Indian economy will bounce back rather quickly than any other country in the country as we are very resilient and we have many inherent factors in our favor which help us tide through tough times. We are a country of 1.38 bn populations having our own resources, skilled manpower, a highly growing market and most importantly the determination to bounce back in tough times. I am highly optimistic about the growth of food products category as going forward, consumers will demand for more affordable and healthy food products. There will be huge lifestyle changes that we will witness in the near future and the country is well placed to cater to such growing demands.
This is the time to build and maintain relationship with the supply chain partners. You should involve them right from the planning stage. Communication is the key so that everyone is on the same page. They understand your pain points and vice versa. Together companies can solve the problems they are facing and devise a workable solution. Following this strategy, we have not only doubled our communication with our partners through advertising, but also reached out to them personally to get this going. You need to treat your supply chain partners as your family members. You shouldn’t stop communicating with them because they are under distress or you are under distress.
Amul is procuring milk from 3.6 million farmers twice every day by using 5, 000 road milk tankers, from 18,500 milk collection centres, coming to around 82 dairy plants or chilling stations. Milk is converted into packaged milk, milk products or frozen milk products. 10000 milk vans to carry packed milk. 10000 trucks to carry dairy products other than milk. 20000 distributors’ van carrying products to various parts of the country. At any given time, around 50000 Amul dedicated vehicles have been plying on the road in today’ time as well. Working with around 1 lakh supply chain partners to ensure that our supply chain is working efficiently.