Cscmp Toolbox - Comprehensive Cases - Indian Mc Donald\'s and the Dabbawallahs PDF

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CSCMP Toolbox - Comprehensive Cases - Indian McDonald's and the Dabbawallahs

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Indian McDonald's and the Dabbawallahs

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Instructor's Note: This comprehensive case covers a broad range of points about all seven logistic principles. It discusses one of the world's largest fast food restaurant chains, McDonalds, and some of the issues they face in foreign expansion-in particular the expansion into India and the competition that they face from the dabbawallahs. India seems an unlikely market for McDonald's. The majority religion, Hindu, considers cows sacred, and off the menu. So much for the Big Mac. A substantial minority religion, Islam, forbids eating pork, eliminating bacon and sausage from the menu. So much for the bacon, egg, and cheese biscuit for breakfast.

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In line with these diet restrictions, many Indians are vegetarians, so India doesn't fit the traditional model of an American McDonald's market. Welcome, then, to the land of the McVeggie, the McAloo Tiki, and the Chicken Maharaja Mac. McDonald's India has a major presence in Mumbai, formerly known as Bombay. These passages from the city's website put it in perspective:

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“Ancient yet modern, fabulously rich yet achingly poor, Mumbai is India in microcosm. Once a sultry tropical archipelago of seven islands, and the Raj's brightest jewel, Mumbai was the dowry of Portuguese Princess Infanta Catherine de Braganza who married Charles II of England in 1661. Today it's a teeming metropolis, commercial hub of an old civilization seeking to find its place in the New World Order. Forty percent of India's taxes come from this city alone, and half of India's international trade passes through its splendid natural harbour. In fact Mumbai is the very soul of human enterprise. At the city's Stock Exchange, millionaires and paupers are made overnight, and the sidewalks are crowded with vendors hawking everything from ballpoint pens to second hand mixies. Everyday, half of Mumbai's population commutes from far-flung suburbs to downtown offices, banks, factories and mills for a living.” http://www.mumbainet.com/cityinfo/index.htm McDonald's has over eighty stores in Mumbai and faces fierce competition from what appears an unlikely source-a cooperative of semi-literate delivery workers. The 5000 dabbawallahs-the name means 'lunch box delivery man'-deliver 175,000-200,000 boxed lunches daily to hungry workers around this city of more than 12 million people. The lunches are homemade by mothers, wives, and sisters, then delivered sometimes many miles away to breadwinners only a few hours later. They are part of a cooperative, the Tiffin Box Cooperative, which got a Six Sigma designation from Forbes magazine. What does that mean? The dabbawallahs make less than one mistake per million deliveries. The actual "products" of McDonald's and the dabbawallahs are quite different. McDonald's makes consistent sandwiches based on supply chain practices that resemble those in Europe or the United States. The Chicken Maharaja Mac should be the same in each of McDonald's 80-plus stores in Mumbai. The dabbawallahs, however, deliver diverse home-cooked meals in boxes designed to keep the food as close as possible to its home-cooked origin. No meal is the same. Yet McDonald's and the dabbawallahs compete with one another because both feed lunch to hungry workers. The real competition takes place between supply chains-sourcing, conversion, and logistics. McDonald's manages its entire supply chain, identifying and qualifying sources of ingredients, converting the food to a more useful form in its stores, and moving and storing ingredients and supplies on the way to the store. The dabbawallahs outsource conversion and sourcing, offering logistics services to their customers. Customers do the conversion and sourcing for the lunches; the cooperative provides the tiffin boxes. The dabbawallahs take care of delivery and reverse logistics for the boxes, while the actual family member prepares

CSCMP Toolbox - Comprehensive Cases - Indian McDonald's and the Dabbawallahs the meal, converts the food from raw to cooked, allocates the amount of food for each dish, and otherwise changes it into a more useful form. Conversely, McDonald's workers cook the food and serve it across the counter at the store. For McDonald's, meeting its customers' needs for meals that fit their religion is a major supply chain issue. McDonald's prepares vegetarian meals separately from meals with meat. They use dedicated equipment; employees in the vegetarian and non-vegetarian sections of the stores wear different colored aprons. They keep vegetarian and non-vegetarian food separate throughout the supply chain from supplier through procurement, distribution, cooking, and serving. For the dabbawallahs, correctly preparing the food is not an issue. The family member who prepares the meal takes care of that. The tiffin boxes are color coded and labeled with simple acronyms, such as HO for hospital, because many dabbawallahs read poorly or don't read. Another code on the tiffin box ensures that returns promptly to where it started, to be used again another day. Dabbawallahs deliver to many customers who observe religious dietary rules, so a faulty delivery could easily offend them. Accuracy is clearly at a premium. McDonald's works with a variety of Indian suppliers and the Indian government to construct a safe, hygienic, supply chain. One example is the McVeggie. The special vegetarian sauce comes from MNS Bector Specialty Foods, Phillaur, Punjab; fresh iceberg lettuce from Trikaya Agriculture, Talegaon, Maharashtra; batter and breading from Cremica EBI, Ludhiana, Punjab; vegetable patties from Vista Processed Foods Pvt. Ltd., Taloja, Maharashtra; buns from Shah Bector & Sons, Khopoloi, Maharashtra, and cheddar cheese from Dynamix Dairy, Baramati, Maharashtra. McDonald's works closely with each of these firms to assure processing, handling, safety, and hygiene meet international standards. In addition, McDonald's uses Radhakrishna Foodland as its primary logistics firm. RF's services include procurement, quality inspection, storage, inventory management, deliveries, data collection, record keeping, and reporting. Therefore, McDonald'suses RF as its single source for logistics services, including dry storage, cold storage, and transportation. The dabbawallahs, however, have the "pioneering" advantage, as their existence dates to the late 1800's when Bombay's growing workforce needed feeding. More than a century later, Mumbai's middle class workers still prefer home-cooked chapattis. The system works in Mumbai because offices are primarily located in the south of this long, narrow city, while residences are primarily in the north. This dichotomy makes the logistics process work well in both directions. Dabbawallahs pick up food from houses and caterers early in the morning on the north side of Mumbai. They put the meals in tiffin boxes at pick up, then take the boxes to the nearest railway station where they are sorted by destination and loaded into large, rectangular trays. Each tray holds about forty boxes. The trays travel by train down the line to the south. There another set of dabbawallahs take the boxes meant for that station off the train and put on the boxes meant for stations down the line, a process that must take place in the twenty seconds that a Mumbai local stops at each station. The boxes are sorted by locale and then taken by handcart or carried to their destinations. The boxes reach the office reception areas by 12:30 p.m. A couple of hours later, the same dabbawallahs pick up the boxes from the same spots and execute the process in reverse. The dabbawallah system is distinguished by its low cost, low capital intensity, and extraordinary service. The service costs each customer about 3000 rupees a month-about four dollars. With the Six Sigma designation, Forbes ranked the dabbawallahs alongside the supply chains of GE and Motorola. When you consider that they deliver 175,000+ lunches a day with less than one mistake, they probably deserve it. McDonald's must involve the customer in the final stage of logistics. The customer must go to the store to get the food; the dabbawallahs bring it much closer to the worker's station. So the two supply chains differ greatly. The competition between the low-tech solution to lunch and the thoroughly modern, westernized approach will play out eventually. Meanwhile, the workers of Mumbai can choose between the two.

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