The Mumbai dabbawallah myth

The Mumbai dabbawallahs seem to be a stuff of fantasy. Every supply chain conference and training seems to be incomplete without a mention of their supposedly fantastic performance. Their par six sigma performance is a dream achievement for every supply chain professional. They have seemed to have achieved an iconic level of excellence with 'uneducated' operators and no technology.

Let me make my position clear. Yes, the dabbawallahs have surely achieved operations excellence. But, they have been able to do so because of some benign business conditions. Most other business are not blessed with the simple and stable pattern existing in the dabbawallahs business. Thus the dabbawallahs are able to excel in Operations without strategy, technology or any type of documented processes.

The same dabbawallah visits the same houses every day at the same fixed time. He collects the lunch box (dabba) and relays it through the same train to the same office at the exact same address. The dimensions of the products are also more or less the same. This 'same' based operation continues every single day. The only variation is that a customer may not have a lunch to deliver on some days. No business enjoys such luxury of stability.

The arrival of customers, the time taken to serve the customers and the type of service or products demanded by the customers all vary in 'normal' businesses. Without variation, or with low variation, business is easier to plan. With stable conditions a business can easily avoid all excess inventory, excess resources and product stock outs.

Let us assume that a beauty salon has exactly one customer coming every ten minutes for exactly the same style of hair treatment and that the treatment takes exactly 30 minutes. In this case the salon can easily employ a staff of 3 people and deliver excellent customer service with very high level of resource utilisation - leading to six sigma operations with high profits. 

An average FMCG firm would have hundreds of SKUs for customers to randomly choose from. The distribution network with multiple independent profit making entities would also have their own buying pattern and behaviour. And, of course, the customers have no compulsion to order in a stable pattern. Thus these businesses are considerably more difficult. The dabbawallahs do the same thing every day. Thus they can easily work from memory. Since businesses have a high number of variables, they need the support of technology to make decisions.

The dabbalwallahs would be very praiseworthy if they were picking up lunch from different houses every day as per some random pattern and also if the delivery addresses were different. To add to the fun it would be wonderful to have the trains running at varying time tables. What the dabbawallahs have achieved is good but nothing incredible. Their model of operation may be a benchmark for abnormal conditions of stability, but is absolutely useless in normal business conditions.

The issue of low truck speeds in India

It is very well known that the average speed of trucks in India is only around 20 kmph. There are estimates of a loss of Rs. 60,000 crores because of this. The Global average speed is said to be 60 - 80 kmph. These numbers point to a significant cost reduction opportunity in logistics.

The toll plazas, checking points and the poor road conditions are the familiar culprits for this ailment of low speed. Firms have been pointing fingers at the government and are painting a picture of them being in a helpless position. However the frequent truck breakdowns, vehicle overloading and poor driving discipline are also major causes of this low speed. These factors can easily be regulated and are in complete control of the firms. 

A two lane road (with one lane for each side) with all vehicles moving in an exact straight line can easily have vehicles travel at a very high inform speed. There are many assumptions in this statement however. The first assumption is that all vehicles are moving at a uniform speed. Because of over loading and also poorly maintained vehicles the speed of a very few vehicles is at around 20 kmph. Especially in cases of two lane highways such vehicles can easily slow down all the other vehicles. Given that only about 14% of the national highways have 4 or more than 4 lanes, this problem affects more than 85% of the Indian National highways.

In most cases the truck drivers are also least likely to follow the discipline of lanes. For four lane roads (with two lanes for each side), if all the slow vehicles could drive in one lane, the other lane could accommodate fast moving vehicles. Because the truck drivers choose to use the lanes that they deem fit at the spur of the moment, the entire highway network is slowed down.

Frequent breakdowns are also a major cause in slowing down the vehicle movements. For various reasons we have had poor maintenance management in professional as well as the owner driven vehicles. The high average age of vehicles (debated to be around 12 - 15 years) is also partly to be blamed for the high rate of break downs. Like the issue of a slow moving vehicle mentioned above, a vehicle breakdown would also cause a reduction in speed for all traffic on that route.

The altruistic answer to this problem would be for all firms to pay attention to vehicle maintenance and driver training and also ensure that all instances of overloading are avoided.  Easier said than done. Low margins in business are forcing logistics firms to minimise the immediate expenses on maintenance also to resort to over loading and such tactics. It would seem that any firm that stays 'honest' would obviously not be able to survive. The honesty and survival issue are topics for another blog.

The main point here is to get the industry to work on the same set of rules that minimise road disruptions and thus lead to high overall speeds. Such industry wide change can only come by forcing the application of the relevant laws in earnest. Instead of lobbying for easier rules, Organised firms should in fact push for strong rules and strict application. Given their expenses, it would be close to impossible for single truck owners to survive without overloading. Such changes would easily throw the unorganised players out of business and allow the organised players to expand their business footprint. That such strict rule implementation could also improve vehicle speed and thus profits would of course be an extra added advantage 
 

Vendor Capacity Planning

Boeing has decided to its capacity to produce the super successful Boeing 737 from the current 34 planes a month to 35 planes a month in early 2012. Read the article here:
http://www.dailymarkets.com/stocks/2010/06/16/boeing-boosts-737-production/

It may seem surprising that a 3% hike in capacity (from 34 to 35 planes per month) should take more and 18 months. Unfortunately this scenario exists in many industries. Even though significant opportunities exist, firms are unable to ramp up capacity fast enough to take advantage. In some cases, the demand piles on in the form of backlog. However, in many cases customers gravitate towards less deserving competitors and the demand is lost.

The issue in most cases is that firms ignore to plan the capacities of their vendors. Making a product will need all the items as per the Bill of Materials (BOM). A constraint in even one single BOM component will limit the expansions. The problem here could be as small as water availability at a key vendor or in some cases the disposition of the vendor to expand the business.

A key component in supply chain planning would be to monitor and keep track of the capacity on the supply side. It is necessary for firms to ensure that all the necessary vendors build enough capacity and are able to ensure the necessary supply. The OEM needs to take the lead time to build capacity at its vendors in consideration. Only then can the real increase in output happen.