Global Trade Management Archives

Amul’s Optimized Supply Chain: Driving Global Growth in the Dairy Industry

Food & Beverage Industry | By Sharada Prahladrao • 10/15/2024

India’s growth story can continue if it streamlines and effectively manages its supply chain like the iconic dairy brand Amul that recently entered the US market. Amul formed a strategic partnership with the Michigan Milk Producers Association (MMPA) to facilitate its US product launch. MMPA is responsible for the collection and processing of milk, while the Gujarat Cooperative Milk Marketing Federation (GCMMF), which operates Amul, oversees marketing and branding initiatives. Amul’s milk products are currently available in key markets, including New York, New Jersey, Chicago, Washington, Dallas, and throughout Texas. Amul has outlined plans for further expansion into major cities across the US and eventually into additional international markets.

The Background

Founded in 1946, Amul (initially Anand Milk Union Limited) is more than a dairy brand; it’s a cooperative movement. In the 1940s, Gujarat’s dairy farmers united against exploitative pricing by private firms, led by Verghese Kurien. This laid Amul’s foundation, empowering farmers with fair prices and delivering quality dairy products to consumers at affordable rates. Amul’s model supports small producers by integrating large-scale economics, cutting out intermediaries, and connecting producers directly with consumers.

Amul’s Supply Chain

The Indian dairy industry is among the fastest growing sectors globally, providing livelihoods for millions of farmers and contributing over 5 percent to the economy. As the industry expands, there is an increasing need to implement sustainable practices throughout the supply chain to reduce environmental and social impacts while ensuring long-term viability. As one of the largest producers and consumers of milk, India’s dairy sector has undergone significant transformation in its supply chain due to various socio-economic factors and the dedicated efforts of industry stakeholders. Amul, a household name in India, owes its success to several key factors: strict hygiene standards, high-quality products, product diversification, effective marketing strategies, and efficient supply chain management.

Amul’s supply chain model is a well-structured and decentralized cooperative framework that focuses on efficiency and farmer welfare. These are the key components of their model:

Cooperative Structure: Amul operates through a cooperative model where farmers are members of village dairy cooperatives. This empowers them to have a stake in the business and share profits.

Direct Procurement: Milk is collected directly from farmers at the village level. This reduces intermediaries, ensuring that farmers receive a higher price for their milk.

Milk Processing: After collection, milk is transported to regional processing plants, where it is pasteurized and packaged. Amul has established a robust network of chilling centers and processing facilities.

Distribution Network: Amul employs a wide distribution network that includes a mix of direct sales to retailers, wholesalers, and through its own branded outlets. This extensive network ensures that products reach consumers efficiently.

Quality Control: The organization maintains strict quality control measures throughout the supply chain, from farm to consumer, to ensure high-quality products.

Innovation and Diversification: Amul continuously diversifies its product range, expanding beyond milk to include butter, cheese, ice cream, and other dairy products, adapting to consumer preferences.

Technology Integration: Use of technology in logistics, inventory management, and supply chain tracking has helped improve efficiency and transparency.

Sustainability: Amul focuses on sustainable practices, promoting eco-friendly methods among farmers and minimizing waste throughout the supply chain.

This model not only enhances productivity but also supports rural development by improving the livelihoods and empowering millions of farmers in India.

GCMMF and Brand Amul

The Gujarat Cooperative Milk Marketing Federation (GCMMF) serves as the marketing entity for all the unions within Gujarat. GCMMF relies on strong-recall advertising rather than heavy expenditures. The products are marketed under the Amul brand name, utilizing the recognizable Amul Girl to deliver witty commentary on contemporary events.

Amul is one of the first FMCG firms in India to employ internet technologies to implement B2C commerce. Another e-initiative provides farmers access to information related to the dairy sector (markets/technologies etc.) through net-enabled kiosks in the villages. Amul has also implemented a Geographical Information System (GIS) at both ends of the supply chain (milk procurement and marketing). In collaboration with IBM, Amul has set up an ERP base system to integrate its upstream and downstream partners to improve efficiency, reduce wastage and balance the supply and demand. The group turnover for Amul in 2023-24 is Rs 80,000 crores ($10 billion), which is an increase from Rs 72,000 crores ($9 billion) in 2022-23.

Conclusion

Amul’s transformation from a farmer-led cooperative to a global brand is truly inspiring. Its recent launch in the US is a bold step toward establishing a strong foothold in the international dairy market. This venture’s success will be closely watched, not only for its implications for Amul but also as a source of inspiration for other Indian brands aspiring to foray into the international arena.

Mass Export Expo Captures National Trade Sentiments

Global Trade | By Clint Reiser • 12/10/2018

The Massachusetts Export Center hosted its ninth annual Mass Export Expo on Friday, December 7th. Although the conference was regional in nature, the topics of discussion are currently of great interest to businesses across the country and even across the globe. There were a number of sessions on topics ranging from US-China trade, US economic sanctions, the recently established USMCA, and much more. The panels included a number of corporate compliance officers and attorneys that discussed the intimate details of trade regulations, procedures, experiences, and opinions. Here are some of the points that I found most informative.

US-China Trade

The session on US-China trade relations was certainly timely and relevant to many. As such, there were a number of questions from the audience. Erin Ennis, SVP of the US-China Business Council moderated the session. When asked about the potential fallout from last week’s detainment of Huawei’s CFO, she stated that clearly, she could only speculate, but she has already seen evidence that some US technology execs are giving a second thought to traveling to China in concern of China retaliation. Audience members also expressed frustration with the many subtle differences between the US and China harmonized tariff schedules and the fact that there is no central repository of translations of China’s tariff schedule to English. With respect to technology development, Martin O’Neill, SVP of Cabot Corporation noted that China is a leader in the development of battery technology. I found this to be interesting due to the common view that China is typically a late-stage entrant in technology development.

I engaged in a separate discussion with Kristen Morneau of Mohawk Global Trade Advisors about the recently enacted tariffs on steel imports and their unintended consequences. Kristen noted that the US steel tariffs were intended to increase US jobs. But she has US clients that are experiencing difficulties from the tariffs. Specifically, companies that import steel as raw material are now subject to high tariffs. These companies transform the steel into final goods. However, their competitors that import the steel in final good form are not subject to the same tariffs. Therefore, the tariffs are threatening the intermediate goods processing jobs in the US, while providing cost advantages to competitors that import the goods from China in final form. Although the importers of steel in raw form can apply for duty drawback, the increased costs and time to reimbursement are substantial enough to threaten their ongoing operations.

The US-Mexico-Canada Agreement (USMCA)

The session on the recent USMCA included presentations and discussions about some of the significant changes from the exiting NAFTA framework. Suzanne Richer of Amber Road pointed out the agreement’s substantial focus on the automotive industry. In particular, the USMCA increases the North America content threshold requirement to 75 percent (at least 75 percent of an automobile must be made in North America to qualify for duty-free treatment). In addition, at least 40-45 percent must be made by workers earning at least $16 an hour. This will clearly reduce the wage advantages of Mexico and encourage manufacturers to reconsider the content inputs from the three countries. Also, the USMCA removes the standardized certificate of origin and transfers responsibility from the exporter to the importer. Although the new process will be more flexible, it is also less standardized and can increase the burden on importers. Finally, I found it interesting that the USMCA includes an automatic review process 6 years after initiation and an automatic termination of agreement in 16 years, unless the parties (US, Canada, Mexico) confirm their wish to continue.

US Economic Sanctions

Providers of sanctioned party screening software will be happy to hear that the panelists in the session on economic sanctions recommended to the audience that they use automated screening software. In fact, a couple panelists mentioned that their firms use multiple systems to assure a thorough process. However, they also stressed that human critical thinking must be paired with the screening software to achieve reliable results. A number of policies and directives (OFAC, etc.) were discussed throughout the session. But I found the difficulties faced by EU companies with respect to US-Iran sanctions to be most interesting. In particular, the updated EU blocking statute forbids EU persons from complying with the US extraterritorial sanctions on Iran. This places EU companies with a US business presence in a difficult situation – disregard US interests or disobey EU law.

Global Trade Management (GTM) Solutions Mitigate Uncertainty

Global Trade | By Clint Reiser • 11/14/2018

I recently began the update of ARC Advisory Group’s research on the global trade management solutions market. At the outset, it was unclear to me how (or even if) the increased global trade uncertainty would impact the market for GTM solutions. In early 2017 there were two theses as to how the uncertainty from Brexit and Trump’s rhetoric on trade agreements would affect business activity. One view was that increased uncertainty would hinder trade volumes, put terms of agreements in flux, and cause companies to take a wait-and-see approach toward investments in supply chain software. The other view was that the increased uncertainty came in lock-step with increased media coverage, and therefore increased corporate awareness about the potential impact of changes to trade agreements. It is clear from my recent discussions with GTM suppliers that the latter has occurred. The changes, and potential changes, to trade agreements have catapulted trade management to the top of the list of topics addressed in corporate board meetings. This is occurring at the same time that digital technologies, enabled by the internet, are widely viewed as the catalyst for the next step change in productivity improvements. In fact, the World Trade Organization’s World Trade Report 2018 is titled The Future of World Trade: How Digital Technologies Are Transforming Global Commerce. GTM solutions reside at the nexus of these two trends. These factors have provided GTM solutions with greater consideration by C-level executives than possibly any time in the past.

Short-Term Savings Can’t Wait

It makes sense in retrospect. Multinational companies have made investment and operational decisions to sustain their competitive positions. Proactive organizations are going to evaluate the potential impact of tariff changes on their cost structure and evaluate numerous scenarios to minimize this impact. GTM solutions provide the structured information necessary for contingency planning to evaluate the numerous alternatives available such as increasing output to capture currently available preferential treatment before it expires, the use of foreign trade zones, or even the establishment of alternative supplier and production arrangements.

Digitization Is A Long-Term Investment

Digitization of global commerce is a secular trend that is likely to play out over a number of years as organizations gradually adopt the technologies and practice that will provide the next level of productivity improvements and incremental efficiencies to their operations. Admittedly, I was skeptical of the increase use of the “digitization” buzzword. And it is likely that the term is being overused. However, I do believe that incremental improvements are occurring on a widespread basis that are substantial in aggregate. In fact, I see similarities to the macroeconomic viewpoint that improvements in inventory management practices enabled by IT advances in the 1980s and 1990s have reduced the fluctuation in inventories and in turn stabilized economic growth and reduced the frequency of recessions.

Final Word

Although my research on the worldwide GTM market has just begun, it appears that 2017 and 2018 year-to-date have been strong years for GTM providers. The geopolitical environment has hindered some businesses (think Harley Davidson) but appears to have benefitted the GTM market.

Beating Mother Nature’s Stormy Character

Global Trade | By Gary M. Barraco • 02/15/2018

Although it’s a fresh, new year, many global companies and their supply chains in the US have been suffering alongside individuals this winter. Icy, wintry winds and driving snow jammed air traffic and roads in the east, while fires swept across the west, then rains turned major highways into muddy messes with flash floods. All throughout 2017, Mother Nature didn’t pause to worry about the delays and problems she created for shippers all over the globe.

These disasters seem to be more frequent and increasingly ferocious, which is bad news for local and global businesses alike that rely on keeping freight moving in their supply chains. So how do these global companies and supply chains weather Mother Nature’s fury? With better visibility, automation tools, and digital technology, shippers can ensure their operations are efficient, effective, and ahead of the storm clouds of disruption.

Weathering the Storms

Troublesome weather puts a strain on supply chain professionals to ensure inventory availability across a broad network of distribution points, along with the capabilities to get product to the consumer in days (the new norm for some retailers). This puts pressure on each step in the shipment process to ensure reliability and accuracy. Smart logisticians are properly orchestrating the fastest and cheapest means of moving goods from factory to consumer. But it isn’t simple.

Managing each phase of the shipment — from production visibility, to shipment prep and booking, movement of the goods, and tracking last mile delivery — can be extremely complex. Even some large companies struggle with these challenges and the excessive costs that are incurred. This makes visibility and accuracy of rates a critical component of cost management that is often missing.

By centrally managing each milestone in the product lifecycle, shippers have a consolidated view across their supply chain. This can then be shared with globally distributed business units and trading partners. The results include greater cost control, agility to move goods expeditiously, and control tower visibility to mediate risks that occur along the way.

Staying Afloat with Visibility

One of the keys to surviving weather disasters is having better supply chain visibility — so the supply chain can adapt, adjust, and respond when required. Companies can better position themselves by making their supply chains more visible to the infinite number of risks that may become realities.

By identifying the risk immediately and flagging solutions and alternatives, a digitized supply chain leveraging a savvy Global Trade Management system can get companies quickly back on their feet to resume operations. Organizations can bolster their transportation operations and proactively mitigate risk by making targeted investments in areas that:

Connect all business partners in a single, integrated, cloud-based platform
Enhance visibility of their supply chains, including second, third, and even fourth-tier suppliers
Collaborate in real-time via cloud-based platforms
Improve control of key operational and quality processes
Enhance agility to improve responses to adverse changes in external environments

As global trade shifts with the changing times, risk management is becoming more important, more time consuming, and more expensive for companies. Digital automation tools will equip companies with the necessary level of visibility and the means to proactively control disruptions before they happen.

While there is no way to avoid what can seem like world-wide disasters, companies that employ the best tools are situated to bounce back quickly and prevent lasting damage to the bottom line.

Gary Barraco, Director of Global Product Marketing, is responsible for developing strategic product marketing direction and presenting the Amber Road brand and solutions worldwide. As the platform evangelist, Gary develops and launches customer insights, go-to-market plans, product messaging and content, and field marketing tactics which establish Amber Road’s solutions as a standard in the Global Trade Management space. Previously, Gary was VP, Industry Development for ecVision for 9 years prior to its acquisition by Amber Road. He has 20 years of active military service where his primary specialty was providing marketing support to Army National Guard recruiting and retention operations in New Jersey. Gary received a BS from the State University of New York and is currently pursuing a Master’s degree at Moravian College.

Global Trade Management (GTM) Technology Market Update

Automotive Industry | By Clint Reiser • 09/13/2017

Congratulations to me! I have (finally) completed ARC’s Global Trade Management Systems Market Research Study. I will take this opportunity to communicate and consolidate the research findings from the study and the accompanying writing I published over the last few months in Logistics Viewpoints.

The GTM Solutions Market

ARC focuses its GTM research on two high-level functionality sets: Trade Compliance – functionality for managing trade compliance costs and processes like duties, tariffs, restricted party screening, etc., and International Trade Visibility & Execution – functionality that enables companies with geographically dispersed trading partners to collaborate, monitor, and manage the steps within the procurement, production, and delivery processes. In my opinion, trade tariffs often act as a form of tax that disturbs the supply and demand equilibrium, and ends up creating an economic inefficiency known as a tax wedge (see Global Trade Management Software –Execution, Visibility, Compliance …and that Darn Tax Wedge). One part of that wedge is an increased cost of an item that could otherwise be procured more efficiently. The increased cost decreased demand (or shifts it to the next best provider) and increases product costs. In fact, the costs can be so substantial that they can influence entire supply chains. So it’s no wonder that free trade agreements are such hotly debated topics.

Most GTM software vendors currently sell their solutions through the SaaS model. In fact, roughly half of the GTM market’s revenues come in the form of SaaS. This allows for easier adoption of GTM solutions and many vendors are allowing the purchase of subsets of functionality to lower barriers to adoption even further. However, the overarching adoption trend is that of GTM suppliers expanding their solution footprints, allowing them to sell their solutions as a GTM platform. This allows users to purchase a system that is more standardized, offers greater continuity across the enterprise (i.e. compliance for multiple business units across countries on one platform), and provides customers with integration benefits.

GTM Solutions in Use

Growth in trade and the value and complexity of goods are drivers of GTM solution usage. The WTO shows that 2016 merchandise trade did grow, but at a slow rate of 1.3 percent. Fortunately, the WTO is projecting more robust trade volume growth in 2017 and 2018. ARC’s research shows Industrial Machinery, Automotive, Food & Beverage, Electronics, and Household items as leading end-user industries for use of GTM solutions. These industries are well aligned with global merchandise category trade volumes and recent trends in the trade of these items. Worldwide export (value in dollars) of household goods grew by 6% a year between 2010 and 2015. Over the same period, Automotive averaged 4% a year. Telecommunications equipment was the category that experienced the fastest growth in 2015 (for more detailed information, see GTM Research Update: Merchandise Trade Analysis).

The primary incentive for adopting GTM for trade compliance purposes is transitioning from general regulatory compliance, toward the management of regulatory programs to the benefit of the organization. In particular, companies are using GTM solutions to take full advantage of preferential treatment programs. Most notably, they’re using GTM solutions for item classification and other process steps to harness the benefits of FTAs (avoiding the costly tariffs referenced above).

Using GTM to Harness Benefits from Free Trade Agreements

Companies in the automotive industry frequently use GTM solutions to harness the preferential treatment benefits made available through free trade agreements. I had the opportunity to speak with an executive from a large automotive manufacturer that uses MIC’s origin calculation system when analyzing sourcing and production scenarios for new vehicle launches and ongoing production thereafter (for more detailed information, see How Free Trade Influences an Automotive Supply Chain). Local content feasibility and assembly layout are evaluated during the concept phase. But what I found most impressive about this process is that the local content is not only projected for a given make and model, but also subsequently calculated for each vehicle around the time of production. For example, if a plant produces 200 vehicles in a day, the local content calculation is performed 200 times that day.

Corporate Actions in GTM Market (that’s mostly M&A to you and me)

The GTM market is still mostly made up of best-of-breed suppliers. Only a few ERP suppliers offer GTM solutions, but I expect more to acquire providers or build their own solutions in the future. The ERP suppliers that currently offer GTM solutions include SAP, Oracle, Infor (GT Nexus), and QAD. Some of the more prominent best-of-breed GTM suppliers include (in alphabetical order) AEB, Amber Road, BluJay, Descartes, Integration Point, MIC Customs, and WiseTech Global. Amber Road, Descartes, and WiseTech Global are the only best-of-breed GTM suppliers that are currently publicly traded companies. Descartes and WiseTech Global have been periodically acquiring smaller GTM suppliers to expand upon their existing GTM portfolio. The largest acquisition in the market is Infor’s 2015 acquisition of GT Nexus (and GT Nexus merged with TradeCard in 2013). Finally, Thomson Reuters and Livingston both acquired GTM providers in the recent past to expand upon their respective offerings, as well. I expect a number of additional mergers and acquisitions to occur in the near future, driven by the attractive growth rate of GTM solution sales and the broader supply chain technology convergence trend.

For further information on ARC’s Global Trade Management Research, go to https://www.arcweb.com/market-studies/global-trade-management.

Sneak Peak: Global Trade Management (GTM) Market Update

Global Trade | By Clint Reiser • 07/19/2017

ARC Advisory Group conducts an annual in-depth analysis of the worldwide global trade management (GTM) software market. The research process includes the analysis of large amounts of information and interviews with executives from numerous GTM companies. The process concludes with the publication of ARC’s Global Trade Management Market Research Study. I am nearing the end of the study update process and thought I would take this opportunity to discuss some of the GTM market’s current characteristics.

ARC’s Definition of the GTM Software Market

ARC has a broad definition of the GTM software market and we segment it into two high-level solution categories: Trade Compliance and International Trade Visibility & Execution. Trade compliance functionality helps companies manage trade compliance costs and processes like duties, tariffs and required filings; and regulations such as restricted party screening that are overhead costs and pose risks for regulatory fines by government entities. International trade visibility & execution functionality provides geographically dispersed trading partners with the ability to collaborate, monitor, and manage the steps within the procurement, production, and delivery processes of the extended supply chain. Some GTM providers, such as MIC Customs Solutions, focus solely on trade compliance. Others such as GT Nexus provide visibility and collaboration functionality for global trading partners. And finally, there are several GTM software providers that offer both trade compliance and international trade visibility and execution functionality. These providers include Descartes, BluJay Solutions, and Amber Road. Even within each of the GTM categories there is great variation in the capabilities offered by suppliers. For example, there are niche compliance solution providers that only manage domestic customs regulations. In addition, international trade solutions may vary by mode. For example, INTTRA provides electronic ocean cargo booking, whereas Champ Cargosystems is dedicated to the air cargo industry. Because of the functional and regional diversity, there is also a diverse range of factors affecting different vendors’ businesses in different ways. In short, the GTM market is very heterogeneous.

GTM Market Characteristics

Many GTM software vendors sell their solutions through the SaaS model. In fact, roughly half of the GTM market’s revenues come in the form of SaaS – with the remainder being perpetual software, implementation, and maintenance services. SaaS makes user adoption an easier decision that can be made through an operating budget rather than a capital budgeting process. This has encouraged the adoption of these solutions by shippers. The systems can be implemented more quickly and usage can be expanded incrementally with lower upfront expenses. But many of the applications have historically been adopted as point solutions. More recently, GTM vendors have expanded their solution footprints, allowing them to sell their solutions as a GTM platform. This allows users to purchase a system that is more standardized, offers greater continuity across the enterprise (i.e. compliance for multiple business units across countries on one platform), and provides integration benefits (for example, visibility into both supplier inventory status and compliance status across the supply chain). This maturation of solutions into larger global deals, with solutions sold as platforms, has contributed to the growth in adoption in GTM solutions. In addition, the incentives for adopting GTM is transitioning from what used to be heavily focused on regulatory compliance, toward the management of regulatory programs to the benefit of the organization. In particular, companies are using GTM solutions for item classification and other process steps to take full advantage of the preferential treatment made available through FTAs. They’re also leveraging duty deferral programs like free/foreign trade zones and bonded warehouses to reduce inventory holding costs. At the same time, secular trends such as outsourcing and increasingly complex international supply chains is supporting the value proposition for supply chain visibility solutions. All of these factors are stimulating the GTM market to grow faster than the more broadly defined supply chain software market. In general, GTM solutions are of greatest interest to companies in industries that have complex supply chains and are subject to high tariff costs or high compliance risks. Some of these industries include automotive, telecom, pharmaceuticals, and household goods (see GTM Merchandise Trade Analysis). However, companies across numerous industries invest in GTM solutions. Of course, logistics service providers are the most prevalent, but other industries such as banking also use GTM solutions to manage compliance risk. GTM software is of interest to a wide range of businesses, and it is supporting the ongoing secular trend of international trade. And despite some of the recent rhetoric, I don’t see this growth trend abating any time soon.

A complete analysis of logistics trends, technologies, and services