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 BhandairMission Director

INTERNATIONAL IMPROVEMENT MISSIONREGD. OFFICE #53-A,SECTOR-18-A CHANDIGARH-160018

Email: [email protected] Tel:0172-2724872 Cell: 9815961853

mailto:[email protected]

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Under Indian conditions, is it possible?

• To procure raw milk without any adulteration, dilution or manipulation.

• Analyze raw mixed milk for exact % B.M. / C.M. and added water and find out its actual net worth.

• Process and market pure & safe pasteurized milk having shelf-life of more than 15 days.

• YES/NO

• YES/NO

• YES/NO

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Under Indian conditions, is it possible?

• Manage total milk handling costs (Procurement to Marketing) to keep the same below Rs.3.50/Liter.

• 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

• YES/NO

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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

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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.

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UNRESOLVED PROBLEMS OF INDIAN DAIRY INDUSTRY

1. TECHNO-COMMERCIAL

LIMITATIONS OF 60:40

TWO AXIS FORMULA FOR

PURCHASING RAW MILK.

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2. LARGE NUMBERS OF DAIRY PLANTS IN INDIA ARE SUFFERING LOSSES DESPITE HIGHER VISIBLE PROFITS.

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3. MANY COMMERCIAL DAIRY PLANTS ARE HANDLING RAW MILK DILUTED WITH 30 to 40% ADDED WATER.

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4. CONSUMERS IN INDIA ARE REQUIRED TO BOIL PASTEURIZED MILK BEFORE CONSUMPTION.

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5. OUR MARKETS ARE FLOODED WITH

SUBSTANDARD PASTEURIZED MILK

AND ADULTERATED DAIRY PRODUCTS.

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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.

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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.

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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 458.333COST 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

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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.

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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)= 1.3538461SNF:Fat ratio of standard cow milk (8.5/3.5)= 2.4285714Cost 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.

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SAWAL SAU CRORE KA (CASE STUDY)• Category % Quantity Fat% S.N.F% Fat Kgs. S.N.F.Kgs• Buffalo Milk 69 69000 6.76 8.62 4664.40

5947.80• Cow Milk 31 31000 3.90 7.88 1209.00 2442.80• Mixed Milk100 100000 5.89 8.40 5890.00 8400.00

• 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.

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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.

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SAWAL SAU CRORE KA (CASE STUDY)

• Qty. Fat % Price S.N.F% Category• 100 6.50 10.40 8.80 100% B.M

0.623459094• 100 5.8901 9.776540906 8.73901 (20.33% + C.M +79.67% B.M)

0.326540906• 100 5.89 9.45 8.40

0.0077 (Manipulated/diluted milk)

• 100 5.57 9.44923 8.707 (31.00% C.M +69.00% B.M.)

2.115925• 100 3.50 7.333305 8.50 100% C.M

• 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 • i.e.>Rs.100 Crores/Year

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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. FatAs 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. FatMILK 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/KgHIDDEN “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

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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}

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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 .

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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.

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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

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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.

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• Eliminate all middlemen in milk purchase system in a phased manner.

• Purchase only pure milk without any dilution or manipulations.

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ELIMINATE SHORTCUT SOLUTIONS FOR MILK PROCUREMENT

• I Free from all kinds of dilution/adulteration/preservatives: (Nominal penalties for adulterants/dilution are being imposed)

• II Total solids>15.3% for B.M. & >12 for C.M. : {Milk with solids as low as 10% is being accepted) • III 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)

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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.

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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.

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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.

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DAIRY BUSINESS MANAGEMENT SYSTEM {DBMS}ANALYZING PROFIT & LOSS STATEMENT

TYPICAL DAILY PROFIT & LOSS STATEMENT {Basis 100 kg.)

S.NO DESCRIPTION AMOUNT (Rs.) S.NO REVENUE AMOUNT(Rs.)

I Purchase price of milk (6.5%/8.8%) 1300 I Sale of standardized milk 800II Overhead cost on milk procurement 100 II Sale of toned milk 400III Processing cost including packing 100 III Sale of double toned milk 500IV Cost of utilities and maintenance 50 IV Sale of skimmed milk 100VI Marketing and Miscl. costs 150 V Sale of other products 150

TOTAL EXPENDITURE 1700 TOTAL REVENUE 1950Assuming total expenses as Rs 1700/100 Kg. Assuming net realization from Pasteurized milk/products as Rs. 1950/100 Kg.

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

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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: Rs./Kg.

1 Basic cost of milk:(As per competitive market rates) 13.00

2 Milk handling charges (Village level milk collection): 0.350

3 Milk transportation expenses ( VLC to MCC): 0.113

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DAIRY BUSINESS MANAGEMENT SYSTEM {DBMS}INTRODUCING PARTHA IN DAIRY BUSINESS (MILK PROC.)

4 Milk transportation expenses from MCC to Dairy plant per Kg.milk: 0.2005 Tester expenses/Kg. milk ; 0.0246 Milk chilling charges/ Kg.milk: 0.1007 Maintenance expenses / Kg. Milk: 0.0038 Manpower cost /Kg. Milk: 0.0589 Cost of testing chemicals (Sulphuric acid) /Kg.milk: 0.01210 Cost of testing chemicals ( Amyl alcohol) /Kg. Milk: 0.02111 Cost of detergents/ cleaning & sanitizing agents /Kg. Milk: 0.00312 Total milk procurement overhead expenses: 0.88413 Landed cost of milk {As per specified Norms} 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.

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• 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.

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DEPARTMENT WISEPARTHA STATEMENT FOR THE MONTH OF JUNE- 2006 Page: 1

ACTUAL PARTHA VARIANCE NORMSPARTICULARS QTY AMOUNT AMOUNT AMOUNTMILK QUANTITY VLC 767955MILK QUANTITY CONT. 0OTHER SOURCES 0MILK QUANTITY TOTAL 767955

PROCUREMENT OVERHEADS

OVERHEAD COST / KG OF MILK

COMMISSION ON MILK 229720.00 268784.25 39064.25 0.35FREIGHT ON MILK BOTH SIDES 721112.00 345579.75 375532.25 0.45MAN POWER COST 185631.00 185631.00 0.00 185631.00CHILLING EXPENSES 145607.00 76795.50 68811.50 0.10MILK COLLECTION EXPENSES 1197.00 15359.10 14162.10 0.02STAFF WELFARE 0.00 1000.00 1000.00 1000.00TELEPHONE EXPENSES 0.00 6000.00 6000.00 6000.00VEHICLE RUNNING (MCC) 99457.00 99457.00 99457.00 99457.00MILK PROCUREMENT EXPS 2306.00 2306.00 2306.00 2306.00

TOTAL: 1385030.00 1000912.60 282354.40 PER/KG EXP. 1.80 1.30 0.50

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• 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.

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AFFECT OF RECOVERY (SNF%) PER MONTHMILK QUANTITY (KGS) 50000 100000 150000 200000 250000 300000 350000SNF KGS 4250 8500 12750 17000 21250 25500 29750SNF RATE @ 55/- / KGS 233750 467500 701250 935000 1168750 1402500 1636250

RECOVERY %97.00 -140250 -280500 -420750 -561000 -701250 -841500 -98175097.10 -133237 -266475 -399712 -532950 -666187 -799425 -93266297.20 -126225 -252450 -378675 -504900 -631125 -757350 -88357597.30 -119212 -238425 -357637 -476850 -596062 -715275 -83448797.40 -112200 -224400 -336600 -448800 -561000 -673200 -78540097.50 -105187 -210375 -315562 -420750 -525937 -631125 -73631297.60 -98175 -196350 -294525 -392700 -490875 -589050 -68722597.70 -91162 -182325 -273487 -364650 -455812 -546975 -63813797.80 -84150 -168300 -252450 -336600 -420750 -504900 -58905097.90 -77137 -154275 -231412 -308550 -385687 -462825 -53996298.00 -70125 -140250 -210375 -280500 -350625 -420750 -49087598.10 -63112 -126225 -189337 -252450 -315562 -378675 -44178798.20 -56100 -112200 -168300 -224400 -280500 -336600 -39270098.30 -49087 -98175 -147262 -196350 -245437 -294525 -34361298.40 -42075 -84150 -126225 -168300 -210375 -252450 -29452598.50 -35062 -70125 -105187 -140250 -175312 -210375 -24543798.60 -28050 -56100 -84150 -112200 -140250 -168300 -19635098.70 -21037 -42075 -63112 -84150 -105187 -126225 -147262

98.80 -14025 -28050 -42075 -56100 -70125 -84150 -98175 98.90 -7012 -14025 -21037 -28050 -35062 -42075 -49087 99.00 0 0 0 0 0 0 0 99.10 7012 14025 21037 28050 35062 42075 49087

99.20 14025 28050 42075 56100 70125 84150 9817599.30 21037 42075 63112 84150 105187 126225 14726299.40 28050 56100 84150 112200 140250 168300 19635099.50 35062 70125 105187 140250 175312 210375 24543799.60 42075 84150 126225 168300 210375 252450 29452599.70 49087 98175 147262 196350 245437 294525 34361299.80 56100 112200 168300 224400 280500 336600 39270099.90 63112 126225 189337 252450 315562 378675 441787

100.00 70125 140250 210375 280500 350625 420750 490875

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AFFECT OF POWER UTILISATION PER MONTHMILK QUANTITY (KGS) 50000 100000 150000 200000 250000 300000 350000UNITS CONSUMED 77576 155152 196351 261801 327251 392702 458152POWER COST @ Rs. 4/- /UNIT 310304 620608 785403 1047204 1309005 1570806 1832607

% POWERUTILISATION

74 -49649 -99297 -125664 -167553 -209441 -251329 -29321775 -46546 -93091 -117810 -157081 -196351 -235621 -27489176 -43443 -86885 -109956 -146609 -183261 -219913 -25656577 -40340 -80679 -102102 -136137 -170171 -204205 -23823978 -37236 -74473 -94248 -125664 -157081 -188497 -21991379 -34133 -68267 -86394 -115192 -143991 -172789 -20158780 -31030 -62061 -78540 -104720 -130901 -157081 -18326181 -27927 -55855 -70686 -94248 -117810 -141373 -16493582 -24824 -49649 -62832 -83776 -104720 -125664 -14660983 -21721 -43443 -54978 -73304 -91630 -109956 -12828284 -18618 -37236 -47124 -62832 -78540 -94248 -10995685 -15515 -31030 -39270 -52360 -65450 -78540 -9163086 -12412 -24824 -31416 -41888 -52360 -62832 -7330487 -9309 -18618 -23562 -31416 -39270 -47124 -54978

88 -6206 -12412 -15708 -20944 -26180 -31416 -36652 89 -3103 -6206 -7854 -10472 -13090 -15708 -18326

90 0 0 0 0 0 0 091 3103 6206 7854 10472 13090 15708 1832692 6206 12412 15708 20944 26180 31416 3665293 9309 18618 23562 31416 39270 47124 5497894 12412 24824 31416 41888 52360 62832 7330495 15515 31030 39270 52360 65450 78540 9163096 18618 37236 47124 62832 78540 94248 10995697 21721 43443 54978 73304 91630 109956 12828298 24824 49649 62832 83776 104720 125664 14660999 27927 55855 70686 94248 117810 141373 164935

100 31030 62061 78540 104720 130901 157081 183261

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AFFECT OF FUEL UTILISATIONMILK QUANTITY (KGS) 50000 100000 150000 200000 250000 300000 350000HUSK CONSUMED IN (MT) 177.00 354.00 531.00 708.00 885.00 1062.00 1239.00STEAM GENERATED (MT) 708.00 1416.00 2124.00 2832.00 3540.00 4248.00 4956.00HUSK COST @ Rs. 1.50/Kg 265500 531000 796500 1062000 1327500 1593000 1858500

% FUELUTILISATION

70 -42480 -84960 -127440 -169920 -212400 -254880 -29736071 -39825 -79650 -119475 -159300 -199125 -238950 -27877572 -37170 -74340 -111510 -148680 -185850 -223020 -26019073 -34515 -69030 -103545 -138060 -172575 -207090 -24160574 -31860 -63720 -95580 -127440 -159300 -191160 -22302075 -29205 -58410 -87615 -116820 -146025 -175230 -20443576 -26550 -53100 -79650 -106200 -132750 -159300 -18585077 -23895 -47790 -71685 -95580 -119475 -143370 -16726578 -21240 -42480 -63720 -84960 -106200 -127440 -14868079 -18585 -37170 -55755 -74340 -92925 -111510 -13009580 -15930 -31860 -47790 -63720 -79650 -95580 -11151081 -13275 -26550 -39825 -53100 -66375 -79650 -9292582 -10620 -21240 -31860 -42480 -53100 -63720 -7434083 -7965 -15930 -23895 -31860 -39825 -47790 -5575584 -5310 -10620 -15930 -21240 -26550 -31860 -37170

85 -2655 -5310 -7965 -10620 -13275 -15930 -1858586 0 0 0 0 0 0 087 2655 5310 7965 10620 13275 15930 1858588 5310 10620 15930 21240 26550 31860 3717089 7965 15930 23895 31860 39825 47790 5575590 10620 21240 31860 42480 53100 63720 7434091 13275 26550 39825 53100 66375 79650 9292592 15930 31860 47790 63720 79650 95580 11151093 18585 37170 55755 74340 92925 111510 13009594 21240 42480 63720 84960 106200 127440 14868095 23895 47790 71685 95580 119475 143370 16726596 26550 53100 79650 106200 132750 159300 18585097 29205 58410 87615 116820 146025 175230 20443598 31860 63720 95580 127440 159300 191160 22302099 34515 69030 103545 138060 172575 207090 241605

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AFFECT OF MAN POWER UTILISATION PER MONTH

MILK QUANTITY (KGS) 50000 100000 150000 200000 250000 300000 350000MAN Hrs. UTILISED 6749 12888 17577 23436 29295 35154 41013RATE / Hrs. @ Rs. 12/-(Avg) 80988 154656 210924 281232 351540 421848 492156

UTILISATION %

80 -8099 -15466 -21092 -28123 -35154 -42185 -4921681 -7289 -13919 -18983 -25311 -31639 -37966 -4429482 -6479 -12372 -16874 -22499 -28123 -33748 -3937283 -5669 -10826 -14765 -19686 -24608 -29529 -3445184 -4859 -9279 -12655 -16874 -21092 -25311 -2952985 -4049 -7733 -10546 -14062 -17577 -21092 -2460886 -3240 -6186 -8437 -11249 -14062 -16874 -1968687 -2430 -4640 -6328 -8437 -10546 -12655 -14765

88 -1620 -3093 -4218 -5625 -7031 -8437 -9843 89 -810 -1547 -2109 -2812 -3515 -4218 -4922 90 0 0 0 0 0 0 0 91 810 1547 2109 2812 3515 4218 4922

92 1620 3093 4218 5625 7031 8437 984393 2430 4640 6328 8437 10546 12655 1476594 3240 6186 8437 11249 14062 16874 1968695 4049 7733 10546 14062 17577 21092 2460896 4859 9279 12655 16874 21092 25311 2952997 5669 10826 14765 19686 24608 29529 3445198 6479 12372 16874 22499 28123 33748 3937299 7289 13919 18983 25311 31639 37966 44294

40

AFFECT OF MILK FILM YIELD / KG (PER MONTH)

MILK PACKED (LITRES) 50000 100000 150000 200000 250000 300000 350000FILM USED 233 465 698 930 1163 1395 1628FILM RATE @ 75/- / KG 17438 34875 52313 69750 87188 104625 122063

YIELD / KG 400 -36488 -72976 -109464 -145952 -182440 -218928 -255416401 -35272 -70543 -105815 -141087 -176359 -211630 -246902402 -34055 -68111 -102166 -136222 -170277 -204333 -238388403 -32839 -65678 -98518 -131357 -164196 -197035 -229874404 -31623 -63246 -94869 -126492 -158115 -189737 -221360405 -30407 -60813 -91220 -121627 -152033 -182440 -212846406 -29190 -58381 -87571 -116762 -145952 -175142 -204333407 -27974 -55948 -83922 -111896 -139871 -167845 -195819408 -26758 -53516 -80274 -107031 -133789 -160547 -187305409 -25542 -51083 -76625 -102166 -127708 -153249 -178791410 -24325 -48651 -72976 -97301 -121627 -145952 -170277411 -23109 -46218 -69327 -92436 -115545 -138654 -161763412 -21893 -43786 -65678 -87571 -109464 -131357 -153249413 -20677 -41353 -62030 -82706 -103383 -124059 -144736414 -19460 -38921 -58381 -77841 -97301 -116762 -136222415 -18244 -36488 -54732 -72976 -91220 -109464 -127708416 -17028 -34055 -51083 -68111 -85139 -102166 -119194417 -15811 -31623 -47434 -63246 -79057 -94869 -110680418 -14595 -29190 -43786 -58381 -72976 -87571 -102166419 -13379 -26758 -40137 -53516 -66895 -80274 -93652420 -12163 -24325 -36488 -48651 -60813 -72976 -85139421 -10946 -21893 -32839 -43786 -54732 -65678 -76625422 -9730 -19460 -29190 -38921 -48651 -58381 -68111423 -8514 -17028 -25542 -34055 -42569 -51083 -59597424 -7298 -14595 -21893 -29190 -36488 -43786 -51083425 -6081 -12163 -18244 -24325 -30407 -36488 -42569426 -4865 -9730 -14595 -19460 -24325 -29190 -34055427 -3649 -7298 -10946 -14595 -18244 -21893 -25542

428 -2433 -4865 -7298 -9730 -12163 -14595 -17028 429 -1216 -2433 -3649 -4865 -6081 -7298 -8514 430 0 0 0 0 0 0 0

41


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.

42


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.

43


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:

44


{SUMMARY OF MISSION RECOMMENDATIONS}

1. USE DIGITAL ANALYTICAL TECHNIQUE TO PROCURE RAW MILK WITHOUT A.D.M.

2. INTRODUCE “APNI DAIRY” MILK PROCUREMENT SYSTEM

3. APPLY “PARTHA” BASED DAIRY BUSINESS MANAGEMENT AND MONITORING SYSTEM

4. INTRODUCE “COMPANY TO CONSUMER “ DIRECT MARKETING

5. IMPLEMENT CONTINUOUS IMPROVEMENT PLAN

45

THANKS FOR

YOUR TIME

techno-economics of dairy business

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