A Project Report On “FINANCIAL ANALYSIS OF AMUL” (working capital management) (Business related results) at
“KAIRA DISTRICT CO-OPERATIVE MILK”
A M U L
SUBMITTED TO: Kaira district co-operative milk producers union ltd. (AMUL) SUBMITTED BY: Janvi Gohil (PGDBM-BE) Punyashree Bhatt(BBA-ITM) Bhatt(BBA-ITM)
Preface Practical Knowledge has sizeable importance in PGDM-BE programme. The theoretical or conceptual knowledge is not sufficient for the over all development; gaining practical know-how is of more importance than the theories that we study at class room level. Practical exposure helps us in implementing what all things that we have learnt theoretically. Being an PGDM-BE student I have to undergo Practical Training Programme, which is in partial fulfillment of PGDM-BE course. Concerning this, I pursued training at “Kaira District Co-operative Milk Producers’ Union Limited” popularly known as “Amul Dairy” which is located at Anand in Gujarat state. A management student or entrepreneurship student is expected to have all round knowledge of all factoids of business. Industrial training is the best option for gaining a g limpse of what business and industry is. To learn more about the practical implications of Financial Management, I pursued training at Amul. The co-operative produces all dairy products. products. It is the largest largest dairy of Asia and the second largest largest dairy in the world. world. It pasteurizes pasteurizes milk collected collected from about 1200 cooperative societies, produces butter, ghee, cheese, paneer, flavored milk, milk shakes etc. It has varieties within each product category. The cooperative society also exports a lot many products to as many as 100 countries around the world. Its major importers are the Gulf countries. The financial year 2007-08 was very good for the firm, as it broke its own set records. It is a continuously flourishing organization. The project report has been prepared from the information obtained from the firm. I have put all my efforts to prepare and present the report. All the presented information and data in the report are true to the best of my knowledge.
Preface Practical Knowledge has sizeable importance in PGDM-BE programme. The theoretical or conceptual knowledge is not sufficient for the over all development; gaining practical know-how is of more importance than the theories that we study at class room level. Practical exposure helps us in implementing what all things that we have learnt theoretically. Being an PGDM-BE student I have to undergo Practical Training Programme, which is in partial fulfillment of PGDM-BE course. Concerning this, I pursued training at “Kaira District Co-operative Milk Producers’ Union Limited” popularly known as “Amul Dairy” which is located at Anand in Gujarat state. A management student or entrepreneurship student is expected to have all round knowledge of all factoids of business. Industrial training is the best option for gaining a g limpse of what business and industry is. To learn more about the practical implications of Financial Management, I pursued training at Amul. The co-operative produces all dairy products. products. It is the largest largest dairy of Asia and the second largest largest dairy in the world. world. It pasteurizes pasteurizes milk collected collected from about 1200 cooperative societies, produces butter, ghee, cheese, paneer, flavored milk, milk shakes etc. It has varieties within each product category. The cooperative society also exports a lot many products to as many as 100 countries around the world. Its major importers are the Gulf countries. The financial year 2007-08 was very good for the firm, as it broke its own set records. It is a continuously flourishing organization. The project report has been prepared from the information obtained from the firm. I have put all my efforts to prepare and present the report. All the presented information and data in the report are true to the best of my knowledge.
Acknowledgement As a student of PGDM-BE, I have to undergo a practical Training Programme, which is in partial fulfillment of the PGDM-BE course. It was a unique experience of the field work outside the four walls of the class – room.
I am thankful to the management of “Kaira District Co-operative Milk Producers’ Union Limited” for permitting me to pursue my practical training at an esteemed organization like Amul and for providing me all the required information for preparing the report. I am very much grateful to Mr. Rajendra Parmar vice chairman, arranged all possible visits for me at AMUL.
I express a sense of gratitude to my Guide Prof. Satya Acharya sir for his help in preparing this report.I would also like to thank Mr. Rakesh Shukla - Manager ACCOUNTS who assigned us with particular project and all other senior executives:
Mr. J.K.Joshi (HUMAN RESOURCE DEPARTMENT) Mr. Sanjay Desai (PURCHASE SECTION) Ms. Vinda (sr.officer PURCHASE SECTION) Dr. Sudhakar Vaikai (Assistant Manager- ANIMAL HUSBANDRY) Mr. Salman (COMMERCIAL DEPARTMENT) Mr. Sanyam (MARKETING DEPARTMENT) Mrs. Smita (HUMAN RESOURCE DEPARTMENT)
and executives of “Amul” who have helped me in successfully completing the project by providing all the required information. I also like to thank Mr. Manoj Chauhan (CORDINATOR) of our working capital management project.
EXECUTIVE SUMMARY
Amul is a co-operative society where farmers from different places supply milk to Amul every morning as well as in the evening. Milk is collected from nearly 1232 societies. 234 BMC (Bulk Milk Coolers) are installed by Amul at various societies. All co-operative societies do not have BMC. Between 5 to 6 villages there is one BMC. Amul produces different dairy products from the milk collected by it. During Flush season it collects nearly 15 lac liters of milk per day while during the lean season it collects around 11 lac liters of milk per day. It manufactures it products using high technology equipments meeting the ISO standards. There are various departments at Amul namely, Purchase, stores, production, finance, commercial, HR. As the name suggests each department undertakes its respective functions. The Commercial department undertakes marketing activities at the local level. Only about 2 % marketing is done by Amul the rest is done by GCMMF, the marketing wing of Amul. I have chosen “Financial Statement Analysis” as a topic of my practical study on “The K.D.C.M.P.U. Ltd.,” [Amul Dairy]. Financial Management is an activity, which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of a business enterprise. . Finally, the objective behind the Preparing the project report on “Financial Statement Analysis are to know how about the v arious sides of finance Department. In addition, we can understand about the profitability, efficiency, liquidity and many more about the firm. The financial statement analysis helps to takes the various financial decisions at the managerial level.
INTRODUCING THE COMPANY
History of the Organisation
During the fourth decade of the 19 th century, the basic sources of income for farmers of the Kaira district was farming and selling milk. At that time there was great demand of milk in Bombay. The biggest purchaser of milk was Polson Ltd. It was a privately owned dairy that produced milk products and also supplied milk to various regions of the state. It enjoyed monopoly. All farmers of the Kaira district were at the mercy of the milk traders who dictated the process; they had nowhere to turn to. This unfair system spread widespread discontent amongst the farmers. Hence they all decided and appealed to Shri Sardar Patel, a great leader of India’s freedom movement, for help. Shri Sardar Patel advised them to market milk through a co-operative society that was operated by them individually. He sent his very trusted person, Shri Morarji Desai to organize the farmers. At a meeting held at Samarkha (a village near Anand) on January 4, 1946, it was resolved that milk co-operative societies would be organized in each village of Kaira district to collect milk from the producers and bring it to the district union. The government should be asked to buy milk from the union. When the government turned down the demand, Kaira district’s farmers organized a milk strike for 15 days, not a single drop of milk was sold to traders. The Bombay Milk Scheme was badly affected. The milk commissioner of Bombay visited Anand, assessed the situation and decided to concede to the farmers’ demands. Thus, KDCMPUL – Kaira District Co-operative Milk Producers’ Union Limited, came to existence. It was formally registered on December 14, 1946. During winter season, the quantity of milk received was very high. But the Bombay Milk Scheme did not accept the excess milk b rought in by the farmers. Hence, this forced the farmers to sell excess milk to traders, which gave them very nominal amount for this quantity. This led to the decision to set up a plant to pasteurize milk. In the beginning there were only few farmers supplying about 250 liters of milk everyday. With the financial help from UNICEF, assistance from the government of New Zealand under the Colombo plant, and technical assistance provided by FAO for Rs. 5 million, planning for the factory to manufacture milk powder and butter was done. Dr. Rajendra Prasad the then President of India laid the foundation on November 15, 1954. On October 31, 1955, Pandit Jawaharlal Nehru, the then Prime Minister of India, declared the plant open. In 1958, the plant expanded. It produced sweetened condensed milk. Two years later, Shri Morarji Desai, the then Finance Minister, inaugurated a new wing designed to manufacture 600 tons of cheese and 2500 tons of baby food per year. This was the first time in the world that cheese and baby food was processed and produced from buffalo’s milk on a large and commercial scale. A plant to manufacture balanced cattle feed, donated by OXYFAM, was formally commissioned on October 31, 1964, by Shri Lal Bahadur Shastri the then Prime Minister of India, at Boriavi. KDCMPUL then set up a plant to manufacture high protein weaning food, chocolate and malted drink at Mogar, about 8 kms south of Anand.
AMUL means "priceless" and it comes from the Sanskrit word “Amoolya. This brand name suggested by a quality control expert in Anand. Variants, all meaning "priceless", are found in several Indian languages. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 42.78 billion in 2006-07). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices, of the genesis of a vast co-operative network, of the triumph of indigenous technology, of the marketing survey of a farmers' organisation. And have a proven model for dairy development.
Today there are twelve dairies producing products under the brand name of AMUL. AMUL is now Asia’s largest dairy brand and it is the world’s second largest firm producing dairy products.
FOUNDER OF THE COMPANY
Mr. Verghese Kurien showed main interest in establishing union who was supported by Shri Tribhuvandas Patel who lead the farmers in forming the Cooperative unions at the village level. The Kaira district milk producers union was thus established in ANAND and was registered formally on 14th December 1946.
Since farmers sold all the milk in Anand through a co-operative union, it was commonly resolved to sell the milk under the brand name AMUL.
Stages of Development
Growth of Amul is not a one-night story. It took several decades to succeed in the present manner. Initially, Amul started with one single society, now it has around 1231 societies in its net. It poured in 250 liters of milk per day initially, which has now reached up to 15 lac liters per day in FLUSH (winter) season and about 8 lac to 9 lac liters of milk per day during LEAN (summer) season. The main stages of development of Amul are as follows: In 1954: UNICEF provided financial help worth Rs. 50 million to Amul. This financial help led Amul to establish fully automatic plant for producing milk and milk powder. In 1958: Amul expands; it started producing sweetened condensed milk. In 1960: Excess milk that was brought in by the farmers in the winter season and huge amount of profit made it possible the expansion of Amul. Amul established producing cheese and baby food. This created history in the world dairy industry because, it was for the first time in the world that cheese and baby food was processed from buffalo’s milk instead of cow’s milk. In 1981: The new cattle feed plant at Kanjari was commissioned. In 1992: For getting the benefits of excess supply of milk, Amul established another plant named Amul III. This plant has a capacity of processing 14 lac liters of milk everyday. In 1994: The new cheese plant was established at Khatraj. Together with it was established the Mogar plant to produce chocolates and malted drink. Both of these plants were commenced with the help of NDDB. In 2001: Amul launched its flavored milk variety. This was a major jump taken by Amul. In 2003: For expanding the market share, Amul launched the ‘Snowball’ pizza and flavored lassi. These helped Amul to gain a major chuck of market share. In 2004: Amul keeps on achieving new heights in the competitive world. It has launched Chocozoo (chocolate) and Munchtime (crunchy snack). Amul also started new satellite dairies at Pune and Kolkata. This will be a help in gaining larger portion of market share.
Organisation Profile Name:
Kaira District Co-operative Milk Producers’ Union Limited Address:
The KDCMPU Ltd. Amul Dairy Road, Anand – 388001 Gujarat [INDIA]
E-MAIL:
[email protected]
Date of Establishment: 14 December, 1946
Form of unit:
A Co-operative Society, registered under Co-operative Societies Act, 1912. Bankers:
1. 2. 3. 4.
Kaira District Central Co-operative Bank Limited. Axis Bank Corporation Bank State Bank of India
Plants:
1. Anand Plant Anand plant is the main plant. Most of the raw-milk is procured here. Products being manufactured here are butter, flavored milk, ghee, milk powder and baby food.
2.Mogar Plant It is situated on Anand-Vadodara national highway no.8. It produces chocolates, nutramul, Amul lite and, Amul Bread and Amul ganthia.
2. Kanjari Plant Cattle feed is produced here.
3.Khatraj Plant This plant is situated between Nadiad and Mhemdabad highway. Cheese, Paneer and Whey powder is produced here.
3. Satellite Dairies Amul has got satellite dairies at Mumbai, Pune and Kolkata. It helps in handling o perations of the organisation from a distant place.
INITIAL PROMOTERS 1). Shri Tribhuvandas Patel. 2). Shri Morarjibhai Desai.
BOARD OF DIRECTORS: [2007-08]
Shri Ramsinh P. Parmar
Chairman
Shri Rajendrasinh D. Parmar
Vice Chairman
Shri Dhirubhai A. Chawda
Member
Shri Mansinh K. Chauhan
Member
Shri Maganbhai G. Zala
Member
Shri Sivabhai M. Parmar
Member
Shri Pravinsinh F. Solanki
Member
Shri Chadubhai M. Parmar
Member
Shri Bhaijibhai A. Zala
Member
Shri Bipinbhai M. Joshi
Member
Shri Madhuben D. Parmar
Member
Shri Saryuben B. Patel
Member
Shri Ranjitbhai K. Patel
Individual Member
Shri B. M. Vyas
MD (GCMMF)
Shri Rahu lku mar Shrivas tav
MD (KDCMPU)
Shri I M Purohit
District Registrar
NUMBER OF EMPLOYEES Approximately 1432
TOTAL NUMBER OF SOCIETY MEMBERS Approximately 2.28 million.
TOTAL NUMBER OF SHIFTS
First Shift Time Second Shift Time Third Shift Time
WEB SITE www.amul.com www.amuldiary.com
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8:30 a.m. to 4:30 p.m. 4:30 p.m. to 12:30 a.m. 12:30 a.m. to 8:30 a.m.
PEOPLE POWER: AMUL'S SECRET OF SUCCESS The system succeeded mainly because it provides an assured market at remunerative prices for producers' milk besides acting as a channel to market the production enhancement package. What's more, it does not disturb the agro-system of the farmers. It also enables the consumer an access to high quality milk and milk products. Contrary to the traditional system, when the profit of the business was cornered by the middlemen, the system ensured that the profit goes to the participants for their socio-economic upliftment and common good. Looking back on the path traversed by Amul, the following features make it a pattern and model for emulation elsewhere. Amul has been able to: · Produce an appropriate blend of the policy makers farmers board of management and the professionals: each group appreciating its rotes and limitations, · Bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment.
· Provide a support system to the milk producers without disturbing their agro-economic systems, · Plough back the profits, by prudent use of men, material and machines, in the rural sector for the common good and betterment of the member producers and · Even though, growing with time and on scale, it has remained with the smallest producer members. In that sense. Amul is an example par excellence, of an intervention for rural change. The Union looks after policy formulation, processing and marketing of milk, provision of technical inputs to enhance milk yield of animals, the artificial insemination service, veterinary care, better feeds and the like - all through the village societies. Basically the union and cooperation of people brought Amul into fame i.e. AMUL (ANAND MILK UNION LIMITED), a name which suggest THE TASTE OF INDIA.
Management Profile 1). Administration Department:-
The main work of administration department in any company is to appoint right people at right time and then supervise them. In AMUL, there is a combined administration and human resources development department. The administration department also performs all activities related to human resources development.
2). Purchase Department:-
There is a centralized purchase system. Purchasing of all the Raw Materials except the cattle feed is done through this department. Main type of materials are Engineering materials, packaging stationary, veterinary medicine, chemicals, raw material for production etc. After getting indent from the stores department the purchase order is placed to different purchasing systems for obtaining different materials. For packaging material and veterinary medicine, an RAL (Rate Approval Letter) is provided by GCMMF in which rate party; quantity, quality etc. are predefined by GCMMF. 3). Commercial Department:-
All activities related to sales and marketing are carried out by the commercial department. Most of the Amul’s products are sold through GCMMF. GCMMF works as a media for selling Amul’s product. Commercial department is a link between Amul and GCMMF. GCMMF is also the largest buyer of Amul products. The second largest buyer of Amul’s products is the Indian Army. There is no intervention of federation while dealing with the Army. Main products that are sold to the Indian Army are Ghee, White Milk Powder, Butter, Cheese, and Nutramul. The byproducts are sold to Vadilal Ice-Cream. Amul also markets some products at small level by itself. Amul sells milk and buttermilk on its own.
4). Accounts Department:-
This is the main accounts department. The activities performed by this department are cash and bank related activities, societies’ accounts, taxes related accounting, investment receipts and payments, milk cycle related activities and data entry. Different types of vouchers are processed here. All final accounting is done in this department. Salary Account:
This is a sub section of accounts department. All accounting related to salaries and wages, provident funds, pension insurance, gratuity etc. is done in this department. Purchase Bill Processing:-
This is again a sub-division of the accounts department. All accounting related to purchase and billing is done here. Vouchers for purchase are prepared in this department and then sent to the accounts department for further clarification and final dispatch. 7). Societies Division:-
Societies’ division is a link between milk producers and Amul. Milk producers first contact the societies’ division for any queries. All the day today transactions with the milk producers are done through this department. 8). Audit Department:-
There are two audit departments at Amul. One is the internal audit department and the other is the Statutory audit department. As the name suggests statutory auditing is done by a Co. operative auditors. Internal audit work is given to an outside accountancy firm. Pre-auditing and Post auditing of different vouchers has done in this department. 9). MIS Department:-
It is a sub-section of the Accounts department. It is called MIS (Management Information System). All the information systems that are required in different departments are first developed in this department. 10). Stores Department:-
All the raw materials are stored in the store department. When requirement for any material arises, the store department gives the necessary indent to the purchase department. This is done on a proactive basis so that no stock out situation arises. All the incoming materials are received by this department and the quality check is done in the laboratories. Goods receipt notes are prepared through this department. The stores department has divided into three main categories, which are (a).General (b).Engineering (c).Miscellaneous. 11). Time Keeping Office:-
Amul produces a large volume of different varieties of products and the manufacturing process for the products continues for 24 hours, 7 days a week and 365 days a year. In Amul, the time keeping department has its own importance. This department handles the work of keeping attendance and on basis of this record the monthly or yearly salaries and compensation wages, which are to be paid to the employees, is decided.
Product Profile Bread spreads:
•
Amul Butter
•
Amul Lite Low Fat Bread spread
•
Amul Cooking Butter
Cheese Range: •
Amul Pasteurized Processed Cheddar Cheese
•
Amul Processed Cheese Spread
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Amul Pizza (Mozzarella) Cheese
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Amul Shredded Pizza Cheese
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Amul Emmental Cheese
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Amul Gouda Cheese
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Amul Malai Paneer (cottage cheese)
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Utterly Delicious Pizza
Mithaee Range (Ethnic sweets): •
Amul Shrikhand (Mango, Saffron, Almond Pistachio, Cardamom)
•
Amul Amrakhand
•
Amul Mithaee Gulabjamuns
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Amul Mithaee Gulabjamun Mix
•
Amul Mithaee Kulfi Mix
•
Avsar Ladoos
UHT Milk Range: •
Amul Shakti 3% fat Milk
•
Amul Taaza 1.5% fat Milk
•
Amul Gold 4.5% fat Milk
•
Amul Lite Slim-n-Trim Milk 0% fat milk
•
Amul Shakti Toned Milk
•
Amul Fresh Cream
•
Amul Snowcap Softy Mix
Pure Ghee:
•
Amul Pure Ghee
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Sagar Pure Ghee
•
Amul Cow Ghee
Infant Milk Range: •
Amul Infant Milk Formula 1 (0-6 months)
•
Amul Infant Milk Formula 2 ( 6 months above)
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Amulspray Infant Milk Food
Milk Powders: •
Amul Full Cream Milk Powder
•
Amulya Dairy Whitener
•
Sagar Skimmed Milk Powder
•
Sagar Tea and Coffee Whitener
Sweetened Condensed Milk: •
Amul Mithaimate Sweetened Condensed Milk
Fresh Milk: •
Amul Taaza Toned Milk 3% fat
•
Amul Gold Full Cream Milk 6% fat
•
Amul Shakti Standardised Milk 4.5% fat
•
Amul Slim & Trim Double Toned Milk 1.5% fat
•
Amul Saathi Skimmed Milk 0% fat
•
Amul Cow Milk
Curd Products: •
Yogi Sweetened Flavored Dahi (Dessert)
•
Amul Masti Dahi (fresh curd)
•
Amul Masti Spiced Butter Milk
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Amul Lassee
Amul Ice creams: •
Royal Treat Range (Butterscotch, Rajbhog, Malai Kulfi)
•
Nut-o-Mania Range (Kaju Draksh, Kesar Pista Royale, Fruit Bonanza, Roasted Almond)
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Nature's Treat (Alphanso Mango, Fresh Litchi, Shahi Anjir, Fresh Strawberry, Black Currant, Santra Mantra, Fresh Pineapple)
•
Sundae Range (Mango, Black Currant, Sundae Magic, Double Sundae)
•
Assorted Treat (Chocobar, Dollies, Frostik, Ice Candies, Tricone, Chococrunch, Megabite, Cassatta)
•
Utterly Delicious (Vanilla, Strawberry, Chocolate, Chocochips, Cake Magic)
Chocolate & Confectionery: •
Amul Milk Chocolate
•
Amul Fruit & Nut Chocolate
Brown Beverage: •
Nutramul Malted Milk Food
Milk Drink: •
Amul Kool Flavored Milk (Mango, Strawberry, Saffron, Cardamom, Rose, Chocolate)
•
Amul Kool Cafe
Health Beverage: •
Amul Shakti White Milk Food
Bakery Products:
Bread Bun
PURCHASE DEPARTMENT
Purchase Department Purchase Dept. plays a very important and crucial role in reaching to the organization’s goals and profit objective. It is the source from where all sorts of raw material, ingredients, and packaging materials will be procured. Hence it does not only contribute towards making of the product but also has its share in making the product attractive, regarding its outer cover and other packing material. It also helps in preserving the product from the harshness of the outside atmosphere and other harmful environment.
Purchase dept. at Amul has been bifurcated into two major parts. One is the Cattle Feed Purchase dept. while the other is the Central Purchase dept.
Cattle Feed Purchase Dept . deals with the procurement of various types of grains, pulses and other proteins and vitamins that are then mixed according to a given formula arrived through scientific methods and cattle feed is prepared. The cattle feed plant is located at Kanjari. The plant was set up back on 31st October 1962. Initially the production capacity was merely 50 metric tons per day. It aims at providing quality and highly nutritious food for the cattle. The motive behind setting up this plant was to provide cattle feed to the farmers and other members of all the co-operative societies of Amul so that the quality of milk that their cattle give can be of greater value. Previously they also used to sell it commercially but since last few months they have decided to limit its sales only to the members of the co-operative societies.
Capacity of the plant is 750 metric tons of cattle feed per day.
Various raw materials that go into the production of cattle feed includes sesame, ground nut, mustard, cotton seeds, palm seeds and so on. While other grains used are bajra, maize, jowar (sorghum), damaged wheat, sugar cane (molasses). The aim of using damaged wheat is that the wheat is not fit for human consumption but it is still nutritious for cattle and it will also not cause undue shortage in the market. Molasses is mainly used as a binder and also helps in sweetness. Other salt, vitamins, minerals and protein has added to the product. At Kanjari plant, they produce Amul by-pass dan, super dan, josh dan, calf dan, etc.
Procedure for purchase of raw materials is as under:
Firstly inquiries regarding the various suppliers are made. Quotations are invited. Next, a comparison and study of the prices quoted by the suppliers is done. If they fall into the parameters as decided by the officials here, then the suppliers are negotiated for the prices as quoted by them. Major advantage that is earned by Amul is that, it has got brokers involved in their transactions. This helps in getting suppliers down to the price as expected by Amul. Annual brokerage is paid to the brokers. Instant clearance of deals is possible only due to the brokers. As tender system is followed, it is difficult to have a single price throughout the year. Brokers are contacted daily and a record of the transactions made is maintained to avoid mal practice by the brokers.
The basic reason for keeping brokers in between each transaction of raw material purchase is that it becomes possible to negotiate and bargain well with the suppliers of the materials. Since it is an agricultural product, having a constant price is impossible. Hence, bargaining is essential. Almost all transactions are in the form of telephonic saudas. The Purchase Head has a Sauda Record Book with him wherein he maintains a daily record of all the offers made by the brokers and the replies made by Amul. This helps when goods are delivered by the supplier. Again since the prices fluctuate a lot, the Purchase Head has to constantly keep an eye over the movements of the market and negotiate prices accordingly. All suppliers are paid within 25 to 30 days.
Plant at Kanjari is run on loss, but only for the betterment of the farmers, production is done and goods are sold at cost. They are planning to expand their production capacity, which they will be able to reach within two months.
Talking about the Central Purchase Unit at Anand, all the purchase related to acquiring other raw materials as well as packing materials is undertaken at Anand.
Purchase Procedure at the Central Purchase unit can be explained as follows:
GCMMF, the marketing federation of Amul, annually sends a RAL (Rate Approval Letter) to Amul. GCMMF selects vendors for the supply of various raw materials as well as packing materials as per the specifications framed by them. GCMMF also has maximum quantity that can be bought from a single vendor. Purchase dept. at Amul can make transactions only with these vendors. Starting with the procedure, an indent is placed by the dept. that requires the product. The purchase dept. invites quotations from these vendors. Then a cost comparison statement is prepared on the basis of the quotations sent by the vendors. After studying the statement the purchase dept. negotiates with the vendors regarding prices and other conditions applied with that. The vendor that offers minimum prices is given the order. For both, cattle feed purchase as well as for the central purchase unit, when goods are received at gate are first sent for quality approval test and if they are found proper only then are sent for unloading or to further procedure.
MATERIAL HANDLING &INVENTORY MANAGEMENT
Material Handling & Inventory Management KDCMPU Ltd. follows the below explained procedure for indenting the goods required up till payment is made to the vendors.
A] Indenting B] Purchasing C] Materials receipt, store’s inventory management D] Bill Processing and Payment
These steps can be briefly explained as under:
A] Indenting
A requisition or indent has to be made by any department or section that requires any material. The Purchase Department shall not initiate its activities unless and until it has received the indent from the respective department or section. If requisition for the same product has been requested by more than two departments at once, the purchase department shall combine the quantities of all such indents and then initiate the procedure for purchase.
All the indents for Capital items will have to be submitted in the form of a ‘Proposal for Capital Items Purchase’. Only after the proposal has been approved by the Board of Directors, it shall be initiated by the Purchase dept. to start the procedure for purchase. The AGM (Accts.) shall verify the budgetary aspect for such capital expenditure.
GCMMF, the marketing wing of Amul, gives an indent for each product in the first week of every month. Productions heads at Amul make this indent their production plan (they adjust their production in this manner). Hence all packaging items are ordered monthly. GCMMF also issues a RAL (Rate Approval Letter) annually, which contains the list of vendors from whom the Purchase Officer at Amul has to select to whom to order. Also the rate at which Amul has to buy the goods is also specified in the RAL.
Indent for engineering items and spare parts shall be made as and when they are required at the plant. In case of Cattle Feed Purchase, no such indents are sent by the GCMMF, here the C.F.Purhcase Head has to have a close look at the production activity and undertake purchase of various raw materials. In this case the GCMMF does not interfere in the matter of rates and the list of vendors. Brokers are given annual contract for purchase of agricultural products. Since all the raw materials for cattle feed is agricultural in nature, brokers are required in between.A Special facility of ICPO (INDENT CUM PURCHASE ORDER), is given to each production department head so as to not to run out of stock. They can make purchase right at their department if the are in urgent need for goods.
B] Purchasing
On receipt of a duly approved indent, purchase dept. shall initiate enquiries for various items covered in an indent. The purchase dept. shall endeavor to float such enquiries to maximum number of suppliers/vendors in order to get most competitive rates for each item.
Since GCMMF issues RAL annually, the Purchase Dept. has to select from the list of vendors mentioned in that.
On receipt of quotations from the various suppliers, the dept. prepares a comparative statement of these vendors and gets it approved from the person in authority.
The Purchase dept. then negotiates with the vendors in terms of rates and arrives at lowest possible rates. Order will be placed to the vendor with minimum rate. For items, which are regularly consumed like Bearings, V-Belts, O Rings, GI and MS Fittings etc. purchase department finalizes “Annul Rate Contracts” (ARCs) for such items to save the time consumed in floating enquiries, receiving quotations, preparation of comparative statements, taking approvals etc. However, ARC rates are first approved by an appropriate authority. It is necessary that a proper purchase order is issued for rate-contracted items also in unions’ pre-printed stationary giving description of items as per rate contract, quantity, rates, discounts, taxes, delivery terms etc. However, no purchase order can be issued on a date expired ARC. It is the sole responsibility of the purchase department to follow-up with the suppliers for timely delivery of goods and as per the store’s specifications. The indenting department will have to follow up with the purchase department, if the goods are not received within the stipulated time. No other department needs to follow up with the suppliers.
C] Material Receipt, Storage and Issue of goods
Store shall receive copies of all the purchase orders placed on the suppliers for which the goods are to be received at the s tores.
For all the goods received at the factory premises, an entry will be made at the Main Gate of the factory. This will help in getting basic information about the goods entering the factory premises. On receipt of the goods at the Stores, the stores shall thoroughly verify the documents and shall ensure that the goods have been received against a valid P.O. (Purchase Order). Under normal circumstances, excess quantity up to 10 % is allowed in the stores.
If the goods are found to be as per store’s purchase order, stores department arranges for taking delivery of goods and stores it at appropriate place. The stores department needs to prepare a “Goods Receipt Cum Test Report” (GR/TR). This can be either prepared manually or generated through the system, if a computerized inventory management programme is in existence. The copies of this (GR/TR) should be distributed as under: (a). User/Indenting department: for their information about the arrival of goods. (b). QA/Engineering department: Where goods are to b e tested/inspected before being used. (c). Purchase department: For their information to track the delivery of goods in case of partial delivery. (d). Stores department: For their records. Whenever any material which has been once rejected but later on accepted on rechecking/retesting or because of exigencies of production, QA/ Engineering department/indenter submits a fresh report of acceptance, giving references of earlier GR/TR duly approved by the departmental head. The stores carry out the necessary corrections in their records. Gate Pass: No material can be taken out of the factory premises without a properly authorized gate pass. Stores/ concerned department issues a gate pass.
D] Bill Processing and Payment
All the invoices from the suppliers are received in the Purchase bill section. The Purchase bill section enters all the invoices as and when received in a computerized bill tracking system. The invoices, which are received in the Stores, KSD Khatraj, FCM Mogar, Pune, Kolkatta, Mumbai and CFF Kanjari along with consignments, are also redirected to the Bill passing section. The Purchase department can advise all the suppliers to mention purchase order nos. and date in their delivery documents, invoices against which the goods are being supplied. This helps in easy tracking of invoices vis-à-vis purchase orders and GR etc. The Stores sends “Goods Receipt Cum Test Reports” (GR/TR) to the Purchase billing section once the Testing/ Inspection formalities are complete. The Purchase billing section verifies the invoices with the corresponding Purchase orders, Goods Receipt Cum Test Reports and processes the supplier’s invoices for payment. It is the responsibility of the Purchase billing section to ensure that only correct payments are made to the suppliers. The advance payment if any is also recovered/ adjusted fully so that no excess payment is ever madder to any party. The Purchase billing section also ensures that timely payment is made to all the suppliers as per PO Terms and no payments are delayed for reasons of delay in p rocessing of payment documents etc.
PRODUCTION DEPARTMENT
Production Department Since Milk is the b asic raw material that the organization procures, we shall first study the process flow chart for pasteurizing milk.
Process Flow Chart for Amul 3 is as follows:
Raw chilled milk (in tankers or cans)
Tested for acidity and temperature (Fat and SNF)
Filter
Chiller (temperature up to 2 degree Celsius)
Raw milk buffer tank
Milk clarifier
Raw milk silos
Balance tank of pasteurize
1st regeneration section of milk pasteurize
Cream separator (60-65 degree Celsius)
Cream separated
Sent to cream buffer tanks
Cream pasteurize (at 90 degree Celsius for no hold)
Cream balance tank
Sent to butter or ghee section
Explaining the process:
Milk from various villages is collected at chilling centers and from there milk is sent to the dairy in tankers. Still at some places where a chilling center is not available, milk is collected in cans. From the milk collected at the Milk Reception Bay or the Raw Milk Receiving Dock, samples are taken and sent for quality check at the laboratory. Various tests that are done to check the quality of the milk tests for fat, SNF (Solid Non Fat), Bacterial count, etc. are done. Acidity and temperature of milk is recorded first because on this basis milk is accepted or rejected.
Unloading of milk is done in a milk buffer tank. Milk stored there is cooled at 4 deg. Celsius and sent for clarification. Clarification is a very important process wherein dust, dirt or any kind of other impurities are removed and milk is purified. From clarifiers milk is sent to the raw milk silos and stored temporarily, from where milk is sent for pasteurization and then to further processes.
Pasteurization is a process whereby the germs and bacteria and pathogens are killed. In this process, milk is heated up to 76 deg. Celsius and is held at that temperature for about 15 to seconds and then cooled up to 4 deg. Celsius. Simultaneously after heating cream is separated from milk. Cream that is separated here is used for standardization of milk and surplus cream is used for production of butter and ghee. Cream is added to milk as per the type of milk that is low fat (skimmed) milk will have minimum fat, while ‘Amul Gold’ will have more percentage of fat.
Surplus of standardized milk is used for production of milk powder or for making flavored milk and sent to market for sale.
The separated cream is further pasteurized at 90 deg. Celsius to make it fit for human consumption. After that it is cooled and is stored in cream tanks for ripening and then it is sent for butter manufacturing.
Reception of Milk
Raw milk collected at Amul 3 is received through cans and in tankers from Amul 2, where three reception lines unload milk tankers.
Each reception line is equipped with following – 1. 2. 3. 4. 5.
Centrifugal pumps each of capacity of 30,000 liters per hour. Deaerator tank to remove air from the milk. Filters to filter out sludge and other impurities from milk. One Pre-heat exchanger after each filter. Raw milk silo for storing raw milk.
Milk pasteurizing has six sections: 1. Regeneration 1st – milk first enters in this section, here the heat of outgoing milk is utilized to heat the incoming chilled milk and incoming chilled milk cools down the outgoing milk. 2. Pre-heating section – at this juncture milk is heated at 60 deg. Celsius. 3. Regeneration 2nd – now the standardized milk is further heated before going to heating section by milk coming from holding tubes. 4. Heating section – milk from the regeneration section 2nd is heated up to the pasteurization temperature by hot water. 5. Holding tubes – pasteurized milk is held in the holding tubes, which is 42 m long, and 72 mm wide in diameter. 6. Chilling section – milk is chilled here by chilled water.
CIP Process
Total lines – 9 Lye concentrate – 1.5% measured as millisem Acid concentrate – 1% Lines for process CIP are – 6 Lines for tankers CIP are – 3
Milk Pouch Packing Process
(Liquid Milk)
Raw Milk Receiving Dock or the Milk Reception Bay at Amul 2 receives milk twice a day. It receives cows, buffalo’s and mix milk from different co-operative societies associated with Amul. They collect milk in the morning as well as in the evening. There are total 102 routes and 1230 societies from where milk is collected and sent to Anand plant. Milk is then standardized to prepare flavored milk. It is homogenized and then flavored milk is produced from it. Surplus milk is sent to Amul 3 where various other milk products are manufactured.
The farthest milk collection centre is at Balasinor while the nearest is at Anand.
Milk Reception
For reception of milk there are two reception lines. Cans are manually put on the conveyor. At first instance the cans are tested by the person in charge of it by putting a plunger inside the can and smelling the milk whether it is good or sour. Sour milk and curd are dumped into another tank. Milk is then put on the weighing tank and is along with weighing it, it is tested for fat and SNF. Then the valve of the weighing tank is opened and milk flows into the raw milk storage tank and cans move to the can washer. On each line there is a can washer and each can washer has a capacity of 20 cans per minute.
Process: Unloading of cans
Chain conveyor
Removing lids of cans/ Opening up the tankers’ mouth
Physical inspection of grading of milk
Transfer of milk in tank
Transferring curd
If quality is good
to butter/ghee Section
Filter
Production of Butter or ghee
Weighing
Raw milk collecting tank
Pasteurizer and standardizations
Processed milk tanks
Sent for milk packing and production Of various other milk product
Butter
Contents •
Milk Fat – 80%
•
Moisture – 16%
•
Salt
– 2.5%
•
Curd
– 0.8%
Process
Cream for manufacturing butter in Amul 3 is to be received from following sources: a) Cream from other dairies through tankers. b) Cream produced in Amul 3 while standardization of milk. c) Cream pumped from Amul 2.
Before initiating the butter making process the Continuous Butter Making Machine has to be rinsed with cold water for about 10 to 15 minutes. The very first step in butter making is churning of cream. Cream is churned at a speed of 800 to 1200 rpm at 12 degree Celsius. Although the speed for churning the cream depends upon the quality of cream and the type of product that is desired from the cream. The properties of cream that influence and are required to be known before churning are viscosity (its thickness), ripening of cream and whether cream is sweet or sour in taste. The butter grains formed in the churning process enter the working cannon along with the buttermilk. Process: Raw cream
Pastuerisation (at 90 oC)
Cooled
Ripening (at 9 oC for 20 hours)
Cream balance tank
Heat exchanges (for temperature adjustment at 6 to 10 oC)
Churning
Unsalted Butter
Salting
White Butter
Grinding
Used for ghee manufacturing 100 gm and 500 gm packs
Brine and color addition
FINANCE DEPARTMENT
PARTICULARS
06-07
07-08
08-09
Opening stock of Raw Material
154.85
207.39
266.58
ADD: Purchase of raw material
64030.16
93690.87
114617.8
LESS: Closing stock of Raw material
207.39
266.58
415.92
COST OF RAW MATERIAL CONSUMED
63977.62
93631.68
114468.46
ADD: Labour expenses
_
_
_
ADD: Opening stock of Work in Progress
1821.55
1902.08
2319.85
LESS: Closing stock of Work in Progress
1902.08
2319.85
2539.55
PRIME COST
63897.09
93213.91
114248.76
1.Research and extension expenses
954.67
1182.12
910.43
2.Processing Expenses
711.64
1089.17
1581.04
3.Packaging Expenses
6438.42
8363.90
10477.66
4.Power and fuel expenses
2305.88
3046.28
4003.98
5.Salaries and wages
822.08
1006.18
1067.71
6.Staff provident fund, Gratuity and other amenities
282.21
288.06
343.15
7.Repairs and Maintenance expenses
682.36
850.84
1024.60
8.Insurance premium
67.76
48.41
36.08
9.Rent,rates and taxes
33.15
34.89
88.52
10.Depreciation
535.35
459.16
641.74
12833.55
16359.39
20174.93
76730.64
109573.3
134423.69
1.Power and fuel expenses
576.48
761.58
1001
2.Salaries and wages
548.06
670.79
711.81
3.Repaires and maintenance
170.6
212.71
256.16
4.Insurance premium
16.95
12.11
9.03
5.Rent,rates and taxes
8.29
8.73
22.13
6.Depreciation
133.83
114.75
160.43
7.Postage,Telegram,Telephone,Printing
56.51
56.14
63.05
8.Audit fees
92.87
99.66
103.79
9.Adminstration expenses
133.51
166.77
198.96
10.Staff Provident fund, Gratuity and other amenities
188.14
192.04
228.76
1925.24
2295.28
2755.12
OFFICE COST
78655.88
111868.58
137178.81
ADD: Opening stock of finished goods
6013.22
4843.32
10890.43
LESS: Closing stock of finished goods
4843.32
10890.43
13379.03
COST OF GOODS SOLD
79825.788
105821.47
134690.21
1.Freight and forwarding expenses
695.21
1015.17
1554.12
2.Marketing expenses
106.17
109.99
125.87
801.38
1125.16
1679.99
80627.16
106946.63
136370.20
ADD: Manufacturing Expenses
FACTORY COST/COST OF PRODUCTION ADD: Administration expenses
And stationary expenses
ADD: Selling and distribution expenses
COST OF SALES
ADD: PROFIT OR SALES
1004.522
240.65
842.144
SALES
81631.69
107187.29
137212.35
Finance Department Finance is the art and science of managing money. Financial management is concerned with the duties of the financial managers in the business firm. Financial managers actively manage the financial affairs of any type of business namely, financial and non- financial, private and public, large and small, profit seeking or not-for-profit.
Scope of Financial Management
The approach to the scope of financial management is divided in to two broad categories, 1. Traditional Approach 2. Modern Approach 1. Traditional Approach
The traditional approach to the scope of finance function evolved during the 1920s and 1930s. As the name suggests, the concern of corporate finance was with the financing of corporate activities. In the other words, the scope of the finance function was treated by the traditional approach in the narrow sense of procurement of funds by corporate enterprise to meet their financial needs. The term ‘procurement’ was used in a broad sense so as to include the whole gamut of raising funds externally. There are several weaknesses of this approach forcing us to discard this as an out-dated approach. The first argument against the traditional approach was based on its emphasis on issues relating to the procurement of funds by corporate enterprises. This approach ignored the views and opinions of those who are to use the funds inside the organisation. They considered the outsider-in approach. The internal decision makers were ignored. The second weakness was that focus was on financing problems of corporate enterprise. It did not consider non-corporate enterprises. Finally, the traditional treatment was found to have a lacuna to the extent that the focus was on long-term financing. It believed that issues pertaining to working capital management were not under the purview of financial management.
2. Modern Approach
The modern approach views the term financial management in a broad sense. According to it, the finance function covers both acquisitions of funds as well as their allocations. Thus, apart from the issues involved in acquiring external funds, the main concern of financial management is the efficient and wise allocation of funds to various uses. The principal contents of modern approach to financial management can be said to be: (i) How large should an enterprise be, and how fast should it grow? (ii) In wh at form shou ld it hold assets? And (iii) What should be the composition of its liabilities? The questions posed above cover major issues faced by any enterprise. The financial management is concerned with the solution of investment, financing and dividend decisions. Thus, financial management, in the modern sense of the firm, can be broken down into three (A) (B) (C)
major decisions as functions of finance:
The Investment Decision, The Financing Decision, and The Dividend Decision.
(A) The Investment decision relates to the selection of assets in which funds will be invested by a firm. The assets which can be acquired can be divided broadly into two groups: (i) long term assets which yield a return over a period of time in future, (ii) short term assets, defined as those assets which in normal course of business can be converted into cash without diminution in value, usually within a year. It normally includes decisions for capital bu dgeting and working capital management.
(B) The Financing decision is concern with the financing-mix or capital structure or leverage. The term capital structure refers to the proportion of debt (fixed interest sources for financing) and equity (variable-dividend securities/source of funds). A capital structure with a reasonable proportion of debt and equity capital is called the optimum capital structure. Thus, one dimension of the financing decision whether there is an optimum capital structure and in what proportion should funds be raised to maximize the return to shareholders? The second aspect of the financing decision is the determination of an appropriate capital structure given the facts and figures.
(C) The third major decision area of financial management is the decision relating to the Dividend policy. The dividend decision should be analyzed in the relation to the financing decision of the firm. Two alternatives are available relating to the dividend decision: (i) they can be distributed to the shareholders in the form of dividend or (ii) they can be retained in the business itself. The decision as to which course should be followed depends largely upon the significant element in the dividend decision, the dividend payout ratio, that is, what proportion of net profits should be paid out to the shareholders. The final decision will rest with the preference of the shareholders and investment opportunities available within the firm. The second major aspect of the dividend decision is the factors determining dividend policy of a firm in practice.
Functions of Financial Management 1. Financial Forecasting The financial management sees that an adequate supply of cash is available at the proper time for smooth flow of firm’s activities. As cash inflow and outflow both are closely related to the volume of sales, it requires financial forecasting. The estimation of the prospective cash inflow and cash outflow in the next quarter or year is necessary to maintain the liquidity in the funds.
2. Investment decision
The investment decision is the most important function of financial management. It involves the allocation of capital to various investment proposals in order of their priority and profitability. As each investment decision involves risk a financial manager assists in evaluating the various proposals in the processes of capital budgeting.
3. Management of Income Management of income is a major function of financial executive. It includes the allocation of net earnings after payment to taxes among shareholders and retaining earning for employers. The shareholders generally are interested in current cash dividends. In order to provide for future contingencies, the top management (management) wants to retain earnings to the maximum possible extent. Deciding between these two is very crucial.
4. Management of Cash Estimating and controlling cash flows is an important function of financial management The cash must be managed for the benefit of the owners. The financial manager tries two things: (i) how can managers choose the best among alternative uses of funds, and (ii) how can they ascertain that this is a better use than stock-holders could find outside the company? The finance manager must choose most desirable investment option.
5. Deciding about New Sources of Finance A business firm is always in need of funds. Therefore, on the basis of forecast of the volume of operations the finance manager should decide upon the needs and prepare the detailed financial plan both short term and long term for the procurement of funds. 6. Analysis and appraisal of Financial Performance Proper analysis, checking and appraisal of financial performance are very essential to carry out finance function smoothly. Various financial statements are prepared, analyzed and then necessary guidelines are set for the future.
Organization Chart of Finance Department Managing Director
Manager
Dept. Manager
Asst. Manager
Senior Executive
Executive
Senior Officer
Senior Assistant
Junior Assistant
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