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Nutan Mumbai Tiffin Box Suppliers Association February 1, 2014

Posted by Ramnath Rangaswamy in Emerging Markets, India, Logistics, Supply Chain.
2 comments

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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!

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Myth Buster – Diesel and Electric Locomotives November 16, 2013

Posted by Ramnath Rangaswamy in India, Indian Economy, Logistics, Railways.
6 comments

ImageAre you one of those who believe that;

Electric locomotives are less polluting than Diesel locomotives;

Electric locomotives are technically superior to Diesel locomotives;

Steam locomotives to Diesel locomotives to Electric locomotives is the natural technological progress;

Diesel locomotives deplete our foreign reserves since bulk of the diesel is imported;

If you have answered YES to any of the questions above then please read on. Many misconceptions will be cleared and clarified.

Pollution

When you see diesel locomotive hauling a train you see smoke coming out of the chimney while an electric locomotive chugs along along without any smoke. This would lead you to conclude (wrongly conclude) that diesel locomotive are polluting while electric locomotives are non-polluting.

This is similar to cleaning your house by throwing your garbage out on the road and claiming your house to be clean while complaining that the road is dirty. What does this analogy have to do with Electric locomotives and Diesel locomotives?

To compare like to like, the pollution at the power plant that produces the electricity needs to be compared to the pollution generated by the diesel locomotive.

Based on analysis, the results of the pollutants in gms/ bhp-hr is as below;

Particulate Emission SOx NOx HC CO
Diesel Locomotive 0.45 0.78 10.44 0.02 2.80
Electric Locomotive 0.51 3.38

Source: Diesel Traction – The Environmental Friendly Option ; AK Kathpal, RDSO

url: irsme.nic.in/files/dsl-kathpal.pdf

As the table above shows very clearly and obviously, an Electric locomotive is more polluting than a Diesel Locomotive.

Availability of Electricity

The Indian Railways uses about 11 billion units of electricity per year (or about 1300MW) about 1% of the electricity produced. However, given that India is short of power, by about   14,000 MW, the Indian Railways, if it had electrified only the routes that justified electric traction, could have reduced the shortage of power by about 5%.

5% may seem small but to put in perspective this could have lit up 650,000 homes.

What this electricity shortage also does is encourage use of inefficient diesel generating sets and diesel pumps.

When I say inefficient, I mean inefficient compared to a diesel locomotive on Indian Railways which is micro-processor controlled and which meets Euro 2 or CPA – 2 standards.

This in turn means more imports of crude oil which is then put to in-efficient usage in pumps and diesel generators. Had electrification been limited to the routes justifying electric traction, the electricity shortage would have been less and less number of in-efficient pumps and diesel-generating sets would have been used.

Costing

Is Electric locomotive operations cheaper than Diesel locomotive operations?

Before I answer that question, let me step back. Electric locomotives have a high capital expenditure but a low operations (or running) expense. The capital expense is high because of high initial cost for the equipment ; overhead electric catenary, sub-stations, transformers have to be constructed for electric locomotives to operate. When the traffic is high (Gross Tonne Kilo Metres, GTKM) then it makes economical sense to have electric traction as the capital cost to setup the electric equipment is divided by a larger amount of traffic and the lower running costs justify the investment.

In the Indian Railways context this threshold traffic in GTKM per year was fixed as 47 million GTKM per year. The irony is that only a small % of the electrified routes make the cut according  the criteria. In fact there are routes that have been electrified that have negative ROR!

To explain this concept, let me take an Indian example.

Diesel in India is cheaper than Petrol -why this is so and the vitiated reasons behind this is another story. But diesel cars are more expensive than petrol cars ie, capital cost is high. Maintenance costs of diesel cars is more than petrol cars. Diesel cars are more fuel efficient than petrol cars ie Operating Costs are lower. Given this data, people in India buy a diesel car only when their usage of the car is more than a certain kms/ month or kms/year similar to GTKM on Railways) which justifies a higher capital cost but lower running expenses. What would you call someone who has all this data but buys a diesel car despite not having the minimum usage to justify a diesel car.

Railways across the world which are electrified have a higher operating ratio (ratio of expenditure to earnings)  France: 44% electrified and operating ratio 184%, Italy: 59% electrified and op. ratio 200%, Sweden: 59% electrified and op. ratio 169%, Bulgaria: 63% electrified and op. ratio 325%, Austria: 59% electrified and op. ratio 205%, and Amtrack (USA) is 100% electrified with an op. ratio 146%.

Railways which use diesel traction have lower operating ratios: USA 0.9% electrified and operating ratio – 81%; Canada 0.1% electrified and op. ratio 86%, Australia 9.6% electrified and op. Ratio 89%.

An individual can be excused for making a mistake. But what about the Indian Railways  which has made such a colossal blunder at the cost of the nation.

So how has this wrong decision impacted the Indian Railways and India?

Indian Railways loses an estimated Rs 2000 Cr* (Rs 200 Billion or Euro 2 billion) every year, because of this wrong decision. This Rs 2000 Cr could have been used to reduce freight costs or improve  the railway infrastructure.

*Jal Khambata – Railway’s Electrification Mania

http://www.angelfire.com/in/jalnews/212991.txt

Also from a strategic and security standpoint, why would anyone electrify routes close to the border areas? Sub-stations and overhead wires if destroyed, are more difficult to restore.

What is the reason for this mindless electrification?

Politicians believe that getting electric traction to their constituency can be touted as progress and leveraged for votes. The contracts of maintenance of over head equipment, sub-stations is worth big money and hence there are many vested interests.

So the next time you see a train hauled by an electric locomotive and think of how clean and non-polluting it is, think of all the smoke and pollution from the power plant. And also think of all the unlighted and dark houses who have been robbed of electricity because of this mindless electrification.

Hope this has cleared some of the myths in your mind regarding Electric locomotives and Diesel locomotives.

http://irsme.nic.in/files/CTracSaxena2.pdf

http://www.angelfire.com/in/jalnews/212991.txt

http://irsme.nic.in/files/FACT_RLY_ELC.pdf

Indian Railways and the Silk Route March 23, 2012

Posted by Ramnath Rangaswamy in Emerging Markets, India, Logistics, Railways, Supply Chain.
Tags: , , , , , , , , , , , , , , , , ,
2 comments

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.

Sketch showing railway lines of India, Iran and the Central Asian Republics

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.

 Turkmenistan

 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.

 

Uzbekistan

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.

 

Railway Map of Uzbekistan

 Tajikistan

From Uzbekistan to Tajikistan, the railway goes via Sariasya –> Dushanbe (the capital of Tajikistan). [ India has setup a humanitarian hospital in Tajikistan near Dushanbe.] 

Afghanistan

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

 Krygistan is connected to Uzbekistan via Kazakhstan Tashkent–> Taraz –> Bishkek.

 Kazhakistan

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.

Armenia

 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.

Azerbijan

 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]

What will the Indian Railways Budget 2012 unveil? March 12, 2012

Posted by Ramnath Rangaswamy in India, Indian Economy, Logistics, Railways, Supply Chain.
3 comments

This is the Budget season. The Railway Budget will be presented on 14th March. As expected, the newspapers have published numerous articles about what ails Indian Railways and what needs to be done. Sam Pitroda’s report on how to modernize the Indian Railways, Dr. Anil Kakodkar’s report on safety, Indian Railways vision 2020 and of course numerous other editorials and in the newspapers.

The reason there is so much activity and buzz around the Railway Budget this year is because (i) Indian Railways financials are in a major mess and (ii) the Indian Railways is an important pillar of the Indian economy / GDP growth.

As per World Bank studies, rail transportation has an elasticity of 1.25 with GDP growth. Hence for an economy which would grow ~9%, rail traffic capacity should grow by 11%. Indian Railways growth is slightly more than half of that required to support the country’s growth. The Indian Railways will become (if it has not already) an impediment to the GDP growth of India. Ask anyone importing bulk commodities at our Ports on how much time, effort, follow-up it takes to evacuate the bulk commodities from the Port to the hinterland. Ask the power companies and the coal companies the issues they face with Indian Railways in coal transportation.

The Indian Railways is now seeking a bail out by asking the government for to pump in about Rs 100,000 Crores ( Rs 1000 billion = Euro 15 billion).

What are the root causes for this mess?

The immediate reason for this financial mess is that (i) Passenger fares have not increased for 8 years and (ii) Vl Pay Commission has increased cost of manpower without any concomitant increase in productivity or earnings.

Passenger traffic is subsidized at the cost of freight traffic. For cheap political popularity, the Railway Ministers have not been increased passenger fares for 8 years. Just for perspective, crude oil prices in 2004, when the last fare increase was done was US$ 35. Today it is now US$ 90. Petrol price in India in 2004 was Rs 35/litre and today it is Rs 60/litre. With economic liberalization, consumers nowadays have become market savvy and understand that prices will increase. An increase in line with input cost increase is logical and accepted by consumers.

The other fundamental and scary reason for the mess of the Indian Railways is that the Indian Railways does not seem to understand their own importance and role in the economic health and growth of the country. Don’t get me wrong; the officers and team of the Indian Railways are smart and bright. The problem is the organization structure, processes and leadership.

The Indian Railways is superbly efficient in operating and running trains. The whole organization from the Railway Board (Ministry of Railways) to the lowest rung in the railways is focussed on safe and punctual running of trains. That is great! But who does the strategic thinking, forward planning if everyone in the organization is going to focus on “daily operational issues”?

Because of this lack in strategic thinking, the Indian Railways has not been able to keep pace with the changing requirements of the liberalized and high growth rates of the Indian economy. The liberalized economy has thrown open many new opportunities for the Indian Railways, but it has been unable to capitalize on them.

Indian Railways share of the freight traffic has dropped from 80% in 1950-51 to 30% in 2000-2001. In any other private company a share drop of such magnitude would prod the organization into action – restructuring, new strategies, renewed focus. But the Indian Railways being a government organization plodded and muddled on “business as usual”.

As mentioned earlier, the committees have made myriad suggestions and inputs on what needs to be done for the Indian Railways to get back on track. These are laundry lists which list everything from unmanned railway crossings to zero discharge toilets. So one has to separate the chaff from the grain.

What is the immediate problem or issue the Indian Railways should focus on?

In my view the problem statement for the Indian Railways would be;

“How does the Indian Railways increase freight capacity at 10% per annum in a financially prudent and sustainable manner?”

The Golden Quadrilateral – 7 HDN (High Density Network) routes of the Indian Railways with 20% track length – carry 70% of the freight traffic. These lines are utilized at >=100% capacity. The Railway Board (Ministry of Railways) did a detailed and meticulous planning to increase the capacity on these 7 lines so as to accommodate a 10% per annum freight increase during the Xl 5-year plan (2006-2007 to 2011-2012). The cost of the capacity increasing works was ~ Rs 14,000 Cr (Euro 2 billion). The final increase in traffic during the Xl 5-year plan would be ~6% per annum.

But to meet the long term freight requirements of India, the Indian Railway will have to look at Dedicated Freight Corridors for all the 7 HDN lines. Work has already started on the Eastern and Western dedicated Freight Corridors. Work will have to soon start on the other 5 Dedicated Freight Corridors (HDNs) if the Indian Railways wishes to continue to support the growth of India.

Similarly, Port Connectivity and Coal Mine connectivity will have to be increased.

Alongside this, wagon design will have to be modified for better payload/tare ratio and track strengthened to 60kg/metre tracks.

Great plan!

But where does all the money required for this come from?

Some of the  projects – Port Connectivity and Coal Mine Connectivity – can be under PPP. These are straightforward and hence would be plausible under a PPP framework.

For the Dedicated Freight Corridors , a soft loan maybe the solution.

But some “tough” decisions will also have to be made, if the Indian Railways have to be viable.

Increase Passenger Rates ahead of CPI so that in the next 5 years the subsidy on 2nd class ordinary/unreserved comes in a band of 10%. There should be no subsidy on any other class.

Non-core activities should be hived off. The Indian Railways has a very good model and examples of having separate legal entities under its ambit – RITES  , IRCON , CONCOR , IRCTC . Non-core activities would mean coach manufacturing, loco manufacturing, catering, mineral water production….

The organization will have to be redesigned so that focus is on freight, passenger, infrastructure, rolling stock and support structures.

Let us see what the Railway Budget brings on March 14th.

To end, I append a quote from The Thirukural

To do that which ought not to be done will bring ruin,

And not to do that which ought to be done will also bring ruin.

Verse 466 Thirukural