Note:
Solve BOTH case studies.
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
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
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
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
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
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.
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