Cash & Liquidity Management
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From Cow To Consumer: A Pioneering Cash Management Model

by R.S. Sodhi, Managing Director, GCMMF Ltd (Amul)

As an organisation that connects 3.5 million farmers with around 1 billion customers, Amul has a unique supply chain, from cow to consumer. To facilitate this, Amul’s distribution network comprises 54 sales offices, 6,000 dealers and one million retailers, one of the largest networks in India. With significant reliance on manual collection methods, particularly post-dated cheques, Amul worked with partner bank BNP Paribas to improve its receivables process to improve operational efficiency and control. In addition, however, as a pioneer of best practices in India, Amul recognised that the project represented a valuable opportunity to promote electronic payment methods, with benefits across the supply chain.

Project background

Cash management is an essential business function that underpins our extensive supply chain. We purchase milk daily, and pay farmers at the point of delivery to one of our collection centres. Eighty per cent of payments are made in cash, although we are working with various banks as part of a financial inclusion programme to encourage producers to open bank accounts. However, with no ATMs in many villages, this will take some time, although we hope that around 80% of payments will be through banking channels in the next two or three years, particularly with new payment methods, such as mobile payments, now emerging strongly.

Having made payments to farmers, we then collect remittances from distributors. These distribution partners purchase milk from Amul on a ‘cash and carry’ basis and we do not offer credit.  Distributors and retailers provide post-dated cheques to Amul towards the payment of future milk supply orders. These cheques are sent to our bank, BNP Paribas, for clearing, settlement and reconciliation, and milk is supplied to the respective distributor/ retailer. Some are now using electronic payment methods.