Robust Supply Chain a key parameter for the success of the Dairy Industry
Like other fields in the consumer products (CP) arena, the Dairy Industry is facing shifting market dynamics, new channel challenges and renewed pressures for business model renovation. The need for change stems partially from explosive population growth, increased urbanization, global climate and natural resources issues—as well as increased demand and consumption from a new class of empowered consumers. With growing competition from private labels, CP companies now must execute flawlessly to connect with consumers, manage supply chain efficiencies and collaborate with channel partners.
The Dairy Industry is of great significance to India. The country is the world’s largest milk producer, accounting for more than 13 percent of the world’s total milk production. The Dairy Industry plays an important role in the socioeconomic development of India. It is instrumental in providing cheap, nutritional food to India’s vast population. Plus, the Dairy Industry helps alleviate poverty and unemployment, especially in rural areas prone to either excessive rain or drought.
Yet in spite of having the world’s largest milk production, India is a very minor player in the international Dairy market. Multiple limitations restrict competitiveness in world markets. In the domestic market itself, the Indian Dairy Industry faces tremendous challenges at every stage.
Challenges across the entire value chain: Procurement, Production, Sales and Marketing, Budgeting
At the Procurement stage, challenges include meeting seasonal spikes in demand and ability to measure the quality of procured milk at the source. Companies need to manage the complex logic of payments to producers based on fat, solid nonfat (SNF) and quality of milk received. Keeping track of truck and tanker routes, as well as capabilities for viewing, monitoring and payment based on route or distance. Plus, the industry needs visibility into the shelf life and stock-outs of raw material.
At the Production and Standardization stage, challenges can be found in manual and time-consuming processes for milk standardization calculation, handling production planning based on nonstandard raw material, addressing growing food concerns from consumers—as well as. Plus FAT accounting and effective tracking of FAT loss in the production process.
At the Sales and Marketing stage, challenges can be found in managing variable pricing conditions, particularly when processes must be capable of working backward from the maximum retail price (MRP), Inventory Management across multiple depots around the country, shelf-life management of finished products in the distribution chain, along with Crate Management and Reconciliation.
Where Budgeting and Financials are concerned, there are challenges around arriving at accurate milk valuation, determining batch-wise cost analysis and analyzing product profitability. Additional challenges here include meeting local, legal and fiscal requirements while improving operational efficiency of administrative activities.
In each of these areas, IT adoption and integration enabled via an ERP solution are critical to getting business benefits. Until recently, the Dairy Industry found it difficult to find and use industry-specific IT solutions to boost overall efficiency and provide insight into the mechanisms that manage cash-flow cycles in operations. Additionally, the industry has found it difficult to attract and retain the right IT talent.
IBM Dairy Solution
IBM has been working with the Dairy Industry globally and in India through its Global Business Services (GBS) division. It has launched its latest Dairy Solution offering in India through a “Pay and Use” Subscription based Hosting model on an SAP platform. Under this model, a customer can access the solution and the services by paying a nominal one-time implementation fee followed by a quarterly usage fee. The solution is hosted and managed by IBM on flexible two-, three-, or four-year terms, which allows customers to focus on their core business. Customers have the flexibility to add users as they grow. With the launch of this tested solution model, private and cooperative Dairy organizations can now manage their supply chain systems in an efficient and cost-effective manner.
The offering includes: