Techno-economics of dairy business

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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: [email protected]
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
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