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Attempt Both Case Study
Case I -DABBAWALLAHS OF
MUMBAI (A)
Dabba
was a generic, colloquial term used explicitly in Mumbai to describe any
cylindrical box. In the context of meal delivery service, a dabba was an
aluminum box carried by its handle like a tin of paint. Each dabba housed three
to four interlocking steel containers and was held together by a collapsible
metallic wire handle. Each of these containers accommodated an individual food
item found in a typical midday lunch.
Wallah
was a label for a tradesperson in a particular profession. For example, a
paperwallah was an individual who delivered newspapers. Taken together, a
dabbawallah was a courier who picked up a lunch-full dabba from a client's home
in the morning, left it outside of the client's workplace for pick-up,
retrieved the empty dabba after the lunch was consumed and returned the empty
dabba to the client's home in the evening.
On
November 7, 2003, Raghunath Medge, president of the Nutan Mumbai Tiffin Box
Suppliers Charity Trust (The Trust), had just returned to his office in
suburban Mumbai after meeting with Britain’s
Prince Charles who was on an official visit to India’s commercial capital.
The
Trust was the managing organization of the dabbawallah meal delivery network.
The dabbawallahs' service, often referred to as tiffinwallahs outside of
Mumbai, was cited internationally by management scholars and industry
executives as an exemplar of supply chain and service management. The service
had acquired a reputation for its delivery reliability in Mumbai. International
interest in the dabbawallahs was largely due to a 1998 article published in
Forbes:
Mumbai's
"tiffinwallahs" have achieved a level of service to which Western
businesses can only aspire. "Efficient organization" is not the first
thought that comes to mind in India,
but when the profit motive is given free rein, anything is possible. To
appreciate Indian efficiency at its best, watch the tiffinwallahs at work.
Documentaries
on the dabbawallahs were produced by the BBC, M1V and ZEE Tv, and their
delivery performance earned them recognition in the Guinness Book
of World Records and Ripley's Believe It or Not!
Medge,
who had personally demonstrated to Prince Charles how the dabbawallah meal
delivery
system worked, was himself in the spotlight of late. He had recently been
invited by the Confederation of Indian Industry to speak to its members at a
leadership summit in a special module titled "Leading Without Suits and
Ties." He was also approached by human resource executives and asked to
present seminars on team building. Additionally, he was asked by corporations,
such as Siemens India, to make a presentation to their employees on the
dabbawallahs'
working practices. Finally, he was also regularly sought by the print
and television media within and outside of India.
The
dabbawallah service had begun informally in 1890 in Mumbai. According to Medge:
A
Parsi banker working in Ballard Pier employed a young man, who came down from
the Poona district to fetch his lunch every day. Business picked up through
referrals and soon our pioneer dabba-carrying entrepreneur had to call for more
helping hands from his village. Such was the origin of the dabbawallahs.
However
trivial the task may sound, it is of vital importance since havoc is caused if
the client had to skip his home-cooked food or worse, carry the dabba himself
in the ever so crowded Mumbai trains during the rush hour!
By
the early 20th century, people from all parts of India were migrating to Mumbai in
large numbers. Once they found a source of livelihood and settled down, they
wanted home-cooked food at their workplaces. Home-cooked food had a comfort
level for various reasons. First, the food was prepared in the ambience of a
domestic kitchen, with recipes that were tried and tested, and that resulted in
familiar fare. Second, homecooked food was comparatively inexpensive.
The dabbawallahs were initially charging two annas per month per dabba for
their delivery service.
Working
independently and in small groups for decades, the dabbawallahs had united in
1954 to put together a rudimentary co-operative. This umbrella organization was
officially registered in 1956 as a charitable trust under the name Nutan Mumbai
Tiffin Box Suppliers Charity Trust. At that time, some of the dabbawallahs
employed delivery boys to carry their dab bas and transport them along their
routes on bicycles and pushcarts.
These
dabbawallahs would collect the fees from their clients every month and pay the
boys whatever they could negotiate with them. This changed in 1983 when the
Trust adopted an owner-partner system. Under this new system, the practice of
subcontracting was dispensed with and dabbawallahs started to receive equal
earnings. The delivery boys' system was converted into an
apprenticeship system wherein new recruits were trained for at least two to
three years on a fixed remuneration before they became full-time dabbawallahs.
By
2003, more than 5,000 dabbawallahs worked under the aegis of the Trust.
Together they delivered about 175,000 lunches daily in Mumbai (see Exhibit 2).
They served a total area that covered approximately 75 kilometres (lan) of
public transport. The dabbawallah business generated approximately Rs380
million per annum. Given the two-way route for each dabba, the number of
deliveries worked out to more than 350,000 per day. Despite the sheer number of
daily deliveries, the failure rate reported by the media numbered one in two
months, or one in every 15 million deliveries.
The Nutan Mumbai
Tiffin Box Suppliers Charity
Trust
The
Trust was responsible for managing the overall meal delivery system. It worked
in close co-ordination with the Mumbai Tiffin Box Suppliers' Association, a
forum that provided opportunities for social interactions among the dabbawallahs,
and the Dakkhan Mavle Sahakari Patpedhi, a credit union that catered to the
financial needs of individual dabbawallahs by providing personal loans.
Given its charitable trust status, the Trust was also involved in community
initiatives by providing free food and accommodation to low-income families at
some pilgrimage
centres.
The
Trust had a three-tier structure: Executive Committee, mukadams and
dabbawallahs. Under this structure, the basic operating unit was the team. Each
team, which comprised between five and eight dabbawallahs, was headed by a
mukadam. Having risen from the ranks of the dabbawallahs, a mukadam's primary
daily responsibility involved the sorting of the dabbas. However, as team
leader, the mukadam performed several administrative tasks that included
maintaining records of client payments, arbitrating disputes between
dabbawallahs and customers, and apprentice training.
|
|
Number
of
|
Number
of
|
|
Year
|
Dabbawallahs
|
Customers
|
|
1900
|
58
|
1,445
|
|
1905
|
75
|
1,965
|
|
1910
|
142
|
4,120
|
|
1915
|
204
|
6,504
|
|
1920
|
321
|
9,675
|
|
1925
|
407
|
12,140
|
|
1930
|
695
|
22,865
|
|
1935
|
1,024
|
34,230
|
|
1940
|
1,206
|
42,340
|
|
1945
|
1,715
|
64,240
|
|
1950
|
2,106
|
82,000
|
|
1955
|
2,552
|
105,120
|
|
1960
|
3,216
|
140,000
|
|
1965
|
4,406
|
198,100
|
|
1970
|
4,605
|
176,040
|
|
1975
|
4,904
|
215,000
|
|
1980
|
5,511
|
275,075
|
|
1985
|
5,524
|
190,645
|
|
1990
|
5,102
|
130,860
|
|
1995
|
5,180
|
142,260
|
|
2000
|
5,164
|
165,670
|
|
2003
|
5,142
|
175,040
|
The
mukadam was also in charge of acquiring new clients for the team and managing
customer satisfaction. New customers purchased their dabba from the
dabbawallahs when service was commenced. Dabbas were typically replaced, at
cost to the customer, once every two years.
Seven
to eight mukadams typically aggregated their efforts and constituted a profit
centre; each profit centre was referred to as a "group." There were
about 120 groups in total. While each group was managed autonomously, its
members stepped in without hesitation to help other groups· in dealing with
emergencies such as dabbawallah absenteeism. Monthly group maintenance costs
totalled Rs35,000, covering the maintenance of the bicycles, pushcarts and
wooden
boxes the dabbawallahs used in their daily deliveries.
The
13 members of the Executive Committee, which were elected by the general body
every five years, co-ordinated the activities of the various groups. The
Committee, which undertook
all major decisions for the Trust and worked on the principles specified in the
Co-operative Societies Act, met on the 15th of each month. Operational issues
typically dominated each meeting's agenda. Examples of such issues included
disputes with the Mumbai city railways over dabbawallahs not carrying their
monthly passes or the ID issued to them by the Trust, and with the city police
when dabbawallahs parked their pushcarts or bicycles where parking was not
permitted. Annually, there were few reports of lost or stolen dabbas. In such
instances, clients were reimbursed by the individual dabbawallah or given a
free dabba.
The
dabbawallahs were a homogenous group in many ways. Its members, traditionally
male, hailed from the same geographical regionknown as Mavla-Iocated
east of the Sahyadri (Western Ghats) near Pune, and they spoke the same
language (Marathi). They shared similar customs and traditions, such as
gathering together for a week every April for a festival in their hometown.
They wore the same dress, a loose white dhoti shirt, cotton pajamas and their
trademark white oval cap.
All
of these combined to form a distinct local identity for the dabbawallahs. They
were easily recognized even in the busiest of locations. Pedestrians and
commuters yielded to the dabbawallahs in order not to interfere with
their service delivery. Seemingly always in a rush, the dabbawallahs were known
for their reliability and work ethic. They ascribed to the traditional Indian
belief that "work is worship." Averaging 55 years in age,
dabbawallahs were typically lean, agile, active and physically fit. While the
minimum level of education of a dabbawallah was grade seven, most never got
past grade eight schooling.
Each
dabbawallah earned a monthly income between Rs5,OOO and Rs6,OOO. Out of this
income, each dabbawallah was responsible for paying:
Rs.
120 for the monthly railway pass that allowed for unlimited access to Mumbai's
railways;
Rs.
60 for the maintenance of the bicycle or the pushcart (which were owned by the
group or profit centre); and the compulsory monthly contribution of Rsl5 to the
Trust.
DABBAWALLAH MEAL
DISTRIBUTION NETWORK
The
dabbawallah meal distribution network was characterized by a combination of a
"baton relay system" in which dabbas were handed off between
dabbawallahs at various points in the delivery process and a "hub and
spokes" system in which the sorting of dabbas was done at specific railway
locations from where individual spokes branched out for distribution. There was
no local historical model on which this distribution network was designed. All
design decisions were driven by the singular purpose of delivering a dabba in
time for the customer's lunch. The delivery processes had largely remained
unchanged since their inception even though the environment of service delivery
had changed. For example, the delivery system did not rely on the use of
computers.
According to Medge:
“If
we were to use computers, we. would be out of business. It is not because we do
not know how to use computers but the system itself is not amenable to the use
of technology in whatever form.
The
only major change in the dabbawallahs' delivery model was the fine-tuning of
the coding system in 1966. The number of customers using the delivery service
had continued to grow, and without some form of common identification that all
dabbawallahs could follow, the sorting process at the hubs was likely to become
overly time-consuming. Medge observed:
We
decided to decentralize the coding at the level of groups and each group was
free to develop its own coding system based on simple and easily identifiable
numbers and signs. In time, each group gradually developed its own distinctive
color code-from a spectrum of combinations of the seven primary colors-serving
as the first line of identification for any dabbawallah”.
The
workday for a dabbawallah started with the first delivery pick-up at 8:30 a.m.
Leaving their Mumbai home, most of the time by bicycle, the dabbawallahs
arrived punctually to the minute at the doorstep of each collection point,
although they might not be wearing a watch. The collection point would
typically be the client's home. Customers were aware of their responsibilities
in the delivery process. Each knew that if the dabba was not ready for pick-up,
the dabbawallah simply moved on; the dabbawallah did not wait. Each dabbawallah
was personally responsible for the daily delivery of 30 to 35 dabbas.
Dabbawallahs found that number to be usually manageable in terms of personal
memory and physical handling capacity.
8:25
a.m. The dabba is filled with lunch at the client's kitchen and kept outside
the door of the residence.
8:30
a.m. The dabbawallah arrives, picks up the dabba and moves on knocking at the
door only if the dabba is not seen. Under normal circumstances there is no
interaction with any member of the client's household.
8:38
a.m. The dabba is placed on the bicycle or pushcart together with dabbas
collected from other customers.
9:20
a.m. Bicycles and pushcarts drawn by individual dabbawallahs arrive from
various collection centres to the suburban railway station.
9:30
a.m. The sorting operation begins with dabbas sorted according to destinations
and placed in cartages that are specific to each destination. The cartages come
in two standard sizes, accommodating 24 and 48 dabbas each.
9:41
a.m. The suburban train arrives. The cartages, normally numbering five to six,
are loaded into the special compartment located next to the driver's cabin.
10:21
a.m. The train arrives at one of the major hubs. The cartages are unloaded and
bundled with those arriving from other collection centres. They are resorted
according to destinations.
11:05
a.m. Cartages are loaded into the suburban train for onward journey to the
final destination terminals.
11:45
a.m. The suburban train reaches the terminal station. Cartages are unloaded and
dabbas are re-sorted, now according to specific delivery routes.
12:1
0 p.m. Dabbas are placed in destination-specific cartages and hitched typically
on to bicycles or pushcarts for delivery to individual clients.
12:30
p.m. The dabba is delivered at the doorstep of the client's workplace.
The
delivery process is reversed in the afternoon. The empty dabba is picked up
between 1: 15 p.m. and 2:00 p.m. for its return to the client's home early that
evening (e.g. by 5:30 p.m.).
The
hub was essentially a mid-point station in the suburban railway network where
trains converged
before branching out to other parts of the city. Dadar, Bandra, Andheri and
Kurla were the four major hubs for the dabbawallahs' meal distribution
network (see Exhibit 5). As epicentres that had to be passed through while
moving from one end of the city to the other, the hubs were crucial links in
the delivery system. They were also places where delivery errors could take
place. That was why each of the hubs was actively managed by the mukadams, who
stepped in to co-ordinate the sorting operation at each hub. As trains kept
arriving
in rapid succession, it became imperative to orchestrate three
activities-sorting, loading and unloading-simultaneously. Doing so was a
challenge during Mumbai's rush hour when thousands of commuters were also getting
on or off each train. Given the tight time schedule for Mumbai's railways, the
dabbawallahs had to complete their tasks quickly and precisely.
From
these hubs, the sorted dabbas spoked out to various destinations-including the
terminal
stations of the city railway-where a third set of dabbawallahs was waiting to
take over. The dabbas were off-loaded at various terminals and re-sorted,
depending now upon specific customer location information, such as the street,
building and the floor. The dabbas were then handed over to the fourth set of
handlers, individual dabbawallahs, who were assigned to specific delivery
routes in Mumbai city. Placing the dabbas on pushcarts or bicycles, or in some
cases carried by hand or in crates on top of their heads (a full crate of
dabbas could weigh up to 100 kilograms), the dabbawallahs delivered the
home-cooked lunches to the designated recipient by 12:30 p.m.
An
hour or two later, the empty dabbasdropped off by the
satiated client at the same spot used for dabba pick-up--were collected to be
routed backwards on their return journey. In short, each dabba was picked up at
the source by one dabbawallah for transport to the railway terminal, sorted and
loaded by a second dabbawallah, unloaded and re-sorted at the hub or
destination station by a third dabbawallah and delivered by a fourth
dabbawallah to the home from which the dabba was picked up earlier in the day.
The exact combination of dabbawallahs used each day varied with the volume and
density of traffic, but it remained the same on the return route.
Since
each dabba traveled through four sets of hands each day, it was important to
identify· and monitor the dabbas while in transit. This was done through a
system of codes painted on the top of each dabba's exterior. The originating
station and the destination station were the primary codes. They were crucial
for the sorting operations that took place at each of the hubs, and they were
normally identified by alphabets that any sorter could recognize. The other encoded
data included the apartment, floor, building and street the dabba originated
from and was to be delivered to. The codes included symbols (e.g. dashes, dots,
etc.), alphabets, numbers and other forms of notation which likely made little
sense outside of the dabbawallah community, but which the dabbawallahs
recognized and understood instantly. The movement of the dabbas was monitored
solely through these codes and client names were not utilized.
Pulling
one dabba aside, Medge explained:
The
codes "K-BO-IO-19/A/15" on top of this dabba mean the following: K
was the dabbawallah who picked it up; BO meant Borivali, the area from where
the dabba was collected; I0 referred to the Nariman Point area, the
destination; 19/N15 referred to the 19th building; A was the dabbawallah who
delivered it; and 15 was the floor of the building where the customer's
workplace was located.
Questions:
1. Comment on how
following issues may be affecting the dabbawallah system:
·
Competition
and resulting shrink in customer base
·
Lifestyle
Changes
·
Workforce
Management
2. How do the dabbawallahs
find recruits?
3. How can an incentive
system based on "equal pay for all" work?
4. Do the dabbawallahs
know their clients?
5. How does the
dabbawallah system ensure that the individual links in the delivery network do
not break down?
6. How is the Trust
dealing with the issue of growth?
7. How is the Trust coping
with dabbawallah competitors?
8. The world around you is
changing but the dabbawallahs have not changed; why not?
9. Is there a future for
Dabbawallahs?
10. Following are the
foundations for the success of the dabbawallah service
·
Low-Cost
Delivery
·
Delivery
Reliability
·
Decentralization
·
Suburban
Railway Network
·
Perceived
Equality.
Justify.
CASE II -LOGISTICS OUTSOURCING
Company Profile
Indian
Steels Limited (ISL) is a Rs. 6000 crore company established in the year 1986.
The company envisaged being a continuously growing top class company to deliver
superior quality and cost effective products for infrastructure development.
With major customers being from Public Sector Undertakings, the company has
established itself well and is said to be considering its expansion plan and
proposed merger with another steel making giant in the country.
In 1996,
owing to the cut throat competition in the emerging dynamic global markets, ISL
emphasized on both effectiveness and efficiency. The company strongly believed
in focusing on its core competency (i.e. manufacturing of steel)
and outsourcing the rest to its reliable partners. Outsourcing of its outbound
logistics was one such move in this direction. ISL out sourced its stockyards and other warehousing
services to a third party called Consignment Agent, who was
selected on an annual basis through a process of competitive bidding. The CA
was responsible for the entire distribution of the products within the
geographical limits of the allotted market segment and was paid by the company
according to the loads of transaction (measured in metric tonnes) dealt by him.
The company also believed in maintaining long-term relationships with the
suppliers as well as the buyers. It always prioritized the needs of its regular
and important customers over others and this worked out to be a win-win
strategy. The case brings out the model of outsourcing logistics the company
has adapted for the enhancement of its supply chain competency and thus
leveraging more on its core competency which led to increased productivity.
Indian
Steels Limited (ISL) is a Rs. 6000 crore company established in the' year 1986. The company envisaged being a continuously
growing top class company to deliver superior quality and cost effective products for infrastructure
development. The company performed with a mission to attain 7 million ton
liquid steel capacity through technological up-gradation, operational
efficiency arid expansion; to produce steel with international standards of
cost and quality; and to meet the aspirations of the stakeholders. The
production started in the year 1988 and initially, it manufactured Angles, Pig Irons) Beams and Wire Rods that were mainly used for
constructing roads) dams and bridges. These products were mainly supplied to
Public Sector Undertakings such as Railways, Public Works Department (PWD)
Central Public Works Department (CPWD) Rashtriya Setu Nigam Limited, Audyogik Kendra Vikas Nigam Ltd. and various foundry units. The
company had its headquarters at Raipur with three stockyards (a kind of
warehouse with a huge land to store the products).
The
company has established itself well and is said to be considering its expansion
plan and proposed merger with another steel making giant in the country. The
company was awarded ISO 9001, ISO 14001 and ISO 18001 certifications. The
temperature in the plant premises is
reportedly about 6°C lesser than that of the township, thanks to the greenery
being maintained therein.
Logistics Outsourcing
Outbound logistics which basically connects the source of supply
with the sources of demand with an objective of bridging the gap between the market
demand and capabilities of the supply sources was always a problem for companies operating in this industry.
Consisting of components like warehousing network, transportation network) inventory control system and
supporting information systems outbound logistics was always playing a key role in making the right product available at the right place, at the right time at the least possible
cost. In 1996 owing to the cut throat competition in the emerging dynamic
global markets, ISL emphasized on both effectiveness and
efficiency. The company strongly believed in focusing on its core competency (Le.
manufacturing of steel) and outsourcing the rest to its reliable partners.
Outsourcing of its outbound logistics was one such move in this direction.
Recognizing
the growing demand for its products from the big, diversified and geographicallydispersed customers, the company started
expanding the number of warehousing stockyards. From a humble beginning, the company today has 26
stockyards; most of them are outsourced. Each of the outsourced stockyards was
managed by a third party, which the company referred to as Consignment Agent (hereafter referred to as CA) in the area. The CA
was selected on an annual basis through
competitive bidding process. The performance of CA was closely monitored by a
company representative (full time
employee of ISL working in the site of CA). The CA was responsible
for the entire distribution of the products within the geographical limits of the allotted market segment and Was paid by the
company according to the loads of transaction (measured in metric tonnes) dealt
by him. Based on their sales turnover CAs were trifurcated into A, Band C
categories. The CAs with a monthly turnover of Rs. 150-200 crore fell under A
category) whereas those with Rs. 100 - 150 crore were B and less than Rs. 100
crore were C category.
In
addition to the company representative) a team of marketing division operated
in the town where, the site of CA was located. This department
was responsible or estimating the future demand, translating it into orders and
sending to the manufacturing plant. Material dispatch was done using either one
or a combination of the two modes: Rail, Road. While using rail as the mode of
transportation, the company had a choice to book a Normal Rake (a full train with about 35 wagons, each wagon with an
approximate capacity of 60 tonnes) or a Jumbo
Rake (a full train of about 52 wagons, each wagon with an approximate
capacity of 60 tonnes). At times, the company was engaging the services of the
CONCOR (Container Corporation of India) where a train of 62 to 70
wagons, each wagon with about 26 tonnes capacity was
used for transportation. Instead, if the company decided to send the material
by road, the company had a choice between Trailor (25-30 tonnes} and Truck
(15-20 tonnes). The choice of transportation mode was based on the quantity of
dispatch.
As soon as
the material was dispatched from the manufacturing plant, the respective CA
used to get a Stock Transfer Chalaan electronically
through Virtual Private Network, which
was developed by a professional software service provider. In-transit,
monitoring was generally done with the help of Indian Railways, if the mode was
Rail. Otherwise, truck/trailor drivers were contacted through mobile phone.
Transit generally took five to six days, providing time for CA to plan for
receiving materials. The CA used to utilize this time for arranging material
handling devices like heavy cranes and required labour. The material thus
unloaded was reaching the warehousing stockyard where CA was responsible for
arranging the materials as per the warehousing norms of ISL.
The
company broadly classified materials into Long
Products and Rounds. Products
falling into each category were further classified by their size, shape and
utility and the company used a distinct colour code for this purpose. Each
subcategory of material had a specific place for downloading. The company used Bin System for this purpose. While
downloading the material in stockyard, the company norms insisted that CA
arrange for providing Dunnagt Material. This
enabled the CA to store material without 1 direct contact with the land surface and thus reduced the
probability of material deterioration. Material was stored in the stockyard until an authorized representative of
the customer used to come and collect it. While dispatching material to the
customer, a Loading Slip was
generated against the Delivery Order. The
company" also believed in maintaining long-term
relationships with the suppliers as well as the buyers. It always prioritized
the needs of its regular and important customers over others and this worked
out to be a win-win strategy.
Operational
problems were majorly because of uncertainties in transportation, fluctuation
in supply of electricity and the load bearing capacity of the soil in the
stockyard. Some: more problems were encountered whenever there was a change in
CA and these were overcome by training the employees of the new CA and keeping
the old CA responsible for the: material in his stockyard for six months after
the contract as well. Observations reveal that, at times there were situations wherein CAs had to do
those things which they were not legally supposed to do (like subcontracting)
because of the pressures mounted by political leaders with selfish interests.
Despite
these problems, this model of outsourcing logistics was working out very well
for the company. The practices, which were started in the year 1996 have
sustained major changes in the environment and are being practiced even in
2006. It has enhanced the supply chain competency of the company by enabling it
leverage more on its core competency, which leads to increased productivity.
Questions:
1. Analyze the case in view of the logistics outsourcing
practices of the ISL.
2.
Discuss the importance of logistics
outsourcing with reference to supply chain management.
3.
Suggest strategies for further strengthening
the supply chain of ISL.
4.
The participants/students are expected to
have a clear understanding of Supply Chain and Logistics Management concepts.
5.
The issues involved in the case are Sales
Forecasting, Strategic Sourcing, Selection of Warehousing Service Provider,
Transportation Mode and other nuances in Logistics Management.
ATTEMPT ANY FOUR CASE
STUDY
CASE I - A CASE OF
ALPHA TELENET LIMITED
Alpha Telecom Ltd., a part of Alpha Group was
established in 1976 by its visionary Chairman and Managing Director, A. S. Verma. The company started with manufacturing of
Electronic Push Button Telephones (EPBT) and Cordless phones in 1985 in Allahabad. On July 7,
1995 Alpha Tele-Ventures Limited was incorporated. A mobile service called
'Web-Tel' was launched in Kochin, which eventually expanded its operations in
Andhra Pradesh in 1996.
Till 1994, fixed telephone services were provided by Department
of Telecommunications (DoT) which had a monopoly in this business. This was regarded as
self-defeating because DoT was a
regulator as well as a competitor. With increasing pressure for privatisation, the government agreed to give license to private operators. Finally in December 1996, the
bill of privatisation of fixed telephone services was passed. The New Telecom Policy (NTP) with its targets for
improving tele-density was an ambitious policy. The NTP planned to achieve a tele-density (number of telephones
per 100 people) of 7 by the year 2005 and 15 by the year 2010, which translated into 130 mn lines. The policy also planned an investment
of Rs. 4000 billion by the year 2010. The above factors combined with the fact that
the domestic long distance telephony was open to private players, led to
considerable demand for the company's products. But to get the tenders from Ministry of Telecommunication,
Government of India, a license fee was to be paid over a period of 15 years and
the viability of telecom projects was also affected by the guidelines that
required private operators to earmark at least 10% of their telephone lines for villages. The operating
companies did not like the idea of
having to pay for the maintenance of lines that might not be used most of the times. The license fee of Maharashtra
state was minimum at Rs.643 crores. Thus, Alpha Telenet, a pioneer in every field wanted to avail this
opportunity and started the survey for extending the services in Pune. Their
marketing survey team provided the statistics of existing customers of DoT, the
waiting list of DoT, potential of users for successive years and so on.
Alpha
Telenet Ltd. (ATL) decided to start their fixed line telephone operations in technical collaboration with Telecom Italia at Pune in Maharashtra. Initially, they received permission for
installing their exchanges covering 0.5 km. of radius which was too small with
respect to the cost involved and thus difficult to achieve lucrative returns.
After struggling for a year, they finally got permission to set up exchanges
covering 1 km. of radius. They set up their exchanges in potential areas in the
city. Another problem was that the consumer's mindset fixated was with DoT and
they were not ready to accept the services of Alpha Telenet Ltd. This was due
to opposite tariff rates for household consumers. Consumers did not rely on ATL as they were private players. ATL initially
had attracted the customers from the areas where the waiting line for DoT
connections was high. Further, they had provided the connections with wireless
CDMA receivers for only Rs. 3000 (movable within the area of 5 km radius)
though its actual cost was Rs.15,000. The connection between exchanges by optical
fibre ensured high quality of voice and data transmission, which was later to
be shifted to the conventional copper wires for consumer connections. The
company made the connection using Ring Topology stay connected even in case of
line disturbances.
They also
installed a Submarine Optical Fibre Cable to Singapore with an 8.4 Tbps
(terabits per second) capacity providing high-class worldwide connectivity. Alpha Telenet installed
the latest Digital Switches from Tiemens and other devices, which were fully compatible with the equipment of other
telecom providers in India.
The company installed a digital
Geographical Information System (GIS) for network surveillance. A 24-hr
Internal Network Management System for technical support and infrastructure maintenance
were also installed with a dedicated round-the-clock
toll-free call centre to ensure prompt services.
In 1997, Alpha Telenet Ltd. obtained a license for providing
fixed-line services in Maharashtra state circle and formed a joint venture with Behrin Telecom, Alpha BT, for providing VSAT services. On June 4, 1998
they started the first private fixed-line services launched in Pune in the Maharashtra circle and thereby ending fixed-:-line
services monopoly of DoT (now TSNL). Alpha entered into a license agreement
with DoT in 2002 to provide international long distance services in India and
became the first private telecommunications service provider. The company also
launched fixed line services in the states of Goa, Uttar Pradesh, Gujarat and Delhi.
With the
start of basic telephony services in the .state of Maharashtra,
residents of the area and others felt a great sense of breaking away from the
old and traditional government monopoly. The kind of ill-treatment of customers
and also the red-tapism and bureaucracy which prevailed earlier, was about to
end. It was observed that no private telecom company wanted to start their
operations in less profitable areas like Bihar
and other eastern states .
. The tariff plans of the TSNL and Alpha
Telenet Ltd. were opposite to each other. TSNLS tariff structure was upwards
i.e., price per unit increase with number of
calls and vice versa for Alpha Telenet. This was the beginning of the entry of
private players in the sector.
1 . Give a critical analysis of the
privatisation of telecom sector in India.
2.
Highlight the secrets of success of Alpha
Telenet Ltd. in terms of technological advancements and service~ provided.
CASE
II - GEARING· FOR GROWTH
Premier Differential Gears Pvt. Ltd. (PDGL)
was formed in the year 1991 near Noida in the state of Uttar Pradesh (India). The
company was established to cater to the evergrowing needs of the differential gear market
for cars, jeeps, trucks, and tractors. It was established under the aegis of the parent company
called Premier Gears Pvt. Ltd. which in turn was established in the year 1962
at Noida. The parent company was engaged in the manufacturing of automobile
transmission gears. With a modest start in 1961, it had never looked back and
by 2006, it became the largest manufacturer of automobile transmission gears in
the country. The parent company had employee strength of 2,500 trained and
dedicated employees and was producing a range of over 1,000 gears. Premier Gears Pvt. Ltd. was making gears for virtually every major brand of truck, car, jeep and tractor. In 2006, the group company comprised of three
firms namely, Premier Gears Pvt. Ltd. (manufacturing
Transmission gears, Gearbox assemblies, Laser marking machines, and Material handling equipments), Premier Differential Gears Pvt. Ltd. (manufacturing differential gears) and Elve Corporation
(a government recognized export house).
PDGL was
manufacturing a wide range of Crown Wheel and Pinions, Bevel Gears,
Bevel Pinions, and Spider Kit Assemblies. The installed capacity was 20,000
sets per month. PDGLs focus on quality, fast product
development and customer service had enabled it to become an OEM supplier to
many car and tractor companies in India,
the EU, and Asia. Almost 75% of the total production was exported to a number
of countries like Germany, Russia, USA,
China, Japan, South Mrica,
etc. The domestic OEM and replacement market accounted for the remaining 25% of the company's sales and in a short span of time, the company had
become one of the major players in the Indian replacement market. The use of
latest technology and comprehensive quality control systems at PDGL go a long
way to ensure that customers get exactly what they want.
PDGL was
using world class Gleason machines in its manufacturing programme. The raw
material for manufacturing gears was in the form of
forgings, which were procured from various parts of the country for
manufacturing crown wheels and pinions. These forgings were subjected to
turning followed by drilling. The drilled crowns and pinions were taken for
tapping, which were then rimmed. After this, the teeth cutting procedure was applied which was called broaching. The broached units were then heat-treated.
Heat treatment was very critical in producing gears having
short tolerance levels. To meet this end, the company had two rotary furnaces
and one state-of-the-art Continuous Gas Carburizing Furnace (CGCF) from
Aichelin ALD of Austria
to heat-treat its products. After the heat
treatment, a number of intermediate processes like short blasting, phosphating, lapping were performed which resulted into the finished
product, ready for putting company marks to avoid imitation/forgery. The
company had developed a state-of-the-art 70-watt NDYAG laser-marking machine in collaboration
with Quantum Laser (UK), which was used for marking on its produces. Laser
marking was environment-friendly and was applied without any force or contact and thus the material was not
subjected to any stress. The marked products were" manually pushed onto a conveyer for packing
and dispatching. All the above have enabled the company to meet international
standards and to produce worldclass gears with the highest performance
standards.
The
upstream portion of the supply chain at PDGL included a number of forgers located at "geographically
dispersed locations in various parts of the country. These forgers were
supplying the forgings to PDGL, which were then used in manufacturing the differential gears. All of the raw material was routed to the POGL
works through road transport and"" due
to large distances, transportation costs were a major issue in increasing the
efficiency of this upstream portion of the supply chain. The forgings were
supplied according to the drawings and dimensions set by design engineers at
the company. The company indeed tried some local suppliers to cope up with the
increasing transportation costs but the results on quality front wet satisfactory. To serve this end, the company was
planning to develop some local suppliers. It had
planned to provide them support in the areas of procuring good material for
producing forgings, procuring good quality machines and" training their workforce in the required
technical know-how. This was considered as an investment by the company to
reduce its inbound transportation costs. To meet the small lot requirements of
the forgings, the company was also contemplating to share the truckloads with
the parent company. This was feasible because of the geographical proximity of
the parent company, which was situated at a distance of less than
15 kms, the similar nature of raw material and same suppliers supplying to both
the units.
The
internal supply chain at PDGL comprised of various processing stations/lines" through which the forgings were transformed
into finished differential gears. The movement of the work-in-progress between
various stations was semi-automatic in which the workers manually placed the
goods on trolleys/carts. Even the finished units were manually placed on a
conveyer; which needed to be pushed to send the units to the packing section. There was a risk of units being damaged in this
process. To minimize this risk, the company was planning to have automatic
systems for moving the material from one place to another. It was decided to
have hydraulic lifts, cranes, electronic escalators and the likes for progression of material from forging to packing. The packing material was
stored on first floor as and when it arrived, with the help of casual laborers,
which was inefficient and also involved a: risk of some· casualty.
The
downstream portion of the supply chain at PDGL included around 10 distributors
located evenly in various parts of the country. These distributors were
supplying the products of PDGL to number of car, truck, jeep and tractor
manufacturers. This portion of the supply chain also included a large
replacement market, which accounted for almost half of the company's domestic sales. To meet its distribution needs the
company had a panel of transporters, who used to distribute the finished goods.
At times, the consignments scheduled for distributors were delayed because of
lack of full truckload. One possible solution to this problem was sharing of
truckload with the parent company. This was feasible because both the companies
shared the same distribution network. The distribution of export consignments
was through an intermediary who helped the company in exporting its products to
the US, UK, Germany, China, Italy, Turkey, Saudi Arabia, Singapore, Malaysia, Thailand, Indonesia,
and Nigeria, amongst other countries. The company's wide export range included replacement gears
for internationally renowned
automotive manufacturers like MercedesBenz, Mitsubishi, Toyota, Nissan, Clark,
Eaton, Fuller, New Process, ZP, Hino, Fuso, Tong Feng, Tata, Leyland, Massey
Ferguson, Magirus - Deutz and various others.
There was
a shortage of skilled employees. Therefore, the company has recently started
training input for all their 400
employees. These training programmes are being conducted in the organization to
enhance the skills of the employees and the duration of these programmes were
20 hours per month. On the financial front, the company is continuously moving
on the growth track showing better financial results year after year. It has
embarked on an ambitious plan to double its turnover by the end of this
financial year and to become the world's numero-uno in the automotive
gear-manufacturing segment. The current capacity utilization was at a meager
6000 sets against a total installed capacity of 20,000 sets per month.
1. Comment
on the upstream and downstream supply chain portions operating in the company.
2.
How far are the plans to improve the supply
chain efficiency in the company feasible?
3.
"Internal supply chain at the company
can be characterized by the lack of it". Comment.
CASE III - INTELLIGENT MOVEMENTS: ANYWHERE ANYTIME
Deepak Pai, an engineering graduate and a
postgraduate in management from United
States, was working in Transport Corporation
of India (TCI), the market leader in conventional transportation. He
established Speed Cargo as an express cargo distribution company after leaving
TCI. Speed Cargo, started with its head office at Hyderabad, as a small cargo specialist in 1989, upgrading itself to desk-to-desk cargo in 1992, cargo management services
in 1995 and became a public limited company when
it was listed in Bombay Stock Exchange in 1999. The company was maintaining a
strong customer base of prestigious companies like Acer, Cadilla, Sony, Panasonic, Titan, Dabur and Hitachi to name a few.
Speed Cargo Limited (SCL), a leader in the
express cargo movement pioneered in distribution and supply chain management
solutions in India.
It differentiated the concept of cargo, from conventional transport industry by
offering door pickup, door delivery, assured delivery date and containerized movement. It had a turnover of
Rs.3600 million in 2005-06. The company had a strong team of 6400 employees
with the fleet of 2000 vehicles on road and an extensive network covering
3,20,000 kilometers per day and a reach of 594 out of 602 districts in India. In
addition to this, it was having a well-structured multimodal connectivity and
6lakh square feet mechanized warehousing facility. Warehousing facilities were
comprised of the most modern storied system and material handling equipment offering very high level of operational
efficiency. The four modes of transport - Road, Air, Sea and Rail were
seamlessly integrated, enabling SCL to effortlessly reach anytime anywhere.
The international wing of SCL took care of
the SAARC countries and Asia Pacific region covering 220 countries with a
specialized India-centric perspective. The company had gone online by
connecting 90 percent of its offices to provide web-centric solutions to its
customers.
The company also offered money back guarantee
to express cargo services. The services offered were customized for corporate,
small and medium enterprises, cluster markets, wholesale markets and
individuals. The state-of-the-art technology made things
easier for the customers whose cargo could be
tracked and traced in the simplest manner, because SCL had an effective
tracking system. SCL believed that best of technology enabled best of service,
and its outlays on providing the IT edge had always resulted in innovative services
and solutions. SCL, in its day-to-day operations, used technologically advanced
equipments like Fork Lifters, Hydraulic Trucks, Hand
Trolly, Drum Trolly, Rubber Pads cushioning, Taper Rollers to move big crates,
color codes for identification to delivery what it promised.
Between 1989, when company was born, and
1995, SCL started a unique value added service called Cash-On-Delivery for the
advantage of its customers. SCL introduced Call Free Number for the first time
in the logistics industry in India.
To establish largest network in air and
to facilitate faster delivery of shipments, SCL entered into a tie-up with
Indian Airlines in 1996; The Company introduced the concept of 3rd party
logistics and later started offering complete logistics and supply chain
solutions in 1997. The courier service Suvidha
later rechristened as Zipp was launched in 1998. The company entered into a tieup with Bhutan and Maldives Postal
Departments to expand its operations to SAARC countries in 1999. The Speed Cargo Development Center
was set up at Pune in India for training of its employees in the same year.
An exclusive cargo train in association with
Indian Railways between Mumbai and
Kolkata was launched in 2001. Based on a survey conducted by Frost
and Sullivan, SCL was conferred the Voice
of Customer Award for being the best logistics company in 2003. After simplifying the internal process for faster and better communication,
and a smarter way to work, SCL set up
its corporate office at Singapore
in 2003 to create an international hub with an aim to reach out to the world.
The company introduced a mechanized racking system in the automated warehouse at Panvel (Maharastra) in 2004.
SCL was sensitive to the avenues where it
could contribute to building a better society. Displaying continuous social
responsibility, SCL associated itself with several community development
programs and contributed generously to many social causes. SCL was the first to build makeshift houses for
400 families who were affected during a massive earthquake in Bhuj district of
Gujarat in India
during January 2001. They reached the devastated village the same day to
provide food, clothes, medication and water to the affected people.
In 2003, SCL accepted to develop one of the
government schools located at Banjara Hills in Hyderabad, and built a building with basic
facilities like classrooms, staff rooms and toilets, and provided furniture for
students and staff. The housekeeping and security of the school, which was now having 1100 students, was also taken care of by the
company. After Tsunami, one of the worst natural disasters that struck South East Asia in December 2004 leaving over 10 lakh
people dead and over 4 million displaced, SCL was on the rescue scene as it
brought in food, water, clothing, medication,
a team of doctors and cooks, and provided the affected people with essential
utensils. After rehabilitating the people in Nagapattnam and Cuddalore, it took
up the development of a high school in Nagore where 500 students came in from
the Tsunami affected families. SCL also actively participated in Kargil
contributions and other rescue and rehabilitation works in India.
LOOKING AHEAD
SCL
believed that in the age of convergence, it had kept pace with time with its
infrastructure, people and technological capabilities for moving cargo to its
destination on time, by making intelligent movements in air and sea, as well as
on road and rail. The company had experience of handling wide range of
materials including confidential papers related to University examination and
sensitive goods like polio drops and life-saving medicines. In view of the strengths of its competitors such as DHL,
Safexpress and Blue Dart, the company had enhanced services with a greater
focus on cargo management and customer satisfaction with the new operations backed by better strategic planning. To achieve its aim, SCL had strategically tied-up with
Jubli Commercials, an lATA accredited freight forwarder, which started its operations as Air Cargo Agent.
The
company was confident that it was set to become 24 x 7 one-stop solution provider for all freight forwarding
services including customs clearance for international cargo. SCL having 40
percent share in express distribution business was developing a huge centralized warehouse on 22 acres of land at Nagpur in India. The centralized warehouse, which was about to be commissioned, was designed as a major hub
or express distribution center for 200 smaller
hubs as its spokes catering to the needs of its customers across India. SCL
believed that it is a concept, a vision and an idea ahead of its time,
which looked at a global perspective and was constantly reinventing itself in delivering the future
of logistics.
Questions
1.
What made SCL a leader in the logistics
industry?
2.
Discuss the strategies adopted by SCL for its
survival in the competitive scenario.
3.
Comment on the contributions of SCL to
society.
4.
What steps the company should take to
globalize its network reach?
Discuss the strategies adopted by SCL for
expansion.
CASE IV - LOGISTICS OUTSOURCING
Company Profile
Indian
Steels Limited (ISL) is a Rs. 6000 crore company established in the year 1986.
The company envisaged being a continuously growing top class company to deliver
superior quality and cost effective products for infrastructure development.
With major customers being from Public Sector Undertakings, the company has
established itself well and is said to be considering its expansion plan and
proposed merger with another steel making giant in the country.
In 1996,
owing to the cut throat competition in the emerging dynamic global markets, ISL
emphasized on both effectiveness and efficiency. The company strongly believed
in focusing on its core competency (i.e. manufacturing of steel)
and outsourcing the rest to its reliable partners. Outsourcing of its outbound
logistics was one such move in this direction. ISL out sourced its stockyards and other warehousing
services to a third party called Consignment Agent, who was
selected on an annual basis through a process of competitive bidding. The CA
was responsible for the entire distribution of the products within the
geographical limits of the allotted market segment and was paid by the company
according to the loads of transaction (measured in metric tonnes) dealt by him.
The company also believed in maintaining long-term relationships with the
suppliers as well as the buyers. It always prioritized the needs of its regular
and important customers over others and this worked out to be a win-win
strategy. The case brings out the model of outsourcing logistics the company
has adapted for the enhancement of its supply chain competency and thus
leveraging more on its core competency which led to increased productivity.
Indian
Steels Limited (ISL) is a Rs. 6000 crore company established in the' year 1986. The company envisaged being a continuously growing top class company to
deliver superior quality and cost
effective products for infrastructure development. The company performed with a
mission to attain 7 million ton liquid steel capacity through technological
up-gradation, operational efficiency arid expansion; to produce steel with
international standards of cost and quality; and to meet the aspirations of the
stakeholders. The production started in the year 1988 and initially, it
manufactured Angles, Pig Irons) Beams and Wire Rods that were
mainly used for constructing roads) dams and bridges. These products were
mainly supplied to Public Sector Undertakings such as Railways, Public Works
Department (PWD) Central Public Works Department (CPWD) Rashtriya Setu Nigam
Limited, Audyogik Kendra Vikas Nigam Ltd. and various foundry
units. The company had its headquarters at Raipur with three stockyards (a kind of
warehouse with a huge land to store the products).
The company
has established itself well and is said to be considering its expansion plan
and proposed merger with another steel making giant in the country. The company
was awarded ISO 9001, ISO 14001 and ISO 18001 certifications. The temperature
in the plant premises is reportedly about 6°C lesser than that
of the township, thanks to the greenery being maintained therein.
Logistics Outsourcing
Outbound logistics which basically connects the source of supply
with the sources of demand with an objective of bridging the gap between the
market demand and capabilities of the supply sources was always a problem for companies operating in
this industry. Consisting of components like warehousing network, transportation network) inventory control system and
supporting information systems outbound logistics was always playing a key role in making the right product available at the right place, at the right time at the least possible
cost. In 1996 owing to the cut throat competition in the emerging dynamic
global markets, ISL emphasized on both effectiveness and
efficiency. The company strongly believed in focusing on its core competency (Le.
manufacturing of steel) and outsourcing the rest to its reliable partners.
Outsourcing of its outbound logistics was one such move in this direction.
Recognizing
the growing demand for its products from the big, diversified and geographicallydispersed customers, the company started
expanding the number of warehousing stockyards. From a humble beginning, the company today has 26 stockyards;
most of them are outsourced. Each of the outsourced stockyards was managed by a
third party, which the company referred to as Consignment Agent (hereafter referred to as CA) in the area. The CA
was selected on an annual basis through
competitive bidding process. The performance of CA was closely monitored by a
company representative (full time
employee of ISL working in the site of CA). The CA was responsible
for the entire distribution of the products within the geographical limits of the allotted market segment and Was paid by the
company according to the loads of transaction (measured in metric tonnes) dealt
by him. Based on their sales turnover CAs were trifurcated into A, Band C
categories. The CAs with a monthly turnover of Rs. 150-200 crore fell under A
category) whereas those with Rs. 100 - 150 crore were B and less than Rs. 100 \ crore were C category.
In addition
to the company representative) a team of marketing division operated in the
town where, the site of CA was located. This department
was responsible or estimating the future demand, translating it into orders and
sending to the manufacturing plant. Material dispatch was done using either one
or a combination of the two modes: Rail, Road. While using rail as the mode of
transportation, the company had a choice to book a Normal Rake (a full train with about 35 wagons, each wagon with an
approximate capacity of 60 tonnes) or a Jumbo
Rake (a full train of about 52 wagons, each wagon with an approximate
capacity of 60 tonnes). At times, the company was engaging the services of the
CONCOR (Container Corporation of India) where a train of 62 to 70
wagons, each wagon with about 26 tonnes capacity was
used for transportation. Instead, if the company decided to send the material
by road, the company had a choice between Trailor (25-30 tonnes} and Truck
(15-20 tonnes). The choice of transportation mode was based on the quantity of
dispatch.
As soon as
the material was dispatched from the manufacturing plant, the respective CA
used to get a Stock Transfer Chalaan electronically
through Virtual Private Network, which
was developed by a professional software service provider. In-transit,
monitoring was generally done with the help of Indian Railways, if the mode was
Rail. Otherwise, truck/trailor drivers were contacted through mobile phone.
Transit generally took five to six days, providing time for CA to plan for
receiving materials. The CA used to utilize this time for arranging material
handling devices like heavy cranes and required labour. The material thus
unloaded was reaching the warehousing stockyard where CA was responsible for
arranging the materials as per the warehousing norms of ISL.
The
company broadly classified materials into Long
Products and Rounds. Products
falling into each category were further classified by their size, shape and
utility and the company used a distinct colour code for this purpose. Each
subcategory of material had a specific place for downloading. The company used Bin System for this purpose. While downloading
the material in stockyard, the company norms insisted that CA arrange for
providing Dunnagt Material. This
enabled the CA to store material without 1 direct contact with the land surface and thus reduced the
probability of material deterioration. Material was stored in the stockyard until an authorized representative of
the customer used to come and collect it. While dispatching material to the
customer, a Loading Slip was
generated against the Delivery Order. The
company" also believed in maintaining long-term
relationships with the suppliers as well as the buyers. It always prioritized
the needs of its regular and important customers over others and this worked
out to be a win-win strategy.
Operational
problems were majorly because of uncertainties in transportation, fluctuation in
supply of electricity and the load bearing capacity of the soil in the
stockyard. Some: more problems were encountered whenever there was a change in
CA and these were overcome by training the employees of the new CA and keeping the
old CA responsible for the: material in his stockyard for six months after the
contract as well. Observations reveal that, at times there were situations wherein CAs had to do
those things which they were not legally supposed to do (like subcontracting)
because of the pressures mounted by political leaders with selfish interests.
Despite
these problems, this model of outsourcing logistics was working out very well
for the company. The practices, which were started in the year 1996 have
sustained major changes in the environment and are being practiced even in
2006. It has enhanced the supply chain competency of the company by enabling it
leverage more on its core competency, which leads to increased productivity.
1. Analyze the case in view of the logistics
outsourcing practices of the ISL.
2.
Discuss the importance of logistics
outsourcing with reference to supply chain management.
3.
Suggest strategies for further strengthening
the supply chain of ISL.
4.
The participants/students are expected to
have a clear understanding of Supply Chain and Logistics Management concepts.
5.
The issues involved in the case are Sales
Forecasting, Strategic Sourcing, Selection of Warehousing Service Provider,
Transportation Mode and other nuances in Logistics Management.
