Nutan Mumbai Tiffin Box Suppliers Association February 1, 2014Posted by Ramnath Rangaswamy in Emerging Markets, India, Logistics, Supply Chain.
About 3 weeks back, I had the immense good fortune to listen to Mr Raghunath Megde, speak to us about customer service. Mr Raghunath Megde is the President of the Mumbai Dabbawalla Association.
It was a very humbling experience. He spoke from his heart and all the 700+ people listening to him, enjoyed his talk. We must have clapped scores of times during his 45 minute talk.
His talk got the me thinking. What was the secret ingredient that made his organization so successful? What are the lessons for us? Many articles and case studies have been written about their service. But what I have tried to do is cull out what I thought were the important points from a Logistics standpoint and what I learnt from the excellent talk.
Setting very clear targets – This is a cliché, but this organization really follows it. The goal is that all meals must be delivered between 12.30 and 13.30 hrs. It is as simple as that.
That is the only target or goal of the dabbawallas. They have no other targets. They have kept it very simple. No Employee Satisfaction Survey scores, no customer satisfaction scores, nothing.
The dabbawallas do not even pick up cellphones during this time.[ I know that many German companies do not allow their workers to use cellphones on the shop floor]
Link to a bigger mission – The delivery of meals has been linked to religion. As per the Hindu religion, there is no bigger and better good deed than feeding someone. Linking the delivery of food to a religion is very smart. In India (as I am sure in many parts of the world) work in the name of religion, is done with full dedication and sincerity. There is no debate or arguments on a goal or mission linked to religion.
Discipline – Absenteeism without notice is fined Rs 1000 (US$ 17) about 10% of his monthly salary. Not wearing a cap, which is part of the uniform, is fined Rs 1000. Discipline is very essential in logistics. A picker absent in a warehouse or delivery boy absent without notice in a courier company or a truck driver not coming on time leads to delays and logistics failures.
The discipline is required to ensures reliability of service and delivery.
Trust –The dabbawallas trust each other implicitly. The dabba (lunch box) passes through so many hands At the railway stations, the dabbawalla will handover the lunch boxes to a person wearing the cap (which is a symbol of the dabbawalla). The trust element is all pervasive. This ensures that each person in the supply chain link focusses only on his part of the job without looking over his shoulders or checking if the previous person in the supply chain is doing his/her job correctly.
Owning all elements of the supply chain- The dabbawallas have not outsourced any activity to a 3PL or 4PL. The only service they do not have control is the Indian Railways, which runs a very efficient suburban service in Mumbai. Is there a lesson here? Do 3PLs/4PLs have to be partners rather than vendors?
Backup – Every team has backups so that in case somebody is absent, another person steps in for the person. In modern organizations, there is always a focus on reducing headcount to the extent of impacting customer service. I believe that organizations should be lean, but there is an optimum number required to deliver quality service.
It was a good start to 2014 for me! Wish all of you A Great 2014!
Indian Railways and the Silk Route March 23, 2012Posted by Ramnath Rangaswamy in Emerging Markets, India, Logistics, Railways, Supply Chain.
Tags: Afghanistan, Armenia, Azerbijan, Caucasian Republics, Central Asia, Georgia, India, Iran, Kazhakstan, Krygzstan, Pakistan, Railways, Russia, Silk Route, Tajikistan, Trans-Caspian, Turkmenistan, Uzbekistan
It is very good to see Logistics being used as a tool for Realpolitik. After all Logistics started as being a branch of the Army and used for wars.
India is now seriously thinking about implementing the International North South Corridor linking Trans-Caspian Railway (Central Asian Railways) with Iran Railways and via sea to India.
This is a multi-modal transport corridor which will link India to Moscow and the Central Asian Republics (Caucasus Republics). The International North-South Corridor was mooted by Russia, Iran and India in 2000. The participating countries are Oman, Tajikistan, Kazhakistan, Turkmenistan, Georgia, Armenia, Turkey, Ukraine, Azerbijan and Syria. After that for 11 years there was very little progress – more words and talk than action. Now work has started again.
This corridor will opens a shorter and chaper trade connection to the Central Asian Republics -Armenia, Azerbijan, Georgia, Krygistan, Kazhakistan, Turkmenistan,Tajikistan, Ukraine and Uzbekistan – Russia and Turkey.
The reason for the renewed interest in the North-South Corridor is that the Iran-Pakistan-India oil pipeline seems to be a non-starter thanks to the deteriorating India Pakistan relations. So an alternate mode of transportation had to be created.
There does exist a direct route from India to Iran and onwards via Pakistan- Delhi-Amritsar- Lahore-Quetta-Tehran and onwards. Unfortunately, given our relations with Pakistan and the way the Pakistan Railways (which was run pretty effectively and efficiently) has been run to the ground, it is prudent, wise to have an alternate route to access the Caucasus. [ Given the way the politicians are playing with the Indian Railways, I hope and pray that the Indian Railways does not go the same way] .This also opens an alternate route to Afghanistan via Turkmenistan and Uzbekistan immediately.
The route to Moscow will be from the western ports in India to Bandar Abbas by ship. Then by rail to Astara on the Caspian Sea via Tehran, Qazvin,Rasht and Anzali. The railway line from Qazvin to Anzali and Astara (375kms) is being constructed by a Chinese company.
Till the railway line is constructed, the goods will go by truck or truck and train with transhipment at Qazvin. From Anzali by ship to the Russian caspian Sea Ports of Makhachakala (Petrovsk) or Astrakhan. [ Makhachakala is close to disturbed areas and security maybe a concern] . From Makhachakala or Astrakhan to Moscow via Volgograd. From Moscow, the whole of Europe is accessible by rail.
India plans to expand Chah Behar (Bandar Behesht), and build a railway line from there to connect to the Iranian Rail system. India plans to build a 900 kms railway line from Chah Bahar to Hajigak in Afghanistan. SAIL has landed a contract for coal mining in Hajigak in Bamiyan Province and this railway line (Chah Bahah – Zahedan- Kandahar – Hajigak) will help in the logistics. This railway line will be on the Standard Gauge 1435mm. Also, Iran is constructing a railway line from Mashhad to Herat via Khaf.
The route to Turkmenistan will be Chah Bahar–> Kerman–>Mashhad–>Serakhs and onward to Ashagabat (the capital) or Turkmenbashi (Krasnovodsk, on the Caspian Sea) or Charjew/Farab or Dashhowuz and onto Uzbekistan. There will be break of gauge here as Iranian Railways is on 1435mm while the restwhile CIS Railways are on 1520mm.
From Turkmenistan there is a short 10kms railway to Afghanistan; Gushgy to Touragondi, which the Soviets built to support their forces in Afghanistan.
The railway connection from Iran to Uzbekistan is via Turkmenistan – Mashhad–> Sarakhs–> Merv –>Charjou –> Bukhara.
The Uzbekistan Railways offers connections to Tashkent (capital), Bukhara and Samarkhand. In addition Uzbekistan offers connections to Tajikistan, Afghanistan, Kazhakistan, Krygistan and to Siberia/ Russian Far East.
From Uzbekistan to Tajikistan, the railway goes via Sariasya –> Dushanbe (the capital of Tajikistan). [ India has setup a humanitarian hospital in Tajikistan near Dushanbe.]
The story of railways in Afghanistan is very interesting. Here is a link to a well written account. http://www.irfca.org/docs/afghanistan.html If you are interested in latest information on Afghanistan Railways –> http://www.andrewgrantham.co.uk/
Contrary to popular notions, Afghanistan does have railway lines. There is a railway line to Afghanistan from Uzbekistan – Termez–>Galaba –> Mazar-e-Sharif. The Western Forces who have invaded and occupied Afghanistan, use the railways as their supply route, just like the Russians did when they invaded Afghanistan – Gushgy to Touragondi.
The Chinese are extending the railway line from Mazar-e-Sharif to Kabul To Jalalabad and onto Pakistan Railways.
Krygistan is connected to Uzbekistan via Kazakhstan Tashkent–> Taraz –> Bishkek.
Kazhakistan has a modern railway. There are regular train services from Moscow to Astana and Almaty. The link from Iran to Kazhakistan is via Turkmenistan and Uzbekistan.
Uzbekistan is connected to Kazhakistan, the largest of the Caucasus Republics. Astana and Almaty are the biggest cities and offer convenient connections to the huge Russian Railway System.
The Armenian Railways called for a tender for operating the Armenian Railways in 2007. RITES applied for the tender but withdrew. Finally the Russian Railways were awarded the rights to operate the Armenian Railways for 30 years with a further extension for 20 years.
In 2007 Iranian Railways signed an agreement to build a railway line Qazvin–>Resht–>Astara. This will connect Iran to Azerbijan.
There is a lot of railway development happening in the Caucasus Republics. The Silk Route which passed through the Caucasus Republics is thousands of years old and has a romantic and magical air about it. Hope the new railways developments will be able to match it’s ages old predecessor!
On an aside, for those of you who have a dream of travelling the Silk Route by train, the fabulous and fantastic website http://www.seat61.com/SilkRoute.htm#Tashkent%20-%20Samarkand%20-%20Bokhara gives all the information one can possibly want.
The Indian government has good plans to develop it’s railway links with Iran, Russia and the Caucasus Republics. I hope the plans fructify and become a reality.
As I write this, I am reminded of a dialogue of Amitabh Bachchan in the movie “Lakshya”, where he quotes a Marathi proverb which translates to;
अपना घर तो संभलता नहीं, दुनिया पर राज करने चले
One who cannot manage one’s own home should not go out o rule the world
[Those who have seen the movie will know the context in which this dialogue is spoken]
Modern Retail versus Traditional Retail – what are the differences in the logistics? January 18, 2012Posted by Ramnath Rangaswamy in Business, Consumer Goods, Emerging Markets, India, Indian Economy, Logistics, Retailing, Supply Chain.
Recently there has been a lot of news about the Retail industry in India. The news mainly revolved around whether FDI (Foreign Direct Investment) should be allowed. Last week there was news on Retailing, but of a different genre. The news was about companies which had assumed that Modern Retailing/Organized Retail will happen in India and had already started operations to use this opportunity.
Future Supply Chain Solutions has setup operations to provide Logistics Services to FMCG brands to service the Modern Retailers.
Why do Organized Retail or Modern Retail require a different distribution network as compared to the Traditional Retail? Why cannot the same distributor who services the regular stores (mom and pop stores) service the Modern Retail or Organized Retail?
To understand this, let us look at the differences in the logistics of a Traditional Retail channel and Modern Retail or Organized Trade channel
Traditional Retail: The sales person goes to the outlet, counts the inventory, explains the promotions (if any) and then suggests an order to the store owner. The store owner then agrees or modifies the order.
Modern Retail: The order would be suggested by the IT system of the Modern Retail chain. This order either would flow to the manufacturer/ LSP (Logistics Service Provider) via EDI or email or fax.
Traditional Retail: The distributor would deliver the order 1-2 days after the order was taken. Or if the model of operation is a ready stock unit [ the salesperson who takes orders travels with a van which carries the stocks] , then the stocks are delivered as soon as the order is taken – the salespersonhands over the order to be delivered to the merchandiser/ delivery boy who travels with the van. They pick the stocks from the van and deliver to the store.
Modern Retail: The delivery slots or delivery windows are fixed by manufacturer. The deliveries to the DC (Distribution Centre) or Stores have to be made within the delivery slots or delivery windows. Any miss on the delivery windows or delivery slots would lead to a penalty or/and going back to the last in the queue (your delivery will be scheduled after all deliveries for the day have been completed) or/and delivering directly to the stores.
Some Modern Retailers may require deliveries in pallets (CHEP or LOSCAM ). If the Modern Retail / Organized Channel does cross-docking, then packing would have to be done storewise [ 1 pallet per store].
In many cases since deliveries to stores has to be done in van/ trucks the deliveries may have to be done at night when there is no NO-ENTRY restriction on heavy vehicles.
In some cases deliveries are scheduled as per the category – food on a particular day, personal care (soaps, shampoos, toothpaste) on another day, staples on another day etc. If a company operates across categories, the company would have to do multiple deliveries in a week.
Traditional Retail: Standard company promotions are executed.
Modern Retail: Promotions would be partially led by the Modern Retailers. These promotions would be unique to the Modern Retailer. Any stickering or customization or manipulation that needs to be done will have to be done by the manufacturer or LSP.
Traditional Retail: A manufacturer would have a sales launch for Traditional Retailers to introduce a new product to the market. On the day the product is to be launched, the salesperson would take orders for the new product and the new product would be on the shelves.
Modern Retail: The launch of a new product in Modern Retail is more complicated. The new product launch would have to be informed to the Modern Retail months in advance. It would have to be included in the product master of the Modern Retail. The planogram would have to be modified to include the new product. In some cases, a placement fees would also have to be paid.
Traditional Retail: Once the stocks are delivered, the store owner or shop assistant arranges the stocks on the shelf or in the back room. When a customer asks for a product, the shop assistant knows where the stock is kept, gives the product to the customer.
Modern Retail: The stocks maybe taken straight to the shelf or taken to the backroom. One of the most important differences between a Traditional Store and Modern Retail store is that in a Modern Retail store the customer picks up the product from the shelf. If the product is not on the shelf, the customer assumes that it is out-of-stock. The product may actually be available in the backroom. So, one of the important logistics activity in a Modern Retail store is to replenish the shelves regularly so that the shelf is always stocked. Many stores maintain merchandisers whose job is to replenish the shelves from the backroom.
Traditional Retail: Payment is made to the stockist or distributor immediately or on the next visit of the salesperson. So, the credit period is usually equal to the time between 2 visits of the salesperson.
Modern Retail: Modern Retailers usually demand a long credit period from manufacturers and vendors. Sometimes, a Modern Retailer may ask for a special format for their invoices. They would not accept the standard invoice format of the manufacturer.
Metrics/ Scorecard Measures
Traditional Retail: Usually, Traditional channel stores do not have a formal scorecard to measure manufacturers. They have a general approach which would be regularity of coverage, time between order and delivery, and fill rates.
Modern Channel: Modern retail chains have a formal scorecard to measure manufacturers. The logistics measures would be shelf availability, inventory levels, case fill rates, on-time delivery.
Because the logistics process of Traditional Retail channel is different from the Modern Retail/ Organized Retail channel, manufacturers have a different team for the two channels. This is what the big players do. The smaller players outsource the logistics of the Modern Retail/ Organized Retail to LSPs.
Doubling India’s Exports June 11, 2011Posted by Ramnath Rangaswamy in Business, Emerging Markets, India, Indian Economy, Logistics, Railways, Supply Chain.
1 comment so far
A few weeks back the government announced that it had set a target of doubling India’s exports to $500 billion in the next three years. To achieve this, India’s exports need to grow at 26.7 per cent every year for the next 3 years.
It is good to have ambitious stretch targets. However, the question we need to ask ourselves is whether India has the infrastructure to support this doubling of exports in the next 3 years.
Bulk of our exports and imports is handled by the Ports. The ratio of exports and imports is 64:100. Our Ports through which most of the exports and imports are routed, handled 847 million MT last year- 330 million MT of exports and 517MT of imports. Being conservative, let us assume that imports remain at the current level and only exports increase by 330 million MT in the next 3 years. This means that export and imports have to grow at 11.6% and infrastructure to support exports and imports also has to grow at the same rate.
The infrastructure which has to support this doubling of exports are;
- port capacity- bulk and containers
- rail connectivity to ports from the hinterland
The port capacity in India is estimated to be 1000 million MT. Over the next 3 years port capacity is expected to increase by 265 million MT. This is a very optimistic projection based on National Maritime Development Programme (NMDP) projects or which work has at least been firmed up (though they may not yet have been approved and work not yet awarded).
So, on an optimistic note, given that India already has a port capacity of 1000 million MT and 265 million MT more would be created, it can be concluded that port capacity will not be a constraint to meet the “doubling of exports in the next 3 years” target.
The cargo has to be moved from the hinterland to the Ports. This would require road capacity and rail capacity to be increased by 330 million MT over the next 3 years.
Over the last 5 years Indian Railways has increased it’s Freight Loading by 200 million MT. Growth in rail freight traffic has been 6% CAGR over the last 5 years. Given these statistics, it is highly unlikely that the railways will have the capacity to support the doubling of exports over the next 3 years. This will impact the transportation of cargo between the hinterland and ports.
Expecting Indian Railways to increase capacity to carry an additional 330 million MT of export and import cargo in the next 3 years seems to be a very tall order. The Indian Railways will also paralelly have to increase capacity in the non import-export routes and sectors. Hence, capacity increase required from the Indian Railways is much higher.
The constraints from the railways would be (i) track capacity from port to the hinterland and (ii) shortage of wagons.
Hence, the Indian Railways is going to be a constraint in doubling the exports in the next 3 years.
Given these issues and constraints what can be done to meet the targets.
The Indian Railways is not adding railway capacity at the rate required to support India’s GDP growth, let alone support a doubling of Exports in 3 years.
The Indian Railways has a limited capacity to execute big ticket projects quickly – both from a managerial capacity and financial closure standpoint. The Indian Railways’ core competency is running trains.
All big railway construction projects were achieved by a separate SPV – Konkan Railway Corporation and Delhi Metro Rail Corporation.
The Indian Railways record in PPP has not been stellar. As per the Xl Plan, Indian Railways will get 19% of investments from Private Partnerships. Contrast this with 34% for Roads, 62% for Ports and 70% for Airports. Even in absolute terms Railways investments from Private Partnerships is higher only than Airports.
It seems that the Indian Railways is not comfortable with PPP. This could be because do not see any advantage of PPP or have not yet developed a strategy on PPP.
The Indian Railways is the Licensor + Regulator + Service Provider + Competitor, all combined into one. Why will the Indian Railways voluntarily allow it’s monopoly to be threatened by private players. One option is to have an independent regulator similar to IRDA or TRAI, which ensures a level playing field and fair competition.
The DFC has been in the offing for long, but not much progress has been made. This has to be speeded up. The Western Corridor of the DFC from Dadri to JNPT will help container traffic on the Northern hinterland – Western Ports (JNPT, Pipavav and Mundra) route.
The general who loses a battle makes but few calculations beforehand.
Thus do many calculations lead to victory, and few calculations to defeat: how much more no calculation at all!
It is by attention to this point that I can foresee who is likely to win or lose.
– Sun Tzu in the “Art of War”
Not much calculations have been done, before setting the goal of doubling exports in the next 3 years. Will India achieve it’s goal of doubling exports in the next 3 years? If Sun Tzu is to be believed, the answer is apparent.
Given the constraints of logistics exports can utmost increase by 15%-20% in the next 3 years.
Doubling in the next 3 years would require a miracle. And I see no evidence of a miracle.