The Kenyan Dairy market is categorized into two; Cold chain/Formal market-Milk delivered to milk processors for processing and warm chain/Informal market - milk sold and used in unprocessed form/Raw milk. Recent studies indicate that 25% of milk marketed is sold through the formal (processed) channels. The balance 75% is sold in raw form (warm channel) or consumed on-farm. Unprocessed milk raises concerns, primarily due to low and unsafe standards of hygiene. The purpose of the study was to examine the existing supply chain management in Kenya’s Dairy industry using Gakindu dairy as a case study. Purposive sampling used to select a sample 30 respondents and data was collected using semi-structured questionnaires. The study focused on farmers in Nyeri County supplying milk to Gakindu dairy as one of the formal processors. The results showed that 57% of the respondents sold their milk through the informal chain mainly because it offered higher prices than the formal chain. The study proposed a milk supply management prototype that offers a comprehensive system of price negotiation, contracting and value chain support to the producer thus eliminating intermediaries in milk supply chain and improves the formal chain through more contracts between farmers and the processors. The findings led to recommendations on ways of formalizing the informal market, the benefits that result thereof and a supply chain management prototype being one of the strategies of increasing milk supply to formal market.