ANALYZING THE SERVICE DELIVERY OF KMF NANDINI

AN EMPIRICAL STUDY

Dr.M.S.Ramachandra* Dr.G.Madegouda

Abstract

T h e study concentrates on researching the service delivery of K M F Nandini.The study covered the
geographical areas of Karnataka Co-operative Milk Producers Federation (KMF) which includes
the cities of Bangalore, Mysore, Mandya, Kolar,Shimoga,Dharwar and Tumkur.The Study will
concentrate primarily on the K M F based milk unions. The empirical paper attempts to identify the
perceptions of consumers towards service delivery of K M F Nandini. The paper tries to identify the
gaps between consumer expectations and the actual delivery of K M F Nandini.

1. Introduction

In India, dairying is recognized as an instrument for social and economic development. The
nation's milk supply comes from millions of small producers, dispersed throughout the rural areas.
These farmers maintain an average herd of one or two milch animals, comprising cows and/or
buffaloes. The animals' nutritional requirements are largely met by agricultural waste and
byproducts (Gupta, 1987). Ample labor and a small land base encourage famners to practice
dairying as an occupation subsidiary to agriculture. While income from crop production is seasonal,
dairying provides a stable, year-round income, which is an important economic incentive for the
small farmer to take to dairying.

Milk production in India is dominated by small and marginal landholding farmers and by landless
labourers who, in aggregate, o w n about 70 percent of the national milch animal herd (Gupta,
1983). As crop production on 78 percent of the agricultural land still depends on rain, it is prone to
both drought and floods, rendering agricultural income uncertain for most farmers. Shackled to
subsistence production as a result of a shortage of finance and credit facilities, these farmers
become entangled in a strangling debt cycle. The combination of an unfavourable land: person
ratio and fragmented landholdings makes it difficult to support large families on crop income alone.

The successful Indian dairy development programme Operation Flood has shown how food aid
can be used as an investment in building the type of institutional infrastructure that can bring about
national dairy development. Programmes like Operation Flood, with similar policy ohentations,

* Director Corporate Relations and Institutional affairs, Dayanada Sagar institutions. Bangalore
** Prof, and Dean, Department of Commerce, Kuvempu University, Shimoga

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m a y prove to be appropriate to dairy development in other Asian as well as African countries since
the conditions that prevail in dairying today in a number of developing countries are comparable to
those that once were found in India. In the early 1950s, India w a s commercially importing around
55000 tones of milk powder annually to meet the urban milk demand. Currently, many developing
countries either commercially import dairy products on a large scale or rely on donations to meet
the gap between d e m a n d and supply of milk products. Together, developing country imports
account for over 70 percent of total world trade in milk products (FAO, 1993)

2. Indian Diary Market

T h e introduction of m o d e r n process technologies for the large scale production of Indian milk
products, including mithais, has provided an opportunity to the organized dairy sector to e x p a n d
its market and ensure financial stability and steady growth. This d e v e l o p m e n t is also having a
tricked-down effect on the entrepreneurs in the traditional dairy sector w h o are modernizing their
age-old mithai-making methods and coming out with new product formulations. The traditional
dairy products sector will play a vital role In value-added utilization of rapidly increasing milk
production in the country.

Despite the widespread popularity and acceptability of traditional milk products in the Indian milieu,
the organized sector has still not been able to fully tap their market potential for many reasons.
S o m e of the most important ones are:

(a) Inadequacy of appropriate technologies for their large-scale production;

(b) Inadequacy of appropriate packaging systems and labeling to take care of new patterns in
consumer demand;

(c) Inadequacy of quality assurance systems in fulfilling the latest standards of hygiene and
product safety; and

(d) Inadequacy of market intelligence to understand the mind-set of prospective entrepreneurs and
inspire confidence in them to undertake commercial production of these products.

T h e organized dairy sector has so far not been able to take the full advantage of these products,
as its current marketing systems do not permit the efficient distribution of short-shelf life products.
The traditional milk products sector has the potential of emerging as a well-structured segment of
the dairy industry. Recently, a few organized dairies have started production of s o m e of the
commercially important dairy products on a large scale, but their impact has been limited.
Organized production and marketing would permit efficient distribution of these products to meet
the needs of the consumers as well as ensure higher returns to rural milk produces in rural areas.

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Production a n d marketing of traditional milk sweets is mostly a small-scale a n d scattered affair
confined to the 'halwa' s h o p s in the local market. O n e reason for this is their short shelf life. T h e
traditional sweets sector, w h i c h absorbs substantial proportion of milk production, has received
little attention due to its concentration in the non-organized sector. Only s o m e selective attempts
h a v e been m a d e in the past to understand different dimensions of this sector, viz., raw material
use, product portfolio, marketing tactics, etc. At the s a m e time, relevant projections regarding
this sector have so far proved a difficult talk in view of its structure and spread.

Milk Consumption Pattern: A n estimated 54 per cent of India's milk production is converted into
products, both traditional and western, in this, the share of traditional products is about 50 per cent,
accounting in 2001 for a little over 42 million tones of milk that yields over 10 million tones of
mithais and other related products per year. The growth projections of their d e m a n d in the
organized sector are presented in Table 1.

Table 1: Milk Consumption Pattern

Product D e m a n d 1988 Projected d e m a n d 2009

Ghee 100000 200000

Cheese 4200 15000

Paneer 1000 16000

Shrikhand 3000 5650

Rasogolla 1600 6000

Gulabjamun 3000 5850

Source : Dairy India 2007

A s the total expenditure on milk and milk products rises, consumers tend to spend proportionately
less on liquid milk, g h e e a n d butter and more on other milk products which include milk-based
sweets, curds, paneer, ghee, butter etc.

Undoubtedly, the major challenge for the dairy sector in any developing nation is to increase milk
production in order to meet the increasing d e m a n d resulting from the almost inevitable expansion
of population and, presumably, growth of income. To meet this challenge, policies must b e c o m e
more market-oriented. The adoption of appropriate technologies for production, procurement,
processing and marketing - after the unique environmental, social, economic, political and cultural
environment of the individual country has been considered - is an important aspect of dairy
development. Those national governments and international institutions for which the dairy sector
is a major concern should accept the challenge and formulate policies that integrate and buttress
the major functions of dairy development.

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3. The Karnataka Co-operative Milk Producers Federation (KMF)

T h e Karnataka Co-operative Milk Producers Federation (KI\/IF) on its part, which was formed
during the early 1980s, has taken tremendous strides in its operations all over the States of
Karnataka T h e Federation has now established 13 Milk Unions, which cater to almost 35 per cent
of the population of Karnataka, through its Milk Unions dotted in the major cities of Karnataka.
Over the last two decades, the K M F has met with a good degree of success in marketing its brand
of Milk and Milk Products all over the state. However, the federation faces several problems which
are directly affecting further growth. The financial performance of a majority of the Milk Unions is a
matter of worry for the KMF's top management, which is now striving hard to see the turnaround of
all the Unions is showing dismal financial performance figures. The federation has been trying out
several w a y s of utilizing the excess milk inflow. It has been continuously trying out on creating
value adding products like S k i m m e d Milk Powder, Butter, Ghee, Pedas, Buttermilk, Flavored Milk,
Ice Creams, B a d a a m Powder, Cheese, and even Mysore Pak. These efforts have never been so
heightened in the recent past as could be observed by the hectic marketing efforts of the K M F in
appointing several wholesalers, retailers, and even franchises and vending t)ooths to sell these
products. Unfortunately, all these efforts have not yielded the desired results, in-as- much as the
efforts of the Dairy Industry has not been met with an either equal match of even a sublimal match
considering the enormity of production. There are several inherent bottlenecks in the system of
distribution and promotion of the products.

This study intends to provide feedback of service delivery for K M F Nandini.

4. Objectives of the Study

1. To analyze the performance of K.iVI.F- with special reference to its service delivery;
2. To find out the customer perceptions towards K M F Nandini

5. Scope of the Study

T h e study concentrates on researching the service delivery of K M F Nandini.The study will cover
the geographical areas of Karnataka Co-operative Milk Producers Federation ( K M F ) which
includes the cities of Bangalore, Mysore, Mandya, Kolar,Shimoga,Dharwar and Tumkur .The
Study will concentrate primarily on the K M F based milk unions. T h e s e Seven Milk Unions
situated in the above cities are fairly representative of the K M F operations, and hence, the Study
will primarily be restricted to these Unions with particular reference to service delivery, brand
loyalty and customer segments.

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6. Research design

The study is one of a management problem at top echelons, but related to strategising its
operations from the grass roots. In a way, this Study will have multifarious ramifications in reaching
the desired Research objectives and there by has to be studied in a wider angle. Hence, the
sampling plan consisted of researching 100 respondents in each of the 6 target markets of Mysore,
Mandya, Kolar,Shimoga,Dharwar and Tumkur and 2 0 0 respondents In Bangalore city selected for
Research purpose in the consumer category, making the total sample to 800. T h e data collected
is analyzed with the help of appropriate statistical tools and techniques for arriving at the accurate
findings and conclusions.

7. Results and discussions

1. Identifying factors of service delivery

A n important question before the researcher was to identify the factors on which the variables can
be measured. Factor analysis can assist to identify the underlying factors that define the service
delivery of a company. Factor analysis is useful in yielding easily understandable factors that
convey the essential information contained in the original set of variables. Thus it w a s decided to
use factor analysis in the present study. The "principal component analysis" and varimax rotation
has been employed for the purpose of extraction and rotation of factors respectively. A total of 6
factors emerged from the factor analysis.

KMO and Bartlett's test of sampling adequacy

The Kaiser Meyer OIkin measure of sampling adequacy w a s used assess the appropriateness of
factor analysis. Table gives the statistics produced by the variables.

Table 2: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .926

Bartlett's Test of Sphericity Approx. Chi-Square 24965.166

df 630

Sig. .000

T h e K M O value is .926 and this is considered to be a d e q u a t e to proceed with factor analysis of

the data. This indicates that there is a high presence of correlation a m o n g s t the variables. T h e
Bartlett's test of sphericity is 24965.1, which is high value, and it is significant at .01 levels. S o
factor analysis w o u l d provide statistically reliable information.

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In table below the information containing all six possible factors and their factor loadings are
featured. After rotation majority of the variance is explained by factor 1 and thereafter the following
5 factors increase only by a small percentage of variance explained.
Factor 1- Customer service
Factor 1 accounts for 33.371% of the variance. The factor is m a d e up of 14 variables that had
highest loadings. These variables relate to customer related issues.

Factor 2 Brand Image.

Factor 2 accounts for 7.037% of the variance. The factor is m a d e of 2 variables that relate to
brand equity of the company.

Factor 3-Accessibility and Availability

This factor consists of 6-varaibles of high factors loading. Factor 3 accounts for 4 . 7 7 7 % of the
variance.

Factor: 4- Prices and offers

Factor 4 accounts for 4.086 % of the variance. Prices and offers mal<e up this factor.

Factor 5: quality of product and services

Factor 5 accounts for 3.527% of the variance. This factor consists of 4 variables that are related
to quality of the product.
Factor 6- Tangibles
Factor 6 accounts for 3.104% of the variance. This factor includes 4 variables that relate to
physical appearance of the outlets.

Table 3: Factor analysis of service delivery aspects of KMF Nandini

Factor 1: Customer service 1 2 3 4 5 6

Providing quick service delivery .612

Dependability of service .569

Providing clear and precise

information about products by .653
retailer

Quickly responds to special

.617 -.453
requests and orders

R e m e m b e r s previous problems
with the products .574 -.403

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Factor 1: Customer service 1 2 3 4 5 6

Returns the balance properly .583 -.304

Pays attention to Individuals .389 .378

Employees' approachability and .537

willingness to help customers
Attends to Physically
Challenged persons and .588
Senior Citizens

Making the effort to understand

the needs and expectations of .439
customers

Responsive and sensitive to

customer complaints, .560 .305
suggestions and problems

Willingness to explain details

and clarify doubts about its .537
products

Readily approachable /
available by customers .419

Factor 2 Brand image

No of Years of existence in .589 .403

business

G o o d will of the outlet .640 .347 .325

(Brand equity)

Factor 3 Accessibility and

Availability

Convenient time of product .604 .464

supply

Availability on all days .600 .458

Immediate availability .464 .573

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Factor 3 Accessibility & 2 3 4 5 6
1
Availability

Proximity to store outlet .537 .419

Home delivery .588

Timely supply .439 .305

Availability of products in one .647

roof
Range of products under one .621

Factor 4 Prices and offers

Competitive prices .627 .580

Concessional and discounted
.710
fares for bulk purchases
Providing rebates for regular
.623 -.325
purchasers

Festiva; offers and packages .679 -.347

Factor 5 : Quality of
product and services

G o o d Quality (taste) .633

Good Quality (no storage) .643

Product packing and .596
presentation
Product labeling statutory .502 .641
information
Factor 6 : Tangibles
Sign Board and other signages .541
.336
written properly
Merchandising and display .356 .649
Seating arrangement at the .359
.243 ,623
shops
General maintenance of shops .595
Extraction Method: Principal C o m p o n e n t Analysis

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2. A n a l y z i n g s e r v i c e d e l i v e r y f a c t o r s

The analysis of the factors by mean scores suggests that the expectations for all the factors are
higher than the delivery (Table 4). Quality of product and services are the most expected factors
by the customers, followed by accessibility and availability. All other factors are given due
importance with scores above 3.50. The actual delivery of KMF is slightly below expectations with
quality and accessibility being rated higher than other factors. The difference between the
expectations and delivery were evident and statistically tested by paired sample tests.
As can be seen from the tables the gap is higher for tangibles and prices and offers suggesting
company can look into the matter of designing the outlets more effectively.
Table 4: A n a l y z i n g t h e f a c t o r s t o f i n d t h e s e r v i c e d e l i v e r y g a p s

EXPECTATIONS EXPECTATIONS

FACTORS MEAN STD. DEVIATION MEAN STD. DEVIATION

Customer service 3.76 .654 3.59 .623

Brand image 3.82 .816 3.72 1.462

Accessibility and Availability 3.97 .823 3.82 .766

Prices and offers 3.65 1.359 3.43 .924

Quality of product and services 4.08 .725 3.91 .763

Tangibles 3.81 .917 3.52 .767

F i g u r e 1: A n a l y z i n g t h e f a c t o r s t o f i n d t h e s e r v i c e d e l i v e r y g a p s

Analyzing the factors to find the service delivery gaps

Tangibles
Q u a l i t y of p r o d u c t a n d s e r v i c e s
Prices and offers
A c c e s s i b i l i t y a n d Availability
Expectations
Brand image
Delivery
Customer service
— A
3 3.2 3.4 3.6 3.8 4 4.2

Mean

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Research Hypothesis: there is significant gap in KIMF service delivery.
Paired sample tests were conducted for all the factors to find the differences between expectations
and actual delivery. From table 7 it can be seen that for all the factors the difference is significant.
This means that there is a gap between expectations and delivery as discussed earlier. The paired
sample correlations suggest the associations between expectations and delivery are slightly
positive for customer service and accessibility, but the association is not very strong
Table 5. Paired statistics for expectations and delivery
Std.
Mean Std. Deviation Error Mean
Customer service Expectations 3.76 .655 .018
Delivery 3.59 .623 .017
Brand image Delivery 3.82 .816 .022
Delivery 3,72 1.462 .039
Accessibility and Delivery 3.97 .821 .022
Availability
Delivery 3.82 .765 .020
Prices and offers Expectations 3.65 1.359 .036
Quality of product and Expectations 4.08 .725 .019
services
Delivery 3.43 .924 .025
Delivery 3.91 .763 .020
Tangibles Expectations 3.81 .917 .025
Delivery 3.52 .767 .020
Table 6: Paired Correlations between expectations and delivery

Correlation Significance
Expectations
Customer service .381 .000
Delivery
Expectations
Brand image .109 .000
Delivery
Expectations
Accessibility and Availability .342 .000
Delivery
Expectations
Prices and offers .283 .000
Delivery
Expectations
Quality of product and services .317 .000
Delivery
Tangibles Expectations
.320 .000
Delivery

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 Table 7: Paired Samples Test

t Sig
Paired Differences (2-tailed)...

Factors Mean Std. Std. 95% Confidence

Deviation Error interval o f t h e
Mean Difference
Lower Upper
Customer D-E .16 .712 .019 .13 .20 8.620 .000
service

Brand image D-E .10 1.594 .043 .02 .19 2.456 .014

Accessibility D-E .15 .911 .024 .10 .20 6.096 .000

and
Availability

Prices a n d offers D-E .23 1.411 .038 .15 .30 6.029 .000

Quality of p r o d u c t .870 .023 .13 .22

D-E .17 7.367 .000
and services

Tangibles D-E .29 .990 .026 .24 .34 11.070 .000

7. Research findings

iVIajor contribution of the study w a s the identification of 6 factors of service delivery which can be
evaluated. W e feel these w o u l d influence the framing and evaluation of service delivery activities
of K M F Nandini. The factors identified w e r e customer service, Brand image, Accessibility and
Availability, Prices and offers, Quality of product and services, Tangibles.

Service delivery gaps

The analysis of the factors by mean scores suggests that the expectations for all the factors are
higher than the delivery. Quality of product and services are the most expected factors by the
customers, followed by accessibility and availability. The actual delivery of K M F is slightly below
expectations with quality and accessibility being rated higher than other factors. The difference
between the expectations and delivery were evident and statistically tested by paired sample tests.
The gap is higher for tangibles and prices and offers suggesting c o m p a n y can look into the matter
of designing the outlets more effectively.

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8. Conclusion

This research explores the significance of identifying the service delivery gaps of any service
provider. Effort has been m a d e to study the expectations and perceptions of consumers towards
service delivery of K M F Nandini. T h e study identified 6 factors, which influence service delivery of
K M F Nandini. T h e study also found significant gaps between expectations of the consumers and
actual delivery of the company. The findings also suggest the service providers to enhance the
effectiveness and efficiency of the service delivery system, which constitute factors of strategic
attributes. Such steps will help a lot to achieve corporate goals and objectives.

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 REFERENCES

1. FAO. 1993. Commodity review and outlook, 1992-93. Rome.

2. Gupta, P.R., ed. 1987. Dairy India 1987, p. 9. New Delhi, Rekha Printers Pvt. Ltd.

3. Gupta, P.R., ed. 1983. Dairy India 1983, p. 21. N e w Delhi, Rekha Printers Pvt. Ltd.

4. Zuvakis, C., Jr. 1979. Economic development: an introduction, p. 227-228. New York, NY, USA,
St Martin's Press.

5. S. C. Dhall and Meena Dhall, "Dairy Industryindia's Strength in Its Livestock," Business Line,
Internet Edition of Financiai Daily from The Hindu group of publications.

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