ERP For Dairy Industry - Increase Efficiencies, Reduce Costs, And Ensure Compliance

India is one of the largest producer of milk, and is now preparing to become the largest food factory in the world.  But in its course of journey to zenith, the Indian ERP dairy industry faces a multitude of challenges and opportunities in procurement of raw milk and processing it into products such as consumer milk, butter, cheese, yoghurt, condensed milk, dried milk (milk powder), ice cream etc., using varied processes such as chilling, pasteurization, and homogenization et all. There is a clear demand supply gap in the domestic milk scenario.

There is also the compulsion to provide the lower prices to retailers because of their increasing negotiating power that has created margin pressures. The industry is struggling with the production planning and processing due to the variations in quantity and quality of the non-standardized and perishable raw material. Recent developments in production technologies can meet the demand for foods with lower carbohydrates or for products with an extended shelf life but, the main concern is to have efficient product innovation processes to provide the advantages associated with speed to market.

The focus of Dairies on increasing efficiencies, reducing costs, and ensuring compliance with food regulations over the whole supply chain are hampered by a number of non integrated processes and system which is affecting the effeciency as well as overall growth of the organization. To overcome these road blocks there is a need to standardize all the scattered processes and information on a single platform.

The growth of milk dairy business since ‘Operation Flood’ or ‘White Revolution’ led by Dr. Kurien through the highly innovative co-operative model has created a unique model for the milk industry. This model is not just unique to India but also to the world. Now, even private dairies try and follow a similar model for milk collection from villages and offer related services. Thus, the smallest of farmer or cattle owner owns a share of the business and gets the benefit from its growth.  As this is a unique Indian model, no standard management solutions or IT solutions can fit it readily.

Due to its unique business model and the back ground of stake holders, the working style of the members in this eco-system is different. Apart from professional managers handling the operations, the workers and operations people are simple village people with limited literacy and computer literacy who have joined the dairies as members of co-operative societies. Any vendor offering ERP solution for dairy industry has to bear in mind that it should have easily adaptable business practices and at the same time should have the flexibility of changing Business Practices to the specific needs of Dairies.

The people running these dairies and the processes also need a different approach to train the manpower and have to be sensitive to their issues. Most Dairy organizations have well defined systems under ISO certification. Some people in this vast network of ERP System for dairy industry are already using IT in a major way in Societies and plants for milk procurement and billing system and accounts. Some dairies or unions have partial automation with islands of computerization along with manual systems. However very few Dairies are using an ERP to automate their entire set of operations.

Features of an ERP for Dairy Industry:

• For Milk procurement which is the most complicated function in a dairy, one needs to define Co-operative Societies (Suppliers) attached to a particular district or region’s Union’s Dairy and details such as Address, Route, Collection time and society information like date of registration, Membership, directors, Bank Accounts etc.
• Routes can be defined on factors like Societies covered, Distances, Truck arrival time, type of milk, Transporter and contract details.
• Details of Transporter including the details of vehicle, the route which they cover, contact information etc.
• Daily Milk Receipt quantity needs to be captured automatically from the Milk Weighing machine with details like Fat and SNF contents etc.
• Many Unions have Chilling plants in remote locations if distances are higher and milk has chances of getting spoilt in the bargain. These chilling plants need to capture similar data and work on-line or offer data upload at any given interval that can be automated or done manually.
• Quality Control – Set of quality parameters can be defined for milk with basic information like Cow milk, Buffalo milk or mixed milk, capture auality of milk from individual societies for all parameters like Fat content and SNF. The data may be entered manually or can be captured from the instruments directly if milk analyzer provides interface files. Raw milk procurement rates are linked to quality parameters of milk for billing purpose.
• Society-wise Billing cycle can be 3 times in a month or fortnightly or weekly etc. This billing has to take into account other deductions or bonus etc. for supplies done to the society while preparing these bills, apart from quality based billing etc.
• Billing cycle is fully integrated with Finance, general stores and cattle feed plant to capture details of supplies done to societies. This can also be linked to veterinary services module if it is operational within the ERP so that medical services can also be debited to society account.
• Cattle feed manufacturing, procurement for its raw material and distribution/sales is a separate business process that is created and integrated with the ERP. Procurement cycle needs to cover the concept of broker/adatiya for ‘sauda’, advances, weigh-bridge integration, quality based rate variance for billing purposes and its linkage to society accounts for supplies done to them.
• Veterinary services are an important service offered by the Unions to their members to take care of their cattle stock. ERP should be able to plan and monitor field visits, medicines supplied, vehicle management and their spares, expenses monitoring operations. It can provide information about prevalence of diseases, their seasonal effect, spread across villages and Doctors’ performance. It needs to be linked to stores, finance and HR.
• Being a perishable commodity and low margin activity due to nature of business, the system would need to keep track on wastages due to spoilt milk or other products that may turn sour due to limitations of expiry, returned goods. These critical issues can provide or take away hidden margins not generally visible in normal operational data.
• Packing material consumption, its rejection due to quality issues, spares consumption that could indicated problems with any plant machinery also form an integral part of ERP.
• At macro-level an ERP for dairies would need to keep an eye on expected production from given quantities of procurement, variance from  the norms, thus provide indicators about the health of operations at procurement and manufacturing levels, losses due to returns, tracking sources of such losses and cost escalation can provide the right kind of controls required in ERP Solutions for dairy industry.

Thus to manage the supply chain, logistics, milk procurement, payments, cattle feed, veterinary and operation to cost controlling and corporate services, an Integrated solution like ERP for dairy industry can provide a single integrated platform. The ERP for dairy industry can greatly help improve operational efficiencies specifically in the areas of milk procurement, distribution, transactions with Co-operative societies and Manufacturing.