Executive Summary
CIO 100 Winner: When you are in the manufacturing business, freight charges consume a huge chunk of your budget. But this CIO, with less than Rs 5 lakh found a way to deal with trucker cartels and improve loading efficiency, saving his company over Rs 12 lakh a month.
Last year, the largest cement manufacturer in North India, Shree Cement spent nearly 20 percent of its total cost of production - a whopping Rs 349 crore - just in freight. And that wasn't all.
Case Study Highlights
The company's transportation needs were met mostly by a bevy unorganized truckers. The prices they charged were essentially controlled by truck unions or local trucker cartels. They practically "dictated freight rates," says Rajat Sharma, senior GM-IT, Shree Cement. Because they had the upper hand, truckers didn't always commit to a job and, often, simply didn't show up. And when they did, the amount of time it took for them to load up, deliver, and return took too long.
Sharma says the company needed to reduce the "cost of freight by breaking the transporters' cartel and improving a truck's turnaround time."
His solution was something no other player in his industry had tried: a freight bidding system, clubbed with an RFID-based vehicular access control system.
The bidding system allows transporters to bid for freight on various routes. A bid for a consignment is open for 30 minutes, after which the lowest bid wins. The company defined basic freight rates on a per-metric-ton-per-kilometer basis. This way, Shree Cement took control back in its hands.
The vehicular access system, which is integrated into the freight bidding system, governs the movement of every truck once it reports for duty. From the moment a truck enters the plant, is loaded and weighed - all of it is automated by an RFID activated system. This has helped cut truck turnaround time and consequently truck availability.
The project, which was launched in November 2008, is generating benefits at multiple levels. First, it's won over truckers by reducing the amount of time they waste waiting for a load, both inside and outside the plant. By integrating the system with Shree Cement's accounting system, truckers are also paid sooner. It reduced the burden on those involved in logistics and accounting at Shree Cement. Elsewhere, it helped contract laborers by introducing efficiency into the system which meant that they have more bags to lift and hence earn more money. Finally, it allowed Shree Cement to save Rs 12.24 lakh every month.
The Person Behind It
“As another first in the cement industry, we implemented a RFID-based truck movement tracking system."
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