Incentive Program for Transportation and Logistics Industry
Content
Incentive Program for Transportation And Logistics Industry
Submitted in partial fulfilment of the requirements for Master of Management Studies
(M.M.S)
(2012-2014)
Under the guidance of Prof. P.G. Kane
SUBMITTED BY
Name: Niket Naik Roll No: M-12-37 Batch: 2012 - 2014
IES Management College and Research Centre, Bandra, Mumbai
IES Management College and Research Centre Bandra, Mumbai
MAY – JUNE 2013
Student’s Declaration
I hereby declare that this report, submitted in partial fulfilment of the requirement for the award for the Master of Management Studies, to IES Management College and Research Centre is my original work and not used anywhere for award of any degree or diploma or fellowship or for similar titles or prizes.
I further certify that without any objection or condition subject to the permission of the company where I did my summer project, I grant the rights to IES Management College and Research Centre to publish any part of the project if they deem fit in journals/Magazines and newspapers etc. without my permission.
Place
: Mumbai
Date
: 25-07-2013
-------------------------------Signature
Name
Class
: Niket Naik
: MMS – II
Roll No. : M-12-37
Certificate from the company
This is to certify that the dissertation submitted in partial fulfillment for the award of Master of Management Studies of IES Management College and Research Centre is a result of the bonafide research work carried out by Mr. Niket Naik under my supervision and guidance. No part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any journals/Magazines.
Date:
25-07-2013
Industry guide Signature of the Industry Guide: ______________ Name of Industry Guide: Mr Jayesh Patil Company: Future Supply Chain
Place: Mumbai
Designation: General Manager
Certificate from the Faculty Guide
This is to certify that the dissertation submitted in partial fulfillment for the award of Master of Management Studies of IES Management College and Research Centre is a result of the bonafide research work carried out by Mr. Niket Naik under my supervision and guidance. No part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any journals/Magazines.
Date:
25-07-2013
Faculty guide Signature of the Faculty Guide: ______________
Name of Faculty Guide: Prof. P.G. Kane Place: Mumbai IES Management College and Research Centre
Acknowledgement
On the very outset of this report, I express my sincere thanks to my project guide, Mr Jayesh Patil, General Manager, Express Logistics, Future Supply Chains, for guiding me right form the inception till the successful completion of the project. I sincerely acknowledge him for extending his valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he has provided to me with all stages of this project.
I am ineffably indebted to Mr Bhushan Watghare and Mr Yogesh Ganjewar for their conscientious guidance and encouragement to accomplish this assignment. I am extremely thankful and pay my gratitude to my faculty guide Prof. P.G. Kane for his valuable guidance and support on completion of this project in its presently. I would also like to thank Miss Shalini Bodra, HR Department, for her help and cooperation throughout our project. I extend my gratitude to Indian Education Society’s Management College and Research Centre for giving me this opportunity.
Last but not least gratitude goes to all of my friends and family members who directly or indirectly helped me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You (Niket Naik)
Table of contents
Page No.
CHAPTER – I
:
Executive Summary (Max-2-3 pages) Introduction to the Industry Introduction to the Company Introduction to the Project
1
3 6 8
CHAPTER –II
:
Objectives Methodology Sampling Design and Sample Size Scope and Limitations
28 29 30 37
CHAPTER – III
:
Analysis & Findings (Only graphs)
38
CHAPTER – IV
:
Conclusions Recommendations
43 43
ANNEXURES
:
Questionnaire Tables
44 44
References and Bibliography
46
LIST OF FIGURES, TABLES, GRAPHS SR NO 1 2 3 4 5 6 7 8 FIGURES NMC CONTROL ROOM WAR ROOM DASHBOARD VTS DEVICE CURRENT TIME REPORT TRIP REPORT VEHICLE MOVEMENT TRACKING DRIVER REGISTRATION FORM SCORE CARD PAGE NO 13 14 15 16 17 18 24 25
SR NO 1 2 3 4
TABLES ROUTEWISE CALCULATION OF INCENTIVES QUARTERLY INCENTIVES AFTER PENALTY/DEPS PER TRIP BASIS (A) PER TRIP BASIS (B)
PAGE NO 32 33 35 35
SR NO 1 2 3 4 5 6 7 8 9 10 11 12
GRAPHS EXISTING SITUATION HALTS TRAFFIC ROAD CONDITIONS DELAYS AT CHECKPOST DELAYS IN PAYMENT FROM VENDORS CRITICAL REGION VEHICLE BREAKDOWN POLITICAL ISSUES REST DELAYS IN DEPARTING FROM ORIGIN HUB DELAYS IN REPORTING AFTER REACHING HUB
PAGE NO 19 38 38 39 39 40 40 41 41 42 42 42
Chapter 1 1.1 Executive summary Logistics is an industry in which efficiency of a company depends on whether they deliver goods or consignments of their partners or clients on time. In present conditions this is a challenge especially in countries like India where there are issues regarding poor infrastructure. Delivering goods on time largely depend on vendors who take up contracts. But the consignments have to be eventually transported by goods carriers. Hence the drivers of the carriers need to be efficient and punctual. Providing incentives to drivers motivate drivers to deliver goods on time. Considering all these aspects a driver incentive program is designed which aims at creating a model to provide incentives to drivers if they deliver goods on time. To develop this model the existing situation was studied (This included operations related to loading and unloading of consignment and various other operations at their Hub such as PTL technology and TMS systems as well as functioning of NMC (Network Monitoring Cell)) and root causes of delay were found out. Some of these reasons or causes were controllable while some were not. To analyse and support these causes, a questionnaire was designed and a survey was conducted consisting of feedback from drivers. The results of the survey were analysed and the approach towards designing this model was finalized. It was observed that delay in on time arrivals was related to operational parameters like route distance, transit time etc. hence the final incentive was calculated based on these parameters. Some other factors like Damages, Excess, Pilferage, Shorts or DEPS also had to be considered. Thus to create this incentive model all the 150 plus transit routes were studied and incentives were calculated. The format was presented in an excel sheet.
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There were three main approaches 1. Flat rates 2. Based on distance travelled 3. Scale based A second alternative was developing a model based on driver’s performance irrespective of their routes or distance travelled. This model was on motivational factors. So a driver incentivizing model called Inam was proposed. There were three stages according to this model 1. Registration 2. Evaluation 3. Appraisal In registration drivers had to register every month. This helped in generating a driver database. In evaluation drivers were evaluated on the basis of on ratio of time arrivals to total arrivals as well as material handling. In appraisal a grade will be given to drivers and incentive will be awarded based on that particular grade. Some other forms of appraisal such as awarding trophy to the best performer or providing some tangible benefits will be considered. The last stage in this project was to calculate the estimated cost to company, how to roll out this scheme and its impact on the existing situation. and suggest some recommendations related to the process.
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1.2 Introduction to Industry 1.2.1 Logistics Logistics is the management of the flow of resources between the point of origin and the point of consumption in order to meet some requirements, for example, of customers or corporations. The resources managed in logistics can include physical items, such as food, materials, equipment, liquids, and staff, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modelled, analysed, visualized, and optimized by dedicated simulation software. The minimization of the use of resources is a common motivation. According to the Council of Logistics Management, logistics includes the integrated planning, control, realization, and monitoring of all internal and network-wide material, part, and product flow, including the necessary information flow, in industrial and trading companies along the complete value-added chain (and product life cycle) for the purpose of conforming to customer requirements. Logistics is the process of planning, implementing, and controlling the effective and efficient flow of goods and services from the point of origin to the point of consumption. Logistics management Logistics management is the part of supply chain management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements. A professional working in the field of logistics management is called a logistician. Logistics is divided into four major categories 1. Materials management 2. Channel management 3. Distribution (or physical distribution) 4. Supply-chain management
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Industry Snapshot
The Indian Logistics Industry is estimated at US$ 125 billion in 2010 Generated employment for 45 million people The industry is expected to grow annually at the rate of 15- 20 per cent, reaching revenues of approximately $ 385bn by 2015.
Highly Unorganized with organized sector responsible only for 6% Market share of organised logistics players is also expected to double to approximately 12 per cent by 2015
The size of the 3PL industry is estimated to be~US$1.5 bn in FY11 (1% of logistics cost).
The share of 3PL services is expected to increase from 6% in FY06 to 13% in FY11, at a CAGR of 25%
Logistics costs are 10-20% of GDP Indian Infrastructure is rated 54th among the 59 countries -- Road : 56/59, Rail: 25/59, Seaport: 51/59, Airport: 40/59
Several factors helped the growth of logistics industry in India over the decade that includes changing tax system, rapid growth in industries such as automobile, pharmaceuticals, FMCG and retail. However, major sectors that are investing huge amounts in logistics industry are aviation, metal & mining and consumer durables. With increasing competition and cost, focus on outsourcing, entry of foreign players is having positive impact on the industry. Three major contributors for the growth of the logistic industry are emergence of organized retail, increase in foreign trade and India becoming soon the manufacturing hub. As per the World Bank’s Logistics Performance Index 2010, India is placed at 47th position out of 155 countries.
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1.2.2 Supply chain management Supply chain management (SCM) is the management of an interconnected or interlinked network, channel and node businesses involved in the provision of product and service packages required by the end customers in a supply chain. Supply chain management spans the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. It is also defined as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally." SCM draws heavily from the areas of operations management, logistics, procurement, and information technology, and strives for an integrated approach. Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and towards the end consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing managerial control of daily logistics operations. Less control and more supply chain partners led to the creation of the concept of supply chain management. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In recent decades, globalization, outsourcing, and information technology have enabled many organizations to successfully operate collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities.
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1.3 introduction to company Future supply chain (FSC) FSC is India's first fully integrated and IT enabled end- to- end Supply Chain and Logistics company in India that delivers the shortest Time- to- Market and the lowest Cost- toMarket. FSC has been a pioneer and leader in modernising logistics and supply chain in India. FSC Supply Chain Solutions has established capabilities to study customer's supply chain processes and re-engineer, build & implement customised Supply Chain Solutions through scientific Supply Chain Management. Vision and mission To increase the revenues and profitability of our customers by lowering the ‘Time- toMarket’ and ‘Cost- to- Market’ through our integrated SCM solutions (SC Design, Movement, Storage and Inventory Management). FSC Supply Chain Services include FSC Contract Logistics, FSC Express Logistics and FSC International Logistics. FSC Express Logistics
Express Logistics is an integrated time- definite movement solutions catering to First Mile, Long Haul, Intermediate and Last Mile delivery across India
FSC Express Logistics has proven expertise in Network Modelling and Design, Route Planning and Optimisation, Load Optimisation and Vehicle Re-engineering. FSC Express Logistics has been India’s first service provider to successfully implement Vehicle Tracking System. It enables customers to view the real time location of their consignments online on the India map. FSC Express Logistics partners with its customers to provide effective solutions which enable customers to manage variability and reduce uncertainty in their logistics and supply chain; thereby enabling them to effectively reduce their Time- to- Market and Cost- to-
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Market. This has been achieved by fully integrating Express Logistics services with Technology, Automation, Infrastructure, People, Processes, Knowhow and Network. FSC contract logistics Integrated state- of- the- art Warehousing and Distribution services is a core competency of FSC Contract Logistics. Key Competencies 1. Integration of Infrastructure, Technology, Automation, People, Processes, Knowhow and Expertise leading to higher Fill- rates and therefore greater Profitability 2. Ability to manage large Distribution Centres and Scale- up at short notice Extremely high Throughput Handling capabilities 3. Pioneers in Indianised and Indigenised implementation of global best practices 4. Integrated with a Robust Distribution and Last Mile fulfilment Network providing end- to- end solutions. FSC international logistics FSC International is the Import Export logistics services. FSC International Features and Benefits 1. Freight Forwarding & Customs Clearance Services 2. Import and Export across South East (by Air and Ocean) to and from India Through a network of Select Agents 3. Strong Relationships with Shipping Lines and Container Freight Stations FSC brand distribution FSC Brand Distribution Services Ltd. was started about 2 years ago. It is a 100% wholly owned subsidiary of Future Supply Chains. FSC BDS (FSC Brand Distribution) is a pioneering effort into organised distribution of FMCG brands to Modern Trade at a pan India level.
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1.4 Introduction to the project Driver Incentive Program A. overview 1. Currently no drivers are being paid for their performance in terms of transit times they achieve per route. 2. Incentivizing model to distribute on time performance benefits to these drivers 3. Various parameters are to be analysed such as route distance, route transit times, actual transits, DEPS etc. 4. Weightage scale to be devised accordingly B. results expected 1. Design and launch of incentivizing model
Critical success factors 1. Identification of critical paths and transit time required. 2. Development of a measurement scale 3. Involvement of drivers
Project strategy 1. To study various routes, their transit times and the distance to be covered. 2. To collect inputs from drivers and other employees associated with express logistics. 3. To develop the incentivizing Model such that the cost to be incurred is considered and check its practicability.
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approach Existing arrival departure situation
Defining root cause for the situation
Finding probable solution
Knowing driver’s expectation
Designing basic driver incentive program
Checking cost impact and practicability
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1.4.1 Hub/Branch Operations and existing situation
A] Hub/Branch Process The following is an overview of Hub and Branch Operations 1. Consignment coming in to HUB Unloading the Consignment: 1. Check the Manifest and unload the Consignment as per the CN number and lot. 2. Checking is done manually. 3. Supervisors need to ensure the proper Consignment unloading in presence of security officer. 4. If any DEPS found note it down on Manifest and click photograph. 5. Put the unloaded Consignment at the defined section at hub. 6. Give copy of Manifest to security for the entry.
Entry in transport management system (TMS): 1. The hub/branch which sends Consignment to concern hub put the details in TMS. 2. So the receiving branch has all the details of that particular vehicle arriving at the hub. 3. Once vehicle arrives at hub administrator need to put an entry in the TMS about arrival of vehicle and rest of the details get imported.
Damages, Excess, Pilferage, Shortage (DEPS) Registration: 1. Register the DEPS and categorize it in TMS. 2. In case of shortage, send mail to previous branch/hub. 3. In case of pilferage, coordinate with vigilance team.
DEPS Closing: 1. A report is circulated every month which accounts the DEPS in the previous month. 2. Against the POD the DEPS is closed, it means if customer has put the remark that goods have received in proper condition then only the DEPS are closed on TMS
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2. Consignment OUT from Hub Receiving from Branch: 1. Consignment moves from branch to concern hub. 2. Branch gives details about the LR (Lorry Receipt) to hub. 3. At hub the Consignment is separated as per the delivery location.
TMS Process: 1. Loading sheet is prepared. 2. Based on the above loading sheet final loading sheet is prepared which is free from the DEPS. 3. After the final loading sheet the Manifest is prepared and finally VHC (Vehicle Hire Contract) is prepared. 4. A single VHC contains multiple Manifests. 5. A single manifest contains multiple CN numbers.
Vehicle Loading: 1. As per the loading sheet and manifest the vehicle is loaded. 2. Count of Consignment is done manually. 3. It is checked against the manifest. 4. Supervisors need to ensure the proper Consignment loading in presence of security officer.
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Branch Process
Consignment IN to Branch: 1. PDA collects Consignment and delivers it to branch along with LR sheet. 2. At branch the Consignment is manually counted and checked against the LR sheet. 3. LR sheet is handover to the administration department for entry to the TMS.
TMS Process: 1. Consignment details are entered in TMS as per the LR/CN number. 2. It is passed then to concern Hub.
Consignment OUT from Branch: 1. Consignment to be moved out for delivery is separated as per the location. 2. Entry of the CN number of that Consignment is put in TMS. 3. DRS (Delivery RUN sheet) prepared and handover it to PDA for delivery.
Data entry Operation: 1. On Consignment delivery the POD are collected from PDA. 2. As per the LR/CN number the information is entered in TMS. 3. POD are scanned and saved for documentation. 4. POD status (Good/Bad) is entered in TMS. 5. A report generated sent to HO.
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B] Study of Network Monitoring Cell (NMC) System: Figure 1 – NMC Control / War Room
Due to importance of Transit Time, continuous monitoring of all the vehicles is necessary for time-period of 24*7. This is done with the help of NMC (Network Monitoring Cell) system, which shows the updated status of the vehicles every 3 minutes. FSCS has purchased this system from M/s Novire Technologies: Leader in Asset Tracking and Management. Along with generating various reports such as Current Status Report, this system also sends alerts in case of diversion from scheduled route, crossing safety speed limit etc. Currently there are about 110 vehicles on 65 different routes across nation. The vehicle tracking is done with the help of GPS and assuming the geo-fencing of hubs & branches up to range of 1 km. Therefore any vehicle within range of 1 km from hub / branch would be reflected on map as to be standing inside branch / hub. NMC System controller of FSCS has the access to all the vehicles across nation whereas the vendors have the access to information regarding their respective vehicles.
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Different colors are used for the vehicles depending upon their status as mentioned below: 1. Red: For the vehicles whose data hasn’t been received for about more than 2 hours 2. Brown: For the vehicles whose ETA (Expected Time of Arrival) has been delayed by more than 5 hours 3. Orange: For the vehicles whose ETA (Expected Time of Arrival) has been delayed by more than 3 hours but less than 5 hours 4. Black: For vehicles running as per ETA
Figure 2 – War Room Dashboard
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Besides tracking the vehicle movements, the scope of work of NMC system controller also involves follow-up with vendors, drivers, touching points, branches & hubs for verification of system data and delivery expedition.
The operation cycle of technology used in NMC system is as below:
Satellite <-> Vehicle <-> GPRS -> Novire Control Centre -> Computer at NMC Room A GPS tracking device is installed in transporter’s vehicle and records the coordinates. The tracking device has a built in capability to send messages over the GSM network to servers which in turn use the same data to show on a map. Customer simply needs to login to Novire’s website with unique username and password to locate their vehicle. Figure 3 – VTS Device
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Figure 4 – Current Time Report
Some of the salient features of this tracking service are: 1. Maintaining 24 * 7 back office support center 2. Ability to analyze data and develop specific MIS reports 3. Ability to customize hardware / applications / report
NMC System generates various reports for different objectives. Some of the reports are as mentioned below:
1) VTS Reports: They include the analysis of completed trips. Various reports under this category are: 1. Zone Performance Report 2. Hub Performance Report
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3. Vendor Performance Report 4. Exception Report 5. Trip Report (For completed trips) 6. War Room Tabular (For ongoing trips) Figure 5 – Trip Report
1) DMRV Report: It serves for the following: 1. Analysis of completed trips 2. Register remarks in MIS 3. Escalation to daily hub operation and management 2) Expected Arrival Report: It’s done to
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1. Monitor the vehicles in transit 2. Check whether the vehicle is on time or not
In short, the first & foremost objective of NMC system is to monitor vehicles through a central location to ensure on time arrival and departure of vehicles. Hence it’s also called as ‘Express Control Room’. Figure 6 – vehicle movement tracking
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Existing arrival situation The ‘on time’ arrival for express logistics in FSC stands at 37% on a pan India level. One of the reasons for less ‘on time’ arrivals is time lag which is caused while delivering goods. This time lag occurs partially due to delay in hub operations and partially due to delay in transportation. This delay in transportation can be addressed through a driver incentive program which motivates drivers to deliver goods on time. Graph 1- Existing Arrival Solution
Defining root cause There are ten major causes of delay. Some of them are due to genuine reasons while some of them can be converted into straight line improvement. There causes are mentioned in the project scope and are classified as follows.
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Causes of delay
can be converted into straight line improvement
genuine reasons
1. traffic jam 2. halts 3. delays at checkpost 4. fuel consumption 5. speed limitations 6. delay in getting advance bhatta
1. road conditions 2. no entry zones 3. political issues 4. vehicle breakdown
Finding probable solution The causes mentioned above which can be converted into straight line improvement can be solved through providing incentives to drivers. The solution to all these causes except fuel consumption is time management on the part of drivers. Drivers can manage their fuel expenses through additional expenses provided to them in the form of incentives. Driver’s expectations: To know driver’s expectations a questionnaire has been designed to get feedback from drivers. The questions mentioned in this questionnaire are related to the causes of delay which could be solved by providing incentives.
Analysis of data obtained by conducting the survey
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1. How many halts do you take on average? Drivers are taking more halts than required even on shorter routes. If incentive is provided then the number of halts can be reduced and time can be saved. 2. Do you always get affected by traffic? The intensity of traffic varies depending on route. The more the route distance the more is the effect of traffic on delivery. 3. How are the road conditions on your route? Some drivers say roads are good and a few say they are excellent. These drivers can improve on their transit time by focusing on other areas of delays. 4. How long do you wait at the check post? Most of the drivers spend more than 1 hour at check post. If incentive is provided they can push for speedy clearance at check post. 5. Do you get late in getting advance payment from vendors? Majority say there are no issues related to payment from vendors and advance payment is not an issue. 6. Is there any critical region on your route? Almost all routes have critical region. On time arrivals depend on how drivers overcome these regions. 7. Is vehicle breakdown a cause of late delivery? This point was to check whether there are any problems from vehicles provided to vendors. Majority say no.
8. If there are political issues do they affect your transport?
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Only those drivers who travel towards the east or those who have had past experience said yes 9. Are you getting enough rest before travelling? Drivers get enough rest before travelling 10. Do you get late while departing from origin hub? This point was to check whether there were any delays due to hub operations Although drivers have said that there are delays, there are no further delays from their side. 11. How long do you take to report at hub/branch after entering the premises? Drivers generally take more than 1 hour to report after they enter the premises This delay can be reduced. Based on the survey conducted the following can be interpreted Causes of delay Can be solved through incentives 1. halts 2. traffic 3. delays at check post 4. delays in advance payment 5. delay in departing from hub 6. delay in reporting at the premises Cannot be solved through incentives 1. road conditions 2. vehicle break down 3. political issues 4. rest 5. critical region
Most of the causes which can be solved through incentives depend on operational parameters like route distance. Hence approach 1 is based on operational parameters. Incentives can also be given based on driver’s performance irrespective of their routes.
1.4.2 Inam … a driver incentive scheme
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With an intention to develop a competition among drivers, a second version of driver incentive program is proposed. This scheme will be implemented on a monthly basis. Drivers operating on line haul as well as feeder routes are eligible for this scheme. Steps
Registration
Evaluation
Appraisal
Stage 1: Registration Each driver has to first register to be eligible for this scheme. Registration will be done in a team of two. The registration period will be 3 weeks. Since drivers are not permanent, registration will help generate a temporary database. If in between a driver backs out then his team mate will be allowed to work with a new team mate. Drivers who fail to register will not be eligible for this scheme. Registrations will take place at all the hubs. Registration of drivers will be done at particular hub depending on vendor controlling location. An individual employee can look after the registration and evaluation as an administrative staff. During registration a unique registration number will be given to the team of drivers. (Example: BWKL0001 will be a code given to the first team operating between Bhiwandi and Kolkata). In case of change of vehicle during a month, the driver has to mention it to the administrative staff and get it approved. The following is an example of Driver Registration Form. Figure 7- Driver Registration Form:
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INAM……a driver incentive scheme
Driver Registration form Registration no: Route: Hub: __________________ __________________ __________________ Vendor name: Vendor code: Vehicle no: __________________ __________________ __________________
Personal Details Driver 1
Photo
Name:
_______________________________________________________________________
Address:
_______________________________________________________________________ _______________________________________________________________________
Driving Liscence no: __________________________
Contact no: Age : Sign:
__________________________ ____ __________________
Stage 2: Evaluation
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This scheme will run on monthly basis. Points will be given to drivers based on the following disciplines On time arrival On time arrivals can be calculated depending on ratio of on time arrivals to trips completed and equivalent score will be given out of 25. Trips which are not completed will not be considered since the reasons for incomplete trips can be due to unavoidable circumstances. Similarly on time arrivals for the return trip can be calculated. The following is an example of a score card to be given to drivers.
Registration no:
BWKL0001 ON TIME ARRIVALS Bhiwandi Kolkata On time arrivals Trips completed 9 12 Kolkata On time 10 Grade TOTAL Bhiwandi Trips completed 12
Vehicle no Month Score 19
WB11B5150 Jan Out of 25
Score 21
Out of 25
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Figure 7- scorecard
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The final scorecard can be as mentioned above In case of a tie then the following order will be considered ‘On time arrivals’>’route distance’
Stage 3: Appraisal
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The final score of driver’s performance will be calculated at the end of the every month and grades will be given to drivers. Depending on their grades the following rewards will be given to the teams. Flat rates:
Grade A+ A B C
Reward Felicitation + cash prize Felicitation + cash prize Cash prize Cash prize
Amount 5000 3000 1500 750
Variable rates: An incentive of Rs 50 can be provided per point earned. Therefore for example if a driver earns 50 points then an incentive of 50*50=2500 will be awarded to him. Quarterly incentive: Each driver will be given bonus score depending on grade every month. A table for bonus is as given below. Grade A+ A B C Bonus Points 20 15 10 5
Bonus points given per month will be complied on a quarterly basis and incentive will be given @ RS 50 per point.
Driver of the month
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The team of drivers who earns a grade A+ will be felicitated by giving a trophy and their photo will be printed on pamphlets distributed to drivers along with other documents while visiting hubs and branches all over India. They will be known as drivers of the month. The team which gets grade A will be felicitated in the same way. The teams from grade B will be awarded a cash prize of Rs 1500 and remaining teams will be awarded a cash prize of Rs 750.
Highlights 1. Registration will be done every time before start of the contest. Since drivers keep on changing, it can help in keeping a record of drivers working at present. 2. Each and every driver irrespective of their grade will be given incentive. No driver will go empty handed. This will help motivate the drivers to do well and create a competitive atmosphere.
Other benefits There are some intangible/tangible benefits which can be provided to the drivers. Setting up restrooms at various hubs can provide drivers which much needed rest and recreation. Setting up wash rooms and toilets for drivers can help in maintaining sanitation.
Chapter 2
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2.1 Objectives Project objectives Designing a basic driver incentive program and check its cost impact and practicability. Resources Route distance, route transit times, actual transit times, DEPS (Damages, extra, pilferage, shorts), budget. Beginning assumptions Full truck load, mileage, single one way route are the basic assumptions considered in designing the basic model. Full truck load indicates that the truck is full to its capacity. Project strategy 1. To study various routes, their transit times and the distance to be covered. 2. To collect inputs from drivers and other employees associated with express logistics. 3. To develop the incentivizing Model such that the cost to be incurred is considered and check its practicability.
Communication strategy 1. To develop a process to collect information 2. To provide analysis and regular evaluation of the information collected. 3. To provide recommendations to senior management
2.2 Methodology
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The system of collecting data for research projects is known as research methodology. The data maybe collected for either Theoretical or Practical research for example Management Research which maybe strategically conceptualized along with operational planning methods and change management. Formulating of research along with sampling is followed by surveys and scaling. The last 2 stages are data analysis and findings which are organized carefully into graphs and tables, so that only important relevant data is shown. Research Methodology is primarily of 2 types: 1. particular object. Eg: Big, circular, robust, weak, heavy, etc to describe an object. 2. Quantitative: Describes data that can be measured. Eg: Area, dimensions, weight, cost, etc to describe an object. The data collection method for which is of two types: 1. 2. Primary data collection Secondary Data collection Qualitative: Describes the qualities or attributes about a
Primary Data Collection: It is a method of data collection in which the researcher or analyst collects data on his own through questionnaire, surveys, interviews, etc. Secondary Data Collection: It is a method of data collection in which the researcher or analyst collects data through external sources such as libraries, data read through systems, books, filed records, etc. It is available effortlessly and rapidly. It is not current data and though old, it might be the only source for carrying out the research, typically in a production or manufacturing organization. type. Data Source: NMC system. Sample: To study the various routes along with their distance and transit time and driver details.
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Data Collection Method: Primary data collection, quantitative
Sample Size: 150 routes and 70 drivers.
2.3 Sampling Design and Sample Size The data collected is primary data. The sample size for this project consisted of 70 drivers and 150 routes. These drivers operate on long hauls as well as short hauls. A majority of drivers (65) operate from Bhiwandi while the remaining drivers were considered for a pan India Program. The sample include data consisting of transport routes along with their transit time, their route distance, on time arrivals and departures, DEPS, no of vehicles, their number and code etc. Designing a basic driver incentive program (various approaches) Paying money to drivers for safe and on time delivery is an acceptable way of motivating drivers to deliver goods on time. But it is not the only way of helping them. One method used by many companies to make on time delivery efforts successful is to launch a driver incentive program. But the basis of this program is not merely ‘on time delivery = reward’. The main purpose of this program is to develop a culture among the drivers to be punctual. There are a number of incentives which can help in developing this culture among the drivers. Some of these incentives include recognition among peers, tangible rewards such as prize or trophy and monetary benefits. In this project we are focusing on monetary benefits for truck drivers i.e. how money can help motivate them to deliver goods on time. If an incentive plan is designed for truck drivers such it increases with efficiency of delivery then it can help in timely delivery of goods, improving operations of the company and help retain drivers for the vendors. Drivers generally consider pay rates to be low and not enough for their expenses. Pay rates range from flat rates to rates based on parameters i.e. percentage of distance or any other parameter like transit time.
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The incentive scheme should be such that good performance over a consistent period should give more benefits to the drivers. It should help solve problems of the driver on a daily basis. Flat rate basis As per this scheme incentives are calculated on predetermined rates i.e. (for example Rs100 for distance covered 0 to 500) and this can vary depending on transit time. The incentive can be calculated based on comparison between actual time taken and standard transit time. Parameter basis This scheme is designed based on the parameter to be considered for example distance, transit time etc. more the distance more is the incentive or if the ‘actual time < transit time’ then incentive increases. The incentives calculated on the above basis can be further increased depending on quarterly or yearly performance (for example if a driver is earning 1500 a month then on quarterly basis he can earn 1500*3=4500+10% of 4500=4950) Financial monetary schemes Drivers can be given financial investment schemes which can benefit them (for example more returns on their investment or more interest for investment). Instead of providing incentives we can ask them to invest and ensure healthy return on investment. Tangible benefits Sometimes the needs of drivers exceed beyond money. Hence in this case the company can provide other benefits such as cell phone connectivity or they can give rewards or seasonal gifts to the drivers. Penalty A driver can be charged with a penalty if he creates a delay in delivery of goods. Penalty is generally charged on the basis of transit time.
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It can be charged on a factor derived from deviation from transit time. (For example a driver is earning Rs1500 if he is on time and transit time is of 3 hours. If he is 2 hours late then he will be charged Rs1000 and will be paid only Rs500. If he is 3 hours late then he will be charged Rs1500 and he won’t be paid any incentive. If he is 5 hours late then he will be charged Rs3000 and has to pay a fine of Rs 1500). In this basic driver incentive program, incentive is calculated depending on distance travelled per month. This distance travelled can be calculated through actual route distance and number of scheduled trips. An abstract of this program is as shown below.
Route wise calculation of incentives:
Table 1- Routewise calculation of incentives
routewise calculation of incentives :
route code S0415 S0414 S0411 S0410 S0376 S0375 route BRGH-KGPB-KOLH KOLH-KGPB-BRGH PNQC-PNQH-BWDH BWDH-PNQC RNCB-JSPB-BRGH BRGH-JSPB-RNCB route type Short Haul Short Haul Short Haul Short Haul Short Haul Short Haul
3 approaches
20 Approach1 Approach2 distance in kms scheduled trips no of vehicles trips/vehicle distance/veh/mth % of dist flat rates 200 30 1 30 6000 1200 200 30 1 30 6000 1200 220 30 2 15 3300 660 220 30 2 15 3300 660 225 30 1 30 6750 1350 225 30 1 30 6750 1350 Approach3 scale based 1000 1065 1000 1065 750 660 750 660 1000 1178 1000 1178
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Table 2- Quarterly incentive/incentive after penalty/incentive after DEPS
Quarterly incentive approach1 approach2 approach3 quarterly incentive quarterly incentive quarterly incentive 693 945 1015.875 693 945 1015.875 600.6 945 949.725 600.6 945 949.725 693 945 1015.875 693 945 1015.875
incentive after penalty
2 approach1 approach2 approach3 transit time incentive incentive incentive 24 192.5 275 295.625 24 192.5 275 295.625 24 166.833333 275 276.375 24 166.833333 275 276.375 24 192.5 275 295.625 24 192.5 275 295.625
incentive after DEPS
24 approach1 approach2 approach3 % of dist flat rates scale based 159.6 228 245.1 159.6 228 245.1 138.32 228 229.14 138.32 228 229.14 159.6 228 245.1 159.6 228 245.1
percentage of distance : 1. a percentage of the total distance travelled per month is given as incentive (e.g. : 10% of 6000 kms i.e. Rs 600)
flat rates:
900Kms Incentives 1000 300
20003000 500 3000-6000 750 6000-9000 1000 9000-12000 1250 >12000 1500
scale based :
1. fixed incentive of 300 Rs and 15p/km for additional distance
quarterly incentives : 1. for quarterly incentives on flat rate basis an additional 5% of quarterly incentive will be awarded
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2. for quarterly incentive on scale basis an additional incentive of 5% will be awarded on distance greater than 900 but less than 8000 and 10% on distance greater than 8000
3. for quarterly incentive on % of distance basis an additional 10% of quarterly incentive will be awarded
kms
900-7999
>8000 10% extra
incentive 5% extra
incentive after penalty : 1. Incentive will be awarded based on the delay in hrs.
2. Only genuine reasons (e.g. Political disturbance) will be considered while awarding incentive
3. no incentive will be awarded for delay of 10 hours or more
4. Delay due to hub operations will be considered. Incentive after DEPS: 1. DEPS i.e. (damages, excess, pilferage and shortage) is considered as a single parameter.
2. no incentive will be awarded for DEPS of 25% or more 3. Genuine reasons will be considered (e.g. Political disturbance) will be considered 4. DEPS due to hub operations will be also be considered.
Expected Cost to Company (per month):
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1. Percentage of distance: Rs 629436 2. Flat rates : Rs 429200 3. Scale Based : Rs 547317 Second alternative (per trip basis): The previous incentives were calculated on monthly basis. An alternative to this is that incentives can be calculated on per trip basis. For variable rates penalty will be charged @20% only on incentives above Rs 500 on a per trip basis. For flat rates penalty will be charged on all rates @20% of incentive. The following are the incentives which are calculated. Table 3- Per trip basis (a)
route code route S0415 BRGH-KGPB-KOLH S0414 KOLH-KGPB-BRGH S0411 PNQC-PNQH-BWDH S0410 BWDH-PNQC S0376 RNCB-JSPB-BRGH S0375 BRGH-JSPB-RNCB
route type distance in kms scheduled trips incentive/trip incentive/month no of vehicles total incentive/route Short Haul 200 30 100 3000 1 3000 Short Haul 200 30 100 3000 1 3000 Short Haul 220 30 110 3300 2 6600 Short Haul 220 30 110 3300 2 6600 Short Haul 225 30 113 3375 1 3375 Short Haul 225 30 113 3375 1 3375
Table 3- Per trip basis (b)
distance in kms incentive/trip penalty/trip scheduled trips incentive/month no of vehicle total incentive/month 200 250 50 30 7500 1 7500 200 250 50 30 7500 1 7500 220 250 50 30 7500 2 15000 220 250 50 30 7500 2 15000 225 250 50 30 7500 1 7500 225 250 50 30 7500 1 7500
Expected Cost to Company in Rs
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1. Variable Rates: 3814110 2. Flat Rates: 15588750 Third alternative (on basis of ‘turnaround time’) Another alternative can be based on turnaround time since each driver completes different number of trips on different routes Example
TRIPS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 TAT 1 2 3 4 5 6 7 8 9 TOTAL 100 105 110 114 119 124 129 134 139 143 148 153 158 163 168 172 177 182 187 192 197 201 206 211 216 221 226 230 235 240 5100 200 220 240 260 280 300 320 340 360 380 400 420 440 460 480 5100 300 347 393 440 487 533 580 627 673 721 5100 449 542 635 729 822 915 1008 5100 500 640 780 920 1060 1200 5100 600 810 1020 1230 1440 5100 785 1112 1438 1765 5100 1000 1700 2400 5100 1000 1700 2400 5100
Incremental scheme 1) 2) 3) 4) Incentive is calculated on a per trip basis. Incentive increases after every trip as shown in the table. If a driver fails to reach on time on a particular day then incentive given will be equivalent to that given on 1st trip and the cycle will continue. Total incentive which a driver can earn every month=Rs 5100 Total incentive which a driver can earn every year=Rs 61200
Expected Cost to Company: Rs 204000 Note: The cost to company is calculated based on data which does not remain constant. Hence the CTC calculated is the maximum possible CTC which can be incurred.
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2.4 Scope and Limitations Project scope Project scope includes Causes that can be converted into straight line improvement such as - Traffic jam - Unnecessary halts - Delays at check post - Fuel consumption - Speed Limitations Project scope does not include Genuine reasons such as - Poor road conditions - No entry zones - Political issues - Vehicle Breakdown - Delay in advance payment from vendor
Limitations
A major limitation of this project is that it’s CTC (cost to company) will keep on fluctuating since it depends on parameters like scheduled trips, and number of vehicles which keep on changing.
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On time delivery also depends on efficiency in Hub operations which is not included in this project.
Chapter 3 3.1 Analysis and Findings (graphs) Based on the questionnaire designed a survey with sample size consisting of 70 drivers was conducted. The major heads of the questionnaire along with their findings and analysis is as shown below
Halts remain the most important issue when it comes to reducing time delay.
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If halts are reduced then consignments can reach their destination on
time. The transit time is set after considering traffic. Hence further delay due to traffic is not acceptable
Although road conditions are poor, it is not in company’s hands to improve or fix the roa
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Check post form a major obstacle during transportation. Drivers can speed up clearances at check posts.
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Although there is delay in getting payments from vendors, drivers generally blame hub officials for the delay.
Critical region is a region which cannot be moved or shifted. If there exist a region then drivers can speed things up so that they can reach and leave this region early.
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Vehicle breakdown generally does not happen and in rarest of rare cases it is the vendor who takes the responsibility.
Managing political issues is not in the hands of company. Hence not much can be done.
Rest here indicates whether drivers are physically and mentally fit to drive the vehicles.
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Even after completing all formalities at hubs drivers take time to depart from the hub. Just as drivers take time to depart, they take more time to report at the hub.
Chapter 4 4.1 Conclusion 1. The following can be one of the many ways through which an incentive program can be designed. Incentive program is designed using two approaches 1. Operational (routes, distance, transit time) 2. Motivational (Inam … a driver incentive program)
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Operations form back end of the project whereas marketing and incentives through human resource will form the front end of the project. 4.2 recommendations 1. More focus should be given on tangible as well as intangible benefits and the company should send a message that they care for welfare of drivers.
Annexures (questionnaire)
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Future Supply Chain Solutions Limited
Feedback Form Driver's Name:Mobile no :Vendor's Name :Route :-
Questionnaire:1. How many halts do you take on average? a) 1 c) 3 b) 2 d) > 3 2. Do you always get affected by traffic? a) Yes b) No 3. How are the road conditions on your route? a) Excellent b) Good c) Bad d) Worse 4. How long do you wait at check post? a) Less than 1 hour b) Between 1 to 3 hours c) Between 3 to 5 hours d) More than 5 hours 5. Do you get late in getting advance payment from vendor? a) Always b) Often c) Sometimes d) Never 6. Is there a specific region on the route where you face problems? a) Yes b) No 7. Is vehicle breakdown a cause of late delivery? a) Always b) Often c) Sometimes d) Never 8. If there are political issues do they affect your transport? a) Always b) Often c) Sometimes d) Never 9. Are you getting enough rest before travelling? a) Yes b) No 10. Do you get late while departing from origin hub? a) Yes b) No 11. How long do you take to report at the hub/branch after entering the premises? a) Less than 1 hour b) Between 1 to 2 hours c) Between 2 to 3 hours d) More than 3 hours 12. According to you what should be the solution for on time arrivals? ___________________________________________________________ ___________________________________________________________ 13. Any other feedback you would like to give? ____________________________________________________________ ____________________________________________________________
Signature:________________
Date:________________
Driver of the month
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Drivers Of The Month (Photos)
Inam … a driver incentive scheme Instructions: Registration 1) Registration will be done in a team of two. 2) Forms will be filled separately. 3) Drivers should report every month to update their registration. Evaluation 1) Drivers will be Evaluated on the basis of 1. On time arrivals 2. In case of a tie 'On time arrivals' > 'Route Distance' Appraisal 1) Incentive to be awarded. 2) Top 10 drivers will be declared as drivers of the month. Score card 1) Depending on the Score a Grade will be alloted. 2) Incentive to be awarded will depend on the rank alloted.
References and Bibliography
46
1. Google 2. Wikipedia 3. Future Supply Chain (Website) 4. Future Supply Chain (Data) 5. Network Monitoring Cell (Data)
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Submitted in partial fulfilment of the requirements for Master of Management Studies
(M.M.S)
(2012-2014)
Under the guidance of Prof. P.G. Kane
SUBMITTED BY
Name: Niket Naik Roll No: M-12-37 Batch: 2012 - 2014
IES Management College and Research Centre, Bandra, Mumbai
IES Management College and Research Centre Bandra, Mumbai
MAY – JUNE 2013
Student’s Declaration
I hereby declare that this report, submitted in partial fulfilment of the requirement for the award for the Master of Management Studies, to IES Management College and Research Centre is my original work and not used anywhere for award of any degree or diploma or fellowship or for similar titles or prizes.
I further certify that without any objection or condition subject to the permission of the company where I did my summer project, I grant the rights to IES Management College and Research Centre to publish any part of the project if they deem fit in journals/Magazines and newspapers etc. without my permission.
Place
: Mumbai
Date
: 25-07-2013
-------------------------------Signature
Name
Class
: Niket Naik
: MMS – II
Roll No. : M-12-37
Certificate from the company
This is to certify that the dissertation submitted in partial fulfillment for the award of Master of Management Studies of IES Management College and Research Centre is a result of the bonafide research work carried out by Mr. Niket Naik under my supervision and guidance. No part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any journals/Magazines.
Date:
25-07-2013
Industry guide Signature of the Industry Guide: ______________ Name of Industry Guide: Mr Jayesh Patil Company: Future Supply Chain
Place: Mumbai
Designation: General Manager
Certificate from the Faculty Guide
This is to certify that the dissertation submitted in partial fulfillment for the award of Master of Management Studies of IES Management College and Research Centre is a result of the bonafide research work carried out by Mr. Niket Naik under my supervision and guidance. No part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any journals/Magazines.
Date:
25-07-2013
Faculty guide Signature of the Faculty Guide: ______________
Name of Faculty Guide: Prof. P.G. Kane Place: Mumbai IES Management College and Research Centre
Acknowledgement
On the very outset of this report, I express my sincere thanks to my project guide, Mr Jayesh Patil, General Manager, Express Logistics, Future Supply Chains, for guiding me right form the inception till the successful completion of the project. I sincerely acknowledge him for extending his valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he has provided to me with all stages of this project.
I am ineffably indebted to Mr Bhushan Watghare and Mr Yogesh Ganjewar for their conscientious guidance and encouragement to accomplish this assignment. I am extremely thankful and pay my gratitude to my faculty guide Prof. P.G. Kane for his valuable guidance and support on completion of this project in its presently. I would also like to thank Miss Shalini Bodra, HR Department, for her help and cooperation throughout our project. I extend my gratitude to Indian Education Society’s Management College and Research Centre for giving me this opportunity.
Last but not least gratitude goes to all of my friends and family members who directly or indirectly helped me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You (Niket Naik)
Table of contents
Page No.
CHAPTER – I
:
Executive Summary (Max-2-3 pages) Introduction to the Industry Introduction to the Company Introduction to the Project
1
3 6 8
CHAPTER –II
:
Objectives Methodology Sampling Design and Sample Size Scope and Limitations
28 29 30 37
CHAPTER – III
:
Analysis & Findings (Only graphs)
38
CHAPTER – IV
:
Conclusions Recommendations
43 43
ANNEXURES
:
Questionnaire Tables
44 44
References and Bibliography
46
LIST OF FIGURES, TABLES, GRAPHS SR NO 1 2 3 4 5 6 7 8 FIGURES NMC CONTROL ROOM WAR ROOM DASHBOARD VTS DEVICE CURRENT TIME REPORT TRIP REPORT VEHICLE MOVEMENT TRACKING DRIVER REGISTRATION FORM SCORE CARD PAGE NO 13 14 15 16 17 18 24 25
SR NO 1 2 3 4
TABLES ROUTEWISE CALCULATION OF INCENTIVES QUARTERLY INCENTIVES AFTER PENALTY/DEPS PER TRIP BASIS (A) PER TRIP BASIS (B)
PAGE NO 32 33 35 35
SR NO 1 2 3 4 5 6 7 8 9 10 11 12
GRAPHS EXISTING SITUATION HALTS TRAFFIC ROAD CONDITIONS DELAYS AT CHECKPOST DELAYS IN PAYMENT FROM VENDORS CRITICAL REGION VEHICLE BREAKDOWN POLITICAL ISSUES REST DELAYS IN DEPARTING FROM ORIGIN HUB DELAYS IN REPORTING AFTER REACHING HUB
PAGE NO 19 38 38 39 39 40 40 41 41 42 42 42
Chapter 1 1.1 Executive summary Logistics is an industry in which efficiency of a company depends on whether they deliver goods or consignments of their partners or clients on time. In present conditions this is a challenge especially in countries like India where there are issues regarding poor infrastructure. Delivering goods on time largely depend on vendors who take up contracts. But the consignments have to be eventually transported by goods carriers. Hence the drivers of the carriers need to be efficient and punctual. Providing incentives to drivers motivate drivers to deliver goods on time. Considering all these aspects a driver incentive program is designed which aims at creating a model to provide incentives to drivers if they deliver goods on time. To develop this model the existing situation was studied (This included operations related to loading and unloading of consignment and various other operations at their Hub such as PTL technology and TMS systems as well as functioning of NMC (Network Monitoring Cell)) and root causes of delay were found out. Some of these reasons or causes were controllable while some were not. To analyse and support these causes, a questionnaire was designed and a survey was conducted consisting of feedback from drivers. The results of the survey were analysed and the approach towards designing this model was finalized. It was observed that delay in on time arrivals was related to operational parameters like route distance, transit time etc. hence the final incentive was calculated based on these parameters. Some other factors like Damages, Excess, Pilferage, Shorts or DEPS also had to be considered. Thus to create this incentive model all the 150 plus transit routes were studied and incentives were calculated. The format was presented in an excel sheet.
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There were three main approaches 1. Flat rates 2. Based on distance travelled 3. Scale based A second alternative was developing a model based on driver’s performance irrespective of their routes or distance travelled. This model was on motivational factors. So a driver incentivizing model called Inam was proposed. There were three stages according to this model 1. Registration 2. Evaluation 3. Appraisal In registration drivers had to register every month. This helped in generating a driver database. In evaluation drivers were evaluated on the basis of on ratio of time arrivals to total arrivals as well as material handling. In appraisal a grade will be given to drivers and incentive will be awarded based on that particular grade. Some other forms of appraisal such as awarding trophy to the best performer or providing some tangible benefits will be considered. The last stage in this project was to calculate the estimated cost to company, how to roll out this scheme and its impact on the existing situation. and suggest some recommendations related to the process.
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1.2 Introduction to Industry 1.2.1 Logistics Logistics is the management of the flow of resources between the point of origin and the point of consumption in order to meet some requirements, for example, of customers or corporations. The resources managed in logistics can include physical items, such as food, materials, equipment, liquids, and staff, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modelled, analysed, visualized, and optimized by dedicated simulation software. The minimization of the use of resources is a common motivation. According to the Council of Logistics Management, logistics includes the integrated planning, control, realization, and monitoring of all internal and network-wide material, part, and product flow, including the necessary information flow, in industrial and trading companies along the complete value-added chain (and product life cycle) for the purpose of conforming to customer requirements. Logistics is the process of planning, implementing, and controlling the effective and efficient flow of goods and services from the point of origin to the point of consumption. Logistics management Logistics management is the part of supply chain management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements. A professional working in the field of logistics management is called a logistician. Logistics is divided into four major categories 1. Materials management 2. Channel management 3. Distribution (or physical distribution) 4. Supply-chain management
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Industry Snapshot
The Indian Logistics Industry is estimated at US$ 125 billion in 2010 Generated employment for 45 million people The industry is expected to grow annually at the rate of 15- 20 per cent, reaching revenues of approximately $ 385bn by 2015.
Highly Unorganized with organized sector responsible only for 6% Market share of organised logistics players is also expected to double to approximately 12 per cent by 2015
The size of the 3PL industry is estimated to be~US$1.5 bn in FY11 (1% of logistics cost).
The share of 3PL services is expected to increase from 6% in FY06 to 13% in FY11, at a CAGR of 25%
Logistics costs are 10-20% of GDP Indian Infrastructure is rated 54th among the 59 countries -- Road : 56/59, Rail: 25/59, Seaport: 51/59, Airport: 40/59
Several factors helped the growth of logistics industry in India over the decade that includes changing tax system, rapid growth in industries such as automobile, pharmaceuticals, FMCG and retail. However, major sectors that are investing huge amounts in logistics industry are aviation, metal & mining and consumer durables. With increasing competition and cost, focus on outsourcing, entry of foreign players is having positive impact on the industry. Three major contributors for the growth of the logistic industry are emergence of organized retail, increase in foreign trade and India becoming soon the manufacturing hub. As per the World Bank’s Logistics Performance Index 2010, India is placed at 47th position out of 155 countries.
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1.2.2 Supply chain management Supply chain management (SCM) is the management of an interconnected or interlinked network, channel and node businesses involved in the provision of product and service packages required by the end customers in a supply chain. Supply chain management spans the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. It is also defined as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally." SCM draws heavily from the areas of operations management, logistics, procurement, and information technology, and strives for an integrated approach. Supply chain management is a cross-functional approach that includes managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and towards the end consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other firms that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing managerial control of daily logistics operations. Less control and more supply chain partners led to the creation of the concept of supply chain management. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In recent decades, globalization, outsourcing, and information technology have enabled many organizations to successfully operate collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities.
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1.3 introduction to company Future supply chain (FSC) FSC is India's first fully integrated and IT enabled end- to- end Supply Chain and Logistics company in India that delivers the shortest Time- to- Market and the lowest Cost- toMarket. FSC has been a pioneer and leader in modernising logistics and supply chain in India. FSC Supply Chain Solutions has established capabilities to study customer's supply chain processes and re-engineer, build & implement customised Supply Chain Solutions through scientific Supply Chain Management. Vision and mission To increase the revenues and profitability of our customers by lowering the ‘Time- toMarket’ and ‘Cost- to- Market’ through our integrated SCM solutions (SC Design, Movement, Storage and Inventory Management). FSC Supply Chain Services include FSC Contract Logistics, FSC Express Logistics and FSC International Logistics. FSC Express Logistics
Express Logistics is an integrated time- definite movement solutions catering to First Mile, Long Haul, Intermediate and Last Mile delivery across India
FSC Express Logistics has proven expertise in Network Modelling and Design, Route Planning and Optimisation, Load Optimisation and Vehicle Re-engineering. FSC Express Logistics has been India’s first service provider to successfully implement Vehicle Tracking System. It enables customers to view the real time location of their consignments online on the India map. FSC Express Logistics partners with its customers to provide effective solutions which enable customers to manage variability and reduce uncertainty in their logistics and supply chain; thereby enabling them to effectively reduce their Time- to- Market and Cost- to-
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Market. This has been achieved by fully integrating Express Logistics services with Technology, Automation, Infrastructure, People, Processes, Knowhow and Network. FSC contract logistics Integrated state- of- the- art Warehousing and Distribution services is a core competency of FSC Contract Logistics. Key Competencies 1. Integration of Infrastructure, Technology, Automation, People, Processes, Knowhow and Expertise leading to higher Fill- rates and therefore greater Profitability 2. Ability to manage large Distribution Centres and Scale- up at short notice Extremely high Throughput Handling capabilities 3. Pioneers in Indianised and Indigenised implementation of global best practices 4. Integrated with a Robust Distribution and Last Mile fulfilment Network providing end- to- end solutions. FSC international logistics FSC International is the Import Export logistics services. FSC International Features and Benefits 1. Freight Forwarding & Customs Clearance Services 2. Import and Export across South East (by Air and Ocean) to and from India Through a network of Select Agents 3. Strong Relationships with Shipping Lines and Container Freight Stations FSC brand distribution FSC Brand Distribution Services Ltd. was started about 2 years ago. It is a 100% wholly owned subsidiary of Future Supply Chains. FSC BDS (FSC Brand Distribution) is a pioneering effort into organised distribution of FMCG brands to Modern Trade at a pan India level.
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1.4 Introduction to the project Driver Incentive Program A. overview 1. Currently no drivers are being paid for their performance in terms of transit times they achieve per route. 2. Incentivizing model to distribute on time performance benefits to these drivers 3. Various parameters are to be analysed such as route distance, route transit times, actual transits, DEPS etc. 4. Weightage scale to be devised accordingly B. results expected 1. Design and launch of incentivizing model
Critical success factors 1. Identification of critical paths and transit time required. 2. Development of a measurement scale 3. Involvement of drivers
Project strategy 1. To study various routes, their transit times and the distance to be covered. 2. To collect inputs from drivers and other employees associated with express logistics. 3. To develop the incentivizing Model such that the cost to be incurred is considered and check its practicability.
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approach Existing arrival departure situation
Defining root cause for the situation
Finding probable solution
Knowing driver’s expectation
Designing basic driver incentive program
Checking cost impact and practicability
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1.4.1 Hub/Branch Operations and existing situation
A] Hub/Branch Process The following is an overview of Hub and Branch Operations 1. Consignment coming in to HUB Unloading the Consignment: 1. Check the Manifest and unload the Consignment as per the CN number and lot. 2. Checking is done manually. 3. Supervisors need to ensure the proper Consignment unloading in presence of security officer. 4. If any DEPS found note it down on Manifest and click photograph. 5. Put the unloaded Consignment at the defined section at hub. 6. Give copy of Manifest to security for the entry.
Entry in transport management system (TMS): 1. The hub/branch which sends Consignment to concern hub put the details in TMS. 2. So the receiving branch has all the details of that particular vehicle arriving at the hub. 3. Once vehicle arrives at hub administrator need to put an entry in the TMS about arrival of vehicle and rest of the details get imported.
Damages, Excess, Pilferage, Shortage (DEPS) Registration: 1. Register the DEPS and categorize it in TMS. 2. In case of shortage, send mail to previous branch/hub. 3. In case of pilferage, coordinate with vigilance team.
DEPS Closing: 1. A report is circulated every month which accounts the DEPS in the previous month. 2. Against the POD the DEPS is closed, it means if customer has put the remark that goods have received in proper condition then only the DEPS are closed on TMS
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2. Consignment OUT from Hub Receiving from Branch: 1. Consignment moves from branch to concern hub. 2. Branch gives details about the LR (Lorry Receipt) to hub. 3. At hub the Consignment is separated as per the delivery location.
TMS Process: 1. Loading sheet is prepared. 2. Based on the above loading sheet final loading sheet is prepared which is free from the DEPS. 3. After the final loading sheet the Manifest is prepared and finally VHC (Vehicle Hire Contract) is prepared. 4. A single VHC contains multiple Manifests. 5. A single manifest contains multiple CN numbers.
Vehicle Loading: 1. As per the loading sheet and manifest the vehicle is loaded. 2. Count of Consignment is done manually. 3. It is checked against the manifest. 4. Supervisors need to ensure the proper Consignment loading in presence of security officer.
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Branch Process
Consignment IN to Branch: 1. PDA collects Consignment and delivers it to branch along with LR sheet. 2. At branch the Consignment is manually counted and checked against the LR sheet. 3. LR sheet is handover to the administration department for entry to the TMS.
TMS Process: 1. Consignment details are entered in TMS as per the LR/CN number. 2. It is passed then to concern Hub.
Consignment OUT from Branch: 1. Consignment to be moved out for delivery is separated as per the location. 2. Entry of the CN number of that Consignment is put in TMS. 3. DRS (Delivery RUN sheet) prepared and handover it to PDA for delivery.
Data entry Operation: 1. On Consignment delivery the POD are collected from PDA. 2. As per the LR/CN number the information is entered in TMS. 3. POD are scanned and saved for documentation. 4. POD status (Good/Bad) is entered in TMS. 5. A report generated sent to HO.
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B] Study of Network Monitoring Cell (NMC) System: Figure 1 – NMC Control / War Room
Due to importance of Transit Time, continuous monitoring of all the vehicles is necessary for time-period of 24*7. This is done with the help of NMC (Network Monitoring Cell) system, which shows the updated status of the vehicles every 3 minutes. FSCS has purchased this system from M/s Novire Technologies: Leader in Asset Tracking and Management. Along with generating various reports such as Current Status Report, this system also sends alerts in case of diversion from scheduled route, crossing safety speed limit etc. Currently there are about 110 vehicles on 65 different routes across nation. The vehicle tracking is done with the help of GPS and assuming the geo-fencing of hubs & branches up to range of 1 km. Therefore any vehicle within range of 1 km from hub / branch would be reflected on map as to be standing inside branch / hub. NMC System controller of FSCS has the access to all the vehicles across nation whereas the vendors have the access to information regarding their respective vehicles.
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Different colors are used for the vehicles depending upon their status as mentioned below: 1. Red: For the vehicles whose data hasn’t been received for about more than 2 hours 2. Brown: For the vehicles whose ETA (Expected Time of Arrival) has been delayed by more than 5 hours 3. Orange: For the vehicles whose ETA (Expected Time of Arrival) has been delayed by more than 3 hours but less than 5 hours 4. Black: For vehicles running as per ETA
Figure 2 – War Room Dashboard
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Besides tracking the vehicle movements, the scope of work of NMC system controller also involves follow-up with vendors, drivers, touching points, branches & hubs for verification of system data and delivery expedition.
The operation cycle of technology used in NMC system is as below:
Satellite <-> Vehicle <-> GPRS -> Novire Control Centre -> Computer at NMC Room A GPS tracking device is installed in transporter’s vehicle and records the coordinates. The tracking device has a built in capability to send messages over the GSM network to servers which in turn use the same data to show on a map. Customer simply needs to login to Novire’s website with unique username and password to locate their vehicle. Figure 3 – VTS Device
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Figure 4 – Current Time Report
Some of the salient features of this tracking service are: 1. Maintaining 24 * 7 back office support center 2. Ability to analyze data and develop specific MIS reports 3. Ability to customize hardware / applications / report
NMC System generates various reports for different objectives. Some of the reports are as mentioned below:
1) VTS Reports: They include the analysis of completed trips. Various reports under this category are: 1. Zone Performance Report 2. Hub Performance Report
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3. Vendor Performance Report 4. Exception Report 5. Trip Report (For completed trips) 6. War Room Tabular (For ongoing trips) Figure 5 – Trip Report
1) DMRV Report: It serves for the following: 1. Analysis of completed trips 2. Register remarks in MIS 3. Escalation to daily hub operation and management 2) Expected Arrival Report: It’s done to
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1. Monitor the vehicles in transit 2. Check whether the vehicle is on time or not
In short, the first & foremost objective of NMC system is to monitor vehicles through a central location to ensure on time arrival and departure of vehicles. Hence it’s also called as ‘Express Control Room’. Figure 6 – vehicle movement tracking
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Existing arrival situation The ‘on time’ arrival for express logistics in FSC stands at 37% on a pan India level. One of the reasons for less ‘on time’ arrivals is time lag which is caused while delivering goods. This time lag occurs partially due to delay in hub operations and partially due to delay in transportation. This delay in transportation can be addressed through a driver incentive program which motivates drivers to deliver goods on time. Graph 1- Existing Arrival Solution
Defining root cause There are ten major causes of delay. Some of them are due to genuine reasons while some of them can be converted into straight line improvement. There causes are mentioned in the project scope and are classified as follows.
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Causes of delay
can be converted into straight line improvement
genuine reasons
1. traffic jam 2. halts 3. delays at checkpost 4. fuel consumption 5. speed limitations 6. delay in getting advance bhatta
1. road conditions 2. no entry zones 3. political issues 4. vehicle breakdown
Finding probable solution The causes mentioned above which can be converted into straight line improvement can be solved through providing incentives to drivers. The solution to all these causes except fuel consumption is time management on the part of drivers. Drivers can manage their fuel expenses through additional expenses provided to them in the form of incentives. Driver’s expectations: To know driver’s expectations a questionnaire has been designed to get feedback from drivers. The questions mentioned in this questionnaire are related to the causes of delay which could be solved by providing incentives.
Analysis of data obtained by conducting the survey
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1. How many halts do you take on average? Drivers are taking more halts than required even on shorter routes. If incentive is provided then the number of halts can be reduced and time can be saved. 2. Do you always get affected by traffic? The intensity of traffic varies depending on route. The more the route distance the more is the effect of traffic on delivery. 3. How are the road conditions on your route? Some drivers say roads are good and a few say they are excellent. These drivers can improve on their transit time by focusing on other areas of delays. 4. How long do you wait at the check post? Most of the drivers spend more than 1 hour at check post. If incentive is provided they can push for speedy clearance at check post. 5. Do you get late in getting advance payment from vendors? Majority say there are no issues related to payment from vendors and advance payment is not an issue. 6. Is there any critical region on your route? Almost all routes have critical region. On time arrivals depend on how drivers overcome these regions. 7. Is vehicle breakdown a cause of late delivery? This point was to check whether there are any problems from vehicles provided to vendors. Majority say no.
8. If there are political issues do they affect your transport?
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Only those drivers who travel towards the east or those who have had past experience said yes 9. Are you getting enough rest before travelling? Drivers get enough rest before travelling 10. Do you get late while departing from origin hub? This point was to check whether there were any delays due to hub operations Although drivers have said that there are delays, there are no further delays from their side. 11. How long do you take to report at hub/branch after entering the premises? Drivers generally take more than 1 hour to report after they enter the premises This delay can be reduced. Based on the survey conducted the following can be interpreted Causes of delay Can be solved through incentives 1. halts 2. traffic 3. delays at check post 4. delays in advance payment 5. delay in departing from hub 6. delay in reporting at the premises Cannot be solved through incentives 1. road conditions 2. vehicle break down 3. political issues 4. rest 5. critical region
Most of the causes which can be solved through incentives depend on operational parameters like route distance. Hence approach 1 is based on operational parameters. Incentives can also be given based on driver’s performance irrespective of their routes.
1.4.2 Inam … a driver incentive scheme
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With an intention to develop a competition among drivers, a second version of driver incentive program is proposed. This scheme will be implemented on a monthly basis. Drivers operating on line haul as well as feeder routes are eligible for this scheme. Steps
Registration
Evaluation
Appraisal
Stage 1: Registration Each driver has to first register to be eligible for this scheme. Registration will be done in a team of two. The registration period will be 3 weeks. Since drivers are not permanent, registration will help generate a temporary database. If in between a driver backs out then his team mate will be allowed to work with a new team mate. Drivers who fail to register will not be eligible for this scheme. Registrations will take place at all the hubs. Registration of drivers will be done at particular hub depending on vendor controlling location. An individual employee can look after the registration and evaluation as an administrative staff. During registration a unique registration number will be given to the team of drivers. (Example: BWKL0001 will be a code given to the first team operating between Bhiwandi and Kolkata). In case of change of vehicle during a month, the driver has to mention it to the administrative staff and get it approved. The following is an example of Driver Registration Form. Figure 7- Driver Registration Form:
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INAM……a driver incentive scheme
Driver Registration form Registration no: Route: Hub: __________________ __________________ __________________ Vendor name: Vendor code: Vehicle no: __________________ __________________ __________________
Personal Details Driver 1
Photo
Name:
_______________________________________________________________________
Address:
_______________________________________________________________________ _______________________________________________________________________
Driving Liscence no: __________________________
Contact no: Age : Sign:
__________________________ ____ __________________
Stage 2: Evaluation
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This scheme will run on monthly basis. Points will be given to drivers based on the following disciplines On time arrival On time arrivals can be calculated depending on ratio of on time arrivals to trips completed and equivalent score will be given out of 25. Trips which are not completed will not be considered since the reasons for incomplete trips can be due to unavoidable circumstances. Similarly on time arrivals for the return trip can be calculated. The following is an example of a score card to be given to drivers.
Registration no:
BWKL0001 ON TIME ARRIVALS Bhiwandi Kolkata On time arrivals Trips completed 9 12 Kolkata On time 10 Grade TOTAL Bhiwandi Trips completed 12
Vehicle no Month Score 19
WB11B5150 Jan Out of 25
Score 21
Out of 25
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Figure 7- scorecard
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The final scorecard can be as mentioned above In case of a tie then the following order will be considered ‘On time arrivals’>’route distance’
Stage 3: Appraisal
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The final score of driver’s performance will be calculated at the end of the every month and grades will be given to drivers. Depending on their grades the following rewards will be given to the teams. Flat rates:
Grade A+ A B C
Reward Felicitation + cash prize Felicitation + cash prize Cash prize Cash prize
Amount 5000 3000 1500 750
Variable rates: An incentive of Rs 50 can be provided per point earned. Therefore for example if a driver earns 50 points then an incentive of 50*50=2500 will be awarded to him. Quarterly incentive: Each driver will be given bonus score depending on grade every month. A table for bonus is as given below. Grade A+ A B C Bonus Points 20 15 10 5
Bonus points given per month will be complied on a quarterly basis and incentive will be given @ RS 50 per point.
Driver of the month
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The team of drivers who earns a grade A+ will be felicitated by giving a trophy and their photo will be printed on pamphlets distributed to drivers along with other documents while visiting hubs and branches all over India. They will be known as drivers of the month. The team which gets grade A will be felicitated in the same way. The teams from grade B will be awarded a cash prize of Rs 1500 and remaining teams will be awarded a cash prize of Rs 750.
Highlights 1. Registration will be done every time before start of the contest. Since drivers keep on changing, it can help in keeping a record of drivers working at present. 2. Each and every driver irrespective of their grade will be given incentive. No driver will go empty handed. This will help motivate the drivers to do well and create a competitive atmosphere.
Other benefits There are some intangible/tangible benefits which can be provided to the drivers. Setting up restrooms at various hubs can provide drivers which much needed rest and recreation. Setting up wash rooms and toilets for drivers can help in maintaining sanitation.
Chapter 2
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2.1 Objectives Project objectives Designing a basic driver incentive program and check its cost impact and practicability. Resources Route distance, route transit times, actual transit times, DEPS (Damages, extra, pilferage, shorts), budget. Beginning assumptions Full truck load, mileage, single one way route are the basic assumptions considered in designing the basic model. Full truck load indicates that the truck is full to its capacity. Project strategy 1. To study various routes, their transit times and the distance to be covered. 2. To collect inputs from drivers and other employees associated with express logistics. 3. To develop the incentivizing Model such that the cost to be incurred is considered and check its practicability.
Communication strategy 1. To develop a process to collect information 2. To provide analysis and regular evaluation of the information collected. 3. To provide recommendations to senior management
2.2 Methodology
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The system of collecting data for research projects is known as research methodology. The data maybe collected for either Theoretical or Practical research for example Management Research which maybe strategically conceptualized along with operational planning methods and change management. Formulating of research along with sampling is followed by surveys and scaling. The last 2 stages are data analysis and findings which are organized carefully into graphs and tables, so that only important relevant data is shown. Research Methodology is primarily of 2 types: 1. particular object. Eg: Big, circular, robust, weak, heavy, etc to describe an object. 2. Quantitative: Describes data that can be measured. Eg: Area, dimensions, weight, cost, etc to describe an object. The data collection method for which is of two types: 1. 2. Primary data collection Secondary Data collection Qualitative: Describes the qualities or attributes about a
Primary Data Collection: It is a method of data collection in which the researcher or analyst collects data on his own through questionnaire, surveys, interviews, etc. Secondary Data Collection: It is a method of data collection in which the researcher or analyst collects data through external sources such as libraries, data read through systems, books, filed records, etc. It is available effortlessly and rapidly. It is not current data and though old, it might be the only source for carrying out the research, typically in a production or manufacturing organization. type. Data Source: NMC system. Sample: To study the various routes along with their distance and transit time and driver details.
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Data Collection Method: Primary data collection, quantitative
Sample Size: 150 routes and 70 drivers.
2.3 Sampling Design and Sample Size The data collected is primary data. The sample size for this project consisted of 70 drivers and 150 routes. These drivers operate on long hauls as well as short hauls. A majority of drivers (65) operate from Bhiwandi while the remaining drivers were considered for a pan India Program. The sample include data consisting of transport routes along with their transit time, their route distance, on time arrivals and departures, DEPS, no of vehicles, their number and code etc. Designing a basic driver incentive program (various approaches) Paying money to drivers for safe and on time delivery is an acceptable way of motivating drivers to deliver goods on time. But it is not the only way of helping them. One method used by many companies to make on time delivery efforts successful is to launch a driver incentive program. But the basis of this program is not merely ‘on time delivery = reward’. The main purpose of this program is to develop a culture among the drivers to be punctual. There are a number of incentives which can help in developing this culture among the drivers. Some of these incentives include recognition among peers, tangible rewards such as prize or trophy and monetary benefits. In this project we are focusing on monetary benefits for truck drivers i.e. how money can help motivate them to deliver goods on time. If an incentive plan is designed for truck drivers such it increases with efficiency of delivery then it can help in timely delivery of goods, improving operations of the company and help retain drivers for the vendors. Drivers generally consider pay rates to be low and not enough for their expenses. Pay rates range from flat rates to rates based on parameters i.e. percentage of distance or any other parameter like transit time.
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The incentive scheme should be such that good performance over a consistent period should give more benefits to the drivers. It should help solve problems of the driver on a daily basis. Flat rate basis As per this scheme incentives are calculated on predetermined rates i.e. (for example Rs100 for distance covered 0 to 500) and this can vary depending on transit time. The incentive can be calculated based on comparison between actual time taken and standard transit time. Parameter basis This scheme is designed based on the parameter to be considered for example distance, transit time etc. more the distance more is the incentive or if the ‘actual time < transit time’ then incentive increases. The incentives calculated on the above basis can be further increased depending on quarterly or yearly performance (for example if a driver is earning 1500 a month then on quarterly basis he can earn 1500*3=4500+10% of 4500=4950) Financial monetary schemes Drivers can be given financial investment schemes which can benefit them (for example more returns on their investment or more interest for investment). Instead of providing incentives we can ask them to invest and ensure healthy return on investment. Tangible benefits Sometimes the needs of drivers exceed beyond money. Hence in this case the company can provide other benefits such as cell phone connectivity or they can give rewards or seasonal gifts to the drivers. Penalty A driver can be charged with a penalty if he creates a delay in delivery of goods. Penalty is generally charged on the basis of transit time.
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It can be charged on a factor derived from deviation from transit time. (For example a driver is earning Rs1500 if he is on time and transit time is of 3 hours. If he is 2 hours late then he will be charged Rs1000 and will be paid only Rs500. If he is 3 hours late then he will be charged Rs1500 and he won’t be paid any incentive. If he is 5 hours late then he will be charged Rs3000 and has to pay a fine of Rs 1500). In this basic driver incentive program, incentive is calculated depending on distance travelled per month. This distance travelled can be calculated through actual route distance and number of scheduled trips. An abstract of this program is as shown below.
Route wise calculation of incentives:
Table 1- Routewise calculation of incentives
routewise calculation of incentives :
route code S0415 S0414 S0411 S0410 S0376 S0375 route BRGH-KGPB-KOLH KOLH-KGPB-BRGH PNQC-PNQH-BWDH BWDH-PNQC RNCB-JSPB-BRGH BRGH-JSPB-RNCB route type Short Haul Short Haul Short Haul Short Haul Short Haul Short Haul
3 approaches
20 Approach1 Approach2 distance in kms scheduled trips no of vehicles trips/vehicle distance/veh/mth % of dist flat rates 200 30 1 30 6000 1200 200 30 1 30 6000 1200 220 30 2 15 3300 660 220 30 2 15 3300 660 225 30 1 30 6750 1350 225 30 1 30 6750 1350 Approach3 scale based 1000 1065 1000 1065 750 660 750 660 1000 1178 1000 1178
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Table 2- Quarterly incentive/incentive after penalty/incentive after DEPS
Quarterly incentive approach1 approach2 approach3 quarterly incentive quarterly incentive quarterly incentive 693 945 1015.875 693 945 1015.875 600.6 945 949.725 600.6 945 949.725 693 945 1015.875 693 945 1015.875
incentive after penalty
2 approach1 approach2 approach3 transit time incentive incentive incentive 24 192.5 275 295.625 24 192.5 275 295.625 24 166.833333 275 276.375 24 166.833333 275 276.375 24 192.5 275 295.625 24 192.5 275 295.625
incentive after DEPS
24 approach1 approach2 approach3 % of dist flat rates scale based 159.6 228 245.1 159.6 228 245.1 138.32 228 229.14 138.32 228 229.14 159.6 228 245.1 159.6 228 245.1
percentage of distance : 1. a percentage of the total distance travelled per month is given as incentive (e.g. : 10% of 6000 kms i.e. Rs 600)
flat rates:
900Kms Incentives 1000 300
20003000 500 3000-6000 750 6000-9000 1000 9000-12000 1250 >12000 1500
scale based :
1. fixed incentive of 300 Rs and 15p/km for additional distance
quarterly incentives : 1. for quarterly incentives on flat rate basis an additional 5% of quarterly incentive will be awarded
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2. for quarterly incentive on scale basis an additional incentive of 5% will be awarded on distance greater than 900 but less than 8000 and 10% on distance greater than 8000
3. for quarterly incentive on % of distance basis an additional 10% of quarterly incentive will be awarded
kms
900-7999
>8000 10% extra
incentive 5% extra
incentive after penalty : 1. Incentive will be awarded based on the delay in hrs.
2. Only genuine reasons (e.g. Political disturbance) will be considered while awarding incentive
3. no incentive will be awarded for delay of 10 hours or more
4. Delay due to hub operations will be considered. Incentive after DEPS: 1. DEPS i.e. (damages, excess, pilferage and shortage) is considered as a single parameter.
2. no incentive will be awarded for DEPS of 25% or more 3. Genuine reasons will be considered (e.g. Political disturbance) will be considered 4. DEPS due to hub operations will be also be considered.
Expected Cost to Company (per month):
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1. Percentage of distance: Rs 629436 2. Flat rates : Rs 429200 3. Scale Based : Rs 547317 Second alternative (per trip basis): The previous incentives were calculated on monthly basis. An alternative to this is that incentives can be calculated on per trip basis. For variable rates penalty will be charged @20% only on incentives above Rs 500 on a per trip basis. For flat rates penalty will be charged on all rates @20% of incentive. The following are the incentives which are calculated. Table 3- Per trip basis (a)
route code route S0415 BRGH-KGPB-KOLH S0414 KOLH-KGPB-BRGH S0411 PNQC-PNQH-BWDH S0410 BWDH-PNQC S0376 RNCB-JSPB-BRGH S0375 BRGH-JSPB-RNCB
route type distance in kms scheduled trips incentive/trip incentive/month no of vehicles total incentive/route Short Haul 200 30 100 3000 1 3000 Short Haul 200 30 100 3000 1 3000 Short Haul 220 30 110 3300 2 6600 Short Haul 220 30 110 3300 2 6600 Short Haul 225 30 113 3375 1 3375 Short Haul 225 30 113 3375 1 3375
Table 3- Per trip basis (b)
distance in kms incentive/trip penalty/trip scheduled trips incentive/month no of vehicle total incentive/month 200 250 50 30 7500 1 7500 200 250 50 30 7500 1 7500 220 250 50 30 7500 2 15000 220 250 50 30 7500 2 15000 225 250 50 30 7500 1 7500 225 250 50 30 7500 1 7500
Expected Cost to Company in Rs
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1. Variable Rates: 3814110 2. Flat Rates: 15588750 Third alternative (on basis of ‘turnaround time’) Another alternative can be based on turnaround time since each driver completes different number of trips on different routes Example
TRIPS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 TAT 1 2 3 4 5 6 7 8 9 TOTAL 100 105 110 114 119 124 129 134 139 143 148 153 158 163 168 172 177 182 187 192 197 201 206 211 216 221 226 230 235 240 5100 200 220 240 260 280 300 320 340 360 380 400 420 440 460 480 5100 300 347 393 440 487 533 580 627 673 721 5100 449 542 635 729 822 915 1008 5100 500 640 780 920 1060 1200 5100 600 810 1020 1230 1440 5100 785 1112 1438 1765 5100 1000 1700 2400 5100 1000 1700 2400 5100
Incremental scheme 1) 2) 3) 4) Incentive is calculated on a per trip basis. Incentive increases after every trip as shown in the table. If a driver fails to reach on time on a particular day then incentive given will be equivalent to that given on 1st trip and the cycle will continue. Total incentive which a driver can earn every month=Rs 5100 Total incentive which a driver can earn every year=Rs 61200
Expected Cost to Company: Rs 204000 Note: The cost to company is calculated based on data which does not remain constant. Hence the CTC calculated is the maximum possible CTC which can be incurred.
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2.4 Scope and Limitations Project scope Project scope includes Causes that can be converted into straight line improvement such as - Traffic jam - Unnecessary halts - Delays at check post - Fuel consumption - Speed Limitations Project scope does not include Genuine reasons such as - Poor road conditions - No entry zones - Political issues - Vehicle Breakdown - Delay in advance payment from vendor
Limitations
A major limitation of this project is that it’s CTC (cost to company) will keep on fluctuating since it depends on parameters like scheduled trips, and number of vehicles which keep on changing.
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On time delivery also depends on efficiency in Hub operations which is not included in this project.
Chapter 3 3.1 Analysis and Findings (graphs) Based on the questionnaire designed a survey with sample size consisting of 70 drivers was conducted. The major heads of the questionnaire along with their findings and analysis is as shown below
Halts remain the most important issue when it comes to reducing time delay.
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If halts are reduced then consignments can reach their destination on
time. The transit time is set after considering traffic. Hence further delay due to traffic is not acceptable
Although road conditions are poor, it is not in company’s hands to improve or fix the roa
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Check post form a major obstacle during transportation. Drivers can speed up clearances at check posts.
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Although there is delay in getting payments from vendors, drivers generally blame hub officials for the delay.
Critical region is a region which cannot be moved or shifted. If there exist a region then drivers can speed things up so that they can reach and leave this region early.
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Vehicle breakdown generally does not happen and in rarest of rare cases it is the vendor who takes the responsibility.
Managing political issues is not in the hands of company. Hence not much can be done.
Rest here indicates whether drivers are physically and mentally fit to drive the vehicles.
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Even after completing all formalities at hubs drivers take time to depart from the hub. Just as drivers take time to depart, they take more time to report at the hub.
Chapter 4 4.1 Conclusion 1. The following can be one of the many ways through which an incentive program can be designed. Incentive program is designed using two approaches 1. Operational (routes, distance, transit time) 2. Motivational (Inam … a driver incentive program)
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Operations form back end of the project whereas marketing and incentives through human resource will form the front end of the project. 4.2 recommendations 1. More focus should be given on tangible as well as intangible benefits and the company should send a message that they care for welfare of drivers.
Annexures (questionnaire)
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Future Supply Chain Solutions Limited
Feedback Form Driver's Name:Mobile no :Vendor's Name :Route :-
Questionnaire:1. How many halts do you take on average? a) 1 c) 3 b) 2 d) > 3 2. Do you always get affected by traffic? a) Yes b) No 3. How are the road conditions on your route? a) Excellent b) Good c) Bad d) Worse 4. How long do you wait at check post? a) Less than 1 hour b) Between 1 to 3 hours c) Between 3 to 5 hours d) More than 5 hours 5. Do you get late in getting advance payment from vendor? a) Always b) Often c) Sometimes d) Never 6. Is there a specific region on the route where you face problems? a) Yes b) No 7. Is vehicle breakdown a cause of late delivery? a) Always b) Often c) Sometimes d) Never 8. If there are political issues do they affect your transport? a) Always b) Often c) Sometimes d) Never 9. Are you getting enough rest before travelling? a) Yes b) No 10. Do you get late while departing from origin hub? a) Yes b) No 11. How long do you take to report at the hub/branch after entering the premises? a) Less than 1 hour b) Between 1 to 2 hours c) Between 2 to 3 hours d) More than 3 hours 12. According to you what should be the solution for on time arrivals? ___________________________________________________________ ___________________________________________________________ 13. Any other feedback you would like to give? ____________________________________________________________ ____________________________________________________________
Signature:________________
Date:________________
Driver of the month
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Drivers Of The Month (Photos)
Inam … a driver incentive scheme Instructions: Registration 1) Registration will be done in a team of two. 2) Forms will be filled separately. 3) Drivers should report every month to update their registration. Evaluation 1) Drivers will be Evaluated on the basis of 1. On time arrivals 2. In case of a tie 'On time arrivals' > 'Route Distance' Appraisal 1) Incentive to be awarded. 2) Top 10 drivers will be declared as drivers of the month. Score card 1) Depending on the Score a Grade will be alloted. 2) Incentive to be awarded will depend on the rank alloted.
References and Bibliography
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1. Google 2. Wikipedia 3. Future Supply Chain (Website) 4. Future Supply Chain (Data) 5. Network Monitoring Cell (Data)
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