After Contents

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Chapter 1
Introduction

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1.1The Dairy Industry in India
Dairy industry is of crucial importance to India. The country is the world’s largest
milk producer, accounting for more than 13% of world’s total milk production. It is the world’s
largest consumer of dairy products, consuming almost 100% of its own milk production. Dairy
products are a major source of cheap and nutritious food to millions of people in India and the
only acceptable source of animal protein for large vegetarian segment of Indian population,
particularly among the landless, small and marginal farmers and women. Dairying has been
considered as one of the activities aimed at alleviating the poverty and unemployment especially
in the rural areas in the rain-fed and drought-prone regions. In India, about three-fourth of the
population live in rural areas and about 38% of them are poor. In 1986-87, about 73% of rural
households own livestock. Small and marginal farmers account for three-quarters of these
households owning livestock, raising 56% of the bovine and 66% of the sheep population.
According to the National Sample Survey of 1993-94, livestock sector produces regular
employment to about 9.8 million persons in principal status and 8.6 million in subsidiary status,
which constitute about 5% of the total work force. The progress in this sector will result in a
more balanced development of the rural economy.
India has the highest livestock population in the world with 50% of the buffaloes
and 20% of the world’s cattle population, most of which are milch cows and milch buffaloes.
India’s dairy industry is considered as one of the most successful development programs in the
post-independence period.
In the year 2006-07 the total milk production in the country was over 94.6 million
tonnes with a per capita availability of 229 gms per day. The industry had been recording an
annual growth of 4% during the period 1993-2005, which is almost 3 times the average growth
rate of the dairy industry in the world. Milk processing in India is around 35%, of which the
organized dairy industry account for 13% of the milk produced, while the rest of the milk is
either consumed at farm level, or sold as fresh, non-pasteurized milk through unorganized
channels.
Dairy Cooperatives account for the major share of processed liquid milk marketed
in the India. Milk is processed and marketed by 170 Milk Producers’ Cooperative Unions, which
federate into 15 State Cooperative Milk Marketing Federations. Over the years, several brands
have been created by cooperatives like Amul (GCMMF), Vijaya (AP), Verka (Punjab), Saras
(Rajasthan). Nandini (Karnataka), Milma (Kerela) and Gokul (Kolhapur).
Uttar Pradesh, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Andhra
Pradesh, Karnataka and Tamil Nadu are the milk surplus states in India. The manufacturing of
milk products is obviously high in these milk surplus States. Exports of dairy products have been
growing at the rate of 25% per annum in the terms of quantity terms and 28% in terms of value

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since 2001. Significant investment opportunities exist for the manufacturing of value-added milk
products like milk powder, packaged milk, butter, ghee, cheese and ready-to-drink milk
products.
India has emerged as the largest milk producing country in the world with present
level of annual milk production estimated as 94.5 million tones with an expected production
level of 135 million tonnes by the year 2015. India has a large livestock population base
constituting 278 million livestock including 180.5 million cattle, 82.8 million buffaloes, 4
million sheep and 9.2 million goats. The livestock population is projected to increase to 322
million by the year 2015. The large livestock population is raised primarily on crop residues and
grazing in the common property including basement. The forest area, which was a major source
of grazing, is no longer available to livestock breeders especially landless people. As a
consequence, the available feed resources fall short of the nutritional requirement. The shortfall
is estimated as 59.9 million tonnes for the green fodder and 19.9 million tonnes for dry fodder.
This shortfall is likely to increase by 2015 to 63.5 million tonnes of green fodder and 23.56
million tonnes of dry fodder.
The landless people are, therefore, likely to face severe shortage of resources to
raise cattle and other species of livestock. There is a real danger that in the absence of resources
to maintain their stock, these under-privilege rural people may give up livestock farming. This
could be a serious setback to lakhs of rural families who derive income as well as employment
opportunities from livestock sector.
India prepares to tackle the international market following Japan, where milk
consumption today, has more than trebled to 70 kg per capita from a mere 20 kg in the ‘sixties –
the consumption of dairy products in other Asian ‘tiger’ nations is also growing. As a
consequence – creating excellent export opportunities for India, as these nations are deficient in
milk by at least 3 million tonnes per year. India, with some 27 per cent of Asia’s population,
accounts for more than half of the milk output with enough growth potential to explore foreign
markets. In anticipation of the export opportunities and in view of the post GATT scenario, India
is gearing up to tackle the demands of the international market.
Indian companies are preparing themselves to meet international standards and
other non-tariff barriers. Planners are taking measures to meet the sanitary and phyto-sanitary
specifications – prescribed by Office International des Epizooties (OIE) under the auspices of the
World Trade Organization (WTO) -, which range from the quality assurance of processed dairy
products to the health status of livestock.
“Milk production is likely to reach about 190 million tonnes in 2015 from current
level of about 123 million tonnes,” the ASSOCHAM study, titled, ‘Indian Dairy Industry: The
Way Ahead’, said. India – the world’s largest milk producer – accounts for around 20 per cent of

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global milk production, with most of it consumed domestically, it added. In India, about 60 per
cent of milk is consumed in liquid form, while the remaining 40 per cent is used in the form of
butter, clarified butter (desi ghee), cheese, curd, paneer, ice cream, dairy whiteners and
traditional sweets. “Growing at about 10 per cent annually, the Indian dairy industry is
predominantly controlled by the 4norganized sector, which accounts for nearly 85 per cent,”
ASSOCHAM Secretary General D S Rawat said in a statement. About eight crore rural families
across India are engaged in dairy production and the rural market consumes over half of the total
milk produced, he added. According to the study, an upward spiral in prices, the lack of proper
infrastructure like cold storages and absence of a transparent milk pricing system are
affecting retail consumption of milk and leading to escalating milk prices in the domestic market.
The lack of fodder, resulting in low yield from cattle, is another problem affecting the sector, it
added. Despite overall food inflation easing marginally to 10.63 per cent for the week ended
November 5, milk prices grew at a faster pace of 10.74 per cent during the period. The private
sector can play a pivotal role in reducing the cost of milk production by employing advanced
techniques to enhance productivity, providing breeding facilities for cattle and by developing
processing and marketing infrastructure, Rawat said. Andhra Pradesh, Bihar, Haryana, Gujarat,
Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh are the leading milk producing
states in the country.
1.2 Company Profile
The Orissa State Cooperative Milk Producers' Federation Limited (OMFED®)
is an apex level Dairy Cooperative Society registered under Cooperative Society Act – 1962. It
has come into existence to integrate the milk producers in rural areas with consumers in the
urban areas with an enterprising aptitude. OMFED®'s main activities include promoting,
production, procurement, processing and marketing of milk & milk products for economic
development of the rural farming community of Orissa.
1.2.1 The Management of Omfed
The Orissa state Cooperative Milk Producers' Federation ltd. is controlled by a Board Of
Directors which consists of Chairman of all affiliated Milk Unions, three nominees of
Government of Orissa, a nominee from the National Dairy Development Board and Managing
Director of the Omfed (the ex-officio member) .The Chairman of the BOD is elected amongst
the members of the Board. The post of Chairman of the Federation is honorary.

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1.2.2 Objectives
The organization was established with the following objectives –
To carry out activities for promoting production, procurement, processing and marketing
of milk & milk products for economic development of the rural farming community.
Development and expansion of such allied activities as may be conductive for the promotion of
the dairy industry. Improvement and protection of milch animals and economic betterment of
those engaged in milk production. In particular and without prejudice to the generality of the
forgoing objective, the federation may:
• Purchase and/or erect building, plant machinery and other ancillary objects to carry out
business
• Study problems of mutual interest related to procurement, marketing of dairy and allied
products
• Purchase commodities from the members of other sources without affecting the interest of the
members, process, manufacture, distribute and sell them same, arrange to manufacture /
purchase and distribute balanced cattle feed and for the purpose to set up Milk collection and
chilling centers, Milk Processing Plants, Product factories etc, in any of the district covered
under its area of operation.
• Provide veterinary aid and artificial insemination services and to undertake animal husbandry
activities so as to improve animal health care disease control facilities
• Advice, guide and assists the Milk Union in all respects of management, supervision audit
functions
• Render technical, administrative, financial and other necessary assistance to the member unions
and enter in to collaboration agreement with someone, if the need arises
• Advise the member unions on price fixations, public relation and allied matters
1.2.3 Vision
To be a leading milk producing organization at international level of efficiency with
widest and satisfied customer base, maximizing wealth of stakeholders & contributing to the
state economy.
1.2.4 Mission
• Advancement of dairying, encouraging and educating people, through mutual participation.
• Continuous endeavor to increase productivity & per capita consumption.
• To promote clean milk production and distribution with state-of-art technology.
• Customer satisfaction with reliable, uninterrupted services and quality products.

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• To foster a performance oriented culture encouraging innovation.
• To promote a congenial work climate encouraging employees to participate and contribute
for organizational growth.
• To be a learning organization and responsive to changing environment.
• Continuous upgradation of skills & competence of employees & their career advancement.
• To enrich quality of life of people and preserve ecological balance.
1.2.5 Organizational Structure
Most of the dairy farmers (“Gowalas”) live in villages. They are organized into Milk Producers’
Cooperative Societies (MPCS). The MPCS collect milk from the dairy farmers, test it for milk
content, fat content, SNF content, and sends it to a Milk Union. The procurement target given by
OMFED for the year 2012 is 80,000 liters per day (LPD) according to the information given by
Mr. P. K. Pani, the procurement in charge at Bhubaneswar Dairy, Chandrasekharpur,
Bhubaneswar. The number of farmers varies from one MPCS to another. All members do not
pour or supply milk on all days. This is partly because a cow does not give milk throughout the
year. The farmers are required to supply only the surplus milk after consumption (marketable
surplus). If they wish to sell milk in the open market, they may do so, but in that case, they will
have to leave the cooperatives; falling prey to the Village Milk Vendor, an exploiting agent.
Table 1.1
SL. No. District Block Place Capacity
1 Balasore Remuna Remuna 30,000
2 Jagatsinghpur Tirtol Tirtol 10,000
3 Puri Tangi Chandeswar 10,000
4 Khurda Bhubaneswar Chandrasekharpur 2,50,000
5 Dhenkanal Dhenkanal Dhenkanal 10,000
6 Kalahandi Sadar Bhawanipatna 20,000
7 Sambalpur Sambalpur Sambalpur 50,000
8 Sundargarh Sundargarh Rourkela 30,000
9 Ganjam Ankuspur Ankuspur 20,000
10 Keonjhar Keonjhar Sadar Silisuan 10,000
11 Koraput Jeypore Jeypore 20,000

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1.2.6 Achievements
Table 1.2
Sl.
Particulars 2007-08 2008-09 2009-10 2010-11 2011-12
No.
01 Organised D.C.S. (No.) 4387 4625 4684 4835 5022
02 Farmer Membership (No.) 236199 246410 244295 253343 260611
03 Milk Procurement (KPD) 288270 294383 298823 342663 370179
SALE OF MILK & MILK
PRODUCTS
01 Milk Sale (LPD) 252400 277394 341890 380302 420100
02 Ghee Sale (MT) 395.334 389.610 309.916 577.499 433.522
03 SFM Sale (Bottle) 1579778 1635986 1950906 2013757 1908756
04 Sweet Curd sale (MT) 752.290 739.105 585.750 645.659 727.391
05 Butter Sale (MT) 11.147 12.160 6.843 8.153 5.69
06 Plain Curd Sale (MT) 2870.886 3802.126 5522.073 7469.949 6888.853
07 Butter Milk (Pkts) 4545185 5947118 7492035 7775500 5610572
08 Paneer (MT) 332.042 545.811 464.983 510.623 411.671
09 Chhenapoda (MT) 17.073 38.732 79.893 47.474 33.956
10 Lassi (Pkts) 1886983 2478910 3920300 4912900 5601153
Physical Achievements of Omfed for the past five
years as on March, 2012 ,2012

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Table 1.3
SL. NO. PARTICULARS 2006-07 2007-08 2008-09 2009-10 2010-11
(Prov)
1 Share Capital 469.89 494.96 497.94 999.38 999.38
2 Turnover 17058.30 21420.16 26974.88 31581.04 38640.27
3 Gross Profit 1152.24 1489.82 2472.38 2446.52 3018.19
4 Net Profit(After Tax) 27.81 (229.42) 280.44 345.35 226.26
Financial Parameters of Omfed as on March 2011

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Figure 1.1
Operational Area of OMFED
1.3. Products
Table 1.4
Ice Cream
Mango Magic 50 ml. Cup 5.00
Mango Magic 100 ml. Cup 10.00
Product Name of the Product Packaging Size Unit M.R.P.
(Rs)

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Mango Magic 500 ml. No. 35.00
Ice Cream
Very Vanilla 50 ml. Cup 5.00
Very Vanilla 100 ml. Cup 10.00
Strawberry 50 ml. Cup 5.00
Strawberry 100 ml. Cup 10.00
Butterscotch 50 ml. Cup 8.00
Butterscotch 100 ml. Cup 15.00
Chocolate 50 ml. Cup 8.00
Chocolate 100 ml. Cup 15.00
Family packs
Very Vanilla (Family Pack) 500 ml. 35.00
Strawberry (Family Pack) 500 ml. 35.00
Butterscotch (Family Pack) 500 ml. 40.00
Chocolate (Family Pack) 500 ml. 40.00
Party Packs
Very Vanilla (Party Pack) 1000 ml. 65.00
Strawberry (Party Pack) 1000 ml. 65.00
Butterscotch (Party Pack) 1000 ml. 75.00
Chocolate (Party Pack) 1000 ml. 75.00

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Bulk Packs
Very Vanilla (Bulk Pack) 4000 ml. 225.00
Strawberry (Bulk Pack) 4000 ml. 225.00
Butterscotch (Bulk Pack) 4000 ml. 280.00
Chocolate (Bulk Pack) 4000 ml. 280.00
Preminum Variety Ice Cream
Packs
Packs will be used
for scooping purpose
Real Pineapple 4000 ml. 300
Vanilla Chaco Chips 4000 ml. 320
Real Black Current 4000 ml. 520
Butterscoth Premium 4000 ml. 390
Tooty Fruity 4000 ml. 690
Real Mango 4000 ml. 355
Strawberry Fantasy 4000 ml. 770
Cone / Bar
Ripple Cone (Chocolate/Butter Scotch) 120 ml. 15.00
Chocobar 60 ml. 12.00
Tooty Fruity
Tooty Fruity 500 ml No. 37.00
Keshar Pista 100 ml Cup 18.00
Keshar Pista 500 ml No. 80.00

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Malai Kesar 100 ml Cup 15.00
Malai Kesar 500 ml No. 47.00
(This will be marketed through authorized OMFED ICE CREAM distributors)
Omfed Peda
*Available from Rourkela Dairy
Packet
10
pieces
25.00
Double Toned Milk
Poly Pack 1 Ltr. 22.00
Toned Milk Poly Pack 1 Ltr. 24.00
Cold Coffee 200 ml
Disposable
Bottle
No. 13.00

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Sweetened Flavoured Milk
200 ml
Disposable
Bottle
No. 13.00
Butter Milk 250 Ml. Pouch No. 6.00
Ghee
1 ltr.
500 Ml.
200 Ml.
100 Ml.
Poly jar
Poly jar
Poly jar
Pouch
No.
No.
No.
No.
350.00
180.00
75.00
37.00
15 Ltr. Tin No. 4500.00
Sweet Curd 80 Gram. Cup No. 7.00
Plain Curd
100 Gram.
200 Gram.
400 Gram.
500 Gram.
Cup
Cup
Cup
Cup
One
Cup
6.50
13.00
24.00
26.00
Whole Milk
Curd

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200 gm Pouch No 8.00
500 gm Pouch No 20.00
Table Butter
500 Gram.
100 Gram.
Pack
Pack
No
No
133.00
27.00
Lassi 250 Ml. Pouch No 8.00
Chennapod
500 Gram. V.Pack No 80.00
Cottage Cheese (Paneer)
10Kg / 5kg BLOCK No 170.00per kg
500 Gram V.Pack No 95.00
200 Gram V.Pack No 40.00
Rabidi 80 Gram. Cup No. 12.00

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Chapter 2
Introduction to the Study

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2.1 Background and significance
Being a student of Marketing, I, in consultation with my external company guide Mr. N.
R. Khadanga and my internal faculty guide and course coordinator Prof. Sujit Kumar Patra
decided on this topic since distribution and logistics form the core and threshold of the marketing
activities of an organization which are associated with the four ‘P’s of marketing – Product,
Price, Place and Promotion.
This is extremely relevant in the context of the topic of my study because focusing on the
distribution channel of the market leader of liquid milk opens up avenues and scopes of
enhancing the efficiency of the channel in addition to helping me have an understanding of the
activities of the channel members. This is applicable in light of the objectives, vision and mission
of the organization – achieving and sustaining international standards and fortifying public
relations and enhancement of rural Orissa.
2.2 Objectives of the study
• The objective of this study is to look into the various intricacies involved in and obtain
insight about the distribution system of OMFED liquid milk.
• The study includes certain observations from the survey conducted at authorized OMFED
milk booths and aims at having an understanding of the channel management which is
quite distinct in nature as opposed to the routine distribution channel of other F.M.C.G.
products.
• This study also aims at looking into the inbound and outbound logistics associated with
the distribution system of liquid milk of OMFED. This includes gaining knowledge about
the procurement as well as the dispatch and final delivery of the product to the milk
booths.
• Finally, the study also aims at deducing certain inferences and conclusions and
suggesting some recommendations based on the data collected from the survey at
OMFED milk booths.
2.3 Scope
The scope of this study involves an overview of the functionalities of the organization,
especially in the purview of the distribution system; from the chilling plant at Bhubaneswar
Dairy, Chandrasekharpur, Bhubaneswar to the milk booths. This study covers the details of the
activities of the channel members or intermediaries and identifies the link which exists among
the same. This is inclusive of the processes involved in procurement, interactions with the

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channel members starting from the organization to the authorized milk booth agents, the order
size of milk booth agents, as well as the benefits or margins enjoyed by them. The study also
comprises the learning from visits to a Bulk Milk Cooler (B.M.C.) under Puri Milk Union and
the visits to 90 odd authorized OMFED milk booths; it tries to highlight the answers to the
questions: “What actually takes place and how?” in the distribution system of OMFED.
2.4 Limitations
• An inherent, but minor communication gap between me and the booth agents.
• Not all milk booth agents were very sanguine about the functioning of the distribution
channel and benefits they receive from OMFED and were more focused on their profits
and were reluctant to share information readily.
• The time that could be squeezed for collecting data and information from the milk booths
was very little as I had to move around in the delivery trucks and we had to be moving to
different booths in a particular route.
• I encountered many people who were eager to take distributorship of OMFED but shrunk
away after I communicated the criteria and procedure to obtain the same since allotment
of distributorship involved a lot of inspection from the organization’s part.
• Distributors selling competitor brands of OMFED were hard to convince since they
seemed to overlook the benefits offered from OMFED and were more concerned with
margins and credit.
• I could cover authorized OMFED milk booths of the ‘Evening Routes’ only since the
distribution for the ‘Morning Routes’ begins late at night.
2.5 Research Methodology
Research Methodology qualifies as one of the most indispensable components of the
project. It is by far most necessary for reaching conclusions and inferences about the data
collected in the course of the survey conducted and study made on the topic. The project and
study was based on a survey conducted by me at 90 odd authorized OMFED milk booths. The
primary objective of the survey was to collect relevant data and gather information pertinent to
my topic of study so as to obtain an insight about the functionalities and activities of the
distribution system and draw certain conclusions based on the results.

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2.5.1 Research Design
Descriptive Research: The survey was conducted in the city of Bhubaneswar and Cuttack –
• To understand the product & service offering by OMFED.
• To assess the customer demand and channel efficiency of the distribution system.
• To obtain data and information regarding booth visits and order size for further value
addition.
Although OMFED has a wide range of product categories starting from dairy products to
horticulture products, I was directed to cover the distribution system of liquid milk of OMFED;
its procurement as well as final delivery by my external company guide Mr. N. R. Khadanga.
So I had prepared a questionnaire for the various milk booth agents whom I had visited while
delivery of liquid milk. So my survey was mainly questionnaire and interview based.
2.5.2 Geographical Coverage
The market survey was conducted in the cities of Cuttack and Bhubaneswar as mentioned
earlier. I had covered four of the evening routes of distribution (delivery); namely Route Nos. 1,
6, 8 of Cuttack and Route No. 11 of Bhubaneswar. The areas I had covered in the delivery
vehicles are as follows –
Cuttack:
• Traffic Tower
• Stoney Road
• Satichaura Road
• Sectors – 7, 9, 11
• High Court CDA
• Badambadi Lane
• Pithapur
• City Hospital
• Seminay Chhak
• Dagarapada
• Mahatabnagar
Bhubaneswar:
• Old Town
• Lingaraj Mandir & Lingaraj Railway Station

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• Mahatab Road
• Bhimatangi
• Ekamra College Chhak
• Sankara Bazar
• Laxmisagar Bazar
• ANI House Chhak
• Canal Road
• SS Vihar
2.5.3 Data Source & Type
i Primary Data: This data has been collected directly from the markets visited with the help
of the questionnaire I had prepared for the authorized OMFED milk booths. This also
includes results from interactions I had with the agents.
ii Secondary Data: This data includes information about the organization, its vision mission
and objectives and its performance with respect to prevalent market conditions and status
of the dairy industry and liquid milk market of India and Orissa in particular.
2.5.4 Research Instruments
1. Questionnaire: The questionnaire was designed primarily to obtain the necessary
numerical data pertaining to the milk booth agents; their order size, sales, demand etc.
2. Interview: The interview was taken mainly with the respective members of the
organization, in-charges of the distribution system, personnel of Milk Producers’
Cooperative Society and finally the booth agents.
2.5.5 Sample Size
The sample size for my survey was 90 booths, the population size being 950 booths
2.5.5 Statistical Tools
The statistical tools used to get results are mainly mean and standard deviation.

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Chapter 3
Findings and Observations

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3.1 The Jagannathpur Chapter
On 14th
May, 2012, I along with Mr. P. K. Pani, the Procurement-in-charge visited the
Milk Producers’ Cooperative Society at Jagannathpur of Nimapada Unit in Puri District
across Nimapada and Peepli; a Bulk Milk Cooler (BMC) where the cow milk is chilled. Over
there I had an interaction with Mr. Pramath Kumar Das, the President and Mr. Kailash
Chandra Mishra, the Secretary and gathered certain information and data about the
procurement starting from the grassroots level.
Most of the dairy farmers (“Gowalas”) live in villages. They are organized into Milk
Producers’ Cooperative Societies (MPCS). The MPCS collect milk from the dairy farmers, test it
for milk content, fat content, SNF content, and sends it to a Milk Union. The procurement target
given by OMFED to Puri Distrct for the year 2012 is 80,000 liters per day (LPD) according to
the information given by Mr. P. K. Pani, the procurement in charge at Bhubaneswar Dairy,
Chandrasekharpur, Bhubaneswar. The number of farmers varies from one MPCS to another.
All members do not pour or supply milk on all days. This is partly because a cow does not give
milk throughout the year. The farmers are required to supply only the surplus milk after
consumption (marketable surplus). If they wish to sell milk in the open market, they may do so,
but in that case, they will have to leave the cooperatives; falling prey to the Village Milk Vendor,
an exploiting agent.
The hierarchy of the MPCS is as follows. The President and Secretary are appointed by
the board of directors of OMFED from the members of the MPCS. The members of each MPCS
are registered with the respective milk unions which in my case study would be the Puri Milk
Union Limited (PUMUL). PUMUL, according to the target set by OMFED which in this case is
80,000 LPD allots quantities of cow milk to be procured to each MPCS and its BMC according
to its capacity and efficiency. In this context it is important note that there are a total of 10
MPCSs under PUMUL.
3.1.1 Details of Activities
The entire procurement process can be divided into three main stages which involves the
following –
1. There are milkmen assigned by the MPCS to collect cow milk from the dairy farmers
who are members and are registered at Jagannathpur MPCS. The MPCS at
Jagannathpur has a labour force of about 25 people. The milkmen move around in

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bicycles in the villages and visit the dairy farmers carrying two cans of capacity 20
liters each for collecting the raw cow milk. After collection of the raw cow milk, these
milkmen assemble these cans at a particular point. This happens in numerous trips.
This particular MPCS has two motorized vehicles – Tata Ace which move around and
collect these 20 liter cans from these points in numerous trips and brings the raw cow
milk at the Bulk Milk Cooler (BMC) of Jagannathpur MPCS.
2. The activity which follows this step is sampling and quality determination of the raw
cow milk collected. This is done so as to determine what price is to be paid to the dairy
farmers who supply the raw cow milk. In this process two conventional scientific
instruments (devices) with which this process is executed; the “Lactometer” and the
“Butrometer”. The Butrometer is a device for measuring the fat content of milk. There
is another component called Solid Not Fat (SNF) which actually helps in determining
the price to be paid to the dairy farmers. There is this particular two way table for
determining the SNF content. The intersection of the Corrected Lactometer Reading
and the Fat Content Reading gives the SNF content of the milk that has been procured.
(Please refer to SNF calculation chart in Appendices)
3. Next, the raw milk is chilled at the BMC. Tankers of PUMUL leave from OMFED
(Bhubaneswar Dairy) collect this chilled milk from these BMCs in two shifts; morning
and evening and bring it to the respective dairy, which, in this case, is the chilling
plant at Bhubaneswar Dairy, at Chandrasekharpur, Bhubaneswar for the procured milk
to undergo further processes like homogenization, pasteurization, chilling, etc.
3.1.2 Other issues
• The capacity of the Bulk Milk Cooler (BMC) at Jagannathpur is – it can chill 2000
liters of raw cow milk per shift (morning and evening), per day.
• The cost of the machinery installed at the BMC for chilling the raw cow milk collected
is about Rs 3-5 lakhs.
• Constant monitoring is carried to address the efficiency of these BMCs.
• To meet the increasing demand of OMFED liquid cow milk, more quantities of milk
need to be procured. In this light 4 more BMCs are about to be established; 3 at
Astaranga and 1 at Kakatpur.
(Please refer to “The Jagannathpur MPCS at a glance in Appendices)

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The following figure illustrates the procurement and dispatch channel of OMFED
Figure 3.1

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3.2 The Distribution system
The distribution system of OMFED liquid milk is a very interesting one; the channel
members being only two namely the organization and the authorized milk booth agents. Now let
us look into the intricacies involved in it.
3.2.1 Criteria for Allotment of Milk Booth:
For Bhubaneswar, Cuttack, Jajpur, Puri, Jatni, Nimapada and Khurda, application in plain paper
is to be submitted to Dy. Gen. Manager (Marketing), Bhubaneswar Dairy through respective
Marketing-In-Charges of that area. For other places application should be submitted to Plant
Manager of respective dairies enclosing Photo Identity Card /Driving License and Sketch map of
the proposed location/site. After receipt of the application, field verification is to be done by field
supervision staff and if report goes in favour of the applicant, he has to submit the following
document for consideration of his application.
• In case of Private land, the applicant has to furnish land document on ownership of
land/house.
• In case of rented house Xerox copy of the agreement is to be furnished.
• In case of Govt./municipality land permission is to be obtained by the applicant from the
concerned Department.
Allotment of booth will be considered on the basis of the following criteria:
• Substantial distance from one booth to another booth is to be maintained taking into account
the sale potentiality of location /area.
• Applicant should have sound financial background to deposit the cost of the required milk in
advance.
• Allotment is to be done provisionally for a period of one year which will be renewed after
reviewing the performance.
• After allotment, Rs. 1000/- is to be deposited towards security deposit and an agreement is
to be executed on Non-Judicial stamp paper amounting Rs. 5/-.

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3.2.2 Criteria for Allotment of Product Distributorship:
For Bhubaneswar, Cuttack, Jajpur, Puri, Jatni, Nimapada and Khurda, application in plain paper
is to be submitted to Dy. Gen. Manager (Marketing), Bhubaneswar Dairy through respective
Marketing-In-Charges of that area. For other places application should be submitted to Plant
Manager of respective dairies enclosing Photo Identity Card /Driving License and Sketch map of
the proposed location/site.
After receipt of the application distributorship will be considered on the basis of the following
criteria:
• Applicant should have sound financial background along with business experience.
• Applicant should have valid SHRIN/TIN from Commercial Tax authority.
• Applicant should have required manpower and own distribution vehicle for distribution of
products.
• Allotment will be done for a particular area as per the requirement/feasibility.
• Product will be supplied against 100% payment (Cash/DD), EX-Dairy/Godown.
• After allotment Rs. 5000/- is to be deposited for distributorship of all OMFED Products and
Rs. 2000/- for fresh Milk products only as refundable Security amount.
3.2.3 Functionalities, Activities & Observations
Now, having looked into the criteria, let us see how actually the activities and
functionalities take place in the distribution channel –
• First, the authorized milk booth agents place an order size at OMFED which is known as the
indent. The agents place the indents for both the morning and evening shifts according to the
estimated demand for that shift.
• The agents make the payment before hand through a ‘challan’ (Please refer to sample
challan in the Appendices) through various banks with which OMFED has tie-ups.
OMFED has tie-ups with seven different banks. For example, Union Bank, Omfed Square,
United Bank Of India, Shahid Nagar, Bank Of India, Bapujinagar. In this context, it is
important to note that all transactions are carried on a cash basis and no credit is given; the
rationale behind it being liquid milk is a perishable product. And besides liquid milk being a
perishable product, had OMFED given credit to its booth agents, collection of the same
would have been next to impossible since the channel members are few but the number of

26 | P a g e
authorized OMFED milk booths where milk is suppled from Bhubaneswar Dairy,
Chandrasekharpur is enormous—
Total No. of authorized OMFED milk booths under Bhubaneswar Dairy………………1200
No. of milk booths in Bhubaneswar……………………………………………………….700
No. of milk booths in Cuttack……………………………………………………………..250
Other cities covered: Puri, Konark & Jajpur
Average no. of grocery stores where OMFED liquid milk is supplied…………………..9-10
• The final, packaged liquid cow milk is loaded in crates and is then dispatched for delivery to
the milk booths. In this context, let us look into the outbound logistics and details of the
vehicles deployed for delivery as shown in the following table.
Type & Make Tata 407 Tata 709 Tata Ace
Capacity 2700 liters 3500 liters 1000 liters
Total no. of vehicles deployed from Bhubaneswar Dairy, Chandrasekharpur: 62
One driver and one/two assistant/s move in every truck while delivery of milk packets.
Payment to the driver : Rs. 4000/-
Payment to the assistant(s): Rs. 2000/-
• There are exceptionally well designed beat plans/route maps known as “Truck Sheets”
(Please refer to Truck Sheets of Evening Routes covered) which efficiently cover the
milk booths in the areas of Bhubaneswar, Cuttack etc. There are route-in-charges who have
been assigned the job of overseeing the channel efficiency of their respective routes; the one
under whose guidance I made the survey being Mr. S. K. Swain, route-in-charge of Route
Nos. 9 & 11.
No. of Morning Routes: 24 Time of loading for Morning Routes: 2:30 A.M.
No. of Evening Routes: 11 Time of loading for Evening Routes: 12:00 P.M.
In this case, it must be noted that these vehicles are deployed on the basis of contracts
OMFED has with various transport companies. The route maps/beat plans are designed in
such a way that every authorized OMFED milk booth is covered both in the morning as well
as the evening shifts. Apart from this, while moving in the delivery vans covering different
evening routes, I observed that after crates were unloaded at a certain booth, the vehicle

27 | P a g e
moved off to another booth and while returning the empty crates of the previous booths
were collected back.
It was also seen that there are certain authorized OMFED milk booths which is directly
inaccessible by the delivery truck. In that case certain delivery men have been assigned the
job of collecting the milk packets in bags and take them to the respective milk booths on
their bicycles. Payments to these delivery men are done by the respective milk booth agents.
3.2.4 Margins and other benefits
Orissa State Cooperative Milk Producers’ Federation offers a good number of benefits
along with margins to the booth agents. These can be attributed to the following –
• Margins:
Cost of production/liter : Rs. 22.65
Per liter price at which milk is sold to the agents: Rs. 23.15
Per liter price to the customer : Rs. 24
• From the above numerical data, it can be observed that OMFED keeps a margin of 2.2%
whereas the milk booth agents enjoy a margin of 3.67%.
• Apart from this there is a provision of free packets according to the indent placed by the
milk booth agents. For every 50 liters, OMFED gives two 500 ml packets free to the booth
agents.
• Besides, OMFED offers a unique benefit of insurance worth Rs. 1,00,000 which is provided
to the authorized booth agents. We have seen earlier that the agents make a profit of 85
paisa/liter. Now, from this 5 paisa per liter per day is deducted from the profit of the booth
agent and is deposited in the agent’s provident fund. So if an agent makes a sale of Rs.
1000/- on a day, Rs. 50 is deposited in his provident fund account. The authorized OMFED
milk booth agent can redeem this amount whenever he likes for further investment;
enhancement of the existing infrastructure of his milk booth.

28 | P a g e
3.3 Other issues
• While surveying in a couple of the modern trade retail outlets – Reliance Fresh, Ravi
Talkies and Garage Chhak I found that the benefits of insurance and free packets are
defunct in those cases and the order size is also less. Moreover, the store managers reported
that the number of damages was on the rise due to the summer season and the cooling
facility is not adequate.
• The authorized OMFED milk booth agents are required to keep the basic promotional
material on display and more importantly, they are not allowed to keep promotional
material and products of the competitor companies which are Milky Moo of Milk
Mantra based at Gope, Konark, Kamdhenu and Seashore; which was found to be true
during my survey.
• The criteria for distributorship are optimally flexible and a milk booth agent is given the
distributorship on the basis of many underlying factors. It is mentioned earlier that one
booth should be at a substantial distance from another, yet it was found that there was
occasional digression from this criteria. This is because of a demand forecast factor. For
example, there is an existing milk booth at Garage Chhak. Now some new establishments
and apartments are about to come up shortly in that area. Considering this situation,
OMFED has decided upon allotting distributorship to agents in that area to meet the
upcoming demand and also so that a single booth is not overburdened and at the same
times it does not lose its sales.
This flexibility in the criteria has been interestingly identified in the type of milk
booth and agents. There are certain counters which have sufficient infrastructure yet they
have lower sales than an agent who has no proper infrastructure and makes a sale of about
1000 liters by the road side near Lingaraj Mandir.
The challenging job of the route-in-charges also involve converting agents of
competitor companies into agents of OMFED by properly, efficiently and effectively
communicating the margins and benefits to the agents which I actually witnessed with Mr.
S. K. Swain.

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Chapter 4
Data Analysis
&
Interpretation

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4.1 Data Analysis & Interpretation
Following are the details and interpretations of the data that had been collected while conducting
the survey at 90 odd authorized milk booths of OMFED of the “Evening Route” in Cuttack and
Bhubaneswar.
(Please refer to questionnaire and response sheet in the Appendices)
• Type of liquid milk sold or ordered from OMFED
The above data clearly shows that the almost all milk booths (99%) of OMFED order for and sell
F.C.M. – Full Cow Milk clearly because definitely its demand is always at the peak. Besides,
OMFED deals in F.C.M. because cow milk has less fat. The fat in cow milk also has greater
percentage of unsaturated fat. Cow milk also contains carotene, because of which cow ghee is
yellowish in colour. Carotene is an anti oxidant and also is converted to Vitamin A in the body.
For all these reasons cow milk is superior to buffalo milk. Also, F.C.M. marketed by OMFED
has 3 to 4% fat and 8 to 9% non fat milk solids. This is standardized with minimum interference
in natural milk. The percentage of fat varies depending upon supply and demand of milk. By
adopting this procedure, OMFED is able to assure supply of milk in a fluctuating market.
F.C.M. 89 99%
Double Toned 0 0%
Both 1 1%

31 | P a g e
• Average order size/indent registered at OMFED per day for “Evening”
The above data is in sync with the mean indent placed by the milk booths in the “Evening”
which was calculated to be 93.4222 liters. As we can see above – 71% of the authorized OMFED
milk booths order/place an indent in between 10 liters and 100 liters. Also it can be seen that
OMFED focuses more on booths selling higher quantities and less on booths with lower sales.
The idea is to have more booths with lower sales and less of higher sales so as to evenly
distribute the bulk of milk to be supplied and sold by the milk booths.
• Awareness about margins and other benefits
10-100 litres 64 71%
101-200 litres 20 22%
201-300 litres 4 4%
301-500 litres 2 2%
>500 0 0%

32 | P a g e
As we can see from the above data and figure, it is quite evident that the majority of the
authorized OMFED milk booth agents is aware of and has access to all the margins and benefits
offered to them. This proves that the margins and benefits have been well communicated by
OMFED to the booth agents. Those who are not aware of all the benefits are aware of the margin
of 2.2% and the quantity discount of 2 free packets per 50 liter and are small agents with
moderate or low sales.
• Average estimated daily demand per milk booth
From the above data it is evident that the bulk of the daily demand lies between 100 liters and
200 liters in 41 booths followed by in between 200 liters and 300 liters in 20 booths. This speaks
of the rising demand of customers for OMFED F.C.M. thus justifying the fact that OMFED is
still the market leader in Orissa as far as liquid milk is concerned.
A margin of 2.2 % from OMFED 27 30%
Insurance Benefits 0 0%
Free Packets 25 28%
All of the above 63 70%
</=100 litres 6 7%
>100 & </=200 41 46%
>200 & </=300 20 22%
>300 & </=500 15 17%
>500 8 9%

33 | P a g e
• Average demand in the evening shift per milk booth
Looking into the previous two data types, we can pool them and interpret that the daily demand
may lie between 100 liters and 200 liters, but during the evening shift, the demand is contained
within 100 liters per booth. This also has the link with the consumer behavior which in this case
is that the bulk of the customers buy relatively more in the early morning than in the evening.
• Estimated daily sales per booth
</=100 47 52%
>100 & </=200 29 32%
>200 & </=300 6 7%
>300 & </=500 2 2%
>500 0 0%
More than Indent
placed [71]
Less than Indent placed [19]

34 | P a g e
According to the above data collected, we see that the majority of the milk booths are able to sell
off the quantity of indent they order. Coming to those who don’t, they use the milk of the left
over packets in other products (making tea or lassi) or sell them off to the local tea stalls and thus
they dispose of the unsold milk packets.
• Shifts in which each milk booth is covered
The above data is a reflection of the efficient distribution system of OMFED. As mentioned
earlier, the delivery trucks try to deliver at every authorized milk booth twice; once in the
morning shift and once in the evening. Clearly as the data collected from the agents suggest in
the above chart, the bulk (84) of the counters surveyed (90) are covered in both the shifts; thus
helping OMFED cater to the high demand of F.C.M.
Less than Indent placed 19 21%
Equal to Indent placed 71 79%
Morning 0 0%
Evening 6 7%
Both 84 93%

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4.2 S.W.O.T. Analysis
Strengths
• OMFED has been and continues to be the market leader in the product category of liquid
milk.
• A well integrated organization structure with distinct hierarchies starting from the MPCS
and Milk Unions till the Federation level.
• A well planned procurement process with effective inbound and outbound logistics
rendering the entire distribution channel efficient.
• Effective and constant implementation of the mantra of Operation Flood which involved
flow of milk from rural to the urban and flow of cash from urban to the rural.
Weaknesses
• There is no system or provision as such for monitoring the distribution of liquid milk.
• There is no presence of a separate distributor thus the entire burden has to be taken by
OMFED solely; breaking the bulk is not prevalent.
• OMFED has not made provisions for installing promotional material at places where its
competitors are ruling the market; for example, the Vivekananda Marg Area.
• OMFED does not offer high margins as compared to its competitors; for example Milky
Moo offers the retailers a margin of Rs. 1.20 per liter.
Opportunities
• There are areas in Bhubaneswar and Cuttack where there is a lot of potential to allot
new authorized booths especially in places where new apartments are coming up.
• Although, the Orissa market is somewhat saturated, OMFED can still extend its
distribution channel beyond the borders of Orissa since its mission is to reach
international standards in the long run.
• OMFED might reconsider the production of Double-Toned milk so that it can target,
acquire and build upon the customer base who are health conscious.
Threats
• A potential threat to the company in the long run can be the new models of distribution
which are being adopted and implemented by OMFED’s competitors especially that of
Milk Mantra’s Milky Moo.
• Another threat can be the low shelf life of OMFED liquid milk as compared to Milk
Mantra’s Milky Moo which has a higher shelf life.

36 | P a g e
Chapter 5
Conclusions

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5.1 Conclusion
OMFED is no doubt the market leader as far as liquid milk is concerned; the organization
being the oldest player in the market and having developed a very effective and efficient
distribution system starting from the procurement till delivery of cow milk. It has undoubtedly
been a great boost to the economy as a whole. Now, if we try to pool the data collected in the
survey and the findings and observations we can infer certain conclusions –
• OMFED has been able to cover the entire market evenly as far as distribution of
liquid milk is concerned by virtue of its well designed ‘Truck Sheets’ and by
focusing on the key areas and also seeing to it that the norms of the organization as
well the criteria for distributorship are adhered to in almost all the cases.
• Although no credit facility can be incorporated, OMFED with proper tie-ups with
banks and constant communication with the booth agents have simplified the
transaction procedure.
• Further, OMFED has been successful in capitalizing on the fact that it is a State run
organization thus enhancing its functionalities by offering its agents more than just
a nominal margin; the benefits of free packets and insurance of Rs. 1,00,000.
• Another intriguing which is evident from my survey as well as the findings and
observations is the exemplary delegation of responsibilities to the channel members.
This includes assigning of delivery men by the milk booth agents, a proper payment
system to the dairy farmers and optimum and effective logistics. This, in my
opinion has been the driving force behind the absence of channel conflicts which is
quite rampant in case of organizations this big.

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5.2 Recommendations
Having discussed about the intricacies of the distribution system; the details of its
functionalities, I have come across certain issues which struck me; issues which OMFED may
reconsider. Following are a few recommendations which I believe can be implemented for the
wholesome enhancement of the organization; the distribution system in particular –
• First of all, I would suggest the organization to customize the criteria for
distributorship of liquid milk, if not flex it. The rationale being there may be
situations arising where there is scope of harvesting from an unexploited market, but
it may not be possible to satisfy all the criteria at a time; apart from the legal
protocols of course.
• According to the information obtained from the organization, Bhubaneswar Dairy is
falling short of the daily demand of liquid milk. In order to check this gap, more
BMCs are required to be installed and more potential dairy farmers need to be
convinced to become an integral part of the respective MPCS. This can be achieved
by dint of OMFED’s Public Relations tools.
• As hinted earlier, in order to have an even stronger competitive edge over its
competitors, OMFED can reconsider restructuring the distribution channel so as to
break the bulk and evenly distribute the burden.
In this context I would like to share certain information which I had gathered
from the Head Office of Milky Moo. Milky Moo has adopted a two pronged approach
of distribution; first direct sales to retailers and second sales through a distributor. The
distributor collects the milk packets directly from the chilling plant at Gope or else
delivery trucks go on distributing the packets to distributors at various strategic parts
of Orissa. These distributors then sell it to the retailers of Milky Moo.
So this is one approach which can be modified and utilized by OMFED so as to
further enhance its already efficient distribution channel.

39 | P a g e
• The previous recommendation has an additive. In order to appoint a distributor, the
distributor needs to have adequate investment capacity as well as proper storage
facility since milk is a perishable product. In this context OMFED can look into and
consider changing the packaging material from the existent one to a tetra-pack one so
as to increase the shelf life of the product since I had mentioned earlier in my report
that certain retailers of modern trade are complaining about the product getting
damaged very soon. This way the distributor can hold his stock or clear it accordingly
without much worry about the product getting damaged.
• Finally, I would like suggest about the margins, benefits and price of the product. But
first I would like to bring to notice a typical consumer behavior and perception which
suggest that consumers often associate low price with low quality. OMFED has been
priced quite compared to its competitors. No doubt that the costs are covered, but the
point is although OMFED offers a lot of additional benefits, it might not be easy to
communicate that to a booth agent who is not quite sanguine about insurance and the
like; booth agents whose primary look out is for his margin. So OMFED can
reconsider increasing the margin and price its product a little high so as to shift gears
fro price leadership to product leadership as well; rather an optimum mix of both.

41 | P a g e
The Jagannathpur MPCS at a glance
1. Name of the MPCS : Jagannathpur
2. Regd. No. & Date : 853 Vet 1985 dt. 01.10.1985
3. Address : At – Jagannathpur
P.O. – Othaka
Via – Kakatpur
District – Puri
4. Block : Kakatpur
5. G.P. : Othaka
6. Area of Operation : i Jagannathpur
ii Somanathpur
iii Tavagolaragada
iv Banamalipur Sasan
v Madhuban
7. Date of opening : 17.08.1984
8. Date of A.I. Centre opening : 05.12.1985
9. Total no. of members : 121
10. Name of the President : Mr. Promod Kumar Das
11. Name of the Secretary : Mr. Kailash Chandra Mishra
Free Facilities Provided by PUMUL
• Vaccination for FMD, HS & BQ.
• Deworming medicine for milch animals.
• Deworming medicine for female claves.
• Subsidized balanced cattle feed and mineral mixture.
• Insurance coverage for milch animal for three years.
• Insurance coverage for farmers through LIC.
• Incentives for fodder cultivation.
• CMP Programme under Govt. of India.
• Different training programmes for up-gradation of knowledge of farmers (Society
Management, Animal Husbandry, A.I., First-Aid Training Programme, Fodder Development,
Tester Training etc.).

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• Conducting infertility camp and supply of free medicines.
• Supply of milko-tester at subsidized rate.
• Installation of Bulk Milk Cooler (BMC).
• Finance of milch animal without any interest for needy farmers.
Jagannathpur Bulk Milk Cooler
1. Name of the Bulk Cooler Centre : Jagannathpur
2. Unit : Nimapara
3. Capacity : 4000 LPD
4. Plant Grant Received : Clean Milk Production
5. Society attached : 8 Nos. –
• Jagannathpur MPCS
• Chandikuda MPCS
• Danduasi Hota MPCS
• Nilakanthapur WDCS
• Kadampatna
• Berji Sahi MPCS
• Basumati C.C.
• Gajanan C.C.
6. Average Milk procurement : 2000 LPD
Fat : 4.5%
SNF : 8.4%
7. Managed by : Jagannathpur MPCS

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