The Hidden Cost of Dairy Wastage: Why Inventory Management Matters in India

India's dairy industry produced 247.87 million tonnes of milk in 2024–25. But production volume alone does not determine the industry's success. Preserving product quality, managing inventory and reducing avoidable losses are equally important to protecting profitability.

India accounts for nearly a quarter of global milk production. Yet, across the journey from procurement to processing, distribution and retail, inefficiencies can erode the economic value of dairy products before they reach consumers.

An article published by The Hindu BusinessLine, authored by the chief executive of Heritage Foods Ltd, highlights the need for a more integrated approach to inventory management, cold-chain discipline and demand forecasting.

Dairy Wastage Is More Than Spoiled Milk

Dairy wastage is often associated with milk that has visibly spoiled or products that must be discarded. However, the economic impact begins much earlier.

Temperature fluctuations can shorten the effective selling window of perishable products. Inventory may remain in warehouses or retail dark stores for too long, forcing businesses to offer discounts as products approach expiry.

Avoidable returns, unsold stock and capital tied up in poorly managed inventory further weaken operational efficiency.

By the time a product is discarded, the business has already incurred costs for milk procurement, processing, packaging, energy and transportation. Preventing these losses therefore protects value created at every preceding stage.

For dairy businesses operating on tight margins, better inventory management is not simply an administrative improvement. It is an important part of commercial performance.

1. Cold-Chain Management Must Extend Beyond the Factory

A reliable cold chain begins with prompt chilling after milk collection and continues through processing, storage, transportation, distribution and retail.

A temperature-control failure at any stage can compromise product quality or reduce the time available for sale, even when visible signs of deterioration are absent.

The responsibility does not end when a product leaves the dairy plant. Distributors, retailers, quick-commerce warehouses and last-mile delivery operators also influence how well temperature-sensitive products are handled.

This becomes particularly important for perishable dairy products such as paneer, khoa, curd and yoghurt.

The Food Safety and Standards Authority of India has reiterated the importance of appropriate temperature control, hygienic handling and safe transportation for perishable foods. These measures are essential for food safety and can also help businesses protect freshness and reduce avoidable losses.

As organised retail and quick-commerce services expand, dairy businesses need better temperature monitoring, documented controls and accountability at every transfer point.

2. Inventory Must Follow Demand—Not the Other Way Around

Improved refrigeration alone cannot eliminate wastage. Dairy companies also need to forecast demand more accurately and align procurement, manufacturing and distribution accordingly.

Different products require different inventory strategies.

Fresh milk moves through the supply chain rapidly, while curd, paneer and yoghurt require frequent replenishment and careful shelf-life management. Products such as ghee, butter and milk powder have different storage characteristics and can provide additional flexibility when managing seasonal variations in milk availability.

The objective is not simply to keep inventory low. It is to maintain the right quantity of the right product in the right location for the right period.

Achieving this requires businesses to integrate store-level sales data, seasonal demand, festivals and weather patterns with procurement schedules and production plans.

Batch-level visibility and first-expiry-first-out (FEFO) stock rotation can help ensure that products nearing their expiry dates are prioritised appropriately throughout the distribution network.

The article also proposes a planning principle for value-added dairy products: aim to deliver products with at least 75% of their declared shelf life remaining, wherever operationally applicable. This is an operational target suggested by the author, not a universal statutory requirement.

3. Flexible Manufacturing Can Help Manage Seasonal Surpluses

Inventory efficiency also depends on how flexibly dairy processors can respond to changes in milk availability and consumer demand.

Within technological, product-quality and market constraints, manufacturers may be able to direct suitable milk supplies towards different product categories, including liquid milk, cultured dairy products, fat-based products and milk powders.

Such flexibility can help processors manage seasonal variations without accumulating unnecessary stock or resorting to distress sales.

However, product conversion must be supported by appropriate processing capabilities, food-safety controls, demand forecasts and realistic market opportunities. Producing more of a product with a longer shelf life does not automatically guarantee that it will sell profitably.

The objective is to connect production decisions with market demand rather than treat inventory management as a task that begins only after manufacturing.

4. Better Inventory Management Can Protect Working Capital

Inventory that moves slowly ties up money that could otherwise support procurement, distribution, product development or infrastructure investment.

At the same time, avoidable discounting and product returns reduce the value recovered from goods already manufactured and delivered into the supply chain.

Improved demand forecasting, consistent cold-chain management and disciplined inventory rotation can help dairy businesses address these problems together.

The benefits extend beyond individual processors. More efficient operations can strengthen product availability, reduce avoidable disposal and support more reliable relationships among producers, processors, distributors and retailers.

Reducing wastage does not remove every cost pressure facing the industry, but it creates an opportunity to retain more value from existing milk supplies.

What This Means for India's Dairy Industry

India's milk-production scale provides a strong foundation for the sector. The next challenge is ensuring that production translates into safe, fresh products and sustainable economic returns.

Dairy companies can strengthen operational performance by focusing on five priorities:

• End-to-end temperature control: Monitor handling conditions from collection and processing to retail and delivery.
• Data-driven demand forecasting: Use sales trends, seasonality and local market signals to guide production and replenishment.
• FEFO inventory rotation: Prioritise stock according to expiry dates and maintain batch-level visibility.
• Flexible production planning: Match product mix to milk availability, processing capabilities and credible market demand.
• Supply-chain accountability: Establish clear procedures for distributors, retailers and delivery partners handling perishable products.

These measures need to work together. Refrigeration cannot compensate for poor forecasting, and accurate forecasting cannot protect product quality if temperature controls fail.

The Bottom Line

India has demonstrated its ability to produce milk at an enormous scale. The next measure of progress should also consider how effectively the industry preserves the value of that production.

For dairy businesses, the opportunity lies in combining cold-chain reliability, smarter inventory management, accurate demand forecasting and flexible manufacturing.

The question is no longer only how much milk India can produce. It is how much of its value the industry can preserve until the product reaches the consumer.

Source: Read full story here 26 Oct, 2026 Edited and Reported by

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