Strategic Management 1 Case Study On Indian Railways
Strategic Management 1 Case Study On Indian Railways
Strategic Management 1 Case Study On Indian Railways
Group: Bhoothnath
Members
Ayush Bindal -2009120
Aditi Goel -2009117
Kanika Sharma - 2009115
Govind Chipalkatti - 2009106
Gaurav Modi - 2009082
Janit Yadav - 2009088
Introduction
Indian Railways (I R ) is the state- owned Railway Company of India, which owns and operates most of
the country's rail transport. It is overseen by the Ministry of Railways of the Government of India. Indian
Railways has one of the largest and busiest rail networks in the world, transporting over 18 million
passengers and more than 2 million tonnes of freight daily. It is one of the world's largest commercial
or utility employers, with more than 1.4 million employees. The railways traverse the length and
breadth of the country, covering 6, 90 9 stations over a total route length of more than 63,327
kilometers (39,350 mi). As to rolling stock, IR owns over 200,000 (freight) wagons, 50,000 coaches and
8,000 locomotives. Railways were first introduced to India in 1853. By 1947, the year of India's
independence, there were forty-two rail systems. In 1951 the systems were nationalized as one unit,
becoming one of the largest networks in the world. IR operates both long distance and suburban rail
systems on a multi- gauge network of broad, metro and narrow gauges..
History
A plan for a rail system in India was first put forward in 1832, but no further steps were taken for
more than a decade. In 1844, the Governor General of India Lord Hardinge allowed private
entrepreneurs to set up a rail system in India. Two new railway companies were created and the East
India Company was asked to assist them. The first train in India became operational in 1851.
The Second World War severely weakened the railways as trains were diverted to the Middle East and
the railway workshops were converted into war ammunition workshops. At the time of independence
in 1947, a large portion of the railways went to the then newly formed Pakistan.
The existing rail networks were abandoned in favour of zones in 1951 and a total of six zones came
into being in 1952. As the economy of India improved, almost all railway production units were
diagnosed. By 1985, steam locomotives were phased out in favour of diesel and electric locomotives.
The entire railway reservation system was streamlined with computerization in 1995.
Some Facts
1. The total route length of Indian railway is approximately 63,000 kms.
2. The first electric train was opened in February 1925 on Mumbai suburban railway on Mumbai
Victoria Terminus (VT) – Kurla branch line.
3. As on 31st march, 20 0 4 the electrified route was 17,503 kms.
4. The Indian railway is the largest in the Asia and second largest in the world after the USSR.
5. The total number of railway station in India is more then 7,000.
6. The Indian railway operates approximately 7,525 trains’ daily covering 7,031 railway stations.
7. The largest platform in India is at Kharagpur. The length is 2,733 feet. It is situated in west
Bengal.
8. The longest railway tunnel is Konkan railway tunnel i.e. 65 kms.
9. The longest rail bridge is across Godavari River. The length is 10,052 feet.
10. The largest marshalling yard is at Mughalsarai.
11. The third class in the Indian railway was abolished in 1974. Now there are s even classes - AC-
1s t, AC-2T, AC-3T, Sleeper, AC chair car, first class and second class.
12. Railway set up a fund in 1974 to give financial assistance to victims of railway accidents.
Pest analysis
Political
The IR is deeply entrenched with Indian politics it is not just owned by the government. It is a separate
ministry. The IR is at the mercy of the Indian budget and co-operation. There has always been concerns
over regioinalism and political gains derived out of the department. The head of railways is also a
political minister so the discrepancies in politics most deeply effects the IR.
Economic
The economic conditions of India are very robust and promising. The high growth coupled with
increasing willingness to spend and rising affordability have the rub of green for the railways. The
increasing number of middle class is the most important factor in the growth of demand but this
situation has led to a demand surplus difficult to manage and an operational nightmare.
Social
The IR has very high responsibility towards the society and public. The middle class in India looks to
railways as a special entity and has a deep connect with it. The IR has a responsibility to help the
achievement of the economic objectives of balanced growth and industrialization. The IR has a
peculiarly high demand amongst the families which make for their major customer segment.
Technological
The IR has been a large laggard in this department. The modern it MIS and ERP systems have a lot to
offer in this regard. Although the railway started with the e ticketing it did not manage to eliminate the
hassle at the railway stations. The use of modern technology such as sms service, GPS systems ticket
kiosks and more agents are the need of the hour.
SWOT ANALYSIS
Strength
Weakness
Opportunities
Improvement of other infrastructure like roadways can result in customers switching to other
modes of transportation
Low cost airlines post competition for the Indian railways.
Absence of passenger facility will drive away the customer to private modes of transport.
Indian railways is losing its market Share in passenger and freight Business.
There is capacity constraint – how to balance demand against available capacity.
Impeditements
Locomotive augmentation is hampered by the capacity and manufacturing constraints at the
two locomotive manufacturing units at Varanasi and Chittaranjan.
Only a paltry 31 to 51 % of the contracted quantity of Wagon are being supplied by the public
and private Wagon manufacturers
The process of capacity augmentation is marker with official meddling, missed targets, cost
escalations and shoddy planning
Customers feel that mechanism of supply of rakes to customers is inefficient
Quality of periodic maintenance in locomotive sheds was poor as a substantial 25 per cent of
locomotives failed on account of poor workmanship. The time involved in train examination in
wagon maintenance depots continued to be beyond the envisaged norm due to operational and
manpower constraints apart from deficient infrastructure
The freight incentive scheme introduced to improve the market share was not successful.
Secondly scheme wise data not maintained and performance of the individual scheme was not
evaluated
New Strategies
Need to expedite the process of augmentation of rolling stocks so that it matches with the
growth of the freight traffic in India
Contract management policies should be made very stringent and defaults in supply by both
public and private manufacturers should be strictly dealt with
Focus on enhancing the quality of locomotive maintenance and address the operational and
infrastructural constraints
Basic facilities should be provided at all the freight terminals. The process of Modernization of
freight terminals should be expedited and implemented in all the zones
Need to evaluate the incremental loading derived from incentive schemes and accordingly will
modify the scheme to capture the market share
Ned to attract private sector financing in some of the infrastructure projects.
Need to assess the reasons behind the current state of affairs. Also need to explore new ways to
capture traffic
Suggestions
Control Office Applications = TVC, MDU, WAT, KUR AND KGP AND Entire network of TVC – HWH
Section before the end of this year
Networked Crew management system for Central and western Railway
MIS – Data Warehousing and Data Mining – Initially for one zone and one division planned
Payment gateway for more major customers
Web enabling of FOIS
Revenue Accounting System
RFID – immediate need for Pilot Project
Workshop Computerisation
Project to be completed in 2 phases.
1st Phase includes 16 workshops on which the work is under progress. To be completed by the
end of this year
In phase – 2, 15 more workshops will be considered for implementation. Estimate sanctioned.
Three major modules
o Rolling Stock Management (RMS)
o Production Planning and Control (PPC)
o Machine & Plant (M&P).
Training of staff and procurement of hardware is in progress.
Other projects
Rail Budget Compilation System (RBCS) . A web-enabled works programme management system
is being developed and linked to same
Comprehensive Accounting & Transaction System (CATS) for RDSO
Comprehensive Pay Roll Processing System (CPPS) for DLW
Railway Officers Information System (ROIS)
Data Center for Zonal railways
MIS for zonal railways
It strategies of IR
Applications should transcend boundaries of railway organisation and go into the domain of the
customer.
Implement decision support systems
Integration with communication systems and other technologies.-use of Internet, mobile
phones, hand held terminals, universal product code readers etc
Manage continuous improvement in technology
Ticketing Solutions (Centralised, Stand-alone, Mobile, Smart Card, Self Service, Internet etc.);
value added services to customer
On line and e-enabled Freight Management System
Integrated revenue accountal system
Train Charting and Control Systems
RFID based Wagon/Parcel Tracking Systems
Integration of Railway Systems with Railway Station Systems
Integrated Materials Management System / Fixed assets mgmt
Safety Systems (GPS, Embedded Systems)
GIS based Track Maintenance Systems
Inbound logistics
Stocking approximately one lakh different type of item in approximately 200 stores depots
spread throughout the country.
Arranging inspection of these stocked items.
Distribution of these stocked items by multi-modal logistics to various consumption centers.
Operations
Indian Railways has one of the largest and busiest rail networks in the world, transporting over 18
million passengers and more than 2 million tonnes of freight daily. It is one of the world's largest
commercial or utility employers, with more than 1.4 million employees. The railways traverse the length
and breadth of the country, covering 6,909 stations over a total route length of more than 63,327
kilometres (39,350 mi). As to rolling stock, IR owns over 200,000 (freight) wagons, 50,000 coaches and
8,000 locomotives. This function due to its strategic importance needs to be most closely maintained
with the IR.
Outbound Logistics
The IR has a big responsibility to transport the various freight and cargo to numerous destinations. The
complexity of operations of the IR is a nightmare. The logistics for the freight and other passengers’
posses the biggest challenge to the IR. The scheduling and utilizing of the resources of the IR has been
the primary agenda for many years and the constraint and pressure of Govt. budgets calls for more
professional and focused management.
Marketing and sales
The marketing of IR has been very limited and in this sector the govt. needs to borrow cues from the
private sector. The IR does not create any aspiration drive for the public on the contrary it deters many.
The sales point and customer experience at the point of sales does not have much to write about.
Services
The IR primarily falls in the service sector domain and hence the importance of satisfying the customers
becomes further more paramount. The services of the IR currently are not properly augmented there is
scope for development of services like motels restaurants phone tracking and sms updates. Apart from
this there is very little emphasis on the quality of service given presently.
Secondary activities
Procurement
Procurement & distribution of Spare parts, Oil, Greases and Lubricants & other related general items
to consignees spread over 7300 stations over all Indian Railways for day to day operation,
maintenance of trains, rolling stock, etc.
Maintenance of Coaches, Wagons and for in-house manufacture of items.
Procurement and supply of sub assemblies and components to the production units for manufacture
of new Diesel Locomotives, Electric Locomotives, Coaches and Wagons.
Firm infrastructure
Technology development
The technology has lot to offer to the IR the lack of use of technology has been one of the severe
criticisms for the IR the orperational complexity of the railways can be better managed through active
use of MIS and ERP systems. Also this function can be very conveniently outsourced to increase the
efficiency of the entire IR.
Outsourcing non value added activities
In this initiative, the control of the strategic assets would remain completely with the government and
operations would be funded by the users resulting in true public private partnership initiative.
Corporatization:
The Railways should have a public sector holding company with the board of directors headed by an
Executive Chairman. The mandate to the company should be to establish & operate the railways net
work efficiently and generate surplus revenue for redeployment into existing and new projects. The
government funding of new infrastructure projects through budget along with operational subsidies on
certain sectors and activities have to be accepted for say first ten years till new model stabilizes.
Fortunately for the railways, there is no problem of finding markets with ever growing population. They
just have to be competitive with other alternative means of transportation through technology up
gradation and passenger focus.
The restructuring of Railways therefore should aim at focus on infrastructure development, technology
development, and operational efficiency. The first two aspects are of strategic importance and therefore
should be handled through Strategic Business Units. Weakness of the railways is in operational efficiency
and therefore restructuring of the operations should aim at improving the same.
Own Your Wagon Scheme has been in operation in a very limited sense. I would like to suggest a
separate subsidiary company “Indian Railways Rolling Stock Company” (IRRS), under the holding
company, which would own the rolling stock, ferry the cargo & passengers and be the user of the
railways network and infrastructure. IRRS should have the 99 year lease for use of the network with
lease rentals to be paid to the respective SBUs for providing infrastructure and technology along with
maintenance services. IRRS should therefore focus on only operations. SBUs for infrastructure &
technology would be responsible for their respective activities at their own costs recovered through
rentals & annual maintenance contracts (AMC) from IRRS.
The IRRS should be the entity for partnership of Indian Railways with private companies & the public. It
can raise finances by going public and offering shareholding and long term bonds so that the rolling
stock is indirectly owned by the millions of shareholders and thousands of corporate entities. IRRS
should have only controlling interests through equity from the holding company for strategic reasons.
The net result of this approach would enable the political establishment to focus on budgeting only for
investments in infrastructure and technology on one hand and operational subsidy on the other hand. It
is needless to say that the operations should be generating enough revenue to offset the expenditure
and generate surplus. It is understandable that the decisions like passenger fares and freight rates have
to be decided in larger public interest and therefore an element of selective subsidy can not be avoided.
This approach will also take the pressure off the exchequer for funding resources for operations of the
railways freeing the same for infrastructure development. This would also bring in substantial
improvement in the customer orientation, operational efficiency and private sector participation in
management of services.
The Government of India should look forward for financial support to bridge the viability gap of
infrastructure projects undertaken through Public Private Partnerships.
PPP can be done in following scenarios:
Firstly, where the Government of India recognizes that there is significant deficit in the availability of
physical infrastructure across different sectors and that this is hindering economic development.
Secondly, where the development of infrastructure requires large investments that cannot be
undertaken out of public financing alone, and that in order to attract private capital as well as the
techno-managerial efficiencies associated with it, the Government is committed to promoting Public
Private Partnerships (PPPs) in infrastructure development.
Thirdly, where the Government of India recognizes that infrastructure projects may not always be
financially viable because of long gestation periods and limited financial returns, and that financial
viability of such projects can be improved through Government support.
The need of the hour is to develop new business models and invite domestic investment through PPP
mode in areas like new lines to world class stations, auto hubs to ancillary industries, manufacturing
units of rolling stock to multi–modal logistic parks, high speed train corridors to port connectivity and
multi-level parking to mine connectivity etc. Domestic investors have tremendous scope in Railways. It
will facilitate large quantum of investment in Railways and provide ready business to investors.
Therefore, it will be a win-win option for all.
Business model
Value Proposition: identifying and building competitive advantages that cannot be easily
replicated.
• Railway acts as a prime mover to the nation, ferrying people and goods across the places.
• To complete this Endeavour it uses approximately 65000 km of rail tracks and over 7151 railway
stations which forms the third largest network.
• IR owns a fleet of 222379 wagons, 42441 coaches and 7910 locomotives which acts as a
backbone of the entire rail system.
• It runs 160251 trains, including 9550 passenger trains, carrying about 1.6 million tonnes of
freight and about 15 million passengers daily.
• Indian Railway carries a huge variety of goods ranging from mineral ores, agricultural produce,
petroleum, milk and vehicles.
Value Configuration: Processes by which inputs are converted into finished products or services
Indian Railways carries 750 million tons of freight this year, more than the 726 million tons that
had been targeted, Batra said.
The utility expects to carry 6.5 billion people in the year ending March 31, 2007, compared with
6 billion people in the previous year, the official said.
Improving wagon mobility and availability by
reducing terminal detentions by increasing goods sheds working hours
improving the infrastructure at the goods sheds;
rationalizing maintenance practices by extending the maintenance cycle of closed circuit
rakes (CC Rakes) to 35 days/7500 kms from 15 days/4500 kms; introducing "premium"
examination at nominated depots with a validity of 15 days
using FOIS (freight operations information system) for better monitoring; complete roll-out
of rake management system module enabling on-line monitoring of freight train operations
Value Appropriation: Identifying Customer Needs, Creating awareness & getting Sales.
Tatkal scheme introduced in 1997 was revised in 2004. The scheme was further revised in 2009
allowing a reduced advance reservation period of 2 days
Dynamic pricing policy was introduced on 1.04.2007 for passenger fares through which varying
discounts were given for busy and lean seasons to attract traffic especially in the upper classes.
In popular trains, class-wise discounts indicated for the busy season were applicable throughout
the year
Upgradation Scheme: With a view to optimising the utilisation of available accommodation in
trains, a scheme was launched in 2006 to upgrade full fare paying passengers to higher class
against available vacant accommodation in all Mail/Express trains having sleeping
accommodation.
Frequent Travellers Scheme: To encourage passengers of higher class to undertake journey by
rail, a Frequent Travellers scheme was launched whereby a Frequent Traveller could redeem
points earned to get a complementary train trip after a certain number of reward points had
accumulated. Till 30th April 2009, 86,348 passengers had registered themselves under this
scheme, out of which 47,649 were active users.
Expansion of the computerized PRS and the Unreserved Ticketing System (UTS), along with i-
ticketing and e-ticketing have been a great convenience to passengers.
Launch of the 139 global enquiry system all over India has been a major passenger friendly
initiative. With the spread of the coaching information system, it has been possible to provide
updated information regarding running of trains. Public grievances, however, continued to be
aired regarding inaccurate information being given, especially with regard to the late running of
trains.
Under Station modernization (Touch & Feel scheme) station have been beautified by
improvements to circulating area, façade of station buildings and better lighting at platforms,
concourses etc.
Expansion
D) Shoulder Screening
Taking a Shoulder Screening cycle of 10 years, screening requirement every year will be 3230
km.
Taking block availability of about 2.5 hours per day, working of Shoulder Ballast cleaning
machine for about 24 days in a month (for 8 months in a year) and progress of about 250 meter
per gross block hour, each BCM would do about 120 km every year.
Total 29 SBCMs are required for this work.
NOTE: In calculating machine requirement 10% extra machines have been taken for taking care
their failures during service and for its schedule maintenance From above total requirement of
machines for periodic maintenance activities is as under:
PASSENGERS COMFORT
Clean Drinking Water:
Everyday 1.8 crore passengers need water, food, toilets, cleanliness, safety and security. To provide
basic facility of clean drinking water, bottling plants should be setup with the mandate that bottled
Fresh Water will be provided at stations at much cheaper rates.
Alerts:
The following initiatives for improving passenger and customer satisfaction should be taken:
PASSENGERS SAFETY
During1960s, the average number of accidents/year were around 1393 . However, the average number
of accidents/year came down to 866, 757 and 464 during1970s,1980s and 1990s respectively.
Accidents per million train kilometers were 5.5 during 1960-61 and this has come down to 0.65 during
2000-2001.
Broad causes of accidents on IR
Railway staff failure 65.67%
Equipment failure 08.44%
Failure of other than 17.46%
Railway staff Sabotage 03.45%
The following were the requirement of renewal :
Arrears of Track Renewals (BG) -12,260 Kms.
Distressed Bridges -262 Nos.
Overaged Signalling Gear -1,560 Stations
Overaged Coaches (BG) -1,322 Vehicle Units
Overaged Wagons (BG) -34,000
To reduce human failures, a major technical input of track circuiting in station areas has been inducted
in the system. To have faster and better communication, Walkie – talkie sets have been provided to
drivers & Guards of all trains. Train operation during foggy and inclement weather is monitored closely
to avoid any mishap.To monitor track geometry, sophisticated track recording cars, osillograph cars and
portable accelerometers are used. Nearly 10,000 accident-prone four-wheeler wagons CRT’s have been
phased out from the system in the last two years.
• Drivers and Guards are also being progressively provided with LED based electronic flashing
lamps.
• To reduce dependence on human elements and to prevent collision of trains, a device ‘block
proving axle counter’ has been installed at 175 stations.
• To detect ‘rail fractures’ and ‘weld failures’ double rai Ultrasonic Flaw detectors and Self
Propelled Ultrasonic Rail Testing cars are being procured.
• Modern simulators for training of drivers are getting installed and used in various training
centers.
• Automatic switching “ON” of flasher lights of locomotives in emergencies has been planned.
• Level Crossing having heavy traffic density are being progressively interlocked with signals.
Safety from Collisions: We have to go in for new, cutting-edge equipment to prevent accidents.
Anti-collision device (ACD) and train protection warning system (TPWS) are two such devices.
Unmanned Crossings: Accidents at unmanned level crossings are a source of deep concern to
all of us. Even now, there are about 17,000 unmanned level crossings. These should be covered
in the shortest possible time.
Training of loco pilots: To strengthen the skills and abilities of loco pilots, a state-of-the-art
advanced loco pilot training centre