Indian Railways cuts rates by 50% for moving rice in covered wagons July 18, 2007Posted by Ramnath Rangaswamy in Indian Economy, Logistics, Supply Chain.
The price cut by the Indian Railways is a typical knee jerk reaction to recover freight volumes and help meet the traffic target for the year. It has not been well thought out and will not lead to a significant increase in business.
The Indian Railways should have first tried to understand the needs of the rice exporters and tailored their service offering to meet those needs.
What a rice exporter would be looking for in a transportation service, in order of priority;
1. Reliability of Service – The stocks to be loaded and unload as per committed schedule
For exports, it is important that the rice gets loaded on the vessel it has been scheduled for. Any delay will result in penalties, rejections and consequently huge losses. That is the reason, adherence to pick-up and delivery schedules is very important.
To get the rice export business traffic, the Indian Railways should have offered a guaranteed transit time/ lead time for the trains to Kandla and Mundra.
To implement this guaranteed transit time/ lead time, the Indian Railways would have to prioritize wagons [ BOXC], locos and path, for the rice exports.
2. Multiple handling of the consignment:
Rice loaded on BOXC wagons would have to be handled more times that rice loaded in containers. See the line diagram below for the process;
1. Factory –> 2. Loading in BOXC wagons –> 3. Unloading at Port –> 4. Stuffing in containers –> 5. Loading on vessel
Process if rice is loaded in covered BOX wagons
1. Factory –> 2. Loading in containers –> 3. Loading on vessel
Process if rice is loaded in containers
Every extra handling increases the probability of delay and contamination. Hence, the exporters would prefer to load the rice in containers.
3. Quality of wagons and vehicles- The stocks should not be damaged or contaminated in transit
Exporters have to meet strict quality norms for rice and other foodstuff. That is why the exporters use containers.
The Indian Railways would have to provide wagons of better quality for the transportation of rice. It would have to identify and prepare a few rakes for the transportation of this rice.
The MOQ [Minimum Order Quantity] of a full rake is a damper on the offering. An exporter would have to book a full rake of ~50 wagons [~2500 tonnes] to avail of the 50% discount. The export of rice, by one exporter through one port at one time is much less than that. Hence, most exporters would not be able to meet the MOQ of a full rake.
To summarize, if the Indian Railways is serious about getting the rice export business from the truckers, the Indian Railways should design a complete transport solution for the rice exporters. The whole service concept should be designed keeping in view the special needs of the rice exporters.
Price cutting alone will not help getting the rice export business from the truckers.
As a supply chain professional, my takeaway is to ensure that the transporter scorecard measures / KPIs [ Key performance Indicators] are designed to deliver my supply chain goals.
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