TECHNO-ECONOMICS OF DAIRY BUSINESS “OPTIMIZING PROFITABILITY THROUGH QUALITY AND PRODUCTIVITY ENHANCEMENT “ PRESENTED BY Jaswant Singh Bhandair Mission Director INTERNATIONAL IMPROVEMENT MISSION REGD. OFFICE #53-A,SECTOR-18-A CHANDIGARH-160018 Email: ibiu_iim@yahoo.co.in Tel:0172-2724872 Cell: 9815961853 1 Under Indian conditions, is it possible? • To procure raw milk without any • YES/NO adulteration, dilution or manipulation. • Analyze raw mixed milk for exact % B.M. / C.M. and added water and find out its actual net worth. • YES/NO • Process and market pure & safe • YES/NO pasteurized milk having shelf-life of more than 15 days. 2 Under Indian conditions, is it possible? • Manage total milk handling costs (Procurement to Marketing) to keep the same below Rs.3.50/Liter. • YES/NO • Increase purchase price of raw milk by Rs.1.00/liter, decrease consumer price by Rs. 1.00/liter and still attain net profit margin of more than 10% of turn over. • Provide loss insurance cover for ethical dairy plants against hidden losses in dairy business. • YES/NO • YES/NO 3 CORE ISSUES AFFECTING PROFITABILITY,PRODUCTIVITY AND QUALITY OF DAIRY PRODUCTS I. ADULTERATION,DILUTION & MANIPULATIONS IN RAW MILK PURCHASE TRANSACTIONS {A.D.M.} II. MIDDLEMEN BETWEEN MILK PRODUCERS AND MILK PLANTS III. MIDDLEMEN BETWEEN COMPANIES AND CONSUMERS IV. LACK OF TRANSPARENT BUSINESS MANAGEMENT /ACCOUNTING SYSTEM V. UNVIABLE INVESTMENTS & UNDESIRABLE OVERHEADS 4 ALARMING SYMPTOMS THAT NEED PROFESSIONAL INTERVENTION ON S.O.S. BASIS • • • • • • • WIDE SPREAD SICKNESS AMONG DAIRY PLANTS. UNDETECTED HIDDEN LOSSES IN DAIRY BUSINESS. NO ONE IS OWNING RESPONSIBILITY AND ACCOUNTABILITY FOR SUCH LOSSES. DILUENTS/ADULTERANTS/RECYCLED MILK COMPONENTS ARE BEING PURCHASED AS RAW MILK CONTENTS. NET AMOUNTS OF MILK PAYMENTS RELEASED BY DAIRY PLANTS ARE NOT ACTUALLY REACHING MILK PRODUCERS. EVEN SUBSTANDARD RAW MILK/UNFIT FOR HUMAN CONSUMPTION IS BEING RECEIVED BY DAIRY PLANTS. BULK OF THE PASTEURIZED MILK/DAIRY PRODUCTS AVAILABLE IN INDIAN MARKETS NOT CONFORMING TO INTERNATIONAL QUALITY REQUIREMENTS. 5 UNRESOLVED PROBLEMS OF INDIAN DAIRY INDUSTRY 1. TECHNO-COMMERCIAL LIMITATIONS OF 60:40 TWO AXIS FORMULA FOR PURCHASING RAW MILK. 6 UNRESOLVED PROBLEMS OF INDIAN DAIRY INDUSTRY 2. LARGE NUMBERS OF DAIRY PLANTS IN INDIA ARE SUFFERING LOSSES DESPITE HIGHER VISIBLE PROFITS. 7 UNRESOLVED PROBLEMS OF INDIAN DAIRY INDUSTRY 3. MANY COMMERCIAL DAIRY PLANTS ARE HANDLING RAW MILK DILUTED WITH 30 to 40% ADDED WATER. 8 UNRESOLVED PROBLEMS OF INDIAN DAIRY INDUSTRY 4. CONSUMERS IN INDIA ARE REQUIRED TO BOIL PASTEURIZED MILK BEFORE CONSUMPTION. 9 UNRESOLVED PROBLEMS OF INDIAN DAIRY INDUSTRY 5. OUR MARKETS ARE FLOODED WITH SUBSTANDARD PASTEURIZED MILK AND ADULTERATED DAIRY PRODUCTS. 10 POSSIBLE SOLUTIONS FOR UNRESOLVED TECHNO-COMMERCIAL PROBLEMS OF INDIAN DAIRY INDUSTRY • TECHNO-COMMERCIAL AUDIT OF OVERALL BUSINESS OPERATIONS OF UNVIABLE AND LOW PROFITS MAKING DAIRY PLANTS BY COMPETENT PROFESSIONAL INSTITUTION. • IMPLEMENTING “PARTHA” BASED DAIRY BUSINESS MANAGEMENT/ACCOUNTING SYSTEM TO ELIMINATE UNDETECTED HIDDEN LOSSES IN DAIRY BUSINESS. • INTRODUCING “MANAGEMENT FOR RESULTS” AND PERFORMANCE LINKED EVALUATION AND REMUNERATION SYSTEM FOR PROFESSIONAL MANAGERS TO ENSURE PROPER ACCOUNTABILITY/ RESPONSIBILITY FOR THEIR PERFORMANCE RESULTS. 11 POSSIBLE SOLUTIONS FOR UNRESOLVED TECHNO-COMMERCIAL PROBLEMS OF INDIAN DAIRY INDUSTRY • “APNI DAIRY “ PRODUCER TO PLANT MILK PROCUREMENT SYSTEM (P TO P). • “COMPANY TO CONSUMER” DIRECT MARKETING (C TO C). • COMPULSARY THIRD PARTY QUALITY CERTIFICATION FOR PASTEURIZED MILK/DAIRY PRODUCTS BY INTERNATIONALLY ACCREDITED INSTITUTION. 12 PROFITABILITY OF DAIRY BUSINESS {PASTEURIZED MILK PRODUCED WITH 50% B.M.+50% C.M..} ASSUMING BASIC PRICE for 6.50% Fat & 8.80% Buffalo Milk=Rs.13.00/Kg. CORRESPONDING PRICE for 3.50% Fat & 8.50% Cow Milk =Rs 9.1666/Kg. COST of 50 Kg.s. Buffalo milk=Rs650 Cost of 50 Kgs. Cow milk=Rs 458.333 COST of Mixed Milk (50%B.M & 50% C.M)= Rs 1108 ( Fat 5.00% & S.N.F. 8.65%) VALUE OF MILK SOLIDS EXTRACTED=Rs. (0.50x110)+(0.15x62.87)=Rs.0.64 /Kg. BASIC COST= (Standardized milk)=Rs.(11.08-0.64)=Rs.10.44/Kg BASIC COST(standardized milk) Rs. 10.77/Liter (10.44x1.032=Rs.10.77/Liter) COST OF STANDARDIZED MILK 4.50% Fat & 8.50% S.N.F.)=Rs 10.77/Liter ASSUMING HANDLING COST{Milk procurement to Marketing}=Rs.4.00/Liter TOTAL COST=Rs.(10.77+4.00+)=Rs.14.77/ Liter SELLING PRICE(standardized milk)=Rs.19/Liter NET PROFIT=Rs.{19-14.77)=Rs.4.23/Liter PROFIT OPPORTUNITY PER YEAR(1LLPD)=Rs. {1x4.23x365}=Rs15,43,95,000 ) >Rs.15CRORES OR 22% of TURNOVER 13 PROFITABILITY OF DAIRY BUSINESS {PASTEURIZED MILK PREPARED FROM BUFFALO MILK} • • • • • • • • • • Dairy plants selling pasteurized milk must earn net profit of > 20% of Turnover. Assuming annual average basic price of raw milk as Rs.13.00/Kg. (6.5%/8.8%) or Rs. 200/Kg. Fat (Rs. 120 /Kg Fat & Rs. 59.09/ Kg. SNF) total solids=15.30% Milk collection/processing/packing /marketing cost for efficiently managed dairy plant will not normally exceed Rs.4.00/Kg. (including processing losses) Cost of Pasteurized standardized milk (4.50% Fat and 8.50% SNF)=Rs.10.42/Kg. Total Cost would thus work out to Rs. (13.00-(2.40-0.17727)+4.00)=Rs.14.42/ Kg. Total cost = Rs{(10.42 + 4.00}x1.032=Rs. 14.88/Liter {(6.5-4.5)x 120=Rs.2.40} (8.8-8.5)x 59.09=Rs.0.17727/ Kg Retail consumer price for pasteurized standardized milk=Rs.19.00/Liter As such there is clear net profit margin of {19.00-14.88)=Rs. 4.12/Liter} Dairy company handling one Lac Liters milk per day would thus make annual net profit of more than Rs. 15 crores. (>20% of turn over) {100000x4.12x365=Rs.15,03,80,000} provided there are no hidden losses. 14 TECHNO-ECONOMICS OF COW MILK V/S BUFFALO MILK Assumed Rate=Rs.13.00/KG or Rs120.00/Kg fat & 59.090909/Kg SNF (Buffalo Milk) Rs. 100/Kg. Fat & Rs. 66.6666/Kg. SNF (Cow Milk) Let us presume that we purchase 100Kgs. B.M. & 100Kgs. C.M. SNF:Fat ratio of standard buffalo milk (8.8/6.5)= 1.3538461 SNF:Fat ratio of standard cow milk (8.5/3.5)= 2.4285714 Cost of B.M.(6.5% & 8.8%)=(6.5x120+8.80x59.0909)=Rs.12.9999/Kg. Cost of C.M.(3.5% &8.5%)=(3.50x100+8.50x63.3333)=Rs.9.1666/Kg. Total cost of 200Kgs. (B.M.+C.M.)=Rs.(1299.99+916.66)=2216.66 (A) Total mixed milk(B.M.+C.M.)=10Kgs Fat +17.30Kgs. S.N.F. Cost of mixed milk=10x120+17.30x59.090909=Rs.2222.2727257 (B) Difference between B & A: Rs.(2222.2727257-2216.66)/200 =Rs.(5.6127257)/200=Rs.0.0280636285/Kg. * Cow milk as such is not relatively expensive but It is dilution and manipulation that makes it costlier for the purchaser due to undetected hidden loss. 15 SAWAL SAU CRORE KA (CASE STUDY) • • • • Category Buffalo Milk Cow Milk Mixed Milk • • • Amount paid as milk payment: Rs. 945000 {@Rs.9.45/Kg} Rs.160/Kg. Fat Purchase rate for Buffalo Milk (6.50% Fat & 8.80% S.N.F.) Rs. 80/Kg Fat & Rs. 60/Kg. S.N.F Purchase rate for Cow Milk 3.50% Fat & 8.50% S.N.F) • Milk purchased by this organization is diluted and manipulated in such a way to cause hidden loss of Rs.2.40/Kg to the purchaser that remains undetected with conventional milk purchase system and calculations. 1. Assume that all the buffaloes and cows available in the milk shed area from where this milk is procured by the said institution are milked without any dilution with water and kept in separate tanks. Now if cow milk and Buffalo milk contained in these tanks is mixed in the indicated ratio 31% C.M. & 69% B.M or any other ratio proportion we can not produce mixed milk containing 5.89% Fat & 8.40% S.N.F. 2. Take 100 Kg.s Buffalo milk containing 6.50% Fat & 9.27% S.N.F. Add 10.357 Kgs water in to this milk You will get diluted mixed milk containing 5.89% Fat & 8.40% S.N.F. • • % 69 31 100 Quantity 69000 31000 100000 Fat% 6.76 3.90 5.89 S.N.F% 8.62 7.88 8.40 Fat Kgs. 4664.40 1209.00 5890.00 S.N.F.Kgs 5947.80 2442.80 8400.00 16 SAWAL SAU CRORE KA (CASE STUDY) • Seller can now manipulate this diluted milk as mixture of 69% Buffalo milk containing 6.76 % Fat & 8.62% S.N.F. & 31% Cow milk containing 3.90% Fat & 7.88% S.N.F. on the milk billing record. • Water used for dilution and manipulation thus becomes milk and gets hidden in the garb of 31% cow milk, resulting in hidden gain to the seller. • In fact for producing mixed milk containing 5.89% Fat we need to mix 79.67% standard buffalo milk (6.50% Fat & 8.8% S.N.F.) & 20.33% cow milk containing 3.50% Fat & 8.50% S.N.F. Mixed milk thus produced would however contain 5.89% Fat & 8.73901% S.N.F valued at Rs.9.776540906/Kg. {Rs. 9.77/Kg.} Similarly if we mix 69% standard buffalo milk containing 6.50% Fat & 8.80% S.N.F) with 31% standard cow milk containing 3.50% Fat & 8.50% S.N.F. (Indicated % of Buffalo and cow milk as per milk bills). Mixed milk thus produced would contain 5.57% Fat & 8.707% S.N.F. valued at Rs. 9.44923/kg {Rs.9.45/Kg.} As per analysis carried out using Digital Analytical Technique (D.A.T.) developed by one of our Mission associate in Canada, milk purchaser suffered hidden loss of Rs. 2.40/Kg. in these purchase transactions. • • 17 SAWAL SAU CRORE KA (CASE STUDY) • • Qty. 100 Fat % 6.50 • 100 5.8901 Price 10.40 0.623459094 9.776540906 S.N.F% 8.80 8.73901 (20.33% + C.M +79.67% B.M) 0.326540906 9.45 0.0077 • 100 5.89 • 100 5.57 9.44923 3.50 2.115925 7.333305 8.40 (Manipulated/diluted milk) 8.707 (31.00% C.M +69.00% B.M.) • 100 • • • HIDDEN LOSS IN MILK PURCHASE TRANSACTIONS: Rs.{(2.115925)+ (0.623459094-0.326540906)-(0.0077)} =Rs. {2.115925+0.29691888-0.0077} • Rs.2.405143188 • HIDDEN LOSS/YEAR @11.50 Lac Liters/Day • =Rs. (11.50x365x2.405143188)=Rs.100,95,58,885 • Category 100% B.M 8.50 100% C.M i.e.>Rs.100 Crores/Year 18 DO WE KNOW OUR HIDDEN LOSSES? Case Study-MFL-2 MILK PROCURMENT:750 (Lac Kgs.) PRICE PAID:14394 (Lac Rs.) COST OF MILK PER Kg.: 14394/750= Rs.19.20 /Kg. Or Rs.295.26/Kg. Fat As Per Weighted Average of actual milk purchase rates through out the year: Actual due payment=Rs.(6.50x230)=Rs.15.05/Kg. Or Rs. 230/Kg. Fat MILK HANDLED=1204(Lac Kgs.) {Raw milk+ Reconstituted milk) COST OF RAW MATERIALS =14470 (Lac Rs.) or Rs. 12.02/Kg. MILK HANDLING COST:3852 (Lac Rs.) or Rs.3.20/Kg. TOTAL COST: {14470+3852}=18322 (Lac Rs.) or = Rs. 15.22/ Kg. TOTAL REVENUE: 17437 (Lac Rs.) or Rs.{17437/1204}= Rs.14.48/Kg. NET PROFIT/LOSS per Kg.=Rs{15.22-14.48}=Rs.0.74/Kg Loss. NET PROFIT:530 Lac Rs (As Indicated on the balance sheet) or =Rs.0.44/Kg. (Profit) PARTHA PROFIT: Rs.3.50/Kg HIDDEN “PARTHA” PROFIT LOSS: Rs.(3.50+0.74)=Rs.4.24/Kg PARTHA PROFIT LOSS= Rs.15,47,60,.000/ Year {@1 Lac Kg./day 19 NET AMOUNTS OF MILK PAYMENTS RELEASED BY DAIRY PLANTS NOT REACHING MILK PRODUCERS • • Price actually reaching the milk producers is much less than milk payment released by the institutions purchasing milk thus discouraging commercial production of microbiologically safe pure milk. As per case study-3 relating to a dairy institution in North India, cost of total milk purchased by it during the year remained Rs.15.67/Kg. {Rs. 241/Kg. Fat} {9060/578=Rs.15.67/Kg.} when as per annual weighted average of milk purchase rates during corresponding period works out to below Rs.200/Kg. Fat or Rs.13.00/Kg.{ for 6.5% Fat & 8.80% S.N.F} 20 DILUTION OF RAW MILK WITH WATER Normally we feel that added water in milk does not benefit the seller or harm the buyer so long we pay the price of milk after testing FAT and SNF in milk but actually it is not so. • 30%ADDITION OF WATER IN MILK • Reduces its contribution by Rs.0.52 per KG. • Increases handling /processing cost by Rs.0.23/KG (@ 10% dilution) • Adversely effects Fat/S.N.F. test results • Helps the seller to manipulate SNF:FAT ratio to his advantage • Helps unethical/unorganized traders to dominate organized sector • Badly effects microbiological quality of raw milk/ dairy products . 21 MANIPULATIONS IN COMPOSITION OF MILK • • • • IMPACT OF MODIFYING SNF:FAT RATIO Declared price of milk is subject to specified % of FAT and SNF {(8.80/6.5=1.3538461 for B.M) and ( 8.50/3.50=2.4285714 for C.M.) Change of FAT or SNF disturbing specified ratio can decrease real worth of milk that does not reflect on milk billing calculations Cost of milk being paid appears logical and reasonable as per arithmetical calculations but causes heavy loss to buyer. Purchasing diluted/adulterated/manipulated milk from traders is major reason for heavy losses to dairy plants. 22 DILUTION OF RAW MILK WITH WATER • 30%ADDITION OF WATER IN MILK • • • • • • • • • • • • Reduces its contribution by Rs. 0.52 per KG. Assumptions: Rate=Rs.13.00/KG (Fat=Rs120/KG & S.N.F.=59.090909/KG) Assumed realization=Fat=Rs130/KG & SNF=Rs.110/KG) Cost of milk (5x120+6.76923x59.090909)=Rs.9.999999/KG. 9.9999x1.30=Rs.12..999 Worth of water content=12.9999-9.9999=Rs.3.00/Kg. Revenue=(5x130+6.76923x110)=13.946153/KG. 13.946153x1.30=Rs.18.13 { For undiluted Milk of standard composition} Contribution=(Revenue-Cost)=13.946153-13.00=Rs.0.946153/KG. 0.946153/1.30=Rs.0.7281 Cost of Standard milk=Rs(6.50x120+8.80x59.090909)=Rs. 12.999999/KG. Revenue= (6.50x130+8.80x110)=Rs. 17.25/KG. Contribution=(Revenue-Cost)= Rs.(17.25-12.99999)=Rs.4.25/KG. Loss of Contribution=Rs.(4.25-3.00)-0.7281=Rs.0.52219/Kg. • Impact on profitability/year:Rs. (1x0.52219x365)= • Rs 1,90,59,935 @ 1 Lac liters/day 23 POSSIBLE SOLUTIONS FOR MILK PROCUREMENT • • • • • • “APNI DAIRY” MILK PURCHASE SYSTEM Mission designed farmer friendly system for Purchasing pure milk directly from actual milk producers without any dilution, manipulation and hidden losses. SALIENT FEATURES: Remunerative for milk producers. Profitable for the dairy plants. Transparent milk purchase transactions without any hidden losses. 24 POSSIBLE SOLUTIONS FOR MILK PROCUREMENT • Eliminate all middlemen in milk purchase system in a phased manner. • Purchase only pure milk without any dilution or manipulations. 25 POSSIBLE SOLUTIONS FOR MILK PROCUREMENT ELIMINATE SHORTCUT SOLUTIONS FOR MILK PROCUREMENT • I Free from all kinds of dilution/adulteration/preservatives: (Nominal penalties for adulterants/dilution are being imposed) • II • III Total solids>15.3% for B.M. & >12 for C.M. : {Milk with solids as low as 10% is being accepted) S.N.F :FAT Ratio strictly as per formula standards for B.M & C.M (Milk with any S.N.F/Fat ratio is being accepted) • IV C.L.R. For B.M=29 C.L.R. For C.M=30 {Milk with C.L.R. as low as 15 is being accepted} V Sodium ions<400/ C.M & <450 For B.M. {Milk with sodium ions as high as 1200 is being accepted} VI M.B.R. time for raw milk in summer>30 minutes and >1 hour in winter (No Consideration) VII { Score for Organoleptic Test: >9/10 ( Scale 1;!0} (No consideration) • • • 26 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS • Introduce transparent value management system based on “Marwari” concept of business management “PARTHA” designed by our Mission associates called “DAIRY BUSINESS MANAGEMENT SYSTEM” {D.B.M.S.} that works like a never failing tool in the hands of professional mangers in controlling hidden losses and optimizing overall profitability of dairy business. 27 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS {D.B.M.S} • Based on infrastructure and resources available with the organization projected “PARTHA” plan can be drafted by the management. • This document should be based on raw material inputs, product mix ,projected expenditure/ revenue account, contribution per unit and anticipated annual profits. 28 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS “PARTHA” BASED” PROFITABILITY STATEMENT • Conventional profitability statement or balance sheet is neither cost specific nor related to output of prime performance parameters. • Total expenditure against each head for each department with specified “PARTHA” norms should be compiled, monitored and analyzed at regular intervals. 29 DAIRY BUSINESS MANAGEMENT SYSTEM {DBMS} ANALYZING PROFIT & LOSS STATEMENT TYPICAL DAILY PROFIT & LOSS STATEMENT {Basis 100 kg.) S.NO I II III IV VI DESCRIPTION AMOUNT (Rs.) S.NO Purchase price of milk (6.5%/8.8%) 1300 Overhead cost on milk procurement 100 Processing cost including packing 100 Cost of utilities and maintenance 50 Marketing and Miscl. costs 150 I II III IV V REVENUE AMOUNT(Rs.) Sale of standardized milk Sale of toned milk Sale of double toned milk Sale of skimmed milk Sale of other products TOTAL EXPENDITURE 1700 TOTAL REVENUE Assuming total expenses as Rs 1700/100 Kg. Assuming net realization from Pasteurized milk/products as Rs. 1950/100 Kg. 800 400 500 100 150 1950 Actual Daily Profit/100Kg.=Rs.{1950-1700}= Rs.250 “PARTHA” PROFIT/100Kg. =Rs{ 2100-(1300+400)}=Rs.400. {As Per Specified norms} LOSS AGAINST PROJECTED“PARTHA PROFIT = Rs. (400-250=Rs.150/100Kg. PARTHA PROFIT OPPORTUNITY LOSS/DAY @1 Lac Kg./Day= Rs1,50,000 30 DAIRY BUSINESS MANAGEMENT SYSTEM {DBMS} INTRODUCING PARTHA IN DAIRY BUSINESS(MILK PROC.) Norms can be fixed in consultation with concerned staff bench marking with the best in the country. CREATING NORMS AFFECTING PARTHA {MILK PROC.} PRIME PERFORMANCE PARAMETERS: NORMS I Quantity of milk procured (Kg/day) As per specified targets II Quality of milk procured ( A-1/A-2/A-3) 100%A- 1 III Landed cost of milk (Rs. /Kg.) As per specified targets EXPENSE RELATED PARAMETERS: 1 Basic cost of milk:(As per competitive market rates) 2 Milk handling charges (Village level milk collection): 3 Milk transportation expenses ( VLC to MCC): Rs./Kg. 13.00 0.350 0.113 31 DAIRY BUSINESS MANAGEMENT SYSTEM {DBMS} INTRODUCING PARTHA IN DAIRY BUSINESS (MILK PROC.) 4 5 6 7 8 9 10 11 12 13 Milk transportation expenses from MCC to Dairy plant per Kg.milk: Tester expenses/Kg. milk ; Milk chilling charges/ Kg.milk: Maintenance expenses / Kg. Milk: Manpower cost /Kg. Milk: Cost of testing chemicals (Sulphuric acid) /Kg.milk: Cost of testing chemicals ( Amyl alcohol) /Kg. Milk: Cost of detergents/ cleaning & sanitizing agents /Kg. Milk: Total milk procurement overhead expenses: Landed cost of milk {As per specified Norms} 0.200 0.024 0.100 0.003 0.058 0.012 0.021 0.003 0.884 13.884 If the cost exceeds these norms then reasons for such increase in cost can be easily investigated for initiating immediate corrective measures Based on these norms and using PARTHA as effective business management tool, efforts must be made to upgrade performance level on continual basis. 32 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS • Close monitoring and effective corrective action for all deviations noticed in the “PARTHA” statement is the key for managing profitability of dairy business operations. • All departments must record all below norms performance entries in red ink so as to high light areas that need prompt attention of top management and all concerned. 33 DEPARTMENT WISE PARTHA STATEMENT FOR THE MONTH OF JUNE- 2006 Page: 1 ACTUAL AMOUNT PARTHA AMOUNT VARIANCE AMOUNT NORMS COMMI SSI ON ON MI LK FREI GHT ON MI LK BOTH SI DES MAN POWER COST CHI LLI NG EXPENSES MI LK COLLECTI ON EXPENSES STAFF WELFARE TELEPHONE EXPENSES VEHI CLE RUNNI NG ( MCC) MI LK PROCUREMENT EXPS 229720.00 721112.00 185631.00 145607.00 1197.00 0.00 0.00 99457.00 2306.00 268784.25 345579.75 185631.00 76795.50 15359.10 1000.00 6000.00 99457.00 2306.00 39064.25 375532. 25 0. 00 68811. 50 14162.10 1000.00 6000.00 99457.00 2306.00 0.35 0.45 185631.00 0.10 0.02 1000.00 6000.00 99457.00 2306.00 TOTAL: 1385030.00 1000912.60 282354. 40 1.80 1.30 0. 50 QTY 767955 0 0 767955 PARTICULARS MI LK QUANTI TY VLC MI LK QUANTI TY CONT. OTHER SOURCES MI LK QUANTI TY TOTAL PROCUREMENT OVERHEADS OVERHEAD COST / KG OF MI LK PER/ KG EXP. 34 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS • NORMS FOR MONITORING UTILIZATION OF KEY RESOURCES • Specify norms for consumption and effective utilization of key resources for each functional activity. Provide live demonstration that specified norms are achievable under field conditions. Monitor and control deviations with immediate corrective actions. • • 35 AFFECT OF RECOVERY (SNF% ) PER MONTH MI LK QUANTI TY ( KGS) SNF KGS SNF RATE @ 55/ - / KGS RECOVERY % 97. 00 97. 10 97. 20 97. 30 97. 40 97. 50 97. 60 97. 70 97. 80 97. 90 98. 00 98. 10 98. 20 98. 30 98. 40 98. 50 98. 60 98. 70 98. 80 98. 90 99. 00 99. 10 99. 20 99. 30 99. 40 99. 50 99. 60 99. 70 99. 80 99. 90 100. 00 50000 4250 233750 100000 8500 467500 150000 12750 701250 200000 17000 935000 250000 21250 1168750 300000 25500 1402500 350000 29750 1636250 -140250 -133237 -126225 -119212 -112200 -105187 -98175 -91162 -84150 -77137 -70125 -63112 -56100 -49087 -42075 -35062 -28050 -21037 -14025 -7012 0 7012 14025 21037 28050 35062 42075 49087 56100 63112 70125 -280500 -266475 -252450 -238425 -224400 -210375 -196350 -182325 -168300 -154275 -140250 -126225 -112200 -98175 -84150 -70125 -56100 -42075 -28050 -14025 0 14025 28050 42075 56100 70125 84150 98175 112200 126225 140250 -420750 -399712 -378675 -357637 -336600 -315562 -294525 -273487 -252450 -231412 -210375 -189337 -168300 -147262 -126225 -105187 -84150 -63112 -42075 -21037 0 21037 42075 63112 84150 105187 126225 147262 168300 189337 210375 -561000 -532950 -504900 -476850 -448800 -420750 -392700 -364650 -336600 -308550 -280500 -252450 -224400 -196350 -168300 -140250 -112200 -84150 -56100 -28050 0 28050 56100 84150 112200 140250 168300 196350 224400 252450 280500 -701250 -666187 -631125 -596062 -561000 -525937 -490875 -455812 -420750 -385687 -350625 -315562 -280500 -245437 -210375 -175312 -140250 -105187 -70125 -35062 0 35062 70125 105187 140250 175312 210375 245437 280500 315562 350625 -841500 -799425 -757350 -715275 -673200 -631125 -589050 -546975 -504900 -462825 -420750 -378675 -336600 -294525 -252450 -210375 -168300 -126225 -84150 -42075 0 42075 84150 126225 168300 210375 252450 294525 336600 378675 420750 -981750 -932662 -883575 -834487 -785400 -736312 -687225 -638137 -589050 -539962 -490875 -441787 -392700 -343612 -294525 -245437 -196350 -147262 -98175 -49087 0 49087 98175 147262 196350 245437 294525 343612 392700 441787 490875 36 AFFECT OF POWER UTILISATION PER MONTH MILK QUANTITY (KGS) UNITS CONSUMED POWER COST @ Rs. 4/- /UNIT % POWER UTILISATION 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 50000 77576 310304 100000 155152 620608 150000 196351 785403 200000 261801 1047204 250000 327251 1309005 300000 392702 1570806 350000 458152 1832607 -49649 -46546 -43443 -40340 -37236 -34133 -31030 -27927 -24824 -21721 -18618 -15515 -12412 -9309 -6206 -3103 0 3103 6206 9309 12412 15515 18618 21721 24824 27927 31030 -99297 -93091 -86885 -80679 -74473 -68267 -62061 -55855 -49649 -43443 -37236 -31030 -24824 -18618 -12412 -6206 0 6206 12412 18618 24824 31030 37236 43443 49649 55855 62061 -125664 -117810 -109956 -102102 -94248 -86394 -78540 -70686 -62832 -54978 -47124 -39270 -31416 -23562 -15708 -7854 0 7854 15708 23562 31416 39270 47124 54978 62832 70686 78540 -167553 -157081 -146609 -136137 -125664 -115192 -104720 -94248 -83776 -73304 -62832 -52360 -41888 -31416 -20944 -10472 0 10472 20944 31416 41888 52360 62832 73304 83776 94248 104720 -209441 -196351 -183261 -170171 -157081 -143991 -130901 -117810 -104720 -91630 -78540 -65450 -52360 -39270 -26180 -13090 0 13090 26180 39270 52360 65450 78540 91630 104720 117810 130901 -251329 -235621 -219913 -204205 -188497 -172789 -157081 -141373 -125664 -109956 -94248 -78540 -62832 -47124 -31416 -15708 0 15708 31416 47124 62832 78540 94248 109956 125664 141373 157081 -293217 -274891 -256565 -238239 -219913 -201587 -183261 -164935 -146609 -128282 -109956 -91630 -73304 -54978 -36652 -18326 0 18326 36652 54978 73304 91630 109956 128282 146609 164935 183261 37 AFFECT OF FUEL UTILISATION MILK QUANTITY (KGS) HUSK CONSUMED IN (MT) STEAM GENERATED (MT) HUSK COST @ Rs. 1.50/Kg % FUEL UTILISATION 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 50000 177.00 708.00 265500 100000 354.00 1416.00 531000 150000 531.00 2124.00 796500 200000 708.00 2832.00 1062000 250000 885.00 3540.00 1327500 300000 1062.00 4248.00 1593000 350000 1239.00 4956.00 1858500 -42480 -39825 -37170 -34515 -31860 -29205 -26550 -23895 -21240 -18585 -15930 -13275 -10620 -7965 -5310 -2655 0 2655 5310 7965 10620 13275 15930 18585 21240 23895 26550 29205 31860 34515 -84960 -79650 -74340 -69030 -63720 -58410 -53100 -47790 -42480 -37170 -31860 -26550 -21240 -15930 -10620 -5310 0 5310 10620 15930 21240 26550 31860 37170 42480 47790 53100 58410 63720 69030 -127440 -119475 -111510 -103545 -95580 -87615 -79650 -71685 -63720 -55755 -47790 -39825 -31860 -23895 -15930 -7965 0 7965 15930 23895 31860 39825 47790 55755 63720 71685 79650 87615 95580 103545 -169920 -159300 -148680 -138060 -127440 -116820 -106200 -95580 -84960 -74340 -63720 -53100 -42480 -31860 -21240 -10620 0 10620 21240 31860 42480 53100 63720 74340 84960 95580 106200 116820 127440 138060 -212400 -199125 -185850 -172575 -159300 -146025 -132750 -119475 -106200 -92925 -79650 -66375 -53100 -39825 -26550 -13275 0 13275 26550 39825 53100 66375 79650 92925 106200 119475 132750 146025 159300 172575 -254880 -238950 -223020 -207090 -191160 -175230 -159300 -143370 -127440 -111510 -95580 -79650 -63720 -47790 -31860 -15930 0 15930 31860 47790 63720 79650 95580 111510 127440 143370 159300 175230 191160 207090 -297360 -278775 -260190 -241605 -223020 -204435 -185850 -167265 -148680 -130095 -111510 -92925 -74340 -55755 -37170 -18585 0 18585 37170 55755 74340 92925 111510 130095 148680 167265 185850 204435 223020 241605 38 AFFECT OF MAN POWER UTILISATION PER MONTH MILK QUANTITY (KGS) MAN Hrs. UTILISED RATE / Hrs. @ Rs. 12/-(Avg) 50000 6749 80988 100000 12888 154656 150000 17577 210924 200000 23436 281232 250000 29295 351540 300000 35154 421848 350000 41013 492156 -8099 -7289 -6479 -5669 -4859 -4049 -3240 -2430 -1620 -810 0 810 1620 2430 3240 4049 4859 5669 6479 7289 -15466 -13919 -12372 -10826 -9279 -7733 -6186 -4640 -3093 -1547 0 1547 3093 4640 6186 7733 9279 10826 12372 13919 -21092 -18983 -16874 -14765 -12655 -10546 -8437 -6328 -4218 -2109 0 2109 4218 6328 8437 10546 12655 14765 16874 18983 -28123 -25311 -22499 -19686 -16874 -14062 -11249 -8437 -5625 -2812 0 2812 5625 8437 11249 14062 16874 19686 22499 25311 -35154 -31639 -28123 -24608 -21092 -17577 -14062 -10546 -7031 -3515 0 3515 7031 10546 14062 17577 21092 24608 28123 31639 -42185 -37966 -33748 -29529 -25311 -21092 -16874 -12655 -8437 -4218 0 4218 8437 12655 16874 21092 25311 29529 33748 37966 -49216 -44294 -39372 -34451 -29529 -24608 -19686 -14765 -9843 -4922 0 4922 9843 14765 19686 24608 29529 34451 39372 44294 UTILISATION % 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 39 AFFECT OF MILK FILM YIELD / KG (PER MONTH) MILK PACKED (LITRES) FILM USED FILM RATE @ 75/- / KG YIELD / KG 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 50000 233 17438 100000 465 34875 150000 698 52313 200000 930 69750 250000 1163 87188 300000 1395 104625 350000 1628 122063 -36488 -35272 -34055 -32839 -31623 -30407 -29190 -27974 -26758 -25542 -24325 -23109 -21893 -20677 -19460 -18244 -17028 -15811 -14595 -13379 -12163 -10946 -9730 -8514 -7298 -6081 -4865 -3649 -2433 -1216 0 -72976 -70543 -68111 -65678 -63246 -60813 -58381 -55948 -53516 -51083 -48651 -46218 -43786 -41353 -38921 -36488 -34055 -31623 -29190 -26758 -24325 -21893 -19460 -17028 -14595 -12163 -9730 -7298 -4865 -2433 0 -109464 -105815 -102166 -98518 -94869 -91220 -87571 -83922 -80274 -76625 -72976 -69327 -65678 -62030 -58381 -54732 -51083 -47434 -43786 -40137 -36488 -32839 -29190 -25542 -21893 -18244 -14595 -10946 -7298 -3649 0 -145952 -141087 -136222 -131357 -126492 -121627 -116762 -111896 -107031 -102166 -97301 -92436 -87571 -82706 -77841 -72976 -68111 -63246 -58381 -53516 -48651 -43786 -38921 -34055 -29190 -24325 -19460 -14595 -9730 -4865 0 -182440 -176359 -170277 -164196 -158115 -152033 -145952 -139871 -133789 -127708 -121627 -115545 -109464 -103383 -97301 -91220 -85139 -79057 -72976 -66895 -60813 -54732 -48651 -42569 -36488 -30407 -24325 -18244 -12163 -6081 0 -218928 -211630 -204333 -197035 -189737 -182440 -175142 -167845 -160547 -153249 -145952 -138654 -131357 -124059 -116762 -109464 -102166 -94869 -87571 -80274 -72976 -65678 -58381 -51083 -43786 -36488 -29190 -21893 -14595 -7298 0 -255416 -246902 -238388 -229874 -221360 -212846 -204333 -195819 -187305 -178791 -170277 -161763 -153249 -144736 -136222 -127708 -119194 -110680 -102166 -93652 -85139 -76625 -68111 -59597 -51083 -42569 -34055 -25542 -17028 -8514 0 40 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS COMPANY TO CONSUMER DIRECT MARKETING • When less educated dairy farmers can be associated directly with dairy plants through formal or informal societies for eliminating middlemen between milk producers and dairy plants then quality conscious urban consumers who already know how to demand value for their money can also be persuaded to form consumer welfare groups for reducing marketing and allied expenses. 41 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS CONTINUOUS IMPROVEMENT PROGRAM • Closely monitored system that involves one and all in the organization for making improvements on continual basis would go in a long way to optimize performance results relating to profitability, productivity and quality of dairy products. 42 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS SYSTEMS APPROCH FOR OPTIMIZING PERFORMANCE RESULTS • • • • • • • • • Specifications for products and self certification procedures: Documented procedures for accepting/rejecting material inputs: Norms for monitoring utilization efficiency of key resources Waste control measures and system for disposal of waste materials: Lubrication, preventive and corrective maintenance of machinery: Inventory control and purchase of materials at Competitive rates: Maintenance of Campus and Security Systems: Compliance of Statutory regulations: Optimum utilization of human resources: 43 POSSIBLE SOLUTIONS FOR DAIRY BUSINESS {SUMMARY OF MISSION RECOMMENDATIONS} 1. 2. 3. 4. 5. USE DIGITAL ANALYTICAL TECHNIQUE TO PROCURE RAW MILK WITHOUT A.D.M. INTRODUCE “APNI DAIRY” MILK PROCUREMENT SYSTEM APPLY “PARTHA” BASED DAIRY BUSINESS MANAGEMENT AND MONITORING SYSTEM INTRODUCE “COMPANY TO CONSUMER “ DIRECT MARKETING IMPLEMENT CONTINUOUS IMPROVEMENT PLAN 44 THANKS FOR YOUR TIME 45