Supply Chain Management in a Private Farming Vis-à-Vis Cooperative Processing and Distribution Environment of Dairy Sector in India

Abstract

Organized segment of dairy sector was hitherto dominated by the cooperative sector that established a structured and three-tiered organizational hierarchy, procured milk from small-scale farms, processed and distributed milk and milk products. With the liberalization of India's economy and market entry by the private sector, new dynamics have emerged. These include increased supplies of a greater variety of value-added products and increased inter-firm competition with companies and supporting their sales development with integrated marketing initiatives. This fostered greater attention to branding, product positioning and product differentiation with intense price discounting for some products. In response to these challenges, the State cooperatives have started to integrate their operations in areas such as procurement of supplies, logistics, manufacturing, distribution and inventory management. However, these face a major constraint regarding the sufficient availability of milk supplies over space and time while due to political interferences, excess staff adds to the administrative costs therby inefficiencies in its operations and losses results.

KEYWORDS:

• Dairy cooperatives
• market liberalization
• dairy industry
• integrated marketing
• supply chain

This article is a revised version of the article presented at the International Conference on Agribusiness and Food Industry in Developing Countries: Opportunities and Challenges, August 10–12, 2007, held at IIM, Lucknow, India.

Notes

1. Punjabi farmers traditionally maintain buffaloes, which give milk with a fat content of 6%–7% and milk yields rarely exceed 1,800 kg per lactation. As against this, the improved Holstein-zebu (local) crossbred cows yield 3,500 kg over a 300-day lactation period. And milk has a fat content of 3%–4%. Besides, buffalo milk yields are 40% less during the lean period while the milk yields from cross-breeds are more uniform throughout the year.