Indian Steels Limited (ISL) is a Rs. 6000 crore company established in the year 1986. The company envisaged being a continuously growing
Indian Steels Limited (ISL) is a Rs. 6000 crore company established in the year 1986. The company envisaged being a continuously growing
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Supply Chain Management
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.
 |
| Indian Steels Limited (ISL) is a Rs. 6000 crore company established in the year 1986. The company envisaged being a continuously growing |
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.
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.
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