SUPPLY CHAIN OPTIMIZATION AT MADURAI MILK DAIRY Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

SUPPLY CHAIN OPTIMIZATION AT MADURAI MILK DAIRY Case Solution

Introduction

Madurai Aavin Milk Dairy started its milk project in the year 1967, which was funded by UNICEF under the New Zealand Freedom from Hunger Campaign Committee. The mission of the company is to provide quality products to its customers and in the least possible cost so that the customer loyalty could be maintained for a longer period of time.

The quality of milk can be analyzed through the proportion of fat about 4.5% and SNF about 9%. However, the current situation is problematic not only for the company as a whole, but also for its customers. The gap between the demand and supply is increasing because of the increasing competition with private distributors.

The company has the alternative of producing premium milk from the usage of SMP and butter, which could be acquired from the other sources. This is also known as recombination. In addition to this, in the case when the quality of milk is not up to the standard, then SMP is required to be added. This is also known as reconstitution. The process of recombination is used by the company to meet the demands of the customers in unusual time period.

The issue, which the company is currently facing, is to increase the supply of demand from 70% to meet the overall demand of the customer efficiently, in a way to maintain profitability. The meeting of demand was also challenged by the increasing diseases and the lack of interest on part from farmers to better grow its products. The other issue in meeting the demand was related to the urbanization as well as the increased demand in the period of festivals in the country, which significantly increase the consumption of milk.

Analysis

The analysis of the situation is performed by considering the product demand profile, manufacturing capacity of the company, outsourcing the milk from other dairies, recombination of SMP as well as butter, and lastly, the inventory capacity. The demand of premium milk product from April 2011 to September 2011 is forecasted below, using the figures of estimated sale of packaged milk in liters. The demand is computed by adding 10% to the sale of premium milk product as illustrated below:

Month	N ear			Forecasting Demand
Month	2008-2009	2009-2010	2010-2011	2011
April	6436977	8168753	8727300	9600030
May	8038673	9042377	9936678	10930346
June	7699105	8535593	9777312	10755043
July	7446966	9159860	10408932	11449825
August	6893954	8660746	9666011	10632612
September	7266777	7985469	8922312	9814543
October	9577732	10287574	11038170	12141987
November	6959258	8865297	9234684	10158152
December	9196648	10106207	10751284	11826412
January	7703373	8763792	9737546	10711301
February	6337111	6573767	7068566	7775423
March	6661873	7012498	7622280	8384508

In order to meet demand in the optimal way by considering the supply of 250000 per day, the demand could be met by performing the gap analysis of the company, which is given below for the overall month of April 2011.

Day	Demand	Supply	Supply Gap		Butter	SMP
1	286387	232031	36387	18	1700	991
2	307453	249099	57453	29	2684	1565
3	288095	233415	38095	19	1780	1038
4	267987	217123	17987	9	840	490
5	288652	233866	38652	19	1806	1053
6	327752	265545	77752	39	3633	2118
7	260029	210676	10029	5	469	273
8	278243	225433	28243	14	1320	769
9	299058	242297	49058	25	2292	1336
10	323536	262129	73536	37	3436	2003
11	269299	218186	19299	10	902	526
12	275672	223350	25672	13	1200	699
13	308182	249689	58182	29	2719	1585
14	287419	232867	37419	19	1748	1019
15	307718	249313	57718	29	2697	1572
16	316682	256576	66682	33	3116	1816
17	330245	267565	80245	40	3749	2186
18	335029	271441	85029	43	3973	2316
19	342925	277838	92925	46	4342	2531
20	309399	250675	59399	30	2775	1618
21	272493	220774	22493	11	1051	613
22	298470	241821	48470	24	2265	1320
23	318493	258043	68493	34	3200	1866