Building Business Excellence for Harvesting Happiness
#BanasDairy #SangramChaudhary #Amul #DairyIndustry“We have a roadmap in terms of our growth that by 2025, we should have a turnover of Rs. 25,000 crore along with 14 million litres of milk coming to Banas Dairy.”
November 2022: In this Pro MFG Leadership Conversation with Ravind Mithe, Supply Chain Consultant, Former Head of Operations Consulting, KPMG India & Advisory Council Member, Pro MFG Media, Sangram R Chaudhary, MD, Banas Dairy (Former Executive Director NDDB & Former MD, Mother Dairy) shares that ‘Banas is unique in the sense that ‘we also do milk’, but our work is harvesting happiness. The society must profit and it must transform not only in terms of economic gains but also in terms of harmony and happiness’.
The world knows Amul very well, but the world doesn’t know the contribution of Banas Dairy to Amul’s success. Could you please tell us about your organization, its footprints, changes it brings to farmers’ livelihoods?
This place has been a kind of milk magic. Banas district is semi-arid with an average 15 to 20 inches of rainfall and water scarce area. But animal husbandry has been there for decades. This organization started with eight small villages and 800 litres of milk in 1966. It’s a very amazing thing that it has grown to 90 lakh litres of milk per day, i.e. 9 million litres of milk per day. When I came in 1992 it was about Rs. 70 crore of business which has grown to Rs. 15,155 crore i.e. approximately US$2 billion now! This journey has been very remarkable and I acknowledge what you say that not many people outside this place know about it. Today, we are 1/3rd of Amul’s products. We manufacture about 300 Amul products including cheese, ghee, butter, ice cream, flavoured milk, curd, varieties of ice cream, whey-based drinks, in different SKUs. Out of all Amul products, 1/3rd or about 35 percent products are manufactured by Banas Dairy. Besides, 4,50,000 farmer families here have grown from zero milk to 90 lakh litres of milk.
Our founder Chairman, Shri Galbabhai Nanjibhai Patel, taking a cue from Mehsana dairy and Amul Dairy, focused on animal husbandry and dairy development. The Operation Flood program came later on but it was with Dr. Kurien’s efforts that Amul was started; then Mehsana and other dairies were started. Before that, people were not selling milk, they said selling milk was a taboo and selling milk was akin to selling your children. Today, there are villages which produce more than 50,000 litres of milk every day. So, in such villages there is a turnover of Rs. 100 crore from milk annually. And this is a world record! Dr. Kurien’s dream of socio-economic transformation through milk has become a reality in this district. I’ve been a humble witness to what has happened here.
Till 1992, we were number 11 in the system of Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF, popularly known as Amul). And today we are number one - way ahead of others! The number two would be 1/3rd of us. So we are three times bigger than number two. And in this journey, the role of the cooperative leaders has also been very important, because their leadership matters. At the grassroot level, we have a three-tier system: the village cooperative societies at the village level, 1500 Village cooperative societies in the district, then we have a federal system of milk union, which is called Banaskantha District Cooperative Milk Producers’ Union. And we are a member of the GCMMF, which has about 20 members.
The turning point came when we started Total Quality Management (TQM). You were a part of this as a young engineer from Eicher Consultancy. I was also a very young managing director. TQM was an eye opener Japanese system. We owe so much to the Japanese people. In 1996, when for the first time we went to Japan, it was way ahead of us. I asked what they had done since 1945, to become the third largest economy of the world. And the one very remarkable answer was that, after the World War, they learnt that the human body has limitations, but the human mind does not! The mind is powerful enough to think. So, thinking processes and knowledge driven systems were introduced by Eicher Consultancy. And it opened our eyes and we humbly started learning the TQM system where Total Quality Control, total waste elimination, and total employee involvement started. Also Kaizen, Hoshin Kanari and small group activities, quality circles, the techniques which were brought by Eicher Consultancy made a great difference in our manufacturing processes.
I must also share this story. People used to tell us that you don’t know anything - how to process butter or you don’t know how to pack. You must go and see Amul Dairy, Anand, as it was the pioneering Amul system. So we started learning. I must tell you about a butter packing machine which we changed to the 2nd generation packing machine. We achieved 120 packs per minute, as against 90 packs. So the Amul team came and appreciated the increased productivity of machines and our people. TQM has helped and I have always acknowledged the contribution of the Japanese people who taught us the techniques, the Deming philosophy and Dr. Ishikawa systems.
In the dairy industry, you have to depend upon nature – the cows and buffaloes. You can’t overnight increase the productivity and throughput of an animal. It’s a natural growth process. So, your supply is, in a way, dependent completely on nature. At the same time, you are in the FMCG market which is ever growing and there is seasonality of products with different SKUs, different regional tastes and so on. In this scenario, what are the operational challenges that you face to meet the demand given the supply limitation?
The fundamental difference between a milk cooperative and any milk private company is that we are in a business of maximising the returns to the farmer. We maximise the price of the raw material. And we shall not refuse any milk coming from our members. So, for some years there is an excess supply and for some years, there is a shortage. The milk is produced in a natural process. We are dependent on nature’s production cycles. So besides milk, commodities like SMP (Skimmed Milk Powder) and white butter which we manufacture, we keep storing that. Commodity prices are very fluid; they are dependent on the global situation so they keep fluctuating. But fortunately for us, Amul being the marketing conglomerate, value addition in retail products has been a great help. So we’ve been able to tide over the situation where there is a great surplus of fat as we build our stocks by conserving fat in our cold stores as well as SMP and then keep it for the next year. Amul continuously keeps innovating products. We were not in cheese or ice cream. Banas is very different in the sense that our present Chairman has a new concept of lateral - horizontal and vertical expansion. Why only milk? He asked ‘why can’t we do other things’. So we have ventured into potato, oil, and pomegranate and have also launched honey. We are one of the largest honey collectors and we are the largest honey brand in terms of Amul honey, and we guarantee that our honey is pure, and it passes through all the international and national quality standards. We have a dream to become less carbon dependent by 2032. And we have a dairy sustainability framework programme, where we talk about how to keep the next generation into milk dairying. Banas has the first pilot plant in converting cow dung into methane and running automobiles on it. Every day, we produce about 800 kgs of liquid compressed methane and run automobiles - about 100 vehicles come every day to our pump for methane. On the other side, we take organic manure back to the farmers, which is very important for soil conservation. So we are part of the ‘Save Soil; mission of Sadhguru. We want to rejuvenate our soil, keep it fertile. Our Chairman is driving a mission of planting 10 million trees every year. Shankar bhai Chaudhary is very passionate about environmental conservation. We have made 75 ponds this year and last year we made about 65 ponds. So we are bringing back the water conservation system, water percolation system and nature based agriculture as well as nature based dairying where we have sustainable dairying. Dairy sustainability is going to be our focus. Banas is unique in the sense that we say, ‘we also do milk’, but our work is harvesting happiness. The society must profit and it must transform not only in terms of economic gains but also in terms of harmony and happiness’. This is the dream which our chairman has. He is a kind of a think tank person who has been driving our leadership. His dream is to make Banaskantha as a model district in the country and a kind of model for the world to emulate where a climatic cycle can be handled.
You are actually creating a true sustainable supply chain. Can you talk about the kind of footprints you have today, and the footprints you would like to have in future?
Outside Gujarat, we have a very large footprint. In 2016, we started with our Faridabad plant with a capacity of 1.5 million litres, Kanpur plant with a capacity of 5 million litres, and the Lucknow plant with a capacity of 7.5 lakh litres, where we manufacture all the Amul products. We are also putting up a Rs.500 crore facility in Varanasi. Besides, we have 30+ third party locations across the country where we are operating. We are collecting about four lakh litres of milk from UP farmers. Our presence there is about 3000 villages. We have also started in Orissa and Jharkhand. In fact, we just started in Andhra Pradesh. In Rajasthan we are collecting about 3 lakh litres of milk every day in about 1000 villages. So, Banas Dairy is not limited to the Banaskantha District; it is a National Dairy in all terms. Well, historically, what has happened is that the Amul brand has dominated us and we remained as a kind of manufacturing arm.
We have invested about Rs. 3500 crore over a period of last 10-15 years. And our net worth has grown from Rs. 700-800 crore to Rs. 4000 crore in the last seven - eight years. So, it has been a remarkable journey! Today, we are a cash rich company and our expansions are totally funded from internal sources. Also, Banas dairy is embarking on a major breeding programme. One of India’s problems is that we are the largest milk producer and we have the largest bovine numbers but our per animal production is one of the lowest in the world. Last week I was in Brazil along with the Chairman and the board and we were very surprised to see that the cows which were taken from our country and were giving 5 – 7 litres of milk, over a period of time, they bred them to become 40 - 50 litres cows. They are our cows – Kankrej, Gir, Tharparkar and so on. So we are bringing them back to breed them for our own people. So improving the productivity of cattle is a challenge which we have already taken. Secondly, retaining the next generation into dairying is a national challenge. For that we have to introduce new mechanisation of farms, new processes, new technology, digital based systems of monitoring, milk production, productivity and disease profiling.
As a supply chain professional and someone who believes in strong digitization needs of the future, can you talk about what are your plans for technology upgradation? How are you building a world class organization which competes with the best in the world in terms of all technologies?
One of the best things to happen is BEST itself: Banas Excellence System of Transformation! We are a learning organization and a thinking organization. Learning is a very, very important part of our philosophy. So, continuously over a period of 25 years, the transformation has continued in terms of starting from the TQM to building the business excellence in various processes and technology. There are three types of technologies: one is the core manufacturing technology. We’ve been very fortunate to use the first generation technology from Dr. Kurien’s Operation Flood programme where the separators were different. Today, we have upgraded to third-generation technologies. Now, we have IoT in place and HMI (human machine interface) in place. Some of our plants have almost 90 percent to 95 percent imported machinery. So our cheese manufacturing is as good as anywhere in the world. The factory which we have put up for the potato processing from the Netherlands is a world-class plant. As far as information technology is concerned, we have AMUL Digital System where we are connected with all the farmers through the AMCS platform (AMCS - Automatic Milk Collection System), where the farmer pours the milk, gets SMS on her mobile with the quantity, price and quality. At the plant level, we have the CCC System (Computer Control Command System), where we have a GPS installed. At any point of time, we have about 1000+ vehicles on the road getting milk or milk products or servicing our people. These all are connected with GPS and we know where they are going, how they are operating, whether they are off route or not, if someone is opening the lid, is there any pilferage or not etc. Now we are bringing AI. We have two meanings of AI; one is artificial insemination, which we do for breeding, and AI for artificial intelligence. So, we should bring predictability for the APS (Advanced Process Control System) in our plant to know machine and process performance. We are also connecting our complete system with our employees to become paperless by 2025. We have a roadmap in terms of our growth that by 2025, we should have a turnover of Rs. 25,000 crore along with 14 million litres of milk coming to Banas Dairy. We will grow into other businesses also with our core competency. We are planning to become a producer of many organic products where we will also do Banas labelling.
Now that you are becoming national and you are getting into multiple products, the organization needs to be very strong and the human development processes have to be much stronger. So far, Banas dairy has taken pride in developing local talent. Going forward, when you require new competencies, what would you do to appeal to outside professionals?
You have asked a very important question. Years back, when I went to Dr. Kurien to upgrade the Generation One technology to the second-generation technology based on HMI and automation systems, he asked where we would get the manpower from. I said, we will train ourselves! I think we have been more or less successful in training the local talent. But you’re right that we need to bring in more talent, more knowledge, and more skills from outside. Dr. Kurien told me that he looked for three things in people: First is integrity, second is integrity and third is integrity! I must tell you that this system gives you great satisfaction for working for society. It reminds me when I passed out from IRMA, I wrote one line into my diary about what I was going to do in my life. So I wrote, bringing smiles on the faces of millions of people. Raising children who become the most responsible citizen of this country is my personal mission. I think after 35 years, I feel so proud of myself, my children, and my people that this has given us so much happiness. What matters is only happiness at the end!
You know, we are running a medical college now. And we are providing health services to our people across the district. We are providing telemedicine and we have 200 seats in the Medical College. We have surrendered the entire management quota to let the merit come in. And then we provide local producers with a fee exemption of 50 percent. Every year, we are going to have 80 local district doctors. This is a great thing to happen for the health system. This was the vision of our chairman to provide health services. The medical college is independently working and is self-sufficient. Now it doesn’t require any support from the milk producers. So my invitation to people, those who want to contribute to the society and become happier and satisfied in the process are most welcome to work here. It provides great freedom!
I always tell my people that when you are sleeping, half of the world is awake and you know, once you wake up in the morning, the world has changed because the 50 percent of the world which was awake in the night has already done so much. Change is one of nature’s wonderful things because change is the only permanent feature in the day. And the acceleration of change is happening so rapidly that if you don’t keep up with it, you will be left behind. So, you have to adopt new things, every day in the technological space.
About the Speakers
Sangram Chaudhary: Born and brought up as a son of a marginal farmer in a rural set up, he is passionate about working with economically marginalized people in their efforts to transform their lives and be self-reliant using dairying as a tool of empowerment of rural women. His experience in the co-operative dairy sector extends to over 36 years. Mr. Chaudhary has the distinction of handling the responsibilities of Asia’s Largest Dairy Cooperative “Banaskantha District Cooperative Milk Producers Union Limited” as the Managing Director & Chief Executive Officer from 1996-2011. During his tenure at Banaskantha Milk Union, he was instrumental in the introduction of several new product variants, expansion of markets, milk procurement, and plant automation with resource optimization. Under his leadership, Banas Milk Union became a phenomenal growth story in co-operative dairying in India, achieving a turnover of Rs. 3500 crore, with milk producer membership of over 3,50,000 (35 percent of them women members) in 1500 village level dairy cooperative societies. He has joined again as In-charge Managing Director of the same organization that has now grown to 8 million litres per day milk procuring. With about Rs.15,255 crore turnover, it is the largest dairy network in the Asia Pacific and is the dominant member of the Amul Federation.
Ravind Mithe: As a seasoned C-level executive with nearly four decades of experience, Ravind has advised and transformed several companies, domestic and MNCs, at varying stages of growth across multiple sectors. Having worked for marquee companies such as KPMG, PwC, ECS, Eicher Motors (now Volvo Eicher), and Crompton Greaves (now CG Power), he brings to table a very strong industry and market knowledge, cross functional domain expertise and ecosystem connects.
He has the acumen and agility to support the entire spectrum of supply chain aspects like Manufacturing system design, Supply chain planning, Business Process Re-engineering, Network Design, Supply Chain Cost Optimization and Operational Excellence using principles of Lean, Six Sigma, TPM, TOC and TQM. Implementation and change management are core parts of his consulting. Ravind has superannuated from KPMG, India in June 19 and currently works as a freelance supply chain consultant, advisor and executive coach. He is based at Mumbai.