If opinion makers need one concrete example to showcase the positive impact IT can have on rural India, they only need to take a look at Amul. From using automated milk collection centres, to making IT literacy compulsory for its employees, Amul leaves no stone unturned in promoting its IT initiatives. Srikanth R P reports on how Amul is truly rural India’s flag bearer in the IT revolution

According to Subbarao Hegde, Amul’s integrated system has proved to be extremely effective in streamlining the demand versus supply data activity on a continuous basis

The term, ‘Digital Divide,’ has always fascinated the Indian IT industry. Both the government and social organisations from the private sector have launched various schemes to take ‘IT to the masses’. It has always been argued that India’s rural population—which accounts for more than 70 percent of the total population—can be uplifted with the help of IT. And if rural India or the government needs a poster boy who could inspire organisations to strategise operations with the help of IT— it has to be Amul. No other Indian brand comes close to it.

Formed in the year 1946, Amul initiated the dairy co-operative movement in India and formed an apex co-operative organisation called the Gujarat Co-operative Milk Marketing Federation (GCMMF). Today, this movement is being replicated in 70,000 villages in over 200 districts in India, transforming the life of the Indian villager. This co-operative revolution has made India the largest producer of milk in the world today. Amul is also one of the largest food brands in India with an annual turnover of $500 million, and with products ranging from milk, butter, ghee, cheese, chocolates, ice-creams and pizzas. The case of Amul is noteworthy simply because the movement has not only lead to efficient collection of milk, but more importantly, has used IT to create higher profits for milk producers. It’s no wonder that when the Nasscom-Boston Consulting group wanted to showcase successful e-commerce cases in India, they chose Amul, for setting an example for building an online bridge to its consumers.

The successful utilisation of IT to bridge the digital divide, has aptly been described by Dr V Kurien, chairman, GCMMF and the man credited for revolutionising the co-operative movement. “Computers were not created to solve the problems of poverty, hence it is futile to expect that the world will be a better place if we all had access to computers and the Internet. But information is power and it stands to reason that if this power is shared equitably, all will benefit.” There is no better example than Amul to prove this fact.

Role of Information Technology
IT has played a critical role in the development of the Amul brand. The logistics behind the co-ordination of approximately six million litres of milk per day from about 10,675 separate village co-operative societies throughout Gujarat, and storing, processing and producing of milk products at the 12 district dairy societies, is carried out with military-like precision.

It’s in these operations that IT plays a critical role. The installation of over 3,000 Automatic Milk Collection System Units (AMCUS) at village societies to capture member information, milk fat content, volume collected, and amount payable to each member, has proved invaluable in ensuring fairness and transparency throughout the entire organisation. The role of IT in Amul is best summed up by B M Vyas, chief executive officer, Amul (GCMMF) when he says, “Amul is not a food company, it is an IT company in the food business.”

The way things were
GCMMF is an apex co-operative organisation that comprises 12 affiliated member dairies/district milk unions, with each having its own manufacturing unit. These member dairies in turn have collectively about 2.1 million milk-producing members who supply milk twice a day to the respective village co-operative societies. As the collection and co-ordination of milk was a complex task, the organisation needed a methodology to streamline operations. Further, following the relaxation on food imports by the government of India, the Indian dairy sector faced a strong challenge from large organised dairies. To meet this challenge, the Indian dairy sector needed a strategy to make its operations competitive. Accordingly, IT was decided as the thrust area that would streamline the production and collection process and the processing of milk products. This is where the installation of AMCUS made the entire operation look simple.

For example, on an average, around thousand farmers come to sell milk at their local co-operative milk collection centre. Each farmer is given a plastic card for identification. At the milk collection counter, the farmer drops the card into a box and the identification number is transmitted to a personal computer attached to the machine. The milk is then weighed and the fat content of the milk measured by an electronic fat testing machine. Both these details are recorded in the PC. The computer then calculates the amount due to the farmer on the basis of the fat content. The value of the milk is then printed out on a slip and handed over to the farmer, who collects the payment at the adjacent window.

Earlier, members had passbooks containing details like identification number, fat percentage of milk and volume of milk. The volume of the milk was recorded in the passbook and a small sample was stored in plastic bottles for measurement of the fat content. The testing of the milk was done at a later date and the entire process used to take more than a week. In the current scenario, with the help of IT, the farmers receive their payments within a matter of minutes. Also, as the method is transparent, the likelihood of fraud has also decreased to a large extent.

But all these initiatives have not come without challenges. For example, in the initial phases, to convince sceptical farmers, the AMCUS were installed free of cost and the co-operative was requested to pay up only if they found the unit satisfactory. However, the experiment paid off and these initiatives made farmers aware to the benefits of the new system. Today, the application is being used in over 3,000 rural locations.

Subbarao Hegde, chief information officer, Amul - GCMMF says, “As milk is a highly perishable commodity, the AMCUS initiative is vital for our operations. Due to this automation, we are in a position to collect six million litres of milk per day from around two million members. More importantly, this initiative has increased the trust and transparency for IT in rural areas.” There are around 10,755 organised village co-operative societies in Gujarat, which are affiliated to the respective district union or member dairies. Each member preserves the milk in the cold storage, processing it and producing several products, which are then sold under the Amul brand name. As all products have a limited shelf life, the organisation’s ability to conduct its operations in a smooth way is much more praiseworthy—especially when one considers the scale of the operations. Amul makes about 10 million payments daily amounting to transactions worth Rs 170 million in cash. More than 5,000 trucks move the milk from the villages to 200 dairy processing plants twice a day, according to a carefully planned schedule. In modern day lingo, it can be described as “Just-in-Time” supply chain management with Six Sigma accuracy.

Key initiatives
While Amul has always been at the forefront of IT initiatives, the major thrust came only in 1994, when the organisation decided on ‘Information Technology’ as the key component needed to sharpen its competitive advantage. Amul studied its existing functions and operations and formulated an IT plan for spearheading its growth in the 21st century. The guiding principle behind the exercise was to align the information strategy with the business strategy of the organisation, and derive maximum benefits from computerisation. During the implementation of the plan, Amul took a strategic decision to re-design and re-organise the existing software applications. While implementing the new software, care was taken to integrate the applications in such a manner that once the information was captured at source, it could be leveraged for the enterprises’ decision making process. The main focus was to ensure that the output of one system could become input of another system and vice-versa. Thus providing a seamless flow of information.

B M Vyas, says, “Amul is not a food company, it is an IT company in the food business”

Enterprise-wide integrated application system
Accordingly, Amul assigned the ERP software development project named as Enterprise-wide integrated application system (EIAS), on a turnkey basis to Tata Consultancy Services. At present, the EIAS system covers a plethora of operations like market planning, advertising and promotion, distribution network planning, stock control, sales and accounting, budgetary control, quality control management and co-operative service management. Amul has also connected all its zonal offices, regional offices and members dairies through VSATs for seamless exchange of information.

Each of Amul’s offices is connected by e-mail and all of them send a daily report on sales and inventory to the main system at Anand. Also, sales offices, C&F points and wholesale distributors of GCMMF have been connected through the Internet for timely exchange of information. The customised ERP EIAS is designed in such a way that it can be plugged into various points of the supply chain and external system. Moreover, the software is platform independent and can work on any operating system. Amul is also in the process of Web-enabling the entire supply chain so that it can capture key information at the source, and use the same for decision-making. This would include the likes of transporters, member-manufacturing units, oil packing stations, suppliers, depots and the entire field force.

Says Hegde, “In the co-operative space, this is the first instance of an integrated system. The same system is going to be linked to each member dairy’s ERP system in order to get information about a variety of details. For example, details like milk procurement, production and stocks ready for despatch, wholesale distributor orders, secondary sales, direct consumers and demographic census data are available on the click of a button. This has proved to be extremely effective in streamlining the demand versus supply data activity on a continuous basis.”

Geographic information systems
In addition to the EIAS, Amul has also been using Geographic Information Systems (GIS) in an innovative way. The company uses GIS in its head office and key marketing offices. Using the Indian map in GIS, the company is in a position to plot zone/depot boundary as well as a pointer for zone, depot and distributor locations, which are superimposed by product-wise sales data. This data is then used for sales and distribution planning according to the various zones. The unique thing about Amul’s GIS is that it is used for business planning activity at the collection level as it captures the farmer-member census information, which includes animal census data. This has enabled Amul to decipher information regarding milk production and productivity of animals, region wise in Gujarat. This ultimately helps in forecasting milk production according to the region and suggests remedies, if any, for a region that has a lower milk production rate. The same GIS system can also be used for monitoring veterinary health and controlling the outbreak of diseases.

DISK
Also significant are the efforts of IIM-Ahmedabad’s (IIMA) e-governance centre that has developed additional modules, by building applications upon the existing system. The centre has tried to extend the benefits of the existing applications by developing a ‘Dairy Information System Kiosk (DISK). Besides automating the collection of milk, the system would be used for data analysis and decision support to help in improving milk collection.

The kiosk would also contain an extensive database on the history of cattle owned by the farmers. This would contain details like medical history of the cattle, reproductive cycle and history of diseases. Besides this, farmers can have access to information related to milk production, including best practices in breeding and rearing cattle. Using the same system, the farmers can even have access to a multimedia database on innovations captured by Srishti, an NGO working with IIMA. As a large amount of detailed history on milk production is available in the database, the system can be used to forecast milk collection and monitor the produce from individual sellers.

Going forward, there are plans to introduce features like Internet banking services and ATMs which will enable milk societies to credit payments directly to the seller’s bank account. In line with this vision, officials at Amul are looking at upgrading the plastic cards which are being currently used only for identification purposes, to smart cards which can be used to withdraw cash from ATMs.

Online initiatives
The history of Amul shows that it radically changed the way business was done—by eliminating the middleman and bringing the producer closer to the consumer—resulting in benefits for both. Incidentally, it was also one of the first Indian companies to have a Web presence. Today, Amul’s cyberstore gifting service is capable of servicing consumers in more than 125 cities. Says Hegde, “We have also linked our distributors to our network and also incorporated Web pages of top retailers in our site, amul.com, as part of our B2B initiatives.” Distributors can place their orders on the website, amulb2b.com, especially meant for accepting orders from stockists and promoting Amul’s products via e-commerce. Currently, the company receives queries from overseas agents for distributing its products in countries like the US, Britain, New Zealand, Singapore and Thailand. As a result of the online initiatives, today, Amul exports products worth around Rs 100 crore, to countries in West Asia, Africa and the US. Amul has also launched sites like amulgreetings.com and amulkids.com to extend the brand identity to kids and teenagers who are its target market for its ice-cream and chocolates products. Also, as a strategy, Amul has a customer feedback channel which uses e-mail like cheese@amul.com for cheese products and butter@amul.com for butter products.

In addition, the organisation’s corporate intranet site contains all the company’s updates including policies, procedures, functional role and responsibilities of each person in the organisation. Another example that puts Amul in a league of its own, is its recruitment policy. For instance, for any new requirement in different functional areas, candidates have to compulsorily undergo a computer literacy test, where the minimum passing mark is 80 percent. Explains Vyas, “Our main emphasis is to increase competency at the end user level with the help of IT. All our employees have undergone computer training according to the departmental needs so that they can take charge of their responsibilities in an effective way at the respective supply points.”

Amul’s success in leveraging IT to its advantage lies in the simple fact that the organisation has a clear IT vision. For example, after a top-level domain co-operative was made available, Amul embraced it with gusto. Hegde says that by developing the ‘Amul.coop’ Web portal, the organisation will be in a position to communicate with other similar co-operative movements. As co-operatives can interact with each other with similar organisations sharing this domain, knowledge can be shared on a pro-active basis, which can lead to further productivity benefits.

While it has always been argued that investments related to information technology made in rural India are a disaster, the case of Amul proves that where there is a will, there is a way. From catchy billboards to being a e-commerce success story, Amul is truly rural India’s flag-bearer in the IT revolution.