This milk production model will improve milk quality and prolong the production period of cows, Pan said. In addition to getting money for the milk produced by their cows, local cow farmers will also receive one share of the group's stock for every five cows they contribute, and can earn dividends from the shares they own. Yili Industrial Group has given over 2 billion yuan ($292.4 million) in loans to farmers to help them buy cows. Now, the group has more than 20 such milk associations.

Pan believes milk associations are a win-win arrangement. They can supply dairy companies with the milk they need, improve efficiency and guarantee milk quality.

While Yili Industrial Group is developing milk associations, Mengniu Dairy is developing medium and large modern pastures. Yang Wenjun, president of the company, said that Mengniu Dairy now has seven pastures that can each raise 10,000 cows, and the company plans to build another 20 large pastures. Yang said that currently, milk from such pastures accounts for more than half of all raw milk supplied to his company.

Joint efforts

The tainted milk scandal reminded both the government and firms that it is imperative for them to take action to guarantee food safety.

Guo Qijun, Vice Governor of Inner Mongolia Autonomous Region in charge of agriculture, said that after melamine was detected in the products of Yili Industrial Group and Mengniu Dairy, both of which are located in the autonomous region, the government held an emergency meeting. It decided to send monitors to keep an eye on every stage of the milk production process. As of September 28, the government and the two big dairy companies had sent nearly 20,000 monitors to various milk-collecting stations.

It has been reported that a GPS system is now installed in every car delivering milk to Mengniu Dairy. All the milk supplied to the company is monitored. On arrival at the dairy company, milk undergoes tests for more than four hours.

Yili Industrial Group now administers 117 types of tests on raw milk supplied to the group, while only 17 of which are required by the government.

As melamine tests for food were not required before, Yili Industrial Group and Mengniu Dairy each invested more than 100 million yuan ($14.6 million) to purchase new testing equipment from the United States and Japan.

The dairy products of the two companies are not only tested by their own inspectors, but also by quality inspectors from the local government. Mengniu Dairy has also invited authorized independent inspectors to test its products. Only qualified products are allowed into the market.