Supply Chain Management in Dairy Sector

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					    SUPPLY CHAIN MANAGEMENT IN DAIRY
PROCESSING UNITS – A COMPARAIVE ANALYSIS OF
      PRIVATE AND CO-OPERATIVE UNITS



                      Thesis submitted to the
         University of Agricultural Sciences, Dharwad
         in partial fulfillment of the requirement for the
                             Degree of




        MASTER OF BUSINESS ADMINISTRATION


                                in


                        AGRIBUSINESS




                               By

                          NITHIN R.R.




      DEPARTMENT OF AGRIBUSINESS MANAGEMENT
         COLLEGE OF AGRICULTURE, DHARWAD
        UNIVERSITY OF AGRICUTLRAL SCIENCES,
                 DHARWAD – 580005


                          JULY, 2008
             ADVISORY COMMITTEE



Dharwad                            (R.A. YELEDHALLI)

JULY, 2008                          MAJOR ADVISOR




                  Approved by:

                  Chairman : ______________________

                                 (R.A. YELEDHALLI)


                  Members   : 1.____________________

                             (BASAVARAJ BANAKAR)

                             2.____________________

                             (BALACHANDRA K. NAIK)

                             3.____________________

                                 (K.A. JAHAGIRDAR)

                             4.____________________

                                 (Y.N. HAVALDAR)
                               CONTENTS

Sl.                            Chapter Particulars                     Page No.
No.
      CERTIFICATE
      ACKNOWLEDGEMENT
      LIST OF ABBREVIATIONS
      LIST OF TABLES
      LIST OF FIGURES
      LIST OF APPENDICES
1     INTRODUCTION
2     REVIEW OF LITERATURE
      2.1 Procurement management
      2.2 Demand management and product management
      2.3 Value addition
      2.4 Sales management
      2.5 Problems faced by the processing units
3     METHODOLOGY
      3.1 Brief description of the selected milk processing units
      3.2 Selection of the processing units
      3.3 Method of analysis
      3.4 Concepts and terms referred in the study
      3.5 Processing of milk into pasteurized milk and milk products
4     RESULTS
      4.1 Procurement management in processing units
      4.2 Demand and product management in processing units
      4.3 Value addition in the selected units
      4.4 Sales management in selected units
      4.5 Problems faced by the processing units
5     DISCUSSION
      5.1 Procurement management in processing units
      5.2 Demand and product management in processing units
      5.3 Value addition in the selected units
      5.4 Sales management in selected units
      5.5 Problems faced by the processing units
      5.6 SWOT analysis of the dairy processing units
6     SUMMARY AND POLICY IMPLICATIONS
      REFERENCES
      APPENDICES


                    LIST OF ABBREVIATIONS
            SMP            -       Skimmed Milk Powder
            MBM            -       Masala Butter Milk
                              LIST OF TABLES


Table                                                                              Page
                                         Title
 No.                                                                                No.
 4.1    Quantity of milk procured and cost involved in procurement of milk by
        the co-operative unit during 2007
 4.2    Quantity of milk procured and cost involved in procurement of milk by
        the private large scale sector during 2007
 4.3    Quantity of milk procured and cost involved in procurement of milk by
        the private small scale sector during 2007
 4.4    Quantity and value of raw materials procured by co-operative and
        different private sector processing units during 2007
 4.5    Seasonal fluctuations in milk procurement by co-operative and
        different private sector processing units during 2007
 4.6    Output and capacity utilization by the co-operative processing unit
 4.7    Output and capacity utilization by the private large scale processing
        units
 4.8    Output and capacity utilization by the private small scale processing
        units
 4.9    Cost of carrying inventory of finished products by the co-operative unit

4.10    Cost of carrying inventory of finished products by the private large
        scale units
4.11    Cost of carrying inventory of finished products by the private small
        scale units
4.12    Demand management of milk and milk products in different milk
        processing units
4.13    Product mix in co-operative and private sector milk processing units
        during 2007
4.14    Cost structure of processing of milk in co-operative and private sector
        processing units
4.15    Sales realization in co-operative and private sector units
4.16    Cost and returns in co-operative and private milk processing units

4.17    Comparative price at different stages of marketing of processed
        products by milk processing units
4.18    Annual cost of marketing of processed products by co-operative
        sector unit
4.19    Annual cost of marketing of processed products by private large scale
        units
4.20    Annual cost of marketing of processed products by private small scale
        units
4.21    Problems faced by co-operative and private sector processing units

4.22    Ranking of problems
                            LIST OF FIGURES

Fig.                                                                    Page
                                       Title
No.                                                                      No.


 1.    Sampling design


 2.    Capacity utilization by the dairy processing units


       Product mix in co-operative and private sector milk processing
 3.
       units during 2007


 4.    Costs in co-operative and private milk processing units
                     LIST OF APPENDICES



Appendix
                                     Title                             Page No.
  No.

   I.      Demand management of Milk in co-operative and private
           sector processing units

   II.     Demand management of Curd in co-operative and private
           sector processing units

   III     Demand management of SMP in co-operative and private
           sector processing units

   IV      Demand management of Butter in co-operative and private
           sector processing units

   V       Demand management of MBM in co-operative and private
           sector processing units

   VI      Demand management of Pedha in co-operative and private
           sector processing units

  VII      Demand management of Lassi in co-operative and private
           sector processing units

  VIII     Demand management of Ghee in co-operative and private
           sector processing units

   IX      Demand management of Paneer in co-operative and private
           sector processing units

   X       Demand management of khowa in co-operative and private
           sector processing units

   XI      Demand management of Mysore pak in co-operative and
           private sector processing units

  XII      Demand management of Cream in co-operative and private
           sector processing units

  XII      Demand management of Shrikand in co-operative and private
           sector processing units
                               1. INTRODUCTION
         The term supply chain management was coined by consultant Keith Oliver, of
strategy consulting firm Booz Allen Hamilton in 1982. Supply Chain Management (SCM) is
the process of planning, implementing and controlling the operations of the supply chain with
the purpose to satisfy customer requirements as efficiently as possible. Supply chain
management spans all movement and storage of raw materials, work-in-process inventory
and finished goods from point-of-origin to point-of-consumption.
          The term ‘Supply chain’ was originally associated with classical multinational
enterprises that were vertically integrated. But, now supply chain management has become
relevant in situations where in there are more than one autonomous players. In such cases,
there is often a dominant enterprise that uses its power to organize and plan the chain by
involving customers and suppliers. Supply chain management involves an organizational or
institutional perspective involving collaboration, business environment, power and trust; a
performance perspective involving performance measurements and consumer behaviour; and
a process perspective involving process management issues such as costing, organizing
supply chain, targets and decision making.
        A supply chain refers to different players being linked from farm to fork to achieve
more effective, efficient, customer focused and market oriented flow of products. The supply
chain may include growers, packers, processors, storage and transport facilitators/providers,
marketers, exporters, importers, distributors, wholesaler and retailers.
         The development of supply chain requires knowledge and expertise about the
functioning of the complete chain including strategic aspects i.e. framing strategies pertaining
to chain design, chain formulation, chain organization, chain management and partnership
and the functioning aspects i.e. chain marketing, chain logistic, quality assurance, material
flow, information flow, value addition, technology and interaction. Managing supply chains
requires an integrated approach in which chain partners jointly plan and control the flow of
goods, information technology and capital from farm to fork and vice versa. Supply Chain
Management is concerned with the efficient integration of the entities involved so that
merchandise is produced and distributed in the right quantity, to the right locations and at the
right time.
         The concept of supply chain has many variants such as commodity chain, value
system, value chain, production network and value network. A value system is a set of
interlinked complete firms, which have all the business functions. Alternatively, a commodity
chain is a network of labour and production processes whose end result is a finished
commodity. It is the series of relations through which a produce passes i.e. extraction,
conversion, exchange, transport, distribution and final use. The participants in a value chain
can be integrated firms, retailers, lead firms, turn key suppliers, and component suppliers.
Global value chain or Commodity Chain Analysis (CCA) highlights the levels of integration
between suppliers, producers, and consumers for a given commodity. Various innovations in
supply chain management include Efficient Consumer Response (ECR), Information and
Communication Technology (ICT) and New Generation Cooperatives (NGCs) besides
strategic alliances, which create more sustainable and profitable partnership in supply chain.

1.1        SUPPLY CHAIN MANAGEMENT WITH PERSPECTIVE
         TO DAIRY INDUSTRY OF INDIA:
         Our country has a rich tradition in dairying since the time of Lord Krishna. Dairying
has been inherent and non separable in Indian culture, for centuries. Milk and milk products
have always been an integral part of our consumption habits. In the vast field of animal
husbandry, the contribution of dairying has been most significant, in terms of employment, as
well as income generation. In post-independence India, co-operative dairying has been one of
our great successes, having a profound impact on socio-economic development of rural
areas.
        India stands first in world milk production with a share of about 14 per cent in world
milk production. Milk has achieved a unique status in terms of its output value exceeding Rs.
1,00,000 crores and has made a rapid stride both in terms of number of milk producers and
quantity of milk produced.
         In India, dairying is the important subsidiary occupation in rural areas, next to the
main occupation of agriculture. Livestock sub-sector alone contributed to 4.22 per cent of the
total value of GDP (Gross Domestic Product). The development of dairy industry in India is
well known all over the world as one of the most successful development programmes in the
globe known as white revolution. Dairy farming is visualized by the farmers in the country as
part of an integrated agricultural system where dairy and agriculture complement one another.
         The milk production in India was 17 million tonnes in 1950-51. This could meet only
25 per cent of the domestic demand; the remaining 75 per cent of the demand was met by
importing the milk solids. The production was stagnant for two decades till 1970, with annual
growth rate of milk production of one per cent. Thanks to the vision and foresight of Dr.
Kurien, in 1970 NDDB (National Dairy development Board) launched “Operation Flood
Programme” with objective of ending milk famine in the country and turning farmer’s co-
operatives into a powerful catalyst for transforming India into a major milk producer in the
world. Further, by providing milk producers a remunerative price round the year, milk
production in India touched 74 million tonnes in 1997. By the year 2006, India has emerged
as the largest milk producer with a production of 100.9million tonnes. This is as a result of
India’s “White Revolution” in milk production.
          The first phase of “Operation Flood Programme” was between 1970 and 1981 and it
laid the foundation for modern dairy industry in India. There was a self-sustaining growth of
producer’s controlled dairy co-operatives. The second phase was in action during 1981 to
1985, which established 136 milk sheds and captured markets in 290 cities and provided 4.9
billion finance. The operation flood had completed third phase on 31 March, 1994 by
capturing 500 cities with a population target of 300 million customers. When the third phase
was over, the following benefits had reached the small dairy farmers.
    1. Sustained increase in production (4-5% growth/annum) raising the per capita
       availability of milk to nearly 220 grams.
    2. Dependence on commercial imports of milk powder ended.
    3. Marketing mechanism improved and providing assured market outlet for milk
       producers and quality milk for consumers.
    4. The quality of milch animals improved.
         At the end of operation flood-II, 72,744 dairy co-operative societies in 170 milk sheds
of the country having a total membership of 93.14 lakh has been organized.
       The Operation Flood Programme launched another massive programme called
“Technology Mission on Dairy Development (TMDD)” in June 1989. The objective of TMDD
was same as that of Operation Flood Programme’s objectives.
          Karnataka has always remained in the forefront of all agricultural development
initiatives in the country and dairy development is no exception. Dairy farming in Karnataka,
like in elsewhere in the country, is largely characterized by the prevalence of dairy enterprises
that are mostly subsidiary occupations alongside the main agricultural activity of the farmer.
Specialized dairy enterprises do exist but not only is their number abysmally low as compared
to regular types, but also are restricted mostly to urban areas and their surroundings.
         Karnataka stands eleventh in milk production in the country and it occupies third
position with respect to milk production under co-operative sector in the country. The milk
production was around 4124 thousand tonnes during the year 2006-07. The KMF is covering
27 districts, with 7000 dairy co-operative societies, around 17000 villages involving 1.5 million
farmers collecting around 20 lakh litres of milk daily.
        As per world bank experts report, for an initial investment of Rs. 200 crores in
Operation Flood III, the net returns per year to the rural economy had been Rs. 24,000 crores.
No other major development programme all over the world, has matched this input-output
ratio.
         The basic functions of any dairy enterprise are procurement, processing and
marketing. This type of operation is known as “Anand pattern of dairying”. The management
of dairy enterprise should be very careful in these activities. The procurement of milk includes
milk collection centers (dairy societies). The other important decision in milk procurement is
pricing of milk. The two axis system of milk pricing is commonly used i.e., based on Fat and
SNF (Solid Not Fat) content of milk. Seasonal fluctuation is another important aspect which
needs adequate attention to ensure regular and sufficient milk throughout the year.
        Since, milk is a perishable commodity, it has to be processed (chilling or pasteurizing)
immediately after procurement, otherwise, it gets spoiled. The processing activity cannot be
neglected as it converts the milk in consumable form to more value addition forms.
        The marketing includes product mix, pricing policy, distribution channel and sales
promotion. The milk products are marketed by both KMF (Karnataka Milk Federation) and
Private Milk Units.
         For the success of a dairy industry/firm efficient supply chain management is a pre-
requisite. Thus, the supply chain performance of the processing units is a deciding factor.
         Milk supply chains are more concerned with controlling of milk quality and supply
fluctuations which are unique to this sector. Perishable goods like milk require a time efficient
supply chain. This perishable factor can affect the milk supply chain. Supply chain
management has seen as a source of gaining competitive advantage in the business world.
Due to pressures from increased competition resulting from globalization of supply,
processing and distribution networks, high levels of service expectations and competitive
pricing, the supply chain management has become more important.
        The Indian supply chain for milk products is affected by abnormal wastage and poor
handling. The wastage occurs because of multiple points of handling. Shortage of cold
storage facilities and refrigerated transport equipment lead to inefficiencies in handling milk
products. There is a compelling requirement for appropriate infrastructure for storage and
transportation such as temperature controlled warehouses and vans. By practicing improved
supply chain management practices, there will be significant reduction in the wastages of milk
and milk products which in turn will benefit both the farmers as well as the consumers by
means of increased returns and decrease in price respectively. Given the fragmented nature
of the milk supply chain, few companies have access to capital and the ability to invest in
supply chain. A detailed study of business performance of milk processing unit would be of
immense use to know whether co-operative or the private sector follows the sound supply
chain management practices. Keeping in view all these facts, an attempt is being made to
assess the management of dairy processing units in Karnataka.
The specific objectives are;
    1) To analyze the procurement management in different types of dairy processing units.
    2) To analyze the demand management and product management.
    3) To ascertain the value addition in different products.
    4) To analyze the sales management of milk and its products by the units.
    5) To analyze the problems faced by the selected units in management of dairy
       processing.

1.2       LIMITATIONS OF THE STUDY
        The study pertains to the owners of the private processing units who are generally
suspicious of the motives of any investigation because of fear of taxation. Therefore, the
investigator has confronted with few drawbacks in ascertaining accuracy of data. Hence,
greater care was taken to collect the data as accurately as possible.
         The present study was undertaken in Dharwad milk union jurisdictions and data were
collected from the processing units during 2007, which was undoubtedly a very short period
for generalization of data and extending concrete recommendations either for similar capacity
firms or the processing industry in the entire state.
1.3     PRESENTATION OF THE STUDY
      The study is presented in six chapters.
  ♦ The first chapter deals with the introduction and objectives.
  ♦ The second chapter presents review of literature on the related topics.
  ♦ The third chapter outlines the features of the study area, sampling framework, analytical
      tools and specifies the concepts used in the study.
  ♦ The fourth chapter presents the results obtained in the study.
  ♦ The fifth chapter discusses the results of the study.
  ♦ The sixth and final chapter presents the summary and policy implications.
                       2. REVIEW OF LITERATURE
        In this chapter, an attempt has been made to critically review the literature of the past
research work, in relevance to the present study. Except a few, most of the studies were
confined to the milk processing. However, the studies conducted on milk processing and
other related agricultural commodities were reviewed and presented under the following
heads.
        2.1     Procurement management
        2.2     Demand management and product management
        2.3     Value addition
        2.4     Sales management
        2.5     Problems faced by the processing units

2.1     PROCUREMENT MANAGEMENT
         Natarajan (1990) observed that the major cost in milk production was cattle feed
(20%). He suggested that Agricultural Price Commission in consultation with Economic
Ministries and Planning Commission to recommend, from time to time to the procurement and
support prices of milk and milk products as done for other agricultural commodities. In
addition, he reported that for better performance of Dairy Co-operative Societies (DCS), four
factors were important viz., high milk utilization, better milk marketing, distribution of cattle
feed and credit for buying and technical assistance to milk producers through co-operatives.
        Mohammed Ali (1992) reported that fresh fruits and vegetables accounted for more
than 90 per cent of the total quantity of raw materials procured in both the private and public
sector processing units. This accounted for more than 77 per cent of the total value in private
sector and 60 per cent in total value of main raw material in public sector. The annual average
purchases of fresh fruits and vegetables by the private sector unit was 12,841.60 metric
tonnes worth Rs. 204.74 lakh, while the same in public sector unit was 575.5 metric tonnes
worth Rs. 9.58 lakhs.
        Balasubramanian and Prema (1996) in their study on processing and trading of
cashew nuts in India observed that the total processing and raw material costs accounted for
about 70 per cent, labour charges 10.5 per cent, purchase taxes per cent, freight and
handling charges 5 per cent, packing cost 4.5 per cent and remaining 5 per cent was
contributed by costs of power, fuel, depreciation and overheads all put together.
         Malleswari (1996) examined the potential, infrastructure and constraints of mango
processing in Andhra Pradesh. The study showed that mainly three varieties of mango were
used for manufacture of pulp viz., totapuri, alphonso and raspuri. Roughly 55 per cent of pulp
was made from totapuri, 35 per cent from alphonso and the rest from other varieties of mango
in the processing units of Chittoor district. Mangoes were purchased both from the markets as
well as from the farmers directly.
        Balappa (1997) in his study production, marketing and processing of redgram in
Gulbarga district revealed that the purchase price of redgram by the dal miller was Rs.
1881.27 per quintal and the sale price was Rs. 2277.04 per quintal of which the cess incurred
for purchasing redgram was Rs. 81.27 per quintal.
         Ramandev (1998) in his study on management appraisal of cashew nut processing
industries in Uttar Kannada revealed that overall, total cost of cashew nut procurement was
Rs. 324.16 per quintal. The total cost of procurement per quintal worked out to be higher
through inter state imports-processor at Rs. 434.41 followed by grower-trader-processor,
grower small dealer-processor, growers processor and international imports processor at Rs.
379.63, Rs. 342.45, Rs. 323.33 and Rs. 299.99 per quintal, respectively.
        Shobha (1998) in her study on performance of fruit and vegetable processing units in
co-operative and private sector in Uttar Kannada district found that the private sector
processing unit procured fruits and vegetables to the tune of 187.098 metric tonnes values at
Rs. 8.37 lakhs. The procurement of fruits and vegetables by the co-operative sector unit was
161 metric tonnes valued at Rs. 6.22 lakhs. Fresh fruits and vegetables constituted 87.58 per
cent of quantity while semi-processed fruits and vegetables accounted for 12.42 per cent of
the total raw material purchased.
         Veena and Tajinder (2000) has studied performance analysis of Bhogpur and
Jargoan sugar mills in Punjab. The procurement pattern of these two sugar mills, the Jargoan
mill crushed 2238.67 thousand tonnes of sugarcane and produced 191.93 thousand tonnes of
sugar. Thus, the quantity of cane crushed and production of sugar were higher for Jargoan
mill compared to the Bhogpur sugar mill. The quantity of cane crushed and the quantum of
sugar production was higher by the Jargoan mill by 38 and 35 per cent, respectively. The
percentage recovery of sugar for Jargoan mill was 8.38 being lower compared with 8.57 for
the Bhogpur sugar mill.
        Lindgreen and Hingley (2003) discussed the measures taken by Tesco Food
Company in setting up effective guidelines for managing its relationships with neat suppliers.
These guidelines make it possible for serious food scares and to address consumers concern
over animal welfare and environmental issues. Specific initiatives include different animals,
feeds and medicinal policies and schemes have been implemented by both Tesco and the
meat suppliers. The benefits of Tesco’s approach to its suppliers and consumers are
considered and included the ability to deliver higher value products.
         Narayana Reddy (2004) in his study reported that most (61%) of the retailers get their
requirements from wholesalers, 15 per cent from the large and other retailers. Over 17 per
cent of the selected retailers get their goods from more than one source, but a small
percentage of retailers get some of their requirements from producers. From the side of the
terms of supply 67 per cent of retailers get their requirements by paying cash. Only 13 per
cent of the retailers get their requirements on credit and 19 per cent get credit partly from the
suppliers. Apart from this, the study also shows that the organized retailers/hyper malls and
super marketers get wholesales’ margin plus concession as they buy in bulk and are also the
producers.

2.2                        DEMAND MANAGEMENT AND PRODUCT
MANAGEMENT
         Blayney and Weimar (1991) analysed four general alternatives to the current US
dairy programme, each with the objectives of avoiding large milk surpluses were studied by
USDA. These were: (1) a target price/deficiency payment programme; (2) a reclassification
plan, commonly called the Class IV plan; (3) two-tier pricing; and (4) milk marketing diversion.
Using a rating system to evaluate each proposed programme's effect on production, use,
prices, farm receipts, retail value, and government cost, it was concluded that the current
programme measured up well against the options studied. Although the current programme
did not guarantee producers a profit, it provided the market signals individuals need to make
decisions and acted as a price floor to stabilize downswings in prices.
         McCool (1996) study described the challenges that make inventory management a
problematic issue for in-flight caterers' financial management practices. In-flight kitchens are a
logistics operation, and effective inventory management and detailed product usage controls
were essential for overall cost control. They were most efficiently operated as large
production food factories with assembly line production of passenger trays. The different
requirements of individual airlines, which may have an account with the caterer, add
considerably to the caterer's costs and must be reflected in the pricing offered to the airlines.
A pricing system was developed which eliminates product food cost as the basis of pricing
and which places new emphasis on actual labour requirements to produce, package, store,
and distribute the products and menu items selected by each airline.
        Chandrashekaran (1999) in his estimation of storage costs for a multi crores, multi
product and multi-location firm found that there existed three different systems of storage
namely company owned, company leased and dealer owned ware-housing facilities. Of these
three different facilities, he found that dealer owned system to be the cheapest and the
company owned system to be the costliest facility.
        Ashraf (2000) in his study on business performance of co-operative oil mills observed
that the interest on capital locked in carrying the inventory, store maintenance and storage
costs and material losses were the major components in the overall cost of the inventory
management for both large and medium scale units.
         Lichtenberg and Zilberman (2000) developed a model to examine storage technology
choices in the inventory management of commodities that are relatively highly perishables,
and their impacts on resource allocation, prices, the environment, and the economic welfare
of consumers or producers. The model was used to derive the socially optimal level of
spoilage reducing input use and to examine the effects of alternative policies for addressing
environmental damage on supply, market equilibrium and consumer and producer incomes. It
was shown that storage technology choices affect total output as well as the temporal
distribution of supply, consumption, and prices.
         Vickener et al. (2002) found that investment in supply chain management technology
in US food industry was extensive, particularly so in the restaurant or food–away-from–home
(FAFH) sub sector. From 1980 to 1995, inventory turns in the restaurant sub sector have
effectively doubled, increasing from 26 to 51. This means FAFH inventories were entirely
replenished once a week, down from the 14 days supply maintained two decades ago. Over
the same period, total market capitalization grew at a compounded annual growth rate of 17
per cent from $ 5 to $53 billion. Based on the co-integration model estimated, they found that
for every one unit increase in inventory turnover, market capitalization increased by $479
million in the FAFH industry over the analysis period. Thus, the equity capital market places a
premium on the efficient management of inventories in the food system and rewards those
firms that develop, adopt and implement supply chain technologies.
         Farsad and LeBruto (2003) reported that the consequences of overstocking items or
understocking were undesirable. Overstocks absorb money and invite waste. Understocks
risk disappointing customers with unavailable menu items or add to food costs by requiring
emergency runs to the cash and carry. Through analysis of daily item use and an application
of risk, managers could calculate when to reorder; that is, when there is sufficient stock to
cover typical demand until the next delivery. To account for unexpected demand, some safety
stock must be included (by calculating the standard deviation of each day's use for the past
time period, say, a week, and factoring that with the Z score of the service-level probability
that management is willing to absorb). By factoring the lead time (delivery and food-prep), the
standard deviation of the usage, and the acceptable probability of a stockout, managers can
use a formula to determine precisely when to reorder.
         Nein and Roan (2004) reported that as computers are more and more widely used in
livestock production and farmers manufacturing their own feeds were growing more popular in
Taiwan. This study was conducted to design a package which included simple feed
formulation and ingredient inventory management to meet the farmers' needs, and to provide
them with a more effective management regime of the feed ingredients. This system was
written in Microsoft Visual Basic 6.0 programming language and Microsoft Access database.
The system was divided into four modules in terms of inputting basic data, formulation
calculation, inventory management, and printing report. The inventory management system
could facilitate the managers in monitoring the inventory to make the most effective
adjustment and usage of the ingredients. The managers could, therefore, load their
ingredients at the right time to avoid wastage and to reduce their ingredient costs. This
system could be executed on Windows operation system and enable the farmers to consider
their livestock growth condition to make it as a calculation tool to formulate animal feeds
rapidly.

2.3      VALUE ADDITION
         Subramanyam and Sudha (1992) worked out the costs and returns associated with
processing one tonne of finished product of tomato (ketchup), it was observed that the benefit
cost ratio was around 2.00 showing that processing was profitable. Raw material and packing
are the two major items accounting for 67 per cent of the total variable cost of processing,
which was Rs. 93.76 per tonne of raw material (fresh tomatoes) was needed for producing
32.42 tonnes of finished product.
        Singh et al. (1994) in a study on economics of marketing and processing of pulses in
Banda district (Uttar Pradesh) observed that per quintal cost of processing of arhar, gram,
and lentil was Rs. 831.67, Rs. 823.47 and Rs. 752.05, respectively.
         Maurya et al. (1995) in their study on marketing of anola and its products in Varanasi
district indicated that, the per quintal processing cost of morabba, pickle and chutney
amounted to Rs. 2198.80, Rs. 1750.40 and Rs. 3233.80, respectively. The highest processing
cost was for anola chutney and the lowest for anola pickle.Katz and Boland (2000) study
revealed that US premium Beef Ltd, a Cooperative partnership between all segments of the
beef industry value chain was affording each segment on interest in the key stages of beef
production and processing, as well as equal share of the financial risks and rewards. This
value added strategy was accomplished through vertical integration and adding a quality-
based pricing structure to more closely link beef producers and consumers.
        Srinivas et al. (1996) in their study on the economics of processing of cashewnut in
Andhra Pradesh, indicated that the processors have to bear the processing cost of Rs. 124.22
per 80 kg of raw nuts. Out of the total cost, Rs. 50.77 was raw material cost, which formed
40.89 per cent and labour cost was Rs. 72.81 which accounted for Rs. 58.61 per cent of total
processing cost.
        Mahesh and Nagaraja (2002) reported that the value addition of cashew (Anacardium
occidentale) kernel baby bits (CKBB) was attempted by coating with cane sugar, honey and
salt. Optimum coating occurs at 100 degrees C for 5 min at 70 per cent concentration for
cane sugar and honey, and 5 per cent for salt. Sweetened (70%) and vanillin (0.1%) flavoured
CKBB are the most preferred. De-fatting of CKBB enhances the per cent coating. Coating of
cashew kernels of different grades with cane sugar at 70 per cent is dependent on the surface
area. Cashew apple juice could be coated on the CKBB. Acceptability of cashew apple juice
coated baby bits (BB) improves with the addition of cane sugar at 70 per cent concentration.
Permitted colours and cane sugar compete with each other during coating.
        Madhuri and Kamini (2003) found that in watermelon, the rind constituted 33 per cent
of the whole fruit weight. Value added preserved products like pickles, tutti fruity, vadiyams
and cheese were prepared using the white portion of watermelon rind. The quality of products
in terms of physical parameters was evaluated. All products were subjected to sensory
evaluation test using a panel of 20 judges. Results showed that mean sensory scores for
product attributes were high. There was no change in mean scores after one month storage.


        Santhosh et al. (2003) in examined the Indian research efforts in vegetable crops,
new niches for vegetable production, and the impact of pest management research. It was
indicated that the ongoing research programmes on vegetables addressing many emerging
challenges, there is a wide scope for innovative improvements and a sharper focus on
vegetable processing, value addition and quality control.
        Subasinghe (2003) studied the different innovations used by food processors to add
value to aquaculture products such as shrimps, in order to survive in a highly competitive
market environment. Some of these innovations were focused on the packaging and
presentation of the shrimps, whereas others focused on pre-processing/processing, such as
peeling, preparation of breaded products, application of batters, and production of other
shrimp-based products.
          Arora et al. (2004) found that vegetable washing is an important primary process unit
operation for value addition of the produce at farm level. Washing is used not only to remove
field soil, dust, pesticides, but also the surface microbial load. Carrots, potatoes and spinach
were washed mechanically in a rotary vegetable washing machine at varying speed and time
and then evaluated for their quality. The microbiological washing efficiency, which is
calculated by observing the total viable count of the surface of the vegetables before and after
washing ranged between 96.5-99.8 per cent as compared to recommended 80 per cent
indicating the adequacy of the vegetable washing machine.
        Kaveri and Bindhu (2004) showed the effect of substituting 50% of the pulse fraction
of 10 Indian recipes (adai, pessarattu, plain dosai, masal vadai, seeyam, mysore bonda,
kandharappam, dhokla, maladu and moong dhal halwa) with whole or defatted soyabean flour
on quality and nutritive value. The results showed that all recipes substituted with whole
soyabean flour had higher carbohydrate and calorie contents than traditional and defatted
soyabean flour-substituted recipes. Calcium, phosphorus, iron and protein contents were
higher in substituted than traditional recipes. The flavour, taste and degree of liking of whole
soyabean flour-substituted and traditional recipes were almost similar. It was concluded that
whole soyabean flour could be included in the daily diet by incorporating in recipes at 50%
level.
         Ramakrishnaiah et al. (2004) attempted to study the technology package developed
to retrieve the cotyledon material from the dhal mill by-products containing about 50 per cent
cotyledon material amounting to one million tonne and also refining the same to an
acceptable/desired level. The technology consists of de-stoning, size separation, and air
classification followed by refining and thermal stabilization of edible material. About 30-35 per
cent of the cotyledon material was recovered from the by-products from the commercial dhal
mills and used in the preparation of traditional pulse based products. It could be substituted in
pulse-based products such as vada, rasam/sambar and papads upto about 50 per cent.
Adoption of this technology by dhal millers in the country would result in the recovery of about
5 lakh tonnes of cotyledon material valued at Rs. 500, which could contribute to the economic
upliftment of the industry.

2.4        SALES MANAGEMENT
         Dalvi et al. (1989) in their study on economics of processing cashewnut in
Singhadurg district of Maharashtra found that the total marketing cost per tin was   Rs.
44.05, the commission charges (50%), tax and octri (51.33%), transportation (10.53%) and
handling costs (2.67%) were the important cost components.
        Premkumari (1992) studied the distribution of milk and milk products of Shimla milk
plant and reported that supply of milk in the suitable channel and with a good container was
very complex and expensive matter in existing situation of dairying.
         Venkateshaiah (1992) while studying groundnut processing by different categories of
traditional oil mills in Cuddapha district of Andhra Pradesh noticed three main channels. All
the three channels were used for marketing oil while only last two were used for marketing of
oil caters. These channels are;
        Channel-I           Producer – Wholesaler – Retailer – Consumer
        Channel-II          Producer – Retailer – Consumer
        Channel-III         Producer – Consumer
       Chahal and Gill (1993) identified six channels of milk marketing in Punjab of which
one channel was through milk plant and in other channel many intermediaries were operating.
The authors concluded that producers share in consumer rupee depends upon length of
channel and number of intermediaries and form in which finally product sold to consumer.
They reported that co-operative channel had highest share of producer in consumer rupee
         Maurya et al. (1995) indicated that in marketing of anola products, highest percentage
of consumer’s rupee (62.25%) was the processing cost followed by the cost of kutch anola
(15.58%), retailers margin (10.87%), manufacturers margin (8.67%) and charges paid by
retailer 2.63 per cent.
        Malleswari (1996) reported that heavy promotion and distribution costs mark the
domestic retailing of processed mango. A can containing 850 g of pulp is sold at the retail
outlets at Rs. 45, whereas the processing cost is only Rs. 18 including the cost of packing.
The price spread between processor and consumer is therefore Rs. 27 per can. The retailer
buys from the distributor at Rs. 38 per can. The spread is therefore the widest between the
processor and wholesale stockiest because branding, labeling, packing and sales promotion
are done at this stage.
         Rajesh and Joginder (1996) while studying the marketing pattern of processed fruits
and vegetable products observed that Processor – Wholesaler – Retailer – Consumer,
Processor – Retailer –Consumer and Processor – Consumer were the three main marketing
channels. They also noticed that in large-scale units all the three channels in medium sized
units, the second and third channels and the small-scale units used only the third channel.
Further, they also reported that large scale units marketed about 58 per cent and 6 per cent of
their produce through first, second and third channel, respectively. Similarly, the medium
scale units marketed about 70 and 30 per cent of their channel in case of small units, all the
products are marketed through third channel only.
        Ramandev (1998) in his study on processing of cashewnut in Uttar Kannada district
of Karnataka identified the following five main channels for marketing cashew kernels.
        Channel-I           Processor – Consumer
        Channel-II          Processor – Trader – Consumer
        Channel-III         Processor – Commission agent – Consumer
        Channel-IV          Processor – Exporter – Consumer
        Channel-V           Processor-cum-Exporter – Consumer
        Further, it could be observed that highest quantity of cashew kernels were marketed
through Channel-III (36.06%) and least was through Channel-IV (3.5%) sales. Further, it
could be noticed that sales tax and turnover tax, transportation and handling costs,
commission charges and export expenses were the major components of marketing cost.
Total marketing costs amounted to Rs. 89.41 per tin. The highest cost of marketing was
noticed in case of Channel-III (Rs. 155.19/tin) and the least was observed in case of Channel-
V (Rs. 70.33/tin).
       Shobha (1998) studied the performance evaluation of co-operative and private of fruit
and vegetable processing units at North Karnataka, she revealed that the marketing of
processed of two processing units, the following alternate channels were;
        Channel-I           Processor – Wholesaler – Retailers – Consumers
        Channel-II          Processor – Retailer – Consumer
        Channel-III         Processor – Consumer
        Channel-IV          Processor – Wholesaler – Caterer
        Channel-V           Processor – Caterer
        The private sector unit was marketing the produce through the two channels (IV and
V) by selling their produce to wholesaler on an average at Rs. 3171.002 (64%) per quintal
and at a price of Rs. 3360.63 per quintal (36%).
        Gajanana and Subrahmanyam (2001) studied the marketing and exports of lemon
grass oil from Kerala. Lemon grass oil was observed to be marketed mainly through two
channels as below.
        Channel-I           Producer – Co-operative society – Processor/Exporter
        Channel-II          Producer – Private traders – Processor/Exporter
        Between the two channels, nearly 78 per cent of growers (including 22% selling to co-
operative society also) sold 59 per cent of the oil to the private traders and 44 per cent of the
growers, sold 41 per cent of the oil to the co-operative society in Kavikadava village of Kerala
state.
         Sawant et al. (2001) studied marketing of mushroom, the system of assembling and
distribution dried mushrooms consisted of mushroom growers, commission agents and
consumers including hotels and big consumers. The commodity through two main channels
namely;
        Channel-I     Producer – Commission agent (farm gate) – Consumers
        Channel-II    Producer – Commission agent (market) – Consumers
         In Channel-II, the producer directly sold mushroom to the commission agents near
big city, with 77.3 per cent while in case Channel-I, the commission agent purchased
mushroom from producer at their farm gate with 22.70 per cent.

2.5       PROBLEMS FACED BY THE PROCESSING UNITS
        Nagesh (1990) found that major problems faced by the groundnut processors in
Karnataka were high competition among the existing processors, short supply of raw
materials, frequent price fluctuations, non-availability of skilled labour and high taxes are the
few major problems experienced by the processing units.
         Venkateshaiah (1992) in his study on groundnut processing units in Andhra Pradesh,
has identified that stiff competition among the processors for getting the required raw
material, frequent power shedding, high taxation, low product recovery and non-adoption of
efficient technology, at an affordable costs as the major problems associated with the
groundnut processing.
         Mangala (1995) while studying the strategies for effective management of sugar
factories in India found that lack of quality raw material, efficient technology and professionally
trained management personnel at different levels of organizational structure as the main
problems and similarly pointed to the firm’s external problems such as governments pricing
policies.
        Rachhpal and Darshan (1996) in their study performance of agro-processing units in
Punjab revealed that failure of these industries on the market front in terms of brand is the
major problem. Further, he opined that any such failure ultimately put a question mark on the
very survival of the industry or unit under consideration.
        Brahmaprakash and Dinesh (1997) in their study on infrastructural requirements for
establishment of development and operation of agro-processed industries in rural areas
opined that lack of market information systems, timely and adequate financial support and
post-harvest technology as the major problems to realize the rural projects in India.
        Roy (1997) opined that lower capacity utilization of the agro-based industries was
reasoned by lack of infrastructural facilities such as lack of transportation, storage and
technology for post-harvest handling. He also opined that the lack of integrated network
between the producer, farmer and the processor as indirect problem of agro-based industries.
        Ramandev (1998) in his study on business performance analysis and appraisal of the
cashew nut processing units in Uttar Kannada district of Karnataka has identified that high
taxation, short supply of raw materials, unfavourable government policies and marketing
system were major problems as conceived by the industry.
        Shobha (1998) studied on performance evaluation of private and co-operative
processing units of fruit and vegetable processing units at North Karnataka. The prevalence
of problems in the co-operative sector processing unit was inadequate availability of raw
material in terms of quality and quantity, lack of power supply and also problem in lack of
modernization of machinery. Inadequate transport facility and high flight charges. Private
sector short supply of power, high taxation is major constitute in private sector.
        Saravanan et al. (2002) reported that the constraints of cashew nut processing units
in Tamil Nadu. Constraints reported by the processors, are high wage rate, exporters by most
of the processors (86.67%) in Kanyakumari district more than 80 per cent of processors felt
that the declining trend in imports and inadequacy in supply of raw materials from domestic
market were major constitute for them. High purchase tax for raw nut at 8 per cent purchased
in domestic market and increasing competition from other countries in processing were the
constraints faced by more than 60 per cent of the respondents, other problems are were
frequent power cuts during the processing period and wide fluctuation in the prices of cashew
kernel.
                                3. METHODOLOGY
        This chapter deals with the methodology followed in the present study, which includes
the selection of the processing units and their description, sources of data and analytical
techniques adopted. The details are presented under the following headings.
        3.1    Brief description of the selected milk processing units
        3.2    Selection of the processing units
        3.3    Method of analysis
        3.4    Concepts and terms referred in the study
        3.5    Processing of milk into pasteurized milk and milk products

3.1     BRIEF DESCRIPTION                        OF       THE        SELECTED              MILK
        PROCESSING UNITS
        The overall objective of the study was to examine the supply chain management in
milk processing units. For the purpose of the study the milk processing sectors were
considered. Eight milk processing units representing one from the co-operative sector, two
from private large scale and five from private small scale sectors have been chosen for the
study. The Dharwad Milk Union (DMU) processing unit under co-operative sector, Sri Krishna
milks Pvt. Ltd. and Vijaykant milk and food products Pvt. Ltd., under private large scale sector
and Shankar milk centre, Ram Rahim milk centre, Al-Rehman (mote) milk centre, Waghmode
and Mullannanavar milk centre under private small scale sector were selected. The sampling
design is represented in Fig. 1.
         Milk processing units are extensively established in and around Dharwad and Hubli.
Being called as educational cities there is a huge demand for milk and its products and it
offers a ready market for processed milk products. A brief description of the selected units is
presented below.
3.1.1    Dharwad Milk Union Co-operative Limited
        Dharwad Milk Union (DMU) processing unit is a part of Operation Flood Project of
NDDB. This is a Government of Karnataka undertaking and an active constituent of
Karnataka milk federation (KMF). The unit was established in 1984 at Lakamanahalli, at a
project cost of Rs. 3 crores which includes capital expenditure on building and machinery.
The processing unit is under the active control of Managing Director. Under Managing
Director, there are four managers, one each for procurement, processing, marketing and
accounts. The main objectives of the unit is to help farmers in realizing better prices by
procuring milk and produce value added products.
        The unit is well equipped with the latest indigenous machinery. The average
procurement of milk by the unit is 249.30 lakh litres per year. Various processed products like
butter, ghee, milk powder, curd, lassi, khowa, paneer, pedha etc. are produced and sold
under the brand name of “Nandini”.
3.1.2 Sri Krishna milks private limited
         Sri Krishna milks is a private limited company. The unit was established in the year
1989 near Kiravatti village, Yellapur Tq of Uttar Kannada district. Sri Krishna milks was
installed with a project cost of Rs. 7 crores that includes capital expenditure on building, plant,
machinery and equipments.
         The processing unit is under the control of Managing Director, who controls
procurement, processing, marketing and accounting. Under Managing Director, there are two
general managers, one for administration and one for accounts. The main objective of the unit
is to procure milk and process the same into value added output. All the machines purchased
are based on the latest technology.
       The average milk procured by the unit is to the tune of 161.15 lakh litres per year.
The unit has occupied a greater market share in liquid milk and its byproducts, which are
produced by the unit. The unit sells liquid milk under the brand name ‘Sri Krishna & Nature
                                   Fig. 1. Sampling design


Rich’ and products like butter, ghee, curd, lassi, khowa, paneer, pedha are processed and
sold under the brand name ‘Sri Krishna’.
3.1.3 Vijaykant milk and food products private limited
        Vijaykant milk and food product is a private limited company. The unit was
established in the year 2006 with an investment of Rs. 8.50 crores near Neginhal of
Bailhongal taluk, Belgaum district.
        The processing unit is under the control of Managing Director. Under Managing
Director, there is one general manager who takes care of procurement, processing, marketing
and accounting. Since the unit was recently established it has not been utilized to the full
capacity possible. Though the unit was recently established it has acquired a greater market
share in terms of liquid milk, under the brand name “Aditya”.
3.1.4 Shankar Milk Centre
         Shankar milk centre is a solely owned small scale private unit established in the year
1999, with a project cost of Rs. 4 lakh on Haliyal road, Dharwad. Average milk procured by
the unit is to the tune of 900- 1500 lts per day. Unit has earned a good name for its products
like ghee and butter.
3.1.5 Ram Rahim Milk Centre
         Ram Rahim Milk Centre is a solely owned small scale private unit established in the
year 1987, with an investment of Rs. 2.28 lakh near Malmaddi, Dharwad. Average milk
procured by the unit is to the tune of 900- 1500 lts per day. Unit has earned a good name for
its products like ghee, lassi and butter.
3.1.6 Al-Rehman (mote) Milk Centre
       Al-Rehman Milk Centre is a solely owned small scale private unit established in the
year 1996, with an investment of Rs. 4.68 lakh near bus depot, Dharwad. Average milk
procured by the unit is to the tune of 800- 1000 lts per day. Unit sells liquid milk and milk
products like cream, khova, etc.
3.1.7 Waghmode Milk Centre
         Waghmode Milk Centre is a solely owned small scale private unit established in the
year 1995, with an investment of Rs. 5.73 lakh near C.B.T, Hubli. Average milk procured by
the unit is to the tune of 500- 650 lts per day. Unit has earned a good name for its products
like lassi, curd and liquid milk.
3.1.8 Mullannanavar Milk Centre
         Mullananavar Milk Centre is a solely owned small scale private unit established in the
year 1982, with an investment of Rs. 1.28 lakh near Gouli galli, Hubli. Average milk procured
by the unit is to the tune of 500- 600 lts per day. Unit has earned a good name for its products
like lassi, curd and liquid milk.

3.2     SELECTION OF THE PROCESSING UNITS
         The present study was undertaken in Dharwad milk union jurisdictions and data were
collected mainly from the dairy processing units during 2007. The data relating to the
procurement of milk for the year 2007 were drawn from the ledger account and purchase
books of respective units. Figures pertaining to the costs and margins have been taken from
the profit and loss accounts and the balance sheets in the case of both the private sector and
co-operative sector units. Relevant data pertaining to the organizational, business and
financial aspects of the unit for the study period were collected from the balance sheet and
profit and loss accounts. The data relating to the pattern of investment was worked out from
the management records. The processing techniques and marketing channels adopted by the
processing units to sell their product was studied from the management records and dispatch
registers.

3.3     METHOD OF ANALYSIS
3.3.1 Procurement pattern
          A detailed information regarding the quantity of milk procured, procurement price of
milk, value of milk procured, transportation cost involved, wastage value and seasonal
fluctuation in milk procurement were gathered from the ledger accounts and purchase books
of respective units. Simple tabular analysis was done to study and compare the purchase
pattern followed by the processing units by employing elementary statistical tools like
averages, percentages etc.
3.3.2 Demand pattern
        Detailed information regarding the quantity of milk processed, processed milk
products demand and fluctuation in milk products demand was gathered from the ledger
accounts and sales register of respective processing units. Simple tabular analysis was used
to study and compare the variations in demand and processing in the processing units by
adopting simple statistical tools like percentages, ratios and averages.
3.3.3 Cost analysis
         The processing cost of the finished products of the eight selected units were analyzed
by simple tabular analysis. The cost of processing of all the products was considered together
instead of individually. The data on processing costs, product mix and product price and
quantity of finished products were obtained for the year 2007 from the balance sheet and the
profit and loss account and through discussion with the head of processing section of the
processing units. In addition to the above mentioned data, the information on installed
capacity and its utilization was also gathered. The cost of processing was broadly categorized
into two groups.
        a. Fixed costs
        b. Variable costs
3.3.3.1 Fixed cost
         The items included under fixed costs are depreciation on machinery and equipments,
buildings, furnitures and fixtures and vehicles; rent, interest rates and taxes; salaries for
permanent employees; repairs , maintenance and insurance.
i. Depreciation charges
        Depreciation at a flat rate of 12 percent per annum on machineries and equipments,
buildings, furniture and fixtures and vehicles were calculated based on the information
available from the management records.
ii. Rents, interest rates and taxes
        The amount paid as rent for hired assets, interest rates paid on loans, all other taxes
except excise duty paid by the processing units were considered as rent rates and taxes.
iii. Salaries
         The wages paid to the permanent staff of the factory as salaries were considered
here. In addition, bonus and provident fund contribution to the staff were also included.
iv. Repairs and maintenance
        All costs incurred in the upkeep of factory, machinery and buildings along with the
repair charges were included under this head.
v. Insurance charges
         The amount paid for insurance premium was considered as insurance charges.
3.3.3.2 Variable costs
       Variable costs include, cost of raw material (milk), sugar, packaging costs, wages for
casual workers, power and fuel and water charges, advertisement and miscellaneous
expenses.
i. Raw material costs (milk)
         The price paid by the unit, as value of milk purchased, formed the raw material costs.
It was the total value of milk utilized in producing processed milk products.
ii. Sugar
        This cost included the price paid to purchase sugar. It is the value of sugar utilized in
producing processed milk products.
iii. Packaging costs
        This included the costs towards packaging materials like sachets, pouches, bottles,
cans, carton boxes, closures and labels which were used to pack the processed milk and milk
products.
iv. Wages
          It included the wages paid to the labourers who were directly involved in processing
activities.
v. Advertisement expenses
        Expenses incurred on popularizing the brands of the company were considered as
advertisement charges.
vi. Power and fuel
        Electricity charges, expenses incurred on furnace oil, petrol/diesel charges for the
vehicles and generators were included as power and fuel charges.
vii. Miscellaneous expenses
       The expenses due to the use of colours, essence, stationary articles, travelling,
postage service and audit fee were included under this head.
3.3.4 Pattern of marketing
        The marketing channels adopted by the processing units for distribution of processed
milk and milk products from different processing units were studied.
3.3.5    SWOT Analysis
       SWOT analysis was carried out to evaluate the strengths, weaknesses, opportunities,
and threats involved in the processing units. It involves specifying the objective of the
business venture or project and identifying the internal and external factors that are favorable
and unfavorable to achieving that objective.

3.4     CONCEPTS AND TERMS REFERRED IN THE STUDY
        The following are the terms and concepts referred in the study.
3.4.1    Procurement related terms
i) Flush season
        It is defined as the period of six months between September to February during which
quantity of milk procured is more than average procurement for the year. During this period,
the procurement is high and more milk is diverted for preparation of milk products.
ii) Lean season
        The period between March to August is referred to as the lean season, during which
the quantity of milk procured will be less than average for the year. During this period, supply
remain less than demand, therefore, the milk powder is reconstituted into milk to cater to the
demand of liquid milk.
iii) Procurement promotional activities
        Various activities carried out by union for increasing milk procurement are referred to
as the procurement promotional activities. The activities include conducting programmes on
dairy development for the benefit of milk producers, to educate them to improve the
production and quality of milk and advantage of supplying milk to the collection centers.
iv) Procurement transportation cost
        Cost incurred in procuring the milk from collection centers or chilling centers is
referred to as procurement transportation cost. It is the charge paid to the transport
contractor. The fixation of rate to the contractor is based on the distance and condition of the
road. The units cost is calculated by dividing the total cost of the route by the quantity
procured.
3.4.2    Processing related terms
i) Cost of milk processing
         The cost of processing of milk is calculated by covering all dairy expenses and other
costs which are considered as the overheads. Cost of processing per unit is obtained by
dividing the total cost by quantity of milk processed.
ii) Processing of milk
        Processing does not mean only change in the form of milk, but also a heat treatment
followed by cooling to increase the self-life of milk. In other words, processing refers to
conversion of raw milk into pasteurized milk and milk products.
iii) Product mix
        It refers to the combination of different products being manufactured by the units. The
product mix of the union includes milk, ghee, pedha, butter, lassi etc.
3.4.3     Marketing related terms
i) Channels of distribution
       It is defined as the pathway which directs the flow of milk and its products from
manufacturer to the ultimate consumers.
ii) Commission agent
        It refers to those functionaries who sell the milk and milk products of the union or
units on commission basis.
iii) Distribution cost
        The cost incurred in distributing milk from the plant to the commission agent. The
transportation cost per litre is calculated by dividing the total charges paid to contractor by the
quantity of milk distributed.
iv) Marketing
       Marketing is defined as the total system which includes four Ps viz., product, price,
promotion and place (distribution). The term distribution is a part of marketing and an
important aspect of marketing.
v) Promotional techniques
        It is defined as short-term incentive to encourage the consumer to purchase the
product. It includes advertising, personal selling, publicity and sales promotion.

3.5      PROCESSING OF MILK INTO PASTEURIZED MILK AND
         MILK PRODUCTS
3.5.1 Pasteurized milk
         The milk received from different places is first weighed and then chilled. After chilling,
the milk will be sent to cream separator, the cream and skim milk is obtained. The skimmed
milk powder is then mixed with whole milk in order to obtain a desired level of fat and SNF.
Then homogenization is done to equalize distribution of SNF and fat in complete batch of
                                               0                                                0
milk. Followed by pasteurization, heating at 72 C for 15 seconds then chilling to less than 5 C
is carried out. The chilled milk is then packed in half litre and one litre sachets. The packed
milk is stored at cold storage at temperature 5°C. The Fig. 3.6 depicts the flow chart for
processing the milk into milk and milk products.
3.5.2     Ghee manufacturing
         The cream obtained is fed to butter churner, the butter and ghee is obtained. The
butter is first melted at 35° to 40°C and then boiled to 115° to 120°C to obtain ghee. This is
allowed to settle for approximately 12 hours then ghee is clarified to separate minute particles
of ghee residue. The ghee is then packed in sachets of 200 g and 300 g and stored at room
temperature.
3.5.3 Pedha manufacturing
         The whole milk is mixed with sugar at the rate of 7 per cent of milk and heated
continuously for 4 to 6 hours with vigorous stirring. The solid mass is formed which is allowed
to cool to room temperature, then it is moulded into pedha of approximately 50 grams each.
The pedha are packed in two sized carton boxes weighing 250 grams and 500 grams.
3.5.4     Curd preparation
         The whole milk after pasteurization and cooling added with 1 per cent culture
(previous day’s curd) is packed in sachets and allowed to settle. If lactic acid is 0.6 per cent
then it is sweet curd and if lactic acid is 1.0 per cent then it is sour curd. The sachets are
stored at room temperature.
3.5.6    Lassi preparation
         Lassi is prepared from curd by adding water to get desired acidity based on sourness,
curd and consistency. Sugar is added (15 – 20%) and stirred well so as to mix uniformly. The
lassi thus prepared is packed in sachets of 200, 250 and 300 ml and stored.
                                     4. RESULTS
        The overall objective of the study was to evaluate the performance of milk processing
units in co-operative and private sectors. In this chapter, the results of the study are
presented under the following heads.
        4.1     Procurement management in processing units
        4.2     Demand and product management in processing units
        4.3     Value addition in the selected units
        4.4     Sales management in selected units
        4.5     Problems faced by the processing units

4.1 PROCUREMENT MANAGEMENT IN PROCESSING
UNITS
        Success of milk processing units largely depends upon the procurement of raw milk.
The raw milk forms an important input in milk processing units. The processing units procure
raw milk covering more than three districts. Procurement management has become the main
stay of the performance of processing units. In this context, a study on the procurement
management of processing could focus on its management performance.
4.1.1 Quantity of milk procured and cost involved in procurement of milk by
      the co-operative unit during 2007
        Table 4.1 shows the average monthly quantity of milk procured and cost involved in
procurement of milk by co-operative unit. The co-operative unit, on an average, procured
20.77 lakh litres of raw milk per month at a price of Rs. 11.65 per litre of the value Rs. 242.44
lakhs along with transportation and handling cost of Rs. 15.28 lakh. The wastage value
accounted for Rs. 20000.00 per month and commission charge accounted for Rs. 7.26 lakhs.
The quantity of milk procured and the value of procured product was highest in the month of
November i.e., 25.48 lakh litres and Rs. 302.29 lakhs, respectively, followed by in December
and October months, whereas the price per litre was highest during March. Transportation
and handling cost and wastage value were highest in January and October, respectively. The
quantity procured and their values were the lowest in the month of June.
4.1.2 Quantity of milk procured and cost involved in procurement of milk by
      the private large scale sector during 2007
        Table 4.2 shows the average monthly quantity of milk procured and cost involved in
the procurement of milk by Private large scale units. The private large scale units on an
average procured 9.36 lakh litres of raw milk per month at a price of Rs. 13.08 per litre of the
value Rs. 119.87 lakhs along with transportation and handling cost of Rs. 15.08 lakh. The
wastage value accounted for Rs. 5000.00 per month and commission charge was to an
extent of Rs. 4.68 lakhs per month.
        The quantity of milk procured and the value of procured product was highest in the
month of December i.e., 10.69 lakh litres per month and Rs. 144.00 lakhs, respectively,
followed by November and October months and the price per litre was also highest in these
months. Transportation and handling cost and wastage value were the highest in the month of
December and April, respectively. The quantity procured and their values were the lowest in
the month of February.
4.1.3 Quantity of milk procured and cost involved in procurement of milk by
      the private small scale sector during 2007
        Table 4.3 shows the average monthly quantity of milk procured and cost involved in
the procurement of milk by Private small scale units. The private small scale units on an
average procured 0.30 lakh litres of raw milk per month at a price of Rs. 13.86 per litre of the
value Rs. 4.28 lakhs along with transportation and handling cost of Rs. 0.02 lakhs. The
Table 4.1: Quantity of milk procured and cost involved in procurement of milk by the co-operative unit during 2007

                                                                                  Transportation and
               Total quantity procured         Price           Total Value                                       Wastage value   Commission
    Month                                                                            handling cost
                       (lakh lit)             (Rs/lit)          (lakh Rs)                                            (Rs)         (lakh Rs)
                                                                                       (lakh Rs)
     Jan                 22.34                 11.94             266.84                  15.65                       15000.00       7.82

     Feb                19.74                  11.63             229.68                  15.11                       16000.00       6.91

     Mar                19.14                  11.99             229.52                  14.73                       20000.00       6.70
     Apr                17.83                  11.93             212.78                  15.23                       23000.00       6.24
     May                18.06                  11.85             214.06                  15.60                       12000.00       6.32

    June                17.21                  11.18             192.41                  15.02                       6000.00        6.02

     July               18.93                  11.23             212.67                  15.40                       14000.00       6.63
     Aug                20.02                  11.21             224.46                  15.38                       13000.00       7.01
     Sep                20.83                  11.16             232.55                  14.92                       33000.00       7.29

     Oct                24.45                  11.97             292.68                  15.53                       40000.00       8.56
     Nov                25.48                  11.86             302.29                  15.19                       38000.00       8.92
     Dec                25.21                  11.87             299.31                  15.56                       12000.00       8.83
   Average              20.77                  11.65             242.44                  15.28                       20000.00       7.26
Table 4.2: Quantity of milk procured and cost involved in procurement of milk by the private large scale sector during 2007


                 Total quantity procured                         Total Value           Transportation and           Wastage value
                                                                                          handling cost                             Commission
    Month                                    Price (Rs/lit)
                         (lakh lit)                               (lakh Rs)                                              (Rs)        (lakh Rs)
                                                                                            (lakh Rs)
     Jan                   8.71                 13.00              110.00                     15.06                    6000.00         4.36

     Feb                   7.65                 13.06              97.79                      14.46                    6000.00         3.83

     Mar                   8.50                 13.52              113.18                     15.10                    8000.00         4.25

     Apr                   8.10                 13.46              106.90                     13.79                    9000.00         4.05

     May                   8.53                 13.37              111.41                     14.50                    8000.00         4.27

     June                  9.74                 12.84              123.11                     15.88                    4000.00         4.87

     July                 10.10                 12.62              124.00                     15.22                    4000.00         5.05

     Aug                   9.60                 12.67              118.16                     15.30                    4000.00         4.80

     Sep                   9.73                 12.60              119.49                     15.33                    4000.00         4.87

     Oct                  10.43                 13.00              131.41                     14.76                    4000.00         5.22

     Nov                  10.56                 13.29              139.01                     15.36                    4000.00         5.28

     Dec                  10.69                 13.53              144.00                     16.19                    5000.00         5.35

   Average                 9.36                 13.08              119.87                     15.08                    5000.00         4.68
Table 4.3: Quantity of milk procured and cost involved in procurement of milk by the private small scale sector during 2007


                       Total quantity            Price          Total Value            Transportation and            Wastage value
                                                                                          handling cost                              Commission (lakh
    Month
                          (lakh lit)            (Rs/lit)          (lakh Rs)                                               ( Rs)           Rs)
                                                                                            (lakh Rs)
     Jan                    0.33                 14.55              4.83                       0.02                           300          0.33

     Feb                    0.29                 14.55              4.34                       0.01                           400          0.29

     Mar                    0.36                 14.55              5.37                       0.01                           400          0.36

     Apr                    0.36                 14.55              5.28                       0.01                           500          0.36

     May                    0.28                 14.55              4.21                       0.01                           500          0.28

     June                   0.23                 13.00              3.09                       0.02                           100          0.23

     July                   0.24                 13.00              3.13                       0.02                           100          0.24

     Aug                    0.24                 13.00              3.21                       0.02                           200          0.24

     Sep                    0.26                 13.00              3.42                       0.02                           100          0.26

     Oct                    0.35                 13.85              4.92                       0.03                           200          0.35

     Nov                    0.35                 13.85              4.92                       0.03                           200          0.35

     Dec                    0.33                 13.85              4.66                       0.02                           200          0.33

   Average                  0.30                 13.86              4.28                       0.02                           300          0.30
wastage value accounted for Rs. 300 per month and commission charge was to an extent of
Rs. 0.30 lakhs per month.
        The quantity procured and the value of procured product was highest in the months of
October and November i.e., 0.35 lakh litres and Rs. 4.92 lakhs, respectively followed by
December and January months. The price per litre was highest in the months ranging from
January to May. Transportation and handling cost and wastage value was highest in the
month of October, November and April, May respectively. The quantity procured and their
values were the lowest in the month of June.
4.1.4 Quantity and value of raw materials procured by co-operative and
      different private sector processing units during 2007
        The Table 4.4 depicts the average quantity and value of raw materials procured
annually by co-operative and different private sector processing units. The co-operative sector
unit procured highest raw materials as compared with private (large and small scale) units. Of
these, it procured sugar to the tune of 64.05 tonnes which was much higher than that
compared to the private large scale unit (18.20 tonnes) and private small scale unit (0.22
tonnes), respectively. Of all these raw materials, packing materials constituted the highest
cost component in all the units (ranging from 85-90 %), followed by sugar (4-6%) and other
raw materials (5-7%).
4.1.5 Seasonal fluctuations in milk procurement by co-operative and different
      private sector processing units during 2007
          The average procurement and wastage per day during the lean season and flush
season, the flush-lean ratio and cost of transportation and handling are given in Table 4.5 for
all the three sectors studied.
        The average procurement of milk during both flush and lean season was the highest
in co-operative unit, followed by large scale private and small scale private units, respectively
and so is the average procurement for the year. The flush-lean ratio was 1.24 in co-operative
sector, 1.06 in large scale private sector and 1.11 in small scale private sector. The average
procurement, transportation and handling cost during flush and lean season was much higher
in co-operative unit when compared with small scale private sector units. Since the
procurement was higher in co-operative unit, the wastage was also high in co-operative unit.

4.2       DEMAND AND PRODUCT MANAGEMENT IN
PROCESSING UNITS
4.2.1 Output and capacity utilization by the co-operative processing unit
          Table 4.6 and Fig. 2 reveals the output and capacity utilization by the co-operative
processing unit. Capacity utilization is one of the important indicators of operational efficiency
of a processing plant. It is generally recognized that a high level of capacity utilization is
imperative for reducing the overhead costs of production. It could be observed from the table
that, both installed capacity and quantity processed was the highest in the case of milk with
19284.72 tonnes of processing against 20000.00 tonnes of installed capacity, with a capacity
utilization of 96.42 per cent. Khowa was the product of co-operative processing unit which
had least installed capacity (2.25 tonnes/year) and quantity processed (2.01 tonnes/year).
          In terms of capacity utilization, the co-operative unit has achieved maximum capacity
utilization in lassi and MBM with a value of 99.88 per cent each. The overall capacity
utilization in co-operative is 95.39 per cent of its installed capacity.
4.2.2 Output and capacity utilization by the private large scale processing
      units
        The average output and capacity utilization by the large scale private processing units
are presented in the table 4.7 and Fig. 2. It can be observed from the table that milk was
processed in highest quantity i.e., 9497.37 tonnes as against the installed capacity of
11000.00 tonnes with a capacity utilization of 84.34 per cent. The next important product
processed was curd with installed capacity of 825 tonnes and utilized capacity of 746.77
tonnes. MBM and lassi were the next important products processed in terms of their installed
Table 4.4: Quantity and value of raw materials procured by co-operative and different private sector processing units during 2007


                                            Co-operative sector                   Private sector (large scale)              Private sector (small scale)


 Sl. No.      Raw materials
                                   Quantity                                    Quantity                                 Quantity
                                                Value (lakh                                Value (lakh                               Value (lakh
                                 (tonnes per                      Per cent   (tonnes per                  Per cent    (tonnes per                   Per cent
                                                   Rs)                                        Rs)                                       Rs)
                                    year)                                       year)                                    year)


                                    64.05          9.28            6.07        18.20          3.16          3.68         0.22           0.035         4.76
    1      Sugar


                                      -           132.06           86.34          -          77.94         90.73           -            1.240        88.76
    2      Packing material


           Other raw
                                    6.53          11.59            7.58         2.37          4.79          5.58         0.02           0.005         6.46
    3      materials
           (litres/year)


                                      -           152.94          100.00          -          85.89         100.00          -            1.28         100.00
             Total
Table 4.5: Seasonal fluctuations in milk procurement by co-operative and different private sector processing units during 2007


                                                                                                                 Private sector   Private sector (small
  Sl. No.                      Particulars                        Units           Co-operative sector
                                                                                                                 (large scale)           scale)

     1      Average procurement during flush season             liters/day             76718.08                    32114.61             1076.44

     2      Average procurement during lean season              liters/day             61786.40                    30327.68             968.96

     3      Average procurement for the year                    liters/day             69252.24                    31221.15             1022.70

     4      Flush-lean ratio                                      Ratio                   1.24                        1.06                1.11

            Average procurement, transportation and
     5                                                           Rs/day                51108.78                    50657.68              87.21
            handling cost during the flush season

            Average procurement, transportation and
     6                                                           Rs/day                50768.96                    49902.49              68.63
            handling cost during lean season

            Average procurement transportation cost
     7                                                           Rs/day                50938.87                    50280.09              77.92
            during the year

     8      Average wastage during flush season                 liters/day               74.29                       13.40                0.67

     9      Average wastage during lean season                  liters/day               43.63                       16.79                0.86

    10      Average wastage for the year                        liters/day               58.96                       15.09                0.76
* Flush season-September to February
* Lean season-March to August
Table 4.6: Output and capacity utilization by the co-operative processing unit


                        Annual         Annual
                                                      Installed       Quantity   Capacity
  Sl.                  installed      quantity
         Products                                     Capacity       Processed   Utilized
  No                   capacity      processed
                                                      (kg/day)        (kg/day)     (%)
                       (tonnes)       (tonnes)

   1    Milk           20000.00       19284.72        54794.52        52834.85    96.42

   2    Curd           3200.00         3169.85         8767.12         8684.53    99.06

   3    SMP             325.00         315.27          890.41          863.76     97.01

   4    Butter          250.00         234.08          684.93          641.30     93.63

   5    MBM             225.00         222.93          616.44          610.77     99.08

   6    Pedha           175.00         160.49          479.45          439.70     91.71

   7    Lassi           150.00         148.62          410.96          407.18     99.08

   8    Ghee            140.00         126.92          383.56          347.72     90.65

   9    Paneer           7.00           6.85            19.18           18.78     97.91

  10    Khowa            2.25           2.01             6.16            5.51     89.38

 Overall Capacity
                                                       95.39
    Utilized%
Fig. 2. Capacity utilization by the dairy processing units
Table 4.7: Output and capacity utilization by the private large scale processing units


                         Annual         Annual
                                                       Installed       Quantity      Capacity
 Sl.                    installed      quantity
         Products                                      Capacity       Processed      Utilized
 No.                    capacity      processed
                                                       (kg/day)        (kg/day)        (%)
                        (tonnes)       (tonnes)

   1    Milk           11000.00        9497.37        30136.99        26020.20           84.34

   2    Curd             825.00         746.77         2260.27         2045.93           90.52

   3    Butter           15.00          14.98           41.10           41.05            99.89

   4    MBM              407.50         405.00         1116.44         1109.59           99.39

   5    Pedha             1.00           0.78            2.74            2.13            77.80

   6    Lassi            400.00         366.07         1095.89         1002.93           91.52

   7    Ghee             200.00         176.57          547.95          483.76           88.29

   8    Paneer           22.00          20.07           60.27           54.99            91.24

   9    Khowa             4.00           3.49           10.96            9.57            87.30

        Mysore
  10                      2.00           1.57            5.48            4.30            78.55
        pak

  Overall Capacity
                                                       87.38
     Utilized%
Table 4.8: Output and capacity utilization by the private small scale processing units


                         Annual          Annual
                                                         Installed       Quantity        Capacity
  Sl.                   installed       quantity
         Products                                        Capacity       Processed        Utilized
  No                    capacity       processed
                                                         (kg/day)        (kg/day)          (%)
                        (tonnes)        (tonnes)

   1    Milk            198.00           179.94           542.47          492.98          90.88

   2    Curd             19.30           18.18             52.88           49.82          94.22

   3    Butter            3.70            3.35             10.14            9.19          90.65

   4    MBM               1.06            0.92             2.91             2.51          84.24

   5    Lassi             2.25            2.00             6.16             5.48          88.87

   6    Ghee              6.50            6.02             17.81           16.50          92.66

   7    Paneer            1.95            1.74             5.34             4.75          88.97

   8    Khowa             9.10            8.12             24.93           22.24          89.22

   9    Cream             2.00            1.74             5.48             4.77          87.00

  10    Shrikand          1.60            1.39             4.38             3.80          86.64

 Overall Capacity
                                                         89.58
    Utilized%
capacity. Pedha was the least important product in terms of installed capacity and utilized
capacity.
        In terms of capacity utilization, the product which stood at the top position was butter
with 99.89 per cent. The overall capacity utilized was 87.38 per cent.
4.2.3    Output and capacity utilization by the private small scale processing
        units
          The annual average output and the capacity utilization of the small scale private
sector processing units are presented in table 4.8 and Fig. 2. It can be observed from the
table that in small scale private sector units milk was processed in highest quantity at 179.94
tonnes as against the installed capacity of 198.00 tonnes with a capacity utilization of 90.88
per cent. Next important product processed by the small scale private sector units based on
their annual production were curd, khowa, ghee, butter and lassi with annual processing of
18.18, 6.02, 3.35 and 2.00 tonnes respectively. MBM was processed in least quantity. The
average capacity utilization was 89.58 per cent. Of all the products, the maximum capacity
utilization was seen in the case of curd processing i.e. (94.22%).
4.2.4    Cost of carrying inventory of finished products by the co-operative unit
        Cost of carrying inventory of finished products by co-operative sector processing unit
is presented in Table 4.9.
       Storage and maintenance cost and the interest on carrying inventory at 14 per cent
were the two items of cost in the case of carrying inventory of finished products. These cost
were calculated on per kg per day basis and expressed in terms of rupees.
        The cost of carrying inventory of finished products was maximum in case of paneer
(Rs.5.04/kg/day) followed by khowa (Rs.4.05/kg/day), SMP (Rs.0.21/kg/day), pedha
(Rs.0.20/kg/day) and butter (Rs.0.16/kg/day). The same was the lowest in curd
(Rs.0.02/kg/day).
        Among the products of co-operative sector ghee was stored for longer duration (45
days), followed by butter and SMP which were stored on an average for 30 days each. The
products like curd, MBM and lassi were stored only for one day. The interest on carrying
inventory ranged from Rs.0.01 to Rs.0.09 and highest was in the case of MBM.
4.2.5    Cost of carrying inventory of finished products by the private large
        scale units
        Cost of carrying inventory of finished products by large scale private processing units
is presented in Table 4.10.
        In large scale private sector units nine different products were produced and stored
on an average from one to sixty days. Ghee was the one which stored for long period (60
days) while butter and panner were stored on an average for 15 days each. Next to follow the
order were khowa (5 days), mysore pak (4days), pedha (3days), curd, MBM and lassi were
stored only for one day on an average. The total cost of carrying inventory of finished
products was maximum in pedha (Rs 8.23/kg/day), khowa (Rs 1.39/kg/day). All other
products had very less (less than one rupee/kg/day) cost on carrying inventory.
4.2.6    Cost of carrying inventory of finished products by the private small
        scale units
        Cost of carrying inventory of finished products by small scale private sector
processing unit is presented in Table 4.11.
         A cursory look at the table suggests that the small scale private processing units were
specialized in nine different products. The total cost of carrying inventory of finished products
was by and large very low in all the products compared to the other two sectors studied. The
maximum cost was in the case of panner (Rs 2.02/kg/day). In all other products the cost was
less than one rupee.
       Among the products, paneer was stored for longer duration (6 days), while butter and
khowa were stored for 5 days each on an average basis. It is really interesting to see that
Table 4.9: Cost of carrying inventory of finished products by the co-operative unit

                                                       Value of
                                                                                      Storage and
                                                      processed                                      Interest on carrying
                 Quantity Stored       Price                            No. of days   maintenance                            Total cost
   Products                                           and stored                                      inventory @ 14%
                    (kg/day)          (Rs/kg)                             stored          cost                              (Rs/ kg/day)
                                                       products                                          (Rs/ kg/day)
                                                                                      (Rs/ kg/day)
                                                         (Rs)

 Curd               4000.00             18.00           72000.00             1           0.01                0.01                0.02

 SMP                  500.00           140.91           70455.00            30           0.16                0.05                0.21

 Butter             1500.00            151.79          227685.00            30           0.10                0.06                0.16

 MBM                  250.00            15.00            3750.00             1           0.02                0.09                0.11

 Pedha                500.00           115.84           57920.00             7           0.16                0.04                0.20

 Lassi                500.00            25.00           12500.00             1           0.08                0.01                0.09

 Ghee               1200.00            177.27          212724.00            45           0.08                0.07                0.14

 Paneer                30.00           115.00            3450.00             2           5.00                0.04                5.04

 Khowa                 10.00           130.00            1300.00             2           4.00                0.05                4.05
Table 4.10: Cost of carrying inventory of finished products by the private large scale units


                                                           Value of                        Storage and         Interest
                      Quantity
                                         Price           processed         No. of days     maintenance       on carrying     Total cost
    Products           Stored
                                        (Rs/kg)          and stored          stored            cost       inventory @ 14%   (Rs/ kg/day)
                      (kg/day)
                                                        products (Rs)                      (Rs/ kg/day)      (Rs/kg/day)

 Curd                 5500.00            19.45           107000.00              1              0.01            0.01            0.02

 Butter               1000.00            125.00          125000.00             15              0.15            0.05            0.20

 MBM                   650.00            13.30             8650.00              1              0.10            0.01            0.11

 Pedha                  10.00            117.92            1179.20              3              8.19            0.05            8.23

 Lassi                 400.00            25.00            10000.00              1              0.10            0.01            0.11

 Ghee                 2000.00            165.00          330000.00             60              0.05            0.06            0.11

 Paneer                250.00            115.00           28750.00             15              0.61            0.04            0.65

 Khowa                  30.00            100.00            3000.00              5              1.35            0.04            1.39

 Mysorepak              25.00            150.00            3750.00              4              6.19            0.06            6.25
Table 4.11: Cost of carrying inventory of finished products by the private small scale units


                                                         Value of                          Storage and         Interest
                     Quantity            Price          processed         No. of days      maintenance        on carrying    Total cost
   Products           Stored
                                        (Rs/kg)         and stored          stored             cost       inventory @ 14%   (Rs/ kg/day)
                     (kg/day)
                                                       products (Rs)                       (Rs/ kg/day)      (Rs/ kg/day)

 Curd                 15.00             20.00             300.00               1               0.05            0.03            0.08

 Butter                5.00             160.00            800.00               5               0.03            0.06            0.09

 MBM                   2.00             15.00              30.00               1               0.04            0.02            0.06

 Lassi                 2.00             25.00              50.00               1               0.04            0.02            0.06

 Ghee                  5.00             210.00           1050.00               1               0.00            0.08            0.08

 Paneer                4.40             139.00            614.00               6               1.97            0.05            2.02

 Khowa                20.00             120.00           2400.00               5               0.02            0.05            0.07

 Cream                 2.00             135.00            270.00               1               0.05            0.03            0.08

 Shrikand              2.00             80.00             160.00               3               0.05            0.03            0.08
Table 4.12: Demand management of milk and milk products in different milk processing units

                                  Quantity   Processed    Quantity      Sold     Quantity    Quantity
Sl.
       Product        Unit       Processed      Value       Sold       Value      Excess      Deficit
No.
                                  (tonnes)    (lakh Rs)   (tonnes)   (lakh Rs)   (Tonnes)    (Tonnes)
 1    Milk       Co-operative     1607.06       231.18    1606.82      230.36     141.44      140.96
                 Private large
                                  791.45      122.88      787.37      122.19      68.54       86.18
                 scale units
                 Private small
                                   14.99       2.40        14.94       2.39        0.71        0.41
                 scale units
 2    Curd       Co-operative     264.15       47.55      261.71      47.11       24.70       19.81
                 Private large
                                   74.68       14.55       74.46      14.51        6.36        8.99
                 scale units
                 Private small
                                   1.52        0.30        1.51        0.30        0.06        0.04
                 scale units
 3    SMP        Co-operative      26.27       37.02       24.77      34.91        3.48        0.49
                 Private large
                 scale units         -           -           -           -          -           -
                 Private small
                 scale units         -           -           -          -            -           -
 4    Butter     Co-operative      19.51       29.61       18.80      28.54        2.37        0.96
                 Private large
                                   1.25        1.56        1.18        1.47        0.16        0.05
                 scale units
                 Private small
                                   0.28        0.42        0.28        0.42        0.01        0.01
                 scale units
 5    MBM        Co-operative      18.58       2.79        18.62       2.79        1.40        1.49
                 Private large
                                   54.00       8.08        56.28       8.42        3.49        8.89
                 scale units
                 Private small
                                   0.18        0.03        0.18        0.03        0.01        0.01
                 scale units
 6    Pedha      Co-operative      13.37       15.49       13.33      15.44        1.19        1.10
                 Private large
                                   0.10        0.11        0.09        0.11        0.01        0.01
                 scale units
                 Private small
                 scale units         -           -           -           -           -           -
 7    Lassi      Co-operative      12.39       3.10        12.42       3.10        0.93        1.00
                 Private large
                                   30.51       7.63        32.17       8.04        1.62        6.28
                 scale units
                 Private small
                                   0.40        0.10        0.40        0.10        0.02        0.02
                 scale units
 8    Ghee       Co-operative      10.58       18.75       10.20      18.08        1.17        0.42
                 Private large
                                   14.71       24.28       14.73      24.31        1.16        1.68
                 scale units
                 Private small
                                   0.50        1.05        0.50        1.05        0.02        0.01
                 scale units
Table 4.12: Contd…..

 Sl.     Product         Unit        Quantity    Processed    Quantity      Sold     Quantity    Quantity
 No.                                Processed       Value       Sold       Value      Excess      Deficit
                                     (tonnes)     (lakh Rs)   (tonnes)   (lakh Rs)   (Tonnes)    (Tonnes)
  9     Paneer      Co-operative       0.57          0.66       0.57        0.65       0.05        0.05
                    Private large
                                       1.67         1.92        1.69       1.94        0.11        0.19
                    scale units
                    Private small
                                       0.14         0.20        0.14       0.20        0.01        0.01
                    scale units
 10     Khowa       Co-operative       0.17         0.22        0.17       0.22        0.01        0.02
                    Private large
                                       0.29         0.29        0.29       0.29        0.02        0.04
                    scale units
                    Private small
                                       0.68         0.81        0.68       0.81        0.03        0.02
                    scale units
 11     Mysore      Co-operative        -            -           -           -           -           -
        pak         Private large
                                       0.31         0.47        0.29       0.43        0.03          -
                    scale units
                    Private small
                    scale units         -            -           -           -           -           -
 12     Cream       Co-operative        -            -           -           -           -           -
                    Private large
                    scale units         -            -           -           -           -           -
                    Private small
                                       0.15         0.20        0.15       0.20        0.01        0.01
                    scale units
 13     Shrikand    Co-operative        -            -           -           -           -           -
                    Private large
                    scale units         -            -           -           -           -           -
                    Private small
                                       0.12         0.11        0.12       0.11        0.01        0.01
                    scale units


      ghee, the product which was stored for longest duration in other two sectors was stored only
      for a day on an average here. Obviously the storage and maintenance cost was maximum in
      the case of panner.
      4.2.7 Demand management of milk and milk products in different milk
            processing units
              The Table 4.12 reveals the quantity demanded and processed of milk and milk
      products and their respective values in co-operative and private sector units. In case of milk
      and curd, the total quantity processed and sold monthly was highest in co-operative unit with
      1607.06 tonnes, of value Rs. 231.18 lakhs and 264.15 tonnes, of value Rs. 47.55 lakhs
      respectively, followed by private large scale units and private small scale units. Similarly, the
      quantity sold and sold value was also highest in co-operative unit with 1606.82 tonnes of
      value Rs. 230.36 lakhs and 261.71 tonnes of value Rs. 47.11 lakhs, followed by private large
      scale units and private small scale units. The excess and deficits were also higher in co-
      operative unit, followed by private large scale units and private small scale units.
              The total quantity of SMP processed and sold annually in co-operative unit was 26.27
      tonnes, of value Rs. 37.02 lakhs. Similarly, the quantity sold and sold value in co-operative
      unit were 24.77 tonnes and Rs. 34.91 lakhs respectively. There was no processing of SMP in
      private units (either large or small scale). In butter, the total quantity processed and sold
      monthly were highest in co-operative unit with 19.51 tonnes of value Rs. 29.61 lakhs, followed
      by private large scale units and private small scale units. Similarly, the quantity sold and sold
      value were also highest in co-operative unit with 18.80 tonnes of value Rs. 28.54 lakhs,
      followed by private large scale units and private small scale units. The excess and deficits
      were also higher in co-operative unit, followed by private large scale units and private small
      scale units.
               In case of MBM, the total quantity processed and sold monthly were highest in private
      large scale units with 54.00 tonnes of value Rs. 8.08 lakhs, followed by co-operative unit and
      private small scale units. Similarly, the quantity sold and sold value were also highest in
      private large scale units with 56.28 tonnes of value Rs. 8.42 lakhs, followed by co-operative
unit and private small scale unit. The excess and deficits were also higher in private large
scale units, followed by co-operative unit and private small scale units. The total quantity
processed and sold of pedha monthly was highest in co-operative unit with 13.37 tonnes of
value Rs. 15.49 lakhs, followed by private large scale units. Similarly, the quantity sold and
sold value were also highest in co-operative unit with 13.33 tonnes of value Rs. 15.44 lakhs,
followed by private large scale units. There was no processing of pedha in private small scale
units. The excess and deficits were also higher in co-operative unit, followed by private large
scale units.
         In lassi, the total quantity processed and sold monthly were maximum in private large
scale units with 30.51 tonnes of value Rs. 7.63 lakhs, followed by co-operative unit and
private small scale units. Similarly, the quantity sold and sold value were also highest in
private large scale units with 32.17 tonnes of value Rs. 8.04 lakhs, followed by co-operative
unit and private small scale units. The excess and deficits were also higher in private large
scale units, followed by co-operative unit and private small scale units. In case of ghee, the
total quantity processed and sold monthly were highest in private large scale units with 14.71
tonnes of value Rs. 24.28 lakhs, followed by co-operative and private small scale units.
Similarly, the quantity sold and sold value were also highest in private large scale units with
14.73 tonnes of value Rs. 24.31 lakhs, followed by co-operative and private small scale units.
It is seen that the co-operative handled about 1.17 tonnes of excess quantity over their
production, while private large scale units faced a deficit of 1.68 tonnes per month.
        The total quantity of paneer processed and sold monthly was highest in private large
scale units with 1.67 tonnes of value Rs. 1.92 lakhs, followed by co-operative unit and private
small scale units. Similarly, the quantity sold and sold value were also highest in private large
scale units with 1.69 tonnes of value Rs. 1.94 lakhs, followed by co-operative unit and private
small scale units. The excess and deficits were also higher in private large scale units,
followed by co-operative unit and private small scale units. In khowa, the total quantity
processed and sold monthly were highest in private small scale units with 0.68 tonnes of
value Rs. 0.81 lakhs, followed by private small scale units and co-operative unit. Similarly, the
quantity sold and sold value were also highest in private small scale units with 0.68 tonnes of
value Rs. 0.81 lakhs, followed by private small scale units and co-operative unit. During the
study period private small scale units handled 0.03 tonnes of excess quantity monthly over
processed quantity while private large scale unit faced the problem of deficit at 0.04 tonnes
monthly.
         Mysore pak was the minor product of dairy industry, which was specialized only by
private large scale units. They processed milk into Mysore pak at a rate of 0.31 tonnes per
month with a value of 0.47 lakh rupees. Cream and shrikand were two other minor products of
small scale private units with monthly production of 0.15 and 0.12 tonnes respectively and
they were valued at 0.20 and 0.11 lakh rupees.

4.3      VALUE ADDITION IN THE SELECTED UNITS
4.3.1 Product mix in co-operative and private sector milk processing units
      during 2007
        Table 4.13 and Fig. 3, gives the details of quantity and proportion of various
processed products prepared in the co-operative and private sectors. Per year about
23609.04 tonnes of finished products were produced by the co-operative unit, as against
10917.01 tonnes of finished products produced by the private large scale units and private
small scale units prepare only 222.26 tonnes of finished products. Although, the co-operative
sector produced a wide range of products, it mainly concentrated on seven major items
namely liquid milk, curd, SMP, butter, MBM, pedha and ghee. These items constituted 99.96
per cent of the total processed products manufactured by the co-operative sector unit, paneer
and khowa together represent 0.04 percent of total processed products.
        The Table also represents quantity and proportion of the various processed products
by private large scale processing units. The private large scale units confined to a product line
consisting of groups of items such as liquid milk, curd, MBM, lassi and ghee. The unit
concentrated mainly on the liquid milk, which accounted for 86.54 per cent of the total
processed items, followed by curd, MBM, lassi, ghee, paneer, butter, khowa, pedha and
mysore pak to an extent of 6.82, 3.87, 1.77, 0.81, 0.09, 0.06, 0.02, 0.01 and 0.01 per cent,
respectively.
        The Table also reflects the quantity and proportion of the various products processed
by the private small scale processing units. The private small scale units confined to a product
line consisting of groups of items such as liquid milk, curd, khowa, ghee and butter. Around
80 per cent of the total processed products were constituted by liquid milk alone. Other items
processed from the unit include, curd, khowa, ghee, butter, lassi, paneer, cream, shrikand
and MBM to an extent of 8.18, 3.65, 2.71, 1.51, 0.91, 0.78, 0.78, 0.50 and 0.33 per cent,
respectively.
4.3.2 Cost structure of processing of milk in co-operative and private sector
      processing units
          An establishment of processing unit in milk encompasses various fixed and variable
costs. These costs directly have an impact on the performance of the unit in terms of
efficiency of production, resource utilization and product development. In this context it may
be quite advisable to study cost structure of processing units which highlights various cost
items responsible for indication of performance of the units. The costs associated with the
processing of milk which are broadly categorized into two heads, namely, fixed costs and
variable costs. A stream of data on fixed and variable cost were examined to realize the
objectives. The detailed components of these two cost items are presented in Table 4.14. The
major items under fixed costs consisted of depreciation, rent, repairs and maintenance,
insurance, salaries paid to the permanent employees and administrative costs. Similarly, the
variable cost comprised of items like raw milk, sugar, packaging material, labour cost,
electricity, fuel and water, miscellaneous cost, etc.
         Table 4.14 reflects the costs associated with the processing of milk. It could be
observed that, variable costs occupy a major share of total costs with more than 90 per cent
in all the three kinds of processing units. It was also observed that the total quantity of milk
processed and cost of processing (per tonne) worked out to be 24930.81 tonnes and Rs.
13912.08 in case of co-operative unit, 11239.61 tonnes and Rs. 15292.14 in case of private
large scale units and 368.17 tonnes and Rs. 15940.65 in private small scale units
respectively. The net returns depended on both variable costs as well as fixed costs of
production. The total fixed and variable cost of processing per tonne of milk formed Rs.
308.80 lakhs (8.90 per cent) and Rs. 3159.59 lakhs (91.10 per cent), respectively in co-
operative unit, Rs. 145.22 lakhs (8.45 per cent) and Rs. 1573.55 lakhs (91.55 per cent),
respectively in the private large scale units and Rs. 5.17 lakhs (8.80 per cent) and Rs. 53.52
lakhs (91.20 per cent), respectively in private small scale processing units.
         Among the fixed costs, salaries for permanent employees formed the major part in
the case of both co-operative unit and private small scale processing units, whereas
depreciation cost accounted for major proportion in private large scale units. In the case of
variable cost, the cost of raw milk was the highest accounting for more than 80 per cent in all
the units followed by packaging materials cost and electricity, fuel and water charges.
4.3.3    Sales realization in co-operative and private sector units
         Sales realization per tonne of milk processed by co-operative and private (large and
small scale) milk processing units is represented in Table 4.15. It showed that, the gross
returns, milk processed and gross returns per tonne by co-operative unit was much higher Rs.
4574.59 lakhs, 24930.81 tonnes and Rs. 18349.15 respectively. In the case of private large
scale units, the same were Rs. 1892.87, 11239.61 tonnes and Rs. 16841.04 respectively and
in the case of private small scale units they were of the order Rs. 66.16 lakhs, 368.17 tonnes
and Rs. 17968.56.
         Of the total sales realization, the sale of milk amounted maximum in all the units with
19281.85 tonnes of value Rs. 2764.34 lakhs in co-operative unit, 9448.47 tonnes of value Rs.
1466.31 lakhs in private large scale units and 179.27 tonnes of value Rs. 28.66 lakhs in
private small scale units, followed by other products. The price per tonne in co-operative,
private large scale and private small scale units was highest in case of ghee at Rs. 1.77 lakh,
Rs. 1.65 lakh and Rs. 2.10 lakh, respectively. The products which were sold the least in co-
Table 4.13: Product mix in co-operative and private sector milk processing units during 2007

                                                                                  (per annum)

                                                    Private large        Private smallscale
                      Co-operative sector
                                                     scale units                units
Sl.
        Products
No.
                       Quantity                Quantity                 Quantity
                                   Per cent                 Per cent                Per cent
                       (tonnes)                (tonnes)                 (tonnes)

  1    Milk           19281.85       81.66      9448.47       86.54      179.27      80.65

  2    Curd            3140.55       13.30      744.55        6.82       18.18        8.18

  3    SMP             297.29        1.26          -            -           -          -

  4    Butter          225.64        0.96        7.07         0.06        3.35        1.51

  5    MBM             223.50        0.95       422.13        3.87        0.74        0.33

  6    Pedha           159.93        0.68        0.73         0.01          -          -

  7    Lassi           149.00        0.63       193.05        1.77        2.01        0.91

  8    Ghee            122.39        0.52        88.40        0.81        6.02        2.71

  9    Paneer            6.83        0.03        10.13        0.09        1.73        0.78

  10   Khowa             2.05        0.01        1.75         0.02        8.11        3.65

  11   Mysore pak         -            -         0.72         0.01          -          -

  12   Cream              -            -           -            -         1.74        0.78

  13   Shrikand           -            -           -            -         1.11        0.50

  Total quantity
                      23609.04      100.00     10917.01      100.00      222.26      100.00
  (tonnes)
Fig. 3. Product mix in co-operative and private sector milk processing units during 2007
Table 4.14: Cost structure of processing of milk in co-operative and private sector processing units

                                                                 Co-operative sector             Private large scale sector     Private small scale sector
 Sl. No.                     Particulars                        Amount                            Amount                         Amount
                                                                               % to total                          % to total                    % to total
                                                               (Rs. lakhs)                      (Rs. lakhs)                     (Rs. lakhs)
    A.     Fixed costs
    1.     Depreciation cost                                      27.30            0.79            69.45             4.04         0.40             0.68
    2.     Rent of premises                                        0.00            0.00             0.00             0.00         1.86             3.16
    3.     Repairs and maintenance                                12.00            0.35             3.48             0.20         0.11             0.19
    4.     Insurance                                               2.50            0.07             1.62             0.09         0.49             0.84
    5.     Salary                                                210.00            6.05            49.68             2 .89        2 .28            3.88
    6.     Administration cost                                    57.00            1.64            21.00             1.22         0.03             0.04
           Sub-total (A)                                         308.80            8.90           145.22             8.45         5.17             8.80
    B.     Variable costs
    1.     Raw milk                                             2909.30           83.88          1438.53            83.70        51.42             87.62
    2.     Sugar                                                  9.29             0.27            3.17              0.18         0.04              0.06
    3.     Other raw materials                                   11.60             0.33            4.79              0.28         0.05              0.09
    4.     Packaging material                                   132 .06            3.81           77.94              4.53         1.24              2.11
    5.     Labour cost                                           12.00             0.35            4.55              0.26         0.00              0.00
    6.     Electricity, fuel and water charges                   83.75             2.41           43.87              2.55         0.70              1.20
    7.     Miscellaneous cost                                     1.60             0.05            0.70              0.04         0.07              0.12
           Sub-total (B)                                        3159.59           91.10          1573.55            91.55        53.52             91.20
           Grand total (A+B)                                    3468.39          100.00          1718.78            100.00       58.69            100.00
    1.     Total quantity of milk processed (tonnes)           24930.81              -          11239.61               -         368.17               -
    2.     Cost of milk processed (Rs/tonne)                   13912 .08             -          15292 .14              -        15940.65              -
operative, private large scale and private small scale units was khowa, mysore pak and MBM,
respectively.
4.3.4 Cost and returns in co-operative and private milk processing units
         Table 4.16 and Fig. 4 reflects the costs and returns associated with processing of one
tonne of milk. The gross returns per tonne were Rs. 18349.15, Rs. 16841.04 and Rs.
17968.56 in co-operative, private large scale and private small scale units, respectively. The
total costs came upto Rs. 14963.25, Rs. 16439.38 and Rs. 16149.99 in co-operative, private
large scale and private small scale units, respectively. It could be observed that of the total
costs (per tonne of milk processed), cost of processing amounted to maximum with Rs.
13912.08 (92.97%), Rs. 15292.14 (93.02%) and Rs. 15940.66 (98.07%) in co-operative,
private large scale and private small scale units, respectively. The least cost was that of cost
of carrying inventory.
        The net returns depend on both variable costs as well as fixed costs of production.
The net returns for co-operative, private large scale and private small scale units were Rs.
3385.90, Rs. 401.66 and Rs. 1818.57, respectively, similarly the B:C ratio were 1.23, 1.02
and 1.11 for these units in the respective order.
4.3.5     Comparative price at different stages of marketing of processed
        products by milk processing units
         Table 4.17 gives the details of ex-factory price, margin and M.R.P of various
processed products in the co-operative and private (large and small scale) units. In co-
operative unit, the ex-factory price, margin and M.R.P per litre were highest for ghee at Rs.
177.27, Rs. 17.73 and Rs. 195 respectively, whereas in private large scale units it was
highest in case of ghee at Rs. 165, Rs. 25 and Rs. 190 respectively. While, in private small
scale units there was no margin, the products were directly sold to the consumers, hence the
ex-factory price itself formed the M.R.P and it was highest in case of ghee. The product with
least ex-factory price, margin and M.R.P per litre was milk in all the units.

4.4        SALES MANAGEMENT IN SELECTED UNITS
4.4.1 Annual cost of marketing of processed products by co-operative sector
      unit
          The cost of marketing of processed products by co-operative processing unit is
presented in Table 4.18. The total cost of marketing was Rs. 222.481 lakh, of which
transportation cost accounted for maximum with Rs. 141.654 lakh followed by carriage and
hamali charges of Rs. 70.827 lakh and advertisement expenses of Rs. 10 lakh. The total
marketing cost was highest in milk with Rs. 181.704 lakh, followed by other products. The
total quantity sold was 23609.041 tonnes. Of all the products, the marketing cost was highest
in milk, followed by other products. The least marketing cost was observed in case of khowa.
4.4.2 Annual cost of marketing of processed products by private large scale
      units
          The cost of marketing of processed products in private large scale processing units is
presented in Table 4.19. The total cost of marketing was Rs. 114.170 lakh, of which
transportation cost accounted for maximum (Rs. 76.419 lakh), followed by carriage and
hamali charges (Rs.32.751 lakh) and advertisement expenses (Rs. 5 lakh). The total
marketing cost was highest in milk with Rs. 98.812 lakh, followed by other products. The total
quantity sold was 10917.011 tonnes. Of all the products, the cost of marketing was highest in
milk, followed by other products. The least cost was observed in case of mysore pak.
4.4.3 Annual cost of marketing of processed products by private small scale
      units
        The cost of marketing of processed products in private small scale processing units is
presented in Table 4.20. The total cost of marketing was Rs. 0.230 lakh, of which carriage
and hamali charges accounted for maximum (Rs. 0.100 lakh), followed by transportation cost
(Rs. 0.080 lakh) and advertisement expenses (Rs. 0.050 lakh). The total marketing cost was
Table 4.15: Sales realization in co-operative and private sector units

                                                Co-operative sector                  Private large scale sector             Private small scale sector
  Sl.                                   Quantity     Price per                 Quantity       Price per                Quantity      Price per
                 Particulars                                         Value                                   Value                                  Value
  No.                                      sold        tonne                      sold          tonne                     sold         tonne
                                                                   (lakh Rs)                               (lakh Rs)                              (lakh Rs)
                                        (tonnes)     (lakh Rs)                 (tonnes)       (lakh Rs                 (tonnes)      (lakh Rs)
   1    Liquid milk                     19281.85        0.14        2764.34    9448.47           0.16       1466.31     179.27          0.16        28.66
   2    Curd                            3140.55         0.18         565.30     744.55           0.19        145.10      18.18          0.20         3.64
   3    SMP                              297.29         1.41         418.91       0.00           0.00         0.00       0.00           0.00         0.00
   4    Butter                           225.64         1.52         342.51       7.07           1.25         8.84       3.35           1.52         5.08
   5    MBM                              223.50         0.15          33.52     422.13           0.15         63.15      0.74           0.15         0.11
   6    Pedha                            159.93         1.16         185.26       0.73           1.18         0.87       0.00           0.00         0.00
   7    Lassi                            149.00         0.25          37.25     193.05           0.25         48.26      2.01           0.25         0.50
   8    Ghee                             122.39         1.77         216.97      88.40           1.65        145.86      6.02           2.10        12.64
   9    Paneer                            6.83          1.15           7.86      10.13           1.15         11.65      1.73           1.40         2.43
  10 Khowa                                2.05          1.30           2.67       1.75           1.00         1.75       8.11           1.20         9.73
  11 Mysorepak                            0.00          0.00           0.00       0.72           1.50         1.08       0.00           0.00         0.00
  12 Cream                                0.00          0.00           0.00       0.00           0.00         0.00       1.74           1.35         2.35
  13 Shrikand                             0.00          0.00           0.00       0.00           0.00         0.00       1.11           0.92         1.02
 Gross returns (lakh Rs)                             4574.59                                   1892.87                                 66.16
 Milk processed (tonnes)                            24930.81                                  11239.61                                368.17
 Gross returns per tonne
                                                     18349.15                               16841.04                               17968.56
 (Rs/tonne)
Table 4.16: Cost and returns in co-operative and private milk processing units

                                                                (Rs/ tonne of milk processed)


  Sl.                                                     Private large      Private small
                Particulars         Co-operative unit
  No.                                                      scale units        scale units


   1     Gross returns/ton              18349.15           16841.04              17968.56


   2     Cost of

                                                           15292.14
         Processing                 13912.08 (92.97)                       15940.66 (98.70)
                                                            (93.02)

                                         108.81              101.44               105.85
         Carrying inventory
                                         (0.73)              (0.62)               (0.66)

                                         942.36             1045.80               103.48
         Marketing
                                         (6.30)              (6.36)               (0.64)

   3     Total cost                     14963.25           16439.38              16149.99


   4     Net returns                     3385.90             401.66              1818.57


   5     Benefit cost ratio               1.23                1.02                 1.11
                                 Co-operative unit          Private large scale units    Private small scale units



            16000


            14000


            12000


            10000
Rs./tonne




            8000


            6000


            4000


            2000


                0
                    Processing                       Carrying inventory                 Marketing



                       Fig. 4. Costs in co-operative and private milk processing units

                            Fig.4. Costs in co-operative and private milk processing units
Table 4.17: Comparative price at different stages of marketing of processed products by milk
              processing units (Rs/ Kg)


                        Co-operative sector   Private large scale sector   Private smallscale sector
Sl.
      Products
No.                Ex-                          Ex-                          Ex-
                 factory    Margin   M.R.P    factory   Margin   M.R.P     factory   Margin   M.R.P
                  price                        price                        price

 1    Milk       14.34       0.66     15.00   15.52      1.54     17.06    15.99       -      15.99

 2    Curd       18.00       2.00     20.00   19.45      2.51     22.00    20.00       -      20.00

 3    SMP        140.91     14.09    155.00      -        -         -         -        -        -

 4    Butter     151.79     18.21    170.00   125.00    18.00    143.00    160.00      -      160.00

 5    MBM        15.00       5.00     20.00   13.30      5.00     19.96    15.00       -      15.00

 6    Pedha      115.84     12.16    128.00   117.92    15.00    133.16       -        -        -

 7    Lassi      25.00       5.00     30.00   25.00      5.00     30.00    25.00       -      25.00

 8    Ghee       177.27     17.73    195.00   165.00    25.00    190.00    210.00      -      210.00

 9    Paneer     115.00     10.00    125.00   115.00    10.00    125.00    139.00      -      139.00

10    Khowa      130.00        -     130.00   100.00     5.00    105.00    120.00      -      120.00

      Mysore
11                  -          -        -     150.00    10.00    160.00       -        -        -
      pak

12    Cream         -          -        -        -        -         -      135.00      -      135.00

13    Shrikand      -          -        -        -        -         -      80.00       -      80.00
Table 4.18: Annual cost of marketing of processed products by co-operative sector unit



                            Total quantity sold      Carriage and hamali       Transportation cost     Advertisement      Total Marketing
     Products
                                  (tones)            charges (lakh Rs)              (lakh Rs)        expenses (lakh Rs)    Cost (lakh Rs)

        Milk                    19281.854                  57.846                    115.691               8.167             181.704

       Curd                     3140.546                    9.422                        18.843            1.330              29.595

       SMP                       297.290                    0.892                        1.784             0.126              2.802

       Butter                    225.645                    0.677                        1.354             0.096              2.126

       MBM                       223.497                    0.670                        1.341             0.095              2.106

       Pedha                     159.929                    0.480                        0.960             0.068              1.507

       Lassi                     148.998                    0.447                        0.894             0.063              1.404

       Ghee                      122.393                    0.367                        0.734             0.052              1.153

      Paneer                      6.835                     0.021                        0.041             0.003              0.064

      Khowa                       2.054                     0.006                        0.012             0.001              0.019

       Total                    23609.041                  70.827                    141.654              10.000             222.481
Table 4.19: Annual cost of marketing of processed products by private large scale units



                          Total quantity sold       Carriage and hamali         Transportation cost     Advertisement      Total Marketing
     Products
                                (tones)             charges (lakh Rs)               (lakh Rs)         expenses (lakh Rs)    Cost (lakh Rs)

       Milk                    9448.470                    28.345                         66.139            4.327              98.812

       Curd                    744.553                      2.234                         5.212             0.341              7.787

      MBM                      422.134                      1.266                         2.955             0.193              4.415

      Lassi                    193.049                      0.579                         1.351             0.088              2.019

      Ghee                      88.402                      0.265                         0.619             0.040              0.925

     Paneer                     10.132                      0.030                         0.071             0.005              0.106

      Butter                     7.070                      0.021                         0.049             0.003              0.074

      Khowa                      1.752                      0.005                         0.012             0.001              0.018

      Pedha                      0.732                      0.002                         0.005             0.000              0.008

   Mysore pak                    0.718                      0.002                         0.005             0.000              0.008

      Total                   10917.011                    32.751                         76.419            5.000             114.170
Table 4.20: Annual cost of marketing of processed products by private small scale units



                            Total quantity         Carriage and hamali        Transportation cost     Advertisement      Total Marketing Cost
    Products
                             sold(tones)           charges (lakh Rs)               (lakh Rs)        expenses (lakh Rs)         (lakh Rs)

       Milk                    179.269                    0.100                      0.080                0.040                 0.220

      Curd                     18.180                        -                            -               0.004                 0.004

     Khowa                      8.110                        -                            -               0.002                 0.002

      Ghee                      6.022                        -                            -               0.001                 0.001

      Butter                    3.353                        -                            -               0.001                 0.001

      Lassi                     2.012                        -                            -                 -                     -

     Cream                      1.738                        -                            -                 -                     -

     Paneer                     1.734                        -                            -                 -                     -

    Shrikand                    1.107                        -                            -                 -                     -

      MBM                       0.737                        -                            -                 -                     -

      Total                    222.263                    0.100                      0.080                0.050                 0.230
highest in milk with Rs. 0.220 lakh, followed by other products. The marketing cost was the
least in the case of MBM.

4.5       PROBLEMS FACED BY THE PROCESSING UNITS
       In order to analyse the problems faced by the processing units, a set of questionnaire
was developed in order to document the problems faced by the units and their suggestions
towards stated problems. The suggestions and opinions were culled out to ascertain the
major problems affecting the units and industry. This study revealed that the most striking
problem faced by the processors of the co-operative sector as well as private sector (large
and small scale) unit was erratic power supply and maintenance of machinery.
        The list of various problems faced by the milk processing units, their respective
scores and ranking are given in Table 4.21 and 4.22, respectively.
          The units considered for the study faced similar kinds of problems, but the extent of
severity varied from unit to unit and therefore, the ranking of each problem varied with the
unit. The problems faced by the units were identified as problems regarding infrastructure
facilities, procurement of raw material, processing, marketing and finance.
           In the co-operative sector unit, the problem regarding processing, infrastructure
facility, finance, procurement of raw milk and sales were identified as major problems, which
constituted 60, 42, 40, 28 and 23 per cent, respectively.
        The private large scale units identified as the first three major problems which
finance, sales, procurement of raw milk, constituted 55, 53 and 49 per cent, respectively,
followed by infrastructural facility and processing to the extent of 42 and 32 per cent,
respectively.
        Similarly, the private small scale units identified and ranked the problems namely
finance, procurement of raw milk, processing of raw milk lack of infrastructure facility and
sales and which constituted 90, 58, 54, 52 and 45 per cent, respectively.
Table 4.21: Problems faced by co-operative and private sector processing units

                                                                                                 Private large   Private small
   Sl. No.                              Problems                           Co-operative sector
                                                                                                 scale sector    scale sector
     A       Infrastructural facility
     1       Location                                                              2                  3               2
     2       Availability of land                                                  2                  3               7
     3       Availability of Electricity                                           8                  8               9
     4       Water                                                                 7                  6               6
     5       Approach roads                                                        2                  2               2
             Total                                                                 21                 21              26
     B       Procurement of milk
     1       Availability of raw milk                                              2                  6               6
     2       Price of milk                                                         3                  8               8
     3       Quality                                                               3                  4               5
     4       Transport facility                                                    2                  5               4
     5       Transport cost                                                        5                  6               2
     6       Cold chain                                                            2                  2               9
             Total                                                                 17                 30              35
     C       Processing
     1       Cost effective technology                                             7                  4               7
     2       Availability of labour                                                3                  3               5
     3       Maintenance of machinery                                              8                  3               4
             Total                                                                 18                 10              16
     D       Sales
     1       Availability of transport vehicle                                     2                   5              3
     2       Transportation cost                                                   2                   6              4
     3       Commission/taxes                                                      3                   6              7
             Total                                                                 7                  16              13
     E       Finance
     1       Availability of funds                                                 4                  7               9
             Total                                                                 4                  7               9
Table 4.22: Ranking of problems

                                                                                       Private large                         Private small
                                           Co-operative sector
                                                                                       scale sector                          scale sector
                         Maximum
 Sl.    Description of
                          score      Points    Percentage                    Points     Percentage                 Points     Percentage
 No.      problem                                                Rank of                               Rank of                               Rank of
                          points   scored by    of points                  scored by     of points               scored by     of points
                                                                 problem                               problem                               problem
                                    problem      scored                     problem       scored                  problem       scored

       Infrastructural
  A                        50         21           42              II         21             42          IV         26            52           IV
       facility

       Procurement
  B                        60         17           28              IV         30             49          III        35            58           II
       of milk

  C    Processing          30         18           60               I         10             32          V          16            54           III

  D    Sales               30         7            23              V          16             53          II         13            45           V

  E    Finance             10         4            40              III        7              55           I         9             90            I
                                   5. DISCUSSION
        The findings of the study, which were presented previously, are discussed in this
chapter under the following headings to arrive at a meaningful interpretation.
        5.1    Procurement management in processing units
        5.2    Demand and product management in processing units
        5.3    Value addition in the selected units
        5.4    Sales management in selected units
        5.5    Problems faced by the processing units
        5.6    SWOT analysis of the dairy processing units

5.1 PROCUREMENT MANAGEMENT IN PROCESSING UNITS
       In this section, a comparative account on the pattern of procurement and use of main
raw materials, namely, raw milk by co-operative and private sector processing units are
presented. Seasonal fluctuation in milk procurement by both sectors are also compared and
discussed below.
5.1.1 Quantity of milk procured and cost involved in procurement of milk by
      the co-operative unit during 2007
         Table 4.1 reveals the average quantity procured and cost involved in procurement of
milk by the co-operative unit. The table highlights the domination of procuring of raw milk in
the month of November, followed by December, October, January and other months, since
these months come under flush season during which quantity of milk procured was more than
the average monthly procurement. The major portion of procurement during these months
was diverted for preparation of milk products. Since, the demand for milk is more or less
constant during these months and demand for value added products would be more due to
marriage and festivals, the processors would derive more benefits by procuring higher
quantity of milk and diverting it for preparation of milk products. The price per litre was highest
in summer months i.e., March and April. The supply of milk used to be low owing to lesser
productivity of animals during these months due to non availability of sufficient green fodder.
Added to it, chances of spoilage also would be very high in these months. These will have
direct effect on total supply of milk and thus on the prices. Surprisingly, the price of milk was
higher also during the peak procurement months. The wastage of milk was exorbitant during
these months.
         The quantity procured and its value was lowest in the month of June, since this is a
lean season month, during which the quantity of milk procured in the hinterlands will be less.
During this period, supply remains less than demand; hence, milk powder is reconstituted into
milk to cater to the demand of liquid milk.
5.1.2 Quantity of milk procured and cost involved in procurement of milk by
      the private large scale sector during 2007
        The Table 4.2 revealed the average quantity and cost involved in procurement of milk
by the large scale private units. Raw milk procurement was the highest during December
month followed by November and October months. These are the flush season months for
milk procurement. Since, the demand being inelastic, the milk procured in excess was
diverted for preparation of milk products to augment the increased demand for value added
products resulted due to marriage and festivals during the season. The value of procured milk
and price per litre were also highest in the respective month mentioned above, whereas the
wastage was highest in the month of April. However this is not a healthy sign for the
development of dairy industry. The milk producing farmer will be at double disadvantage
during these months. On one hand the productivity will be low during these months due to
non availability of green fodder leading to lower income to the farmer and on the other hand
the wastage value. Wastage may be due to improper handling or may be due to spoilage of
milk due to dry and hot weather conditions. In the case of farmer, the wastage can be
minimized through formal trainings for proper handlings of such raw materials.
        The quantity procured and value was lowest in the month of February due to short
supply of milk.
5.1.3 Quantity of milk procured and cost involved in procurement of milk by
      the private small scale sector during 2007
         The Table 4.3 revealed the average quantity and cost involved in the procurement of
milk by the small scale private sector unit. Raw milk procurement was the highest during
October and November months, followed by December and January months, which are the
flush season months for milk procurement. Since, the demand being inelastic, the milk
procured in excess was diverted for preparation of milk products to augment the increased
demand for value added products resulted due to marriage and festivals during the season.
The value of procured milk was highest in the month of March and the price per litre was also
high during this month. The wastage was highest in the months of April and May, followed by
February and March months. The milk producing farmer will be at double disadvantage during
these months. On one hand the productivity will be low during these months due to non
availability of green fodder leading to lower income to the farmer. Wastage may be due to
improper handling or may be due to spoilage of milk due to dry and hot weather conditions. In
the case of small scale units, the wastage can be minimized through formal trainings for
proper handlings of such raw materials.
        Further, it can be seen that of all the units, the quantity and value of raw milk
procured, transportation and handling cost and wastage cost was the highest in case of co-
operative unit followed by large scale private and small scale private unit, whereas the
commission charges were found to be highest in case of small scale private unit, followed by
large scale private and co-operative unit.
5.1.4 Quantity and value of raw materials procured by co-operative and
      different private sector processing units during 2007
         The quantum of raw materials procured by different sector milk processing units is the
indicator of capacity of processing of the units. Of the three different sectors studied, the
cooperative sector was found to be the major player in milk processing business. It is quite
understandable that Karnataka milk federation is the operation flood driven cooperative sector
organization established since long time. It has wide spread network of procurement centres
in roots and corners of the villages and operate through milk collection centres and milk
collection vans. It has horizontal linkage between different units to meet the demand for
finished products. Hence, obviously its volume of business would be very high. Therefore, to
meet the needs of its processing plant the cooperative unit has to procure raw material in
large quantities. Because of the similar reasons, the next in the order were large scale private
followed by small scale private processing units in terms of their volume of raw material
procurements.
        Of the different raw material procured, the cost of packing materials was the
maximum followed by that other raw materials and sugar. Packaging provides value addition
and in turn induces more demand for the products. Hence, it is quite imperative for all the
three sector processing units to invest more on packing materials to make it more appealing
to grab major share of the total demand for the product in the market.
5.1.5 Seasonal fluctuations in milk procurement by co-operative and different
      private sector processing units during 2007
         From the results of the study (Table 4.5), it is clear that the average procurement of
raw milk was more in flush season in general and co-operative unit in particular. The average
procurement were to the tune of 76718.08 liters per day in co-operative, 32114.61 litres per
day in large scale private sector units and 1076.44 litres per day in small scale private sector
units during the months of September to February. This was due to the reason that during
flush season, production of milk was high due to cold climate which was conducive for
animals, availability of green fodder and chance of grazing in the field for the animals. The
average wastage during flush season was also high compared to lean season in co-operative,
whereas it was reverse in the case of both large and small scale private sector units. The
flush-lean ratio was highest in co-operative unit compared to private large and small scale
units, since the procurement and sales was high in co-operative unit.
5.2       DEMAND AND PRODUCT MANAGEMENT IN
PROCESSING UNITS
5.2.1 Output and capacity utilization by the co-operative processing unit
         The co-operative milk processing unit studied has utilized about 95 per cent of cent of
its installed capacity, which in turn speaks off the success of co-operative movement in the
study area. Out of the different products processed, milk processing utilized 96.42 percent of
its installed capacity highest among the products in terms of their capacity utilization. Curd,
SMP and Butter are next in that order.
        Co-operatives have well established hinterland as for as milk is concerned. With a
well connected network of collection points and refrigerated transport vans they can usher to
the needs of processing unit. The horizontal integration between different milk unions
operating throughout the country would provide siphoning effect to meet the installed capacity
of the individual unions. The other products are processed according to local needs and
demands. Hence, their capacity utilization would largely depend upon the demand in the
immediate following market.
5.2.2    Output and capacity utilization by the private large scale processing
        units
         As that of co-operative milk processing units, large scale private sector units also
concentrated more for processing of milk and utilized 84.34 per cent of its installed capacity.
Private processing units establish their processing plants based on the demand and
availability of raw milk, since they do not afford to waste their investment. Hence, they always
try to meet the full capacity. The other important products processed by the large scale units
in the order of their important were curd, MBM and lassi. Processing of milk into pedha was in
least quantity owing to its fewer quantity of demand in the local market. When one sees the
capacity utilization of different products processed, butter utilized maximum (99.89 %) of its
installed capacity. MBM, lassi, paneer and curd were the next important products in terms of
their capacity utilization.
5.2.3    Output and capacity utilization by the private small scale processing
        units
         In terms of annual quantity processed, milk was processed in highest quantity
followed by curd, khowa, ghee and other products. The product which was processed in least
quantity was MBM. In terms of capacity utilization, the highest capacity utilized was in case of
curd and the least capacity utilized was in MBM. The overall capacity utilized in small scale
private unit was 89.58 per cent.
          The small scale private sector units also as that of co-operative and large scale
private sector units, tried to meet that full capacity. But these small scale units have much
product diversification to meet the local demand. Hence, the specialize in those commodities
which have local demand. Therefore, products like shrikand and cream were prepared by
them. Since, these product preparations were highly demand initiative the full capacity
utilization may not be practically possible. However, they try to reach the full capacity in order
to meet atleast the over head expenditure.
         Further, it was also observed that, higher quantity processed and capacity utilization
was observed in co-operative sector unit because the efficiency per unit of consumption of
raw materials was very high. They have set up modern processing technology. Plant has
significantly increased the processing over the years in co-operative sector unit. In large scale
private units the quantity processed was higher compared to small scale private units but the
capacity utilized was lower since the installed capacity was much higher than the actual
quantity processed in private large scale units. The overall capacity utilized was 95.39 per
cent in co-operative unit, which was highest, may be due to the high demand for the products,
followed by small scale private (89.58%). The capacity utilized was lowest in large scale
private (87.38%), may be due to the reason that of the two units selected under this category,
one unit was recently established and may not be utilized to the full capacity.
5.2.4 Cost of carrying inventory of finished products by the co-operative unit
          It could be observed from the Table 4.9 that, the co-operative processing unit on an
average stored the finished products upto a maximum of 45 days. The total cost of carrying
inventory was considered as necessary evil with respect to most of the agro-processing units.
The commodity which was stored for maximum duration was ghee, since it was less
perishable compared with other products. The average total cost was found to be highest in
the case of paneer Rs. 5.04 per kg per day, because the storage and maintenance cost was
high. The total cost was least in the case of curd since the storage and maintenance cost was
less as it was stored maximum of one day. The interest on carrying inventory was also less in
the case of curd.
5.2.5 Cost of carrying inventory of finished products by the private large
      scale units
          It is observed from the Table 4.10 that the large scale private processing units on an
average stored the finished products upto a maximum of 60 days. The commodity which was
stored for maximum duration was ghee, since it was less perishable compared with other
products. Usually ghee is not prepared every now and then. Whenever the excess of butter
left out in the processing unit they convert it into ghee and store until it is marketed. Though
ghee was stored for longer duration (60 days), the cost of storage was maximum in the case
of pedha (Rs 8.19/kg/day) which was stored only for 3 days on an average. Ghee can be
stored even in room temperature and staked in the bottles one over the other, but pedha has
to be stored in particular temperature and cannot be heaped or staked in large quantities.
Hence, storage space per unit quantity was also more in the case of pedha. Therefore it had
taken more storage and maintenance cost. The total cost was least in case of curd since the
storage and maintenance cost and the interest cost was very less for this product.
5.2.6 Cost of carrying inventory of finished products by the private small
      scale units
         It is observed from the Table 4.11 that the small scale private processing units on an
average stored the finished products upto a maximum of 6 days. The commodity which was
stored for maximum duration was paneer. The average total cost was found to be highest in
case of paneer with Rs. 2.02 per kg per day since the storage and maintenance cost was high
as compared to other products. The total cost of carrying inventory was the least in the case
of lassi and MBM since the interest cost was less for this product.
        Small scale private sector units had been established with very little investment and
hence they did not have proper infrastructure to store the commodities for long. At the same
time they cannot keep their investment locked up in stored product. Hence, they specialize in
fast moving products in the locality and produce those products depending upon day to day
demand. The evidence is there in the table itself, that they produced more quantity of curd
and khowa and produced two new products, cream and shrikand to meet the local demand.
Hence, production behaviour of small scale private sector units would largely depend upon
the local demand of the product rather than the aggregate demand in the market
         The difference in the cost incurred on carrying inventory by co-operative and private
sector processing units was due to differences in per tonne price of different finished products
and the number of days it was stored. Hence, there is a need to reduce the storage and
maintenance cost and rate of interest on carrying inventory capital, as these reflect in the
pricing of finished products while marketing.
5.2.7 Demand management of milk and milk products in different milk
      processing units
         From the Table 4.12, it was found that, the total quantity processed and demanded
and the value of milk, curd, butter and pedha was highest in case of co-operative unit,
followed by private large scale units and private small scale units, as discussed earlier in this
chapter, the co-operatives had a wide spread and well knit network of procurement as its area
of operation was also very large and the excess of milk procured was diverted towards the
production of curd, butter and pedha since the demand for these products produced under
their brand name “Nandini” was high. Hence, obviously its volume of business would be very
high. Similarly the quantity sold and the sold value of these products was highest in co-
operative unit. The excess and deficit were also highest in co-operative unit, since the
quantity processed was highest in this unit compared to all the units.
        SMP was processed only in co-operative unit. They are very large scale producing
units and have to balance the supply of milk regularly to the regular customers. Hence, during
flush season they prepare skimmed milk powder (SMP) and store them to use during lean
season to offset the demand, by reconstituting SMP into milk. Private units, either small or
large scale units solely depend on fresh milk only to meet consumer demand. Hence, only the
co-operatives were found producing SMP.
         In case of MBM, lassi, ghee and paneer, it was found that, the total quantity
processed and demanded and the value of the processed product was highest in case of
private large scale units, followed by co-operative unit and private small scale units,
marketability of many of the dairy products goes with their brand name, and usually the
customers are brand loyal. Hence, there used to be a regular demand for a product of
particular brand. Similarly the quantity sold and the sold values were highest in these unit.
The excess and deficits were also higher in private large scale units, followed by co-operative
unit and private small scale units.
         In khowa, it was found that, the total quantity processed and demanded and the value
of the processed product was highest in case of private small scale units, followed by private
large scale units and co-operative unit. It is already discussed in the previous sections that
production of certain products were highly demand specific. Mysore pak was processed only
in private large scale units, and Cream and shrikand were processed only in private small
scale units. These small units produce these products in small quantities to meet 1ocal
demand. The large units cannot take up production of these products as these products are
demanded in small quantities and that too only by a small section of the community.

5.3       VALUE ADDITION IN THE SELECTED UNITS
5.3.1 Product mix in co-operative and private sector milk processing
      units during 2007
         The co-operative sector unit produced a wide range of products (Table 4.13) which
include the product groups like liquid milk, curd, SMP, butter, MBM, pedha and ghee formed
bulk of product line (99.96 per cent) followed by paneer (0.03 per cent) and Khowa (0.01 per
cent). In private large scale units, liquid milk constituted major share accounting for 86.54 per
cent of the total product line followed by curd, MBM, lassi, and ghee to an extent of 6.82,
3.87, 1.77 and 0.81 per cent, respectively. In private small scale units, liquid milk constituted
major share accounting for 80.65 per cent of the total product line followed by curd, khowa,
ghee and butter to an extent of 8.18, 3.65, 2.71, and 1.51 per cent respectively.
       Thus, the large and small scale private units mainly concentrated on liquid milk,
where as the co-operative sector on many product lines such as curd, SMP, butter, MBM,
pedha, ghee, paneer and khowa. The product mix of a unit largely depends on the quantum
of demand in the market. Depending upon the type of product demanded by the customers,
each unit whether it is private or co-operative go for the product mix, supporting the
assumption that the production of a given preparation is demand driven.
5.3.2 Cost structure of processing of milk in co-operative and private sector
      processing units
       The cost of processing for all the products together was considered and the results
presented in the previous chapter are discussed below. The costs associated with the
processing of milk were broadly categorized in to two heads, namely, fixed costs and variable
costs.
        The major cost components under fixed costs were salaries, administrative cost,
depreciation, and repairs and maintenance. These costs together constituted 8.90 per cent of
the total cost in the co-operative sector (Table 4.14). In the private large scale sector the
same costs accounted for 8.45 per cent of total cost whereas in private small scale sector
they accounted for 8.80 per cent of total cost. Higher depreciation and maintenance costs in
the co-operative sector unit reflected the state of technology used in processing implying that
the unit has no modern sophisticated machines. The major items, which constituted the
variable costs in processing of milk were raw milk, packing, electricity and other raw
materials. These costs accounted for 91.10 per cent of total cost in the co-operative sector
unit and 91.55 per cent of the total cost in private large scale and 91.20 per cent private small
scale units. The private (large and small scale) sector units, in order to earn more reasonable
profits has to make effects of reduce cost per tonne of processed product.
         Subramanyan and Sudha (1992) also observed that raw material and packing were
the two major items of total cost of processing. As the raw milk is the basic raw material for
processing units it accounted for highest in the total cost of processing per tonne of
processed products in both co-operative and private sector units. It accounted for 83.88 per
cent of total cost in co-operative sector, while the same accounted for 83.70 per cent in
private large scale and 87.62 in private small scale sector unit.
5.3.3    Sales realization in co-operative and private sector units
         Gross returns from one tonne of milk (Table 4.15) was Rs. 18349.15, Rs. 16841.04
and Rs. 17968.56 in co-operative, private large scale sector and private small scale sector
unit respectively. In all the units, main product which constituted in sales realization was liquid
milk followed by other products. Sales realization was more in co-operative sector unit,
because quantity sold was more, brand name and the prices associated with them.
5.3.4 Cost and returns in co-operative and private milk processing units
        Table 4.16 showed that the average cost per tonne incurred on milk processing. In
case of co-operative unit it was less i.e., Rs. 13912.08 when compared to private large scale
units and private small scale units which were Rs. 15292.14 and Rs. 15940.66, respectively.
The co-operative units process large quantity of milk. The economy of large scale operation
operates here. Therefore, the processing cost per unit was lower in cooperative units. Still, it
was observed during the investigation that the cooperative unit uses the old technology and
old machinery and equipments. The efficiency of these machinery and equipment are low as
compared to sophisticated equipments used in private (large and small) units, which were
established recently. Hence, cooperatives could reduce their cost of processing still more if
they replace their old machinery, equipments and technology with the modern ones.
         The cost of marketing was also high in private (large and small scale) units compared
to co-operative sector unit, due to relatively high transportation costs by the private large
scale units. Co-operative units had their own distribution unit, equipped with own transport
and distribution equipments and personnel, while the private large scale unit had to depend
upon other agencies to do these works. Obviously the cost of marketing per unit would be
more in private large scale units. Since there were no huge transportation and handling cost
in the case of products processed in private small scale units, the cost of marketing was very
less in these units.
         The total cost was low in co-operative unit compared to private (large and small
scale) units, which resulted in higher net returns in co-operative unit. Among the different
products processed in both the sectors, the benefit cost ratio was high in co-operative sector
(1.23), where as in private large scale units it was only 1.02 and 1.11 in private sector small
scale units. Among the two private sector large scale units, one was established very recently
and has not utilized its full capacity. Hence, the unit cost would escalate leading to higher cost
of processing. The returns per unit also being lesser as compared to co-operative unit the B:C
ratio in private large scale sector was low. In small scale private sector units the quantity
handled were less. Other things being the same due to non-operation economy of scale thus
units had to incur more costs, which has resulted in lower benefit cost ratio.
5.3.5     Comparative price at different stages of marketing of processed
        products by milk processing units
        The comparative prices of processed products at different stages (Table 4.17)
revealed that, in co-operative unit the margin was highest in case of butter i.e., Rs. 18.21,
followed by ghee, SMP, pedha, paneer and other products. The least margin was observed in
case of milk. The M.R.P was also highest in ghee, followed by butter, S.M.P, pedha and
margin was also very high in these products. In private large scale units the margin was
highest in ghee i.e., Rs. 25, followed butter, pedha, paneer and other products. The least
margin was observed in case of milk. The M.R.P was high in ghee, followed by mysore pak,
butter, pedha, paneer and other products. In private small scale units, there was no margin for
any of the products, hence the ex-factory price itself formed the M.R.P. The M.R.P was high
in ghee, followed by butter, paneer, cream and other products.

5.4        SALES MANAGEMENT IN SELECTED UNITS
5.4.1 Annual cost of marketing of processed products by co-operative sector
      unit
        It was found that the transportation cost by co-operative unit accounted for maximum
in the case of marketing of finished products (Table 4.18), since their area of operation was
very large, followed by carriage and hamali charges and advertisement expenses. Some
times the milk was lifted to other union to balance the demand. High risk was also associated
with long distance transportation like to spoilage and other calamities. All these would add up
to the marketing cost to budge.
        Among all these products the cost under all the categories was highest for milk
followed by other products.
5.4.2 Annual cost of marketing of processed products by private large scale
      units
         From the Table 4.19, it was found that transportation cost accounted for maximum by
private large scale units also as that of co-operative units. These private units had to depend
on private truck or van owners to transport milk and processed products to the sales counters.
The distance to be travelled was also very long. Hence, obviously the transportation cost has
to be higher in these large scale units. Khowa, pedha and Mysorepak had least cost of
marketing as these commodities were transported in milk carrying vans along with milk and
their sales were also concentrated in near by cities and towns only. Hence, their marketing
costs were lower.
5.4.3 Annual cost of marketing of processed products by private small scale
      units
        It was found that carriage and hamali charges accounted for maximum by
private small scale units in the case of marketing of processed products (Table 4.20), followed
by transportation cost and advertisement expenses, respectively. Among all the products, the
marketing cost was highest for milk, followed by other products.
         It can be seen that the total cost involved in marketing of processed products was
highest in co-operative unit, followed by private large scale and private small scale units,
respectively. The co-operative units had large area of operation and they had well established
brand loyalty to induce demand for the products of co-operative units. This was not the case
in private small scale sector.

5.5        PROBLEMS FACED BY THE PROCESSING UNITS
         The prevalence of problems in the processing units is somewhat different and these
are no exception. The opinions of sample processors on different problems are discussed. In
case of co-operative unit, the main problem of the milk processors was processing, because
of difficulty in maintenance of machinery, cost effective technology and also moderate
availability of skilled labour. In case of private (large and small scale) units, the main problem
was finance leading to under utilization of plant which affected their processing capacities.
Similar problems were also reported by Venkatasheshaiah (1992) while studying the
processing units. In co-operative unit processing was the most acute problem whereas in
                                                                 st
case of private (large and small scale) finance occupied the 1 rank.
        The problems of infrastructural facility and sales was the second major problem in co-
operative and private large scale processing units, respectively. All the units complained
about the problem of high taxation of the products which constituted major share in total cost.
The various studies conducted by Government of India showed that the processed food
products have been subjected to high tax incidence at various stages of processing.
        The problem of finance was the third major problem in co-operative unit, because of
moderate availability of funds and high rate of interest where as in case of private sector
(large and small scale) units the same problem was considered as the most acute,
complaining about the high rate of interest.
         The major constraints observed in milk processing units were the lack of cost
effective technology, irregular power supply, higher taxes for processed products. These
could be overcome by proper planning of processing technologies. The units should create
some more channels in order to reduce the commission and the competition. The government
policies also need to be changed to regulate regular power supply and appropriate tax
policies for processed products.

5.6        SWOT ANALYSIS OF THE DAIRY PROCESSING UNITS
5.6.1 SWOT analysis of co-operative processing unit
Strength
   •      Regular and guaranteed supply of raw milk from the milk co-operative societies
   •      As it is located in between Dharwad and Hubli it has a spatial advantage
   •      Large area of operation
   •      Maximum capacity utilization
   •      Economy of large scale operation
   •      Lesser commission and procurement charges
   •      Largest network of artificial insemination centers help to get quality milk from the
          farmer through societies
   •      Due to horizontal integration, ability to meet the demand and withstand
          competitiveness even during varied procurement is possible
   •      Well established brand name
Weakness
   •      Seasonal fluctuation in supply of raw milk
   •      Due to institutional management losses during handling is higher
   •      Obsolete equipment and technologies
   •      Chronic lack of technical and management skills
Opportunities
   •      Increased demand for milk and milk products
   •      Diversification of products
   •      Scope for modernization of the unit
Threats
   •      High raw material cost
   •      Strong competition from private companies
   •      Extremely challenging climatic condition
5.6.2 SWOT analysis of large scale processing units
Strength
   •      Professional and scientific management
   •      Efficient distribution channels
   •      Use of modern equipments and technology which helps in efficient production
   •      Spatial advantage
   •      Established brand name
   •      Economy of large scale operation
Weakness
   •      Seasonal fluctuation in supply of raw milk
   •      High investment
   •      Lower margins
   •      More number of intermediaries in procurement of milk
Opportunities
   •      Increased demand for milk and milk products
   •      Diversification of products
Threats
   •      High raw material cost
   •      Strong Competition from local milk vendors and co-operative unit
   •      Extremely challenging climatic condition
5.6.3 SWOT analysis of small scale processing units
Strength
   •      Use of less labour keeping the production cost relatively low
   •      Marketing cost is minimized through localized sales and non-use of any sophisticated
          equipments
   •      Higher demands for products like cream, shrikhand, etc., which are not produced in
          other units
   •      Intimate relationship with the consumers
   •      Production of those products and quantity as per the demand hence wastage is
          minimized
Weakness
   •      Inadequate institutional and infrastructure facilities like no cold storage non existence
          of modernized processing equipments
   •      Inefficient supply chain
   •      Lack of organized marketing of milk
   •      Lack of scientific and profession management
   •      Lack of capital investment
   •      The small scale dairy units are faced with daunting challenges in the area of
          infrastructure, financial insecurity, quality assurance, price regulation, untrained man
          power and seasonality
Opportunities
   •      Potential demand for milk and milk products
   •      Scope for better marketing network and advertisements
   •      Substantial scope for adoption of modern production, processing and marketing
          technologies
   •      Key issues for promoting small scale dairy units would be organize farmers; integrate
          production with marketing, upgrade milk marketing chains and through adoption of
          modern technology
   •      On the other hand, collective marketing by small processors can result in increased
          revenue
   •      To ensure product quality, proper transportation of milk should have interconnected
          cold chains
Threats
   •      Inability of processors to collect milk required due to transport and cold chain
          problems
   •      Lack of affordable milk collection and processing equipment of appropriate capacity
          and employing appropriate technologies
   •      Extremely challenging climatic conditions
   •      Very high interest rates for loans
   •      Existence of competition from big units with strong marketing channel and huge
          advertising budget
          6. SUMMARY AND POLICY IMPLICATIONS
        Milk processing industry in India derives its significance from its high potential for
employment at low capital cost, use of local resources, possibilities for forward and backward
linkages and its scope for earning more output. With a share of about 14 per cent in world
milk production. Milk has achieved a unique status in terms of its output value exceeding Rs.
1,00,000 crores and has made a rapid stride both in terms of number of milk producers and
quantity of milk produced.
        The milk production in India was 17 million tonnes in 1950-51. This could meet only
25 per cent of the domestic demand; the remaining 75 per cent of the demand was met by
importing the milk solids. The production was stagnant for two decades till 1970, with annual
growth rate of milk production of one per cent. Thanks to the vision and foresight of Dr.
Kurien, in 1970 NDDB launched “Operation Flood Programme” with the objective of ending
milk famine in the country and turning farmer’s co-operatives into a powerful catalyst for
transforming India into a major milk producer in the world. Further, by providing milk
producers a remunerative price round the year, milk production in India touched 74 million
tonnes in 1997. By the year 2006, India has emerged as the largest milk producer with a
production of 100.9million tonnes. This is as a result of India’s “White Revolution” in milk
production.
          Karnataka has always remained in the forefront of all agricultural development
initiatives in the country and dairy development is no exception. Dairy farming in Karnataka,
like in elsewhere in the country, is largely characterized by the prevalence of dairy enterprises
that are mostly subsidiary occupations alongside the main agricultural activity of the farmer.
Specialized dairy enterprises do exist but not only is their number abysmally low as compared
to regular types, but also are restricted mostly to urban areas and their surroundings.
         Karnataka stands eleventh in milk production in the country and it occupies third
position with respect to milk production under co-operative sector in the country. The milk
production was around 4124 thousand tonnes during the year 2006-07. The KMF is covering
27 districts, with 7000 dairy co-operative societies, around 17000 villages involving 1.5 million
farmers collecting around 20 lakh litres of milk daily.
         The basic functions of any dairy enterprise are procurement, processing and
marketing. This type of operation is known as “Anand pattern of dairying”. The management
of dairy enterprise should be very careful in these activities. The procurement of milk includes
milk collection centers (dairy societies). The other important decision in milk procurement is
pricing of milk. The two axis system of milk pricing is commonly used i.e., based on Fat and
SNF content of milk. Seasonal fluctuation is another important aspect which needs adequate
attention to ensure regular and sufficient milk throughout the year.
        Since, milk is a perishable commodity, it has to be processed (chilling or pasteurizing)
immediately after procurement, otherwise, it gets spoiled. The processing activity cannot be
neglected as it converts the milk in consumable form to more value addition forms.

6.1          Supply chain management with perspective to dairy
industry of India:
          Milk supply chains are more concerned with controlling of milk quality and supply
fluctuations which are unique to this sector. Perishable goods like milk require a time efficient
supply chain. This perishable factor can affect the milk supply chain. Supply chain
management has seen as a source of gaining competitive advantage in the business world.
Due to pressures from increased competition resulting from globalization of supply,
processing and distribution networks, high levels of service expectations and competitive
pricing, the supply chain management has become more important in recent years. For the
success of a dairy industry/firm efficient supply chain management is a pre-requisite. Thus,
the supply chain performance of the processing units is a deciding factor for the success of
the unit.
        The Indian supply chain for milk products is affected by abnormal wastage and poor
handling. The wastage occurs because of multiple points of handling. Shortage of cold
storage facilities and refrigerated transport equipment lead to inefficiencies in handling milk
products. There is a compelling requirement for appropriate infrastructure for storage and
transportation such as temperature controlled warehouses and vans. By practicing improved
supply chain management practices, there will be significant reduction in the wastages of milk
and milk products which in turn will benefit both the farmers as well as the consumers by
means of increased returns and decrease in price respectively. Given the fragmented nature
of the milk supply chain, few companies have access to capital and the ability to invest in
supply chain. A detailed study of business performance of milk processing unit would be of
immense use to know whether co-operative or the private sector follows the sound supply
chain management practices. Keeping in view all these facts, an attempt is being made to
assess the management of dairy processing units in Karnataka.
The specific objectives are;
    1)To analyze the procurement management in different types of dairy processing units.
    2) To analyze the demand management and product management.
    3) To ascertain the value addition in different products.
    4) To analyze the sales management of milk and its products by the units.
    5) To analyze the problems faced by the selected units in management of dairy
       processing.
        The overall objective of the study was to examine the supply chain management in
milk processing units. For the purpose of the study the milk processing sectors were
considered. Eight milk processing units representing one from the co-operative sector, two
from private large scale and five from private small scale sectors have been chosen for the
study. The Dharwad Milk Union (DMU) processing unit under co-operative, Sri Krishna milks
Pvt. Ltd. and Vijaykant milk and food products Pvt. Ltd., under private large scale and
Shankar milk centre, Ram Rahim milk centre, Al-Rehman (mote) milk centre, Waghmode and
Mullannanavar milk centre under private small scale were selected.
          Milk processing units are extensively established in and around Dharwad milk union
jurisdictions. Being called as educational cities there is a huge demand for milk and its
products and it offers a ready market for processed milk products. A brief description of the
selected units is presented below.
         The data relating to procurement management, demand management, sales
management and value addition were obtained from the relevant records maintained by the
three sectors during the period 2007. The views of processors about the milk processing as
well as constraints faced there on were also obtained.
       The data collected were presented in tabular form to facilitate easy comparisons.
Tabular analysis was used to workout averages and percentages for the procurement
management, demand management, sales management and value addition.

6.2       Findings of the study
    1. The quantity and cost of milk procurement indicated that co-operative unit procured
       the highest quantity (20.77 lakh litres/month), followed by private large scale and
       private small scale units. In case of cost involved in procurement of milk, the
       transportation and handling cost accounted for maximum for all the units.
    2. The Procurement pattern of prime raw materials shows that, packing materials
       accounted for maximum cost, followed by sugar and other raw materials by all the
       sectors.
    3. The seasonal fluctuation in milk procurement revealed that, the procurement of milk
       during both flush and lean season was highest in co-operative unit, followed by
       private large scale and private small scale units, respectively. The flush-lean ratio
       was 1.24 in co-operative sector, 1.06 in large scale private sector and 1.11 in small
       scale private sector.
    4. In terms of capacity utilization, the top place was occupied by co-operative unit
       (95.39%), followed by private small scale units (89.58%) and private large scale units
       (87.38%), respectively.
5. The cost of carrying inventory of finished products indicated that, co-operative unit
   stored the maximum quantity followed by private large scale units, but the private
   large scale units stored the products for a maximum duration of 60 days. The quantity
   stored in private small scale units was very negligible when compared with other
   units. The total cost incurred on storing the products was found to be high in private
   large scale units followed by co-operative unit.
6. The demand management of processing units depicted that, the demand for milk,
   curd, butter and pedha was highest in co-operative unit, whereas private large scale
   units had the highest demand for MBM, lassi, ghee and paneer. The private small
   scale units had the highest demand for khowa. Products like SMP, mysore pak,
   cream and shrikand were demanded and processed only in some sectors.
7. The co-operative sector unit produced a wide range of products which include the
   product groups like liquid milk, curd, SMP, butter, MBM, pedha and ghee, which
   formed bulk of product line (99.96 per cent), whereas in private large scale and
   private small scale units, liquid milk constituted major share accounting for 86.54 per
   cent and 80.65 per cent, respectively, followed by other products. Thus, the large and
   small scale private units mainly concentrated on liquid milk, where as the co-
   operative sector on many product lines such as curd, SMP, butter, MBM, pedha,
   ghee, paneer and khowa.
8. The major cost components were variable costs, which accounted for 91.10 per cent,
   91.55 per cent and 91.20 per cent in the case of co-operative, private large scale and
   private small scale units, respectively and the rest was made up by fixed costs. The
   major items, which constituted the variable costs in processing of milk, were raw milk,
   packing, power and other raw materials. The private (large and small scale) sector
   units, in order to earn more reasonable profits has to make effects of reduce cost per
   unit of processed product.
9. Gross returns from one tonne of milk was Rs. 0.18 lakh, Rs. 0.17 lakh and Rs. 0.18
   lakh in co-operative, private large scale sector and private small scale sector unit
   respectively. In all the units, main product which constituted in sales realization was
   liquid milk.
10. The analysis of costs and returns of processing indicated that on an average, the total
    cost amounted to Rs. 14963.25, Rs. 16439.38 and Rs. 16149.99 per tonne of milk
    processed in co-operative, private small scale and private large scale units,
    respectively. Further, the average gross returns per tonne of milk processed was
    highest in co-operative unit with Rs. 18349.15, followed by private small scale units
    (Rs. 17968.56) and private large scale units (Rs. 16841.04), respectively. The B:C
    ratio was also highest in co-operative unit (1.23), followed by private small scale
    units (1.11) and private large scale units (1.02).
11. In terms of comparative prices of processed products, in co-operative unit, the M.R.P
    was highest in ghee, followed by butter, S.M.P, pedha since the margin was also very
    high in these products. In private large scale units, the margin was high in ghee,
    followed by Mysorepak, butter, pedha, paneer and other products. In private small
    scale units, there was no margin for any of the products, hence the billing itself
    formed the M.R.P. The least margin was observed in case of milk in all the sectors.
12. In case of cost of marketing of processed products, commission charges accounted
    for maximum in the case of co-operative and private large scale units, followed by
    other costs like transportation cost, carriage and hamali charges and advertisement
    expenses. The marketing costs of private small scale units was very less compared
    to that of co-operative and private large scale units. Further it can be seen that the
    total cost of marketing of processed products was highest in co-operative unit,
    followed by private large scale and private small scale units, respectively. This was
    because of more commission charges by both co-operative and private large scale
    sector and also accompanied by high transportation costs incurred by both the units,
    which was not the case in private small scale sector.
    13. The constraints observed in milk processing in case of co-operative unit was
        processing, whereas in case of private (large and small scale) units, the main
        problem was finance which affected their processing capacities.
        From the above analysis, it can be concluded that among the three sectors studied
the performance efficiency of the co-operative sector unit was superior than that of the private
(large and small scale) units.

6.3       POLICY IMPLICATIONS
    1. The results indicated that the investment in private processing units was quite high
       compared to the co-operative sector unit. The performance with respect to economies
       of scale can be realized through additional investment. The co-operative sector unit
       should update the production technologies through additional investment and modern
       equipments and improve efficiency of production.
    2. The procurement pattern of raw milk by the private sector unit involved many
       intermediaries like contractors and sub-contractors. So, the private sector units
       should evolve a system by reducing the number of intermediaries organizing by
       farmers producer groups for better procurement.
    3. The installed capacity of private sector unit is higher than the co-operative sector unit
       but the percentage capacity utilization is less in the private sector unit. So, the private
       sector unit should accelerate their capacity utilization by increasing procurement of
       raw milk, adequate planning and increased market sales.
    4. The number of by products produced in the private sector unit is comparatively less
       than co-operative sector unit. So, the private unit should increase product mix through
       product diversification to increase their sales realization.
    5. The results of the study have revealed that private small scale units are realizing
       higher returns for their products due to high demand from the customers due to high
       quality and good services. The units may be provided with additional funds to
       produce more processed products to meet the future demands.
    6. The private small scale units are producing certain products of local demand and thus
       increasing their sales realization and inturn net profit. The co-operatives as well as
       private large scale units can think of establishing sub units exclusively for producing
       the locally demanded products like Shrikand and cream which will not only add up to
       their revenue but also bring product competitiveness in the local market.
    7. High sales tax has become a serious impediment for promotion of sale of some of the
       products. Inorder to maintain the tempo of operation flood and white revolution
       encouragement from the side of the policy is highly imperative. Policy makers think in
       these like to sustain the growth of dairy industry.
    8. Finance has become a serious bottleneck in development of dairy industry. The
       sector itself being of prime in nature, the subsidy facilities can be extended to the
       private dairy units also to augment the flow of dairy industry in right direction.
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                                        APPENDIX
                                          APPENDIX I


      Demand management of Milk in co-operative and private sector processing units


                               Quantity    Processed    Quantity      Sold     Quantity   Quantity
Sl.
                     Month    Processed       Value       Sold       Value      Excess    Deficit
No.       Unit
                               (tonnes)     (lakh Rs)   (tonnes)   (lakh Rs)   (Tonnes)   (Tonnes)
                      Jan      1825.95        272.79    1659.96      247.99     166.00        -
                      Feb      1648.11        246.41    1526.03      228.16     122.08        -
                      Mar      1681.27        256.44    1715.58      261.68         -       34.31
                      Apr      1407.42        196.42    1563.80      218.24         -      156.38
                      May      1406.73        195.87    1654.98      230.44         -      248.25
                      Jun      1269.87        139.12    1548.63      169.66         -      278.75
      Co-
1                     Jul      1497.52        255.47    1593.10      271.78         -       95.59
      operative
                      Aug      1592.33        223.90    1624.83      228.47         -       32.50
                      Sep      1607.12        226.12    1575.61      221.69      31.51        -
                      Oct      1790.24        252.50    1642.42      231.65     147.82        -
                      Nov      1746.39        245.45    1559.27      219.15     187.11        -
                      Dec      1811.77        263.67    1617.65      235.42     194.12        -
                    Average    1607.06        231.18    1606.82      230.36     141.44     140.96
                      Jan       859.24        131.87     781.12      119.89      78.11        -
                      Feb       778.64        119.68     720.97      110.82      57.68        -
                      Mar       690.32        103.65     750.35      112.66         -       60.03
                      Apr       611.95         95.42     695.40      108.43         -       83.45
                      May       598.16         93.69     703.72      110.22         -      105.56
      Private         Jun       665.75        102.74     832.18      128.43         -      166.44
2     large scale     Jul       755.12        116.66     770.53      119.04         -       15.41
      units           Aug       757.35        117.57     742.50      115.27      14.85        -
                      Sep       755.31        118.81     719.34      113.15      35.97        -
                      Oct       879.99        132.05     799.99      120.04      80.00        -
                      Nov      1028.98        160.38     935.44      145.80      93.54        -
                      Dec      1116.57        182.09     996.93      162.58     119.63        -
                    Average     791.45        122.88     787.37      122.19      68.54      86.18
                      Jan        18.03         2.82       16.93       2.65        1.10        -
                      Feb        15.30         2.41       14.78       2.33        0.52        -
                      Mar        19.13         3.05       19.82       3.16          -       0.69
                      Apr        18.42         2.94       19.09       3.05          -       0.67
                      May        12.35         2.05       13.07       2.17          -       0.72
      Private         Jun        9.06          1.47        9.49       1.54          -       0.43
3     small scale     Jul        9.60          1.56        9.84       1.60          -       0.25
      units           Aug        10.26         1.66       10.31       1.67          -       0.05
                      Sep        10.41         1.71       10.47       1.72          -       0.05
                      Oct        19.32         3.07       19.03       3.03        0.29        -
                      Nov        19.70         3.13       19.03       3.02        0.67        -
                      Dec        18.36         2.87       17.40       2.72        0.96        -
                    Average      14.99         2.40       14.94       2.39        0.71      0.41
                                          APPENDIX II

      Demand management of Curd in co-operative and private sector processing units


                                                                   Sold
                               Quantity    Processed    Quantity           Quantity
Sl.                                                                Value              Quantity
                    Month     Processed       Value       Sold              Excess
No.      Unit                                                      (lakh               Deficit
                               (tonnes)     (lakh Rs)   (tonnes)           (Tonnes)
                                                                    Rs)               (Tonnes)
                      Jan      307.59        55.37      279.62     50.33    27.96          -
                      Feb      310.98        55.98      287.94     51.83    23.04          -
                      Mar      423.24        76.18      431.87     77.74       -         8.64
                      Apr      230.03        41.41      255.59     46.01       -        25.56
                      May      213.16        38.37      250.77     45.14       -        37.62
                      Jun      142.59        25.67      173.89     31.30       -        31.30
      Co-
1                     Jul      177.73        31.99      189.07     34.03       -        11.34
      operative
                      Aug      216.36        38.94      220.78     39.74       -         4.42
                      Sep      212.23        38.20      208.07     37.45     4.16          -
                      Oct      295.35        53.16      270.97     48.77    24.39          -
                      Nov      326.36        58.74      291.39     52.45    34.97          -
                      Dec      314.24        56.56      280.57     50.50    33.67          -
                    Average    264.15        47.55      261.71     47.11    24.70       19.81
                      Jan      122.24        24.45      111.13     22.23    11.11          0
                      Feb      120.35        24.07      111.43     22.29     8.92          0
                      Mar      109.50        21.90      119.02     23.80       -         9.52
                      Apr      111.00        22.20      126.13     25.23       -        15.14
                      May      62.06         12.15       73.02     14.29       -        10.95
      Private         Jun       47.12        9.02        58.89     11.28       -        11.78
2     large scale     Jul      43.38         8.34        44.27      8.51       -         0.89
      units           Aug       54.61        10.58       53.54     10.37     1.07          -
                      Sep       55.24        10.66       52.61     10.15     2.63          -
                      Oct      74.57         14.33       67.79     13.03     6.78          -
                      Nov       88.29        16.89       80.26     15.35     8.03          -
                      Dec       89.96        17.19       80.32     15.35     9.64          -
                    Average     74.68        14.55       74.46     14.51     6.36       8.99
                      Jan        1.63        0.33         1.53      0.31     0.10          -
                      Feb        1.46        0.29         1.41      0.28     0.05          -
                      Mar        1.50        0.30         1.55      0.31       -         0.05
                      Apr        1.50        0.30         1.55      0.31       -         0.05
                      May        1.45        0.29         1.53      0.31       -         0.08
      Private         Jun        1.36        0.27         1.43      0.29       -         0.06
3     small scale     Jul        1.42        0.28         1.46      0.29       -         0.04
      units           Aug        1.45        0.29         1.46      0.29       -         0.01
                      Sep        1.56        0.31         1.57      0.31       -         0.01
                      Oct        1.60        0.32         1.57      0.31     0.02          -
                      Nov        1.61        0.32         1.56      0.31     0.05          -
                      Dec        1.65        0.33         1.57      0.31     0.09          -
                    Average      1.52        0.30         1.51      0.30     0.06        0.04
                                           APPENDIX III


      Demand management of SMP in co-operative and private sector processing units


                                                                     Sold
                                Quantity    Processed     Quantity           Quantity
Sl.                                                                  Value              Quantity
                     Month     Processed       Value        Sold              Excess
No.       Unit                                                       (lakh               Deficit
                                (tonnes)     (lakh Rs)    (tonnes)           (Tonnes)
                                                                      Rs)               (Tonnes)
                       Jan       54.73        77.13        49.76     70.11     4.98         -
                       Feb       12.41        17.49        11.49     16.19     0.92         -
                       Mar       34.98        49.28        35.69     50.29       -        0.71
                       Apr        0.74         1.04         0.82      1.15       -        0.08
                       May        0.74         1.04         0.87      1.22       -        0.13
                       Jun        0.27         0.38         0.33      0.47       -        0.06
       Co-
1                      Jul       21.19        29.86        22.54     31.77       -        1.35
       operative
                       Aug       28.54        40.22        29.13     41.04       -        0.58
                       Sep       16.45        23.18        16.13     22.72     0.32         -
                       Oct       35.70        50.30        32.75     46.15     2.95         -
                       Nov       51.46        72.52        45.95     64.75     5.51         -
                       Dec       58.07        81.83        51.85     73.06     6.22         -
                     Average     26.27        37.02        24.77     34.91     3.48       0.49
                       Jan          -            -            -         -        -          -
                       Feb          -            -            -         -        -          -
                       Mar          -            -            -         -        -          -
                       Apr          -            -            -         -        -          -
                       May          -            -            -         -        -          -
       Private         Jun          -            -            -         -        -          -
2      large scale     Jul          -            -            -         -        -          -
       units           Aug          -            -            -         -        -          -
                       Sep          -            -            -         -        -          -
                       Oct          -            -            -         -        -          -
                       Nov          -            -            -         -        -          -
                       Dec          -            -            -         -        -          -
                     Average        -            -            -         -        -          -
                       Jan          -            -            -         -        -          -
                       Feb          -            -            -         -        -          -
                       Mar          -            -            -         -        -          -
                       Apr          -            -            -         -        -          -
                       May          -            -            -         -        -          -
       Private         Jun          -            -            -         -        -          -
3      small scale     Jul          -            -            -         -        -          -
       units           Aug          -            -            -         -        -          -
                       Sep          -            -            -         -        -          -
                       Oct          -            -            -         -        -          -
                       Nov          -            -            -         -        -          -
                       Dec          -            -            -         -        -          -
                     Average        -            -            -         -        -          -
                                           APPENDIX IV



      Demand management of Butter in co-operative and private sector processing units


                                                                    Sold
                                Quantity    Processed    Quantity            Quantity
Sl.                                                                 Value               Quantity
                     Month     Processed       Value       Sold               Excess
No.       Unit                                                      (lakh                Deficit
                                (tonnes)     (lakh Rs)   (tonnes)            (Tonnes)
                                                                     Rs)                (Tonnes)
                      Jan        28.61        43.43       26.01     39.48      2.60         -
                      Feb        29.48        44.74       27.29     41.43      2.18         -
                      Mar        21.46        32.58       21.90     33.24        -        0.43
                      Apr        12.47        18.93       13.86     21.04        -        1.39
                      May         8.65        13.13       10.17     15.44        -        1.52
                      Jun         8.74        13.27       10.66     16.19        -        1.91
      Co-
1                     Jul         4.10         6.22        4.36      6.62        -        0.26
      operative
                      Aug        12.98        19.71       13.25     20.11        -        0.26
                      Sep        17.79        27.00       17.44     26.47      0.35         -
                      Oct        21.44        32.54       19.67     29.85      1.77         -
                      Nov        33.81        51.32       30.19     45.82      3.62         -
                      Dec        34.54        52.43       30.84     46.81      3.70         -
                    Average      19.51        29.61       18.80     28.54      2.37       0.96
                      Jan         0.56         0.70        0.51      0.64      0.05         -
                      Feb         0.43         0.53        0.39      0.49      0.03         -
                      Mar         0.29         0.36        0.31      0.39        -        0.02
                      Apr         0.39         0.49        0.44      0.56        -        0.05
                      May         0.44         0.55        0.52      0.65        -        0.07
      Private         Jun         0.41         0.51        0.51      0.64        -        0.10
2     large scale     Jul         0.68         0.85        0.70      0.87        -        0.01
      units           Aug         0.96         1.21        0.95      1.18      0.02         -
                      Sep         0.71         0.89        0.68      0.85      0.03         -
                      Oct         3.42         4.27        3.11      3.88      0.31         -
                      Nov         2.98         3.72        2.71      3.38      0.27         -
                      Dec         3.72         4.65        3.32      4.15      0.40         -
                    Average       1.25         1.56        1.18      1.47      0.16       0.05
                      Jan         0.30         0.46        0.29      0.43      0.02         -
                      Feb         0.27         0.41        0.26      0.40      0.01         -
                      Mar         0.29         0.43        0.30      0.45        -        0.01
                      Apr         0.28         0.42        0.29      0.44        -        0.01
                      May         0.26         0.40        0.28      0.42        -        0.01
      Private         Jun         0.25         0.37        0.26      0.39        -        0.01
3     small scale     Jul         0.25         0.38        0.26      0.39        -        0.01
      units           Aug         0.26         0.39        0.26      0.40        -          -
                      Sep         0.28         0.43        0.29      0.43        -          -
                      Oct         0.29         0.45        0.29      0.44        -          -
                      Nov         0.30         0.46        0.29      0.45      0.01         -
                      Dec         0.31         0.46        0.29      0.44      0.02         -
                    Average       0.28         0.42        0.28      0.42      0.01       0.01
                                          APPENDIX V


      Demand management of MBM in co-operative and private sector processing units


                               Quantity   Processed    Quantity      Sold     Quantity
Sl.                                                                                      Quantity
                    Month     Processed      Value       Sold       Value      Excess
No.       Unit                                                                            Deficit
                               (tonnes)    (lakh Rs)   (tonnes)   (lakh Rs)   (Tonnes)
                                                                                         (Tonnes)
                      Jan       19.01        2.85      17.28        2.59        1.73         -
                      Feb       34.19        5.13      31.65        4.75        2.53         -
                      Mar       59.99        9.00      61.21        9.18          -        1.22
                      Apr       24.66       3.70       27.40        4.11          -        2.74
                      May       21.53       3.23       25.33        3.80          -        3.80
                      Jun       4.27         0.64       5.21        0.78          -        0.94
      Co-
1                     Jul       3.21         0.48       3.42        0.51          -        0.21
      operative
                      Aug       2.42         0.36       2.47        0.37          -        0.05
                      Sep       14.41        2.16      14.12        2.12        0.28         -
                      Oct       14.71        2.21      13.49        2.02        1.21         -
                      Nov       12.38        1.86      11.05        1.66        1.33         -
                      Dec       12.18        1.83      10.87        1.63        1.30         -
                    Average     18.58        2.79      18.62        2.79        1.40       1.49
                      Jan       13.03        1.95      11.85        1.78        1.18         -
                      Feb      317.09       47.56      293.60      44.04       23.49         -
                      Mar      116.08       17.41      126.17      18.93          -        10.09
                      Apr      164.81       24.72      187.28      28.09          -        22.47
                      May       67.32       10.01      79.20       11.78          -        11.88
      Private         Jun       11.63        1.70      14.54        2.12          -        2.91
2     large scale     Jul       2.84         0.43       2.90        0.44          -        0.06
      units           Aug       3.49         0.52       3.42        0.51        0.07         -
                      Sep       3.22         0.48       3.07        0.46        0.15         -
                      Oct       10.41        1.56       9.46        1.42        0.95         -
                      Nov       10.43        1.56       9.48        1.42        0.95         -
                      Dec       5.35         0.79       4.78        0.70        0.57         -
                    Average     54.00        8.08      56.28        8.42        3.49       8.89
                      Jan       0.18         0.03       0.17        0.03        0.01         -
                      Feb       0.19         0.03       0.18        0.03        0.01         -
                      Mar       0.18         0.03       0.19        0.03          -        0.01
                      Apr       0.18         0.03       0.19        0.03          -        0.01
                      May       0.18         0.03       0.19        0.03          -        0.01
      Private         Jun         -            -          -           -           -          -
3     small scale     Jul         -            -          -           -           -          -
      units           Aug         -            -          -           -           -          -
                      Sep         -            -          -           -           -          -
                      Oct         -            -          -           -           -          -
                      Nov         -            -          -           -           -          -
                      Dec         -            -          -           -           -          -
                    Average     0.18         0.03       0.18        0.03        0.01       0.01
                                           APPENDIX VI

      Demand management of Pedha in co-operative and private sector processing units


                                                                    Sold
                                Quantity   Processed     Quantity           Quantity
Sl.                                                                 Value              Quantity
                     Month     Processed      Value        Sold              Excess
No.       Unit                                                      (lakh               Deficit
                                (tonnes)    (lakh Rs)    (tonnes)           (Tonnes)
                                                                     Rs)               (Tonnes)
                       Jan       15.13       17.53        13.76     15.93     1.38         -
                       Feb       12.01       13.91        11.12     12.88     0.89         -
                       Mar       13.42       15.55        13.69     15.86       -        0.27
                       Apr       10.49       12.15        11.66     13.50       -        1.17
                       May       11.04       12.78        12.98     15.04       -        1.95
                       Jun        9.92       11.50        12.10     14.02       -        2.18
       Co-
1                      Jul       12.03       13.93        12.79     14.82       -        0.77
       operative
                       Aug       13.44       15.57        13.72     15.89       -        0.27
                       Sep       16.37       18.96        16.05     18.59     0.32         -
                       Oct       16.88       19.56        15.49     17.94     1.39         -
                       Nov       14.21       16.46        12.69     14.70     1.52         -
                       Dec       15.55       18.01        13.88     16.08     1.67         -
                     Average     13.37       15.49        13.33     15.44     1.19       1.10
                       Jan        0.04        0.04         0.03      0.04       -          -
                       Feb        0.03        0.04         0.03      0.03       -          -
                       Mar        0.02        0.02         0.02      0.03       -          -
                       Apr       0.05         0.06         0.06      0.07       -        0.01
                       May        0.02        0.02         0.02      0.03       -          -
       Private         Jun        0.05        0.06         0.06      0.07       -        0.01
2      large scale     Jul        0.04        0.05         0.04      0.05       -          -
       units           Aug        0.07        0.09         0.07      0.08       -          -
                       Sep        0.06        0.07         0.05      0.06       -          -
                       Oct        0.25        0.29         0.22      0.27     0.02         -
                       Nov        0.24        0.28         0.22      0.26     0.02         -
                       Dec        0.07        0.09         0.07      0.08     0.01         -
                     Average      0.10        0.11         0.09      0.11     0.01       0.01
                       Jan          -           -            -         -        -          -
                       Feb          -           -            -         -        -          -
                       Mar          -           -            -         -        -          -
                       Apr          -           -            -         -        -          -
                       May          -           -            -         -        -          -
       Private         Jun          -           -            -         -        -          -
3      small scale     Jul          -           -            -         -        -          -
       units           Aug          -           -            -         -        -          -
                       Sep          -           -            -         -        -          -
                       Oct          -           -            -         -        -          -
                       Nov          -           -            -         -        -          -
                       Dec          -           -            -         -        -          -
                     Average        -           -            -         -        -          -
                                          APPENDIX VII


Demand management of Lassi in co-operative and private sector processing units


                                                                    Sold
                               Quantity    Processed     Quantity           Quantity
Sl.                                                                 Value               Quantity
                     Month    Processed       Value        Sold              Excess
No.       Unit                                                      (lakh                Deficit
                               (tonnes)     (lakh Rs)    (tonnes)           (Tonnes)
                                                                     Rs)                (Tonnes)
                      Jan        12.67        3.17        11.52      2.88        1.15        -
                      Feb        22.79        5.70        21.10      5.28        1.69        -
                      Mar        39.99         10         40.81     10.20          -       0.82
                      Apr        16.44        4.11        18.26     4.57           -       1.83
                      May        14.35        3.59        16.89     4.22           -       2.53
                      Jun         2.85        0.71         3.47      0.87          -       0.63
      Co-
  1                   Jul         2.14        0.54         2.28      0.57          -       0.14
      operative
                      Aug         1.61        0.40         1.64      0.41          -       0.03
                      Sep         9.60        2.40         9.42      2.35        0.19        -
                      Oct         9.81        2.45         9.00      2.25        0.81        -
                      Nov         8.25        2.06         7.37      1.84        0.88        -
                      Dec         8.12        2.03         7.25      1.81        0.87        -
                    Average      12.39        3.10        12.42      3.10        0.93      1.00
                      Jan        24.84        6.21        22.58      5.65        2.26        -
                      Feb        32.39        8.10        29.99      7.50        2.40        -
                      Mar        58.57       14.64        63.67     15.92          -       5.09
                      Apr        78.97       19.74        89.74     22.44          -      10.77
                      May        66.40       16.60        78.12     19.53          -      11.72
      Private         Jun        14.65        3.66        18.31      4.58          -       3.66
  2   large scale     Jul         7.41        1.85         7.56      1.89          -       0.15
      units           Aug         9.60        2.40         9.41      2.35        0.19        -
                      Sep        11.13        2.78        10.60     2.65         0.53        -
                      Oct        19.34        4.84        17.58      4.40        1.76        -
                      Nov        21.49        5.37        19.54     4.88         1.95        -
                      Dec        21.27        5.32        18.99     4.75         2.28        -
                    Average      30.51        7.63        32.17      8.04        1.62      6.28
                      Jan         0.43        0.11         0.40      0.10        0.03        -
                      Feb         0.39        0.10         0.38      0.09        0.01        -
                      Mar         0.40        0.10         0.41      0.10          -       0.01
                      Apr         0.39        0.10         0.41      0.10          -       0.01
                      May         0.39        0.10         0.41      0.10          -       0.02
      Private         Jun           -           -            -         -           -         -
  3   small scale     Jul           -           -            -         -           -         -
      units           Aug           -           -            -         -           -         -
                      Sep           -           -            -         -           -         -
                      Oct           -           -            -         -           -         -
                      Nov           -           -            -         -           -         -
                      Dec           -           -            -         -           -         -
                    Average       0.40        0.10         0.40      0.10        0.02      0.02
                                           APPENDIX VIII


      Demand management of Ghee in co-operative and private sector processing units


                                                                    Sold
                                Quantity    Processed    Quantity           Quantity
Sl.                                                                 Value              Quantity
                     Month     Processed       Value       Sold              Excess
No.        Unit                                                     (lakh               Deficit
                                (tonnes)     (lakh Rs)   (tonnes)           (Tonnes)
                                                                     Rs)               (Tonnes)
                       Jan       13.56        24.03        12.32    21.84      1.23        -
                       Feb       12.55        22.24        11.62    20.59      0.93        -
                       Mar       24.62        43.64        25.12    44.53        -       0.50
                       Apr        3.38         5.99         3.75     6.65        -       0.37
                       May        3.23         5.73         3.80     6.74        -       0.57
                       Jun        1.72         3.05         2.10     3.72        -       0.38
       Co-
1                      Jul       10.12        17.94        10.76    19.08        -       0.65
       operative
                       Aug        1.25         2.21         1.27     2.25        -       0.03
                       Sep       10.02        17.77         9.83    17.42      0.20        -
                       Oct       12.98        23.01        11.91    21.11      1.07        -
                       Nov       20.93        37.10        18.69    33.13      2.24        -
                       Dec       12.57        22.28        11.22    19.90      1.35        -
                     Average     10.58        18.75        10.20    18.08      1.17      0.42
                       Jan       14.99        24.73        13.62    22.48      1.36        -
                       Feb       14.02        23.14        12.98    21.42      1.04        -
                       Mar       14.75        24.33        16.03    26.45        -       1.28
                       Apr       11.26        18.58        12.80    21.11        -       1.54
                       May       11.79        19.45        13.87    22.88        -       2.08
       Private         Jun       12.57        20.73        15.71    25.92        -       3.14
2      large scale     Jul       16.88        27.85        17.23    28.42        -       0.34
       units           Aug       12.80        21.12        12.55    20.70      0.25        -
                       Sep       19.96        32.93        19.01    31.36      0.95        -
                       Oct       17.52        28.91        15.93    26.28      1.59        -
                       Nov       16.22        26.76        14.75    24.33      1.47        -
                       Dec       13.83        22.82        12.35    20.38      1.48        -
                     Average     14.71        24.28        14.73    24.31      1.16      1.68
                       Jan        0.52         1.10         0.49     1.03      0.03        -
                       Feb        0.47         0.99         0.45     0.95      0.02        -
                       Mar        0.52         1.09         0.54     1.13        -       0.02
                       Apr        0.53         1.11         0.55     1.15        -       0.02
                       May        0.46         0.96         0.49     1.02        -       0.03
       Private         Jun        0.44         0.93         0.46     0.97        -       0.02
3      small scale     Jul        0.45         0.95         0.47     0.98        -       0.01
       units           Aug        0.47         0.99         0.48     1.00        -         -
                       Sep        0.51         1.07         0.51     1.07        -         -
                       Oct        0.54         1.14         0.54     1.12      0.01        -
                       Nov        0.55         1.16         0.53     1.12      0.02        -
                       Dec        0.55         1.15         0.52     1.09      0.03        -
                     Average      0.50         1.05         0.50     1.05      0.02      0.01
                                            APPENDIX IX


      Demand management of Paneer in co-operative and private sector processing units


                                                                   Sold
                                Quantity   Processed    Quantity            Quantity
Sl.                                                                Value                Quantity
                     Month     Processed      Value       Sold               Excess
No.       Unit                                                     (lakh                 Deficit
                                (tonnes)    (lakh Rs)   (tonnes)            (Tonnes)
                                                                    Rs)                 (Tonnes)
                       Jan       0.64         0.74        0.58     0.67        0.06         -
                       Feb       0.57         0.65        0.53     0.60        0.04         -
                       Mar       0.59         0.68        0.60     0.69          -        0.01
                       Apr       0.44         0.51        0.49     0.57          -        0.05
                       May       0.51         0.58        0.60     0.68          -        0.09
                       Jun       0.47         0.54        0.57     0.66          -        0.10
          Co-
1                      Jul       0.44         0.51        0.47     0.54          -        0.03
        operative
                       Aug       0.54         0.62        0.55     0.63          -        0.01
                       Sep       0.62         0.72        0.61     0.70        0.01         -
                       Oct       0.70         0.80        0.64     0.74        0.06         -
                       Nov       0.65         0.75        0.58     0.67        0.07         -
                       Dec       0.69         0.79        0.61     0.70        0.07         -
                     Average     0.57         0.66        0.57     0.65        0.05       0.05
                       Jan       0.95         1.10        0.87     1.00        0.09         -
                       Feb       1.47         1.69        1.36     1.56        0.11         -
                       Mar       1.18         1.35        1.28     1.47          -        0.10
                       Apr       1.72         1.98        1.95     2.25          -        0.23
                       May       1.17         1.34        1.37     1.58          -        0.21
         Private       Jun       1.56         1.79        1.94     2.24          -        0.39
2      large scale     Jul       1.79         2.06        1.82     2.10          -        0.04
          units        Aug       2.97         3.41        2.91     3.35        0.06         -
                       Sep       3.61         4.15        3.44     3.95        0.17         -
                       Oct       1.19         1.36        1.08     1.24        0.11         -
                       Nov       1.35         1.55        1.22     1.41        0.12         -
                       Dec       1.14         1.31        1.01     1.17        0.12         -
                     Average     1.67         1.92        1.69     1.94        0.11       0.19
                       Jan       0.16         0.23        0.15     0.21        0.01         -
                       Feb       0.15         0.21        0.14     0.20        0.01         -
                       Mar       0.15         0.21        0.15     0.21          -        0.01
                       Apr       0.15         0.21        0.15     0.22          -        0.01
                       May       0.14         0.19        0.15     0.20          -        0.01
         Private       Jun       0.12         0.17        0.13     0.18          -        0.01
3      small scale     Jul       0.12         0.17        0.13     0.18          -          -
          units        Aug       0.13         0.18        0.13     0.18          -          -
                       Sep       0.14         0.19        0.14     0.19          -          -
                       Oct       0.16         0.22        0.15     0.21          -          -
                       Nov       0.16         0.22        0.15     0.21        0.01         -
                       Dec       0.16         0.23        0.15     0.21        0.01         -
                     Average     0.14         0.20        0.14     0.20        0.01       0.01
                                           APPENDIX X

      Demand management of khowa in co-operative and private sector processing units


                                                                   Sold
                                Quantity   Processed    Quantity            Quantity
Sl.                                                                Value               Quantity
                     Month     Processed      Value       Sold               Excess
No.       Unit                                                     (lakh                Deficit
                                (tonnes)    (lakh Rs)   (tonnes)            (Tonnes)
                                                                    Rs)                (Tonnes)
                       Jan       0.18         0.24       0.17      0.22       0.02         -
                       Feb       0.26         0.33       0.24      0.31       0.02         -
                       Mar       0.12         0.16       0.12      0.16         -          -
                       Apr       0.14         0.18       0.16      0.20         -        0.02
                       May       0.44         0.58       0.52      0.68         -        0.08
                       Jun       0.13         0.17       0.16      0.21         -        0.03
       Co-
1                      Jul       0.07         0.09       0.08      0.10         -        0.01
       operative
                       Aug       0.09         0.11       0.09      0.11         -          -
                       Sep       0.08         0.10       0.08      0.10         -          -
                       Oct       0.07         0.08       0.06      0.08       0.01         -
                       Nov       0.28         0.36       0.25      0.32       0.03         -
                       Dec       0.16         0.20       0.14      0.18       0.02         -
                     Average     0.17         0.22       0.17      0.22       0.01       0.02
                       Jan       0.22         0.22       0.20      0.20       0.02         -
                       Feb       0.20         0.20       0.18      0.18       0.01         -
                       Mar       0.31         0.31       0.33      0.33         -        0.03
                       Apr       0.26         0.26       0.29      0.29         -        0.04
                       May       0.25         0.25       0.30      0.30         -        0.05
       Private         Jun       0.26         0.26       0.32      0.32         -        0.06
2      large scale     Jul       0.29         0.29       0.30      0.30         -        0.01
       units           Aug       0.28         0.28       0.28      0.28       0.01         -
                       Sep       0.29         0.29       0.27      0.27       0.01         -
                       Oct       0.55         0.55       0.50      0.50       0.05         -
                       Nov       0.24         0.24       0.22      0.22       0.02         -
                       Dec       0.35         0.35       0.31      0.31       0.04         -
                     Average     0.29         0.29       0.29      0.29       0.02       0.04
                       Jan       0.73         0.88       0.69      0.83       0.04         -
                       Feb       0.68         0.81       0.65      0.79       0.02         -
                       Mar       0.68         0.82       0.70      0.84         -        0.02
                       Apr       0.69         0.83       0.72      0.86         -        0.03
                       May       0.62         0.75       0.66      0.79         -        0.04
       Private         Jun       0.60         0.72       0.63      0.75         -        0.03
3      small scale     Jul       0.59         0.70       0.60      0.72         -        0.02
       units           Aug       0.60         0.72       0.60      0.72         -          -
                       Sep       0.69         0.83       0.69      0.83         -          -
                       Oct       0.73         0.87       0.72      0.86       0.01         -
                       Nov       0.76         0.91       0.73      0.88       0.03         -
                       Dec       0.75         0.90       0.71      0.85       0.04         -
                     Average     0.68         0.81       0.68      0.81       0.03       0.02
                                           APPENDIX XI

 Demand management of Mysore pak in co-operative and private sector processing units

                                                                    Sold
                                Quantity   Processed     Quantity           Quantity
Sl.                                                                 Value              Quantity
                     Month     Processed      Value        Sold              Excess
No.       Unit                                                      (lakh               Deficit
                                (tonnes)    (lakh Rs)    (tonnes)           (Tonnes)
                                                                     Rs)               (Tonnes)
                       Jan         -            -           -         -         -         -
                       Feb         -            -           -         -         -         -
                       Mar         -            -           -         -         -         -
                       Apr         -            -           -         -         -         -
                       May         -            -           -         -         -         -
                       Jun         -            -           -         -         -         -
      Co-
1                      Jul         -            -           -         -         -         -
      operative
                       Aug         -            -           -         -         -         -
                       Sep         -            -           -         -         -         -
                       Oct         -            -           -         -         -         -
                       Nov         -            -           -         -         -         -
                       Dec         -            -           -         -         -         -
                     Average       -            -           -         -         -         -
                       Jan         -            -           -         -         -         -
                       Feb         -            -           -         -         -         -
                       Mar         -            -           -         -         -         -
                       Apr         -            -           -         -         -         -
                       May         -            -           -         -         -         -
      Private unit     Jun         -            -           -         -         -         -
2     (large           Jul         -            -           -         -         -         -
      scale)           Aug       0.09         0.13        0.08      0.13        -         -
                       Sep       0.14         0.21        0.13      0.20      0.01        -
                       Oct       0.51         0.76        0.46      0.70      0.05        -
                       Nov       0.59         0.88        0.53      0.80      0.05        -
                       Dec       0.24         0.36        0.22      0.33      0.03        -
                     Average     0.31         0.47        0.29      0.43      0.03        -
                       Jan         -            -           -         -         -         -
                       Feb         -            -           -         -         -         -
                       Mar         -            -           -         -         -         -
                       Apr         -            -           -         -         -         -
                       May         -            -           -         -         -         -
      Private unit     Jun         -            -           -         -         -         -
3     (small           Jul         -            -           -         -         -         -
      scale)           Aug         -            -           -         -         -         -
                       Sep         -            -           -         -         -         -
                       Oct         -            -           -         -         -         -
                       Nov         -            -           -         -         -         -
                       Dec         -            -           -         -         -         -
                     Average       -            -           -         -         -         -
                                          APPENDIX XII


      Demand management of Cream in co-operative and private sector processing units


                                                                    Sold
                               Quantity    Processed     Quantity           Quantity
Sl.                                                                 Value              Quantity
                    Month     Processed       Value        Sold              Excess
No.       Unit                                                      (lakh               Deficit
                               (tonnes)     (lakh Rs)    (tonnes)           (Tonnes)
                                                                     Rs)               (Tonnes)
                      Jan         -             -           -         -         -          -
                      Feb         -             -           -         -         -          -
                      Mar         -             -           -         -         -          -
                      Apr         -             -           -         -         -          -
                      May         -             -           -         -         -          -
                      Jun         -             -           -         -         -          -
      Co-
1                     Jul         -             -           -         -         -          -
      operative
                      Aug         -             -           -         -         -          -
                      Sep         -             -           -         -         -          -
                      Oct         -             -           -         -         -          -
                      Nov         -             -           -         -         -          -
                      Dec         -             -           -         -         -          -
                    Average       -             -           -         -         -          -
                      Jan         -             -           -         -         -          -
                      Feb         -             -           -         -         -          -
                      Mar         -             -           -         -         -          -
                      Apr         -             -           -         -         -          -
                      May         -             -           -         -         -          -
      Private         Jun         -             -           -         -         -          -
2     unit (large     Jul         -             -           -         -         -          -
      scale)          Aug         -             -           -         -         -          -
                      Sep         -             -           -         -         -          -
                      Oct         -             -           -         -         -          -
                      Nov         -             -           -         -         -          -
                      Dec         -             -           -         -         -          -
                    Average       -             -           -         -         -          -
                      Jan       0.16          0.22        0.15      0.21      0.01         -
                      Feb       0.15          0.20        0.14      0.19        -          -
                      Mar       0.15          0.20        0.15      0.21        -        0.01
                      Apr       0.15          0.20        0.15      0.20        -        0.01
                      May       0.13          0.18        0.14      0.19        -        0.01
      Private         Jun       0.12          0.17        0.13      0.17        -        0.01
3     unit (small     Jul       0.13          0.17        0.13      0.18        -          -
      scale)          Aug       0.12          0.17        0.13      0.17        -          -
                      Sep       0.15          0.20        0.15      0.20        -          -
                      Oct       0.16          0.21        0.15      0.21        -          -
                      Nov       0.16          0.21        0.15      0.20        -          -
                      Dec       0.16          0.22        0.15      0.21      0.01         -
                    Average     0.15          0.20        0.15      0.20      0.01       0.01
                                            APPENDIX XIII


      Demand management of Shrikand in co-operative and private sector processing units


                                 Quantity    Processed    Quantity      Sold     Quantity
Sl.                                                                                         Quantity
                      Month     Processed       Value       Sold       Value      Excess
No.        Unit                                                                              Deficit
                                 (tonnes)     (lakh Rs)   (tonnes)   (lakh Rs)   (Tonnes)
                                                                                            (Tonnes)
                        Jan         -             -           -          -           -          -
                        Feb         -             -           -          -           -          -
                        Mar         -             -           -          -           -          -
                        Apr         -             -           -          -           -          -
                        May         -             -           -          -           -          -
                        Jun         -             -           -          -           -          -
       Co-
1                       Jul         -             -           -          -           -          -
       operative
                        Aug         -             -           -          -           -          -
                        Sep         -             -           -          -           -          -
                        Oct         -             -           -          -           -          -
                        Nov         -             -           -          -           -          -
                        Dec         -             -           -          -           -          -
                      Average       -             -           -          -           -          -
                        Jan         -             -           -          -           -          -
                        Feb         -             -           -          -           -          -
                        Mar         -             -           -          -           -          -
                        Apr         -             -           -          -           -          -
                        May         -             -           -          -           -          -
       Private unit     Jun         -             -           -          -           -          -
2      (large           Jul         -             -           -          -           -          -
       scale)           Aug         -             -           -          -           -          -
                        Sep         -             -           -          -           -          -
                        Oct         -             -           -          -           -          -
                        Nov         -             -           -          -           -          -
                        Dec         -             -           -          -           -          -
                      Average       -             -           -          -           -          -
                        Jan       0.13          0.12        0.12       0.12        0.01         -
                        Feb       0.12          0.11        0.11       0.10          -          -
                        Mar       0.12          0.11        0.12       0.12          -          -
                        Apr       0.12          0.11        0.12       0.11          -          -
                        May       0.12          0.11        0.12       0.12          -        0.01
       Private unit     Jun       0.09          0.08        0.10       0.09          -          -
3      (small           Jul       0.10          0.09        0.10       0.09          -          -
       scale)           Aug       0.10          0.09        0.10       0.09          -          -
                        Sep       0.12          0.11        0.12       0.11          -          -
                        Oct       0.13          0.12        0.12       0.11          -          -
                        Nov       0.12          0.11        0.12       0.11          -          -
                        Dec       0.13          0.12        0.12       0.11        0.01         -
                      Average     0.12          0.11        0.12       0.11        0.01       0.01
     SUPPLY CHAIN MANAGEMENT IN DAIRY
PROCESSING UNITS - A COMPARATIVE ANALYSIS OF
      PRIVATE AND CO-OPERATIVE UNITS
NITHIN R. R.                               2008                   Dr. R. A. YELEDHALLI
                                                                   MAJOR ADVISOR

                                         ABSTRACT
         Supply Chain Management (SCM) is the process of planning, implementing and
controlling the operations of the supply chain as efficiently as possible. Milk supply chains are
more concerned with controlling of milk quality and supply fluctuations. For the success of a
dairy industry, efficient supply chain management is a pre-requisite. Hence, an effort was
made to assess the management of dairy processing units in co-operative and private
sectors.
         The study revealed that both co-operative and private sector units procured highest
quantity of raw milk during flush season, due to high production. Of all the three sectors, the
co-operative unit utilized maximum installed capacity compared to other sectors. The benefit
cost ratio was also high in co-operative sector, followed by private small scale and private
large scale units. The total quantity of milk processed and demanded was highest in co-
operative unit, followed by private large scale and private small scale units. The large and
small scale private units mainly concentrated on liquid milk, where as the co-operative sector
concentrated on many product lines such as curd, butter, pedha, ghee, paneer and khowa.
          The variable costs were the major cost component in processing of milk in all the
three sectors. The total cost of marketing of processed products was highest in co-operative
unit, followed by private large scale and private small scale units, since co-operative unit had
large area of operation and well established brand loyalty. Sales realization was more in co-
operative sector unit compared to other units, because quantity sold was more. In co-
operative unit processing was the most acute problem whereas in case of private (large and
small scale) units, finance was the major problem. The major constraints observed in milk
processing units were the lack of cost effective technology, irregular power supply and higher
taxes for processed products.

				
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