The Supply Chain Game "Beer Game" questions & solutions - Role of Retailer, Wholesaler, Distributor or Manufacturer in Beer Game, How to reduce Bullwhip effect in Supply Chain Beer Game

                                                     The Supply Chain Game

Please find the game link below:

https://beergame.opexanalytics.com/#/

 The Supply Chain Game Questions

1. Are there certain actions or behaviors during the game that you did particularly well or badly? And why? 
2. In the supply chain game which role (Role of Retailer, Wholesaler, Distributor or Manufacturer) do you consider was most difficult to manage inventory? Explain why ?
3. In what ways do you think you could improve your own practice in relation to gathering information and intelligence that will help to reduce the bullwhip effect? 

Solution to Supply Chain Game "Beer Game"

1. Are there certain actions or behaviours during the game that you did particularly well or badly? And why?

Initially I was not able to place orders accurately due to which stock out cost was getting increased every time I place an order due to which I lost game many times and contributed to bullwhip effect by big values above than 4. Later on I started noting my orders on notepad along with replenishment period to get exact number of units to be arrived at my place in every week which helped me to overcome challenges related to stock out cost but this time, I was overburdened with holding cost due to which I lost the game again. Next time, I kept on placing orders keeping in view my ending inventory levels and replenishment period. Since incoming order was unknown and difficult to predict, however playing many times, I got little bit idea of incoming order and started placing bigger orders in first two week period , then up to 8 to 10 week period one or two units greater than incoming order and then placed orders equal to incoming orders from week 11 to week 16, then increased orders by one or two units of incoming order in next 3 to 4 weeks and then placed less orders from week 20 to 26 than incoming order and then placed orders equal to incoming orders till week 30 and in last 6 week orders I placed orders keeping in view my ending inventory and incoming orders. Repeating this process a bit up and down multiple times, I was able to reduce bullwhip effect finally and won the game too. 

2. In the supply chain game which role (Role of Retailer, Wholesaler, Distributor or Manufacturer) do you consider was most difficult to manage inventory? Explain why?

Role of manufacturer was most difficult while handling inventory at its level. Since it was unpredictable when how many incoming orders will come every week, issue of holding extra inventory came into force every time I played as manufacturer in the game. Sometimes incoming order was very low and even zero and sometimes incoming order tends to reach upto 20 orders creating a dilemma in placing orders from my side. Since manufacturer is last participant in supply chain system and even switching on visibility mode and getting to know exact number of units ordered by customers, it was difficult to make adequate forecast on number of units to be ordered every week in order to reduce holding cost. When I reduced number of units ordered playing again, I was burdened with stock out cost. So managing an adequate inventory at manufacturer level to reduce holding and stock out cost was very difficult to achieve. Hence from my point of view, it was manufacturer where managing inventory was toughest task. I played multiple times as manufacturer applying all my logics and reasoning to win but lost every time. I adopted multiple strategies such as less units ordered in beginning weeks, more units in middle weeks, units equal to incoming orders in later weeks and mingled this strategy here and there but still not able to win the game and contributed to bullwhip effect.

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3. In what ways do you think you could improve your own practice in relation to gathering information and intelligence that will help to reduce the bullwhip effect?

Getting real time information on actual demand from customers is utmost important to plan and forecast demand of products to counter bullwhip effect and reduce holding as well as stock out cost. All Participants of supply chain system should be integrated on a common platform using ERP system to have adequate information of stocks available with each participant and actual demand coming from customer side so as to build safety stock in order to cope up with contingencies and bullwhip effect as arisen during Covid 19 pandemic situation. Information on Replenishment period is utmost important in countering bullwhip impact. So it is very necessary to know exact location and geographies of participants of supply chain system so as to avoid delays in shipment and transportation. A good and healthy relation and effective communication among all participants on sharing real time information on demand forecasting, inventory and shipment information will help to carve out bullwhip effect in supply chain system. Implementation of Collaborative forecasting system in supply chain will help to supervise stock Keeping units and sales status on real time basis and predict demand more adequately and with more visibility. Supply chain performance can be improved by sharing forecasting information such as sales and inventory data, planned orders and promotion information by all participants of supply chain system. Overall, real time information on actual flow of demand from customers for which retailers play an important role, replenishment period, collaboration of participants’ data on inventory planning and demand forecasting, building up of safety stock, implementation of ERP system to gather real time information related to inventory available with participants and collaborative forecasting system are major tools in relation to gathering information and intelligence that will help not only to reduce bullwhip effect but also fulfill customers’ needs and increase profitability.

Supply Chain Case Study solution: Pandemic gives hyperlocal model a new lease of life Supply Chain Management Case study solution MBA Project and assignment solutions MBA Online Coaching, Home Tutor &Tuition

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Case Study: Pandemic gives hyperlocal model a new lease of life Supply Chain Management Case study solution

Case study source: https://tech.economictimes.indiatimes.com/news/internet/pandemic-gives-hyperlocal-model-a-new-lease-of-life/75072580

1.      “Everyone is jumping onto it right now, but the underlying supply hasn’t changed. We’re staying away from it,” said Albinder Dhindsa, co-founder and CEO of grocery retailer, Grofers. What do you think are the complexities associated with hyperlocal grocery delivery business model? Discuss in detail. 

2.      “Pandemic gives hyperlocal model a new lease of life”. Do you think this boost in business will be short lived or will it create an everlasting impact on the hyperlocal ecommerce business scenario? 

3.      Compare Bigbasket and Grofers supply chain capabilities. Which do you think is superior in meeting market requirements and is more sustainable? Justify your answer with suitable reasoning. 

4.      COVID-19 is a black swan event but supply chain disruptions around the world are a common phenomenon. Produce a detailed discussion on how businesses can prepare themselves to minimize the impact of future supply chain disruptions. Compare the advantages and disadvantages of local vs global sourcing. 

1.“Everyone is jumping onto it right now, but the underlying supply hasn’t changed. We’re staying away from it,” said Albinder Dhindsa, co-founder and CEO of grocery retailer, Grofers. What do you think are the complexities associated with hyper local grocery delivery business model? Discuss in detail. 

Hyper Local grocery business in India is an active move by new generation entrepreneurs for Indian market where all types of retail business including grocery is unorganized and unstructured and there is a huge potential of growth into it. There is a growth of 80 % in startups of hyper local delivery business since 2014 in India¹. More than twenty such start ups came into existence during 2018-19 but many of them have shut down their business with eight to ten months of operations due to under weighing complexities associated with this business model and to it². The major complexities and challenges related to hyper local grocery business includes³-

Partnering with local retailers as suppliers

Convincing local retailers to become supplier is very difficult to attain as most of retail outlets care for life time value of customers and repeat purchase that takes place due to good conduct with customers, selling goods on credit, socializing with them and treating customers as friends and relatives benefits of which is ripped over a period of time which is lagging in hyper local delivery business. Most of famous grocery stores are not present due to absence of peculiar showcasing of such stores on these apps. Many retailers are uneducated and technophobic which also creates complexities in conduct of business⁴. This has led to set up of own warehouse of grocery items for many hyper local grocery delivery company insisting them to invest huge chunk of money in inventory of grocery items.

Inventory management

Local merchants are not well organized and structured. Most of them do not follow any inventory management system. Keeping a record of inventory without knowing availability of such inventory with partner merchants puts the company on risk of mismanagement of inventory and making a particular inventory available and delivering it on a particular location for customers within a specified time frame becomes difficult in real time scenario⁴. Setting up own warehouse and inventory puts extra cost of handling such inventories to the company narrowing down profit margins.

Poor or delay in delivery

Delivering groceries with in promised time frame is the major focus of hyper local business but due to poor infrastructure such as heavy traffic on roads and delay in searching address of delivery makes last mile delivery delay making customers unsatisfied with service of company leading to switching of customers either to other such app or mostly local grocers as most of local grocers are availing free delivery of grocery directly to customers where delivery time is very less and urgent delivery facility is also provided by such local grocers⁵.

Issues faced by delivery persons

Due to unavailability of all products ordered by customers in a single partner store, these delivery executives have to move from one store to other store to collect inventory and reaching to customers within same stipulated time period of delivery seems impractical and creates chaos in case they have to collect goods from store which is quite far from other store and customer delivery address is also in different direction⁵.

Unreliable delivery service

Shortage of skilled delivery executives and absence of large fleet to manage delivery system efficiently may ruin success of this business model. Even if they are present, they are very irregular and unreliable posing threat to efficiently manage delivery service on time.

Quality issues related to Perishable & Non branded items

Perishable nature products if not reached to customers in fresh conditions and non branded products if not up to the mark of customers will lead to return of such products thus increasing operational cost of company and moving of customers away from the company to other such business apps.

Issues related to return and refund of products

In case customers return goods, many partner stores are not willing to take it on return and refund money creating an issue to company to keep them convincing that this is policy of company to take goods on return and refund money in case buyer returns the product. Due to it, many partners do not hesitate to even break contract of collaboration.

Irregular surge or decline in orders

Many times company suddenly gets sure or decline in orders creating problems in managing operational efficiency during such period and such time they need to adjust delivery boys, fleets and other operational capabilities to meet such requirement which creates problem for the company⁶.

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2. “Pandemic gives hyper local model a new lease of life”. Do you think this boost in business will be short lived or will it create an everlasting impact on the hyper local ecommerce business scenario?  

Covid 19 outbreak has changed the mindset of buyer and seller and popularity of hyper local business model has been witnessed during this pandemic. In initial period of lockdown, hyper local deliver companies have seen three to five times surge in demand of hyper local delivery than pre covid (Praharsh Chandra, co-Founder and COO, Shadowfax). Companies like Grofers, Big basket and Amazon Fresh have seen a surge of approximately 45 % in its orders during lockdown and 18 % in its order value. Flipkart has launched its own hyper delivery service called Flipkart quick and Paytm Mall is in process of partnering with 1000 local merchants to cater needs of hyper local service. Swiggy too in the race has opened Instamart with 2500 products in August 2020.⁷

This pandemic has paved a new way of convergence of offline and online in a fast and positive fashion which was taking placing since last few years. This boost in business will create long lasting impact  on Hyper local E Commerce business and facilitate not only survival but tremendous scope and opportunities in terms of huge revenue potential, growth and success in long run once pandemic will be over. Entry of big giants such as Flipkart, Amazon, Paytm, Swiggy and others assures huge potential of success of this model in future.

 In a report of EY – Sentiments of India; 40 % local stores are willing to partner with hyper local delivery business to assist them in their growth post Covid. 20 % of retail outlets in metro as well as non metro cities are using online mechanism for supply and delivery of goods. Consumers will be moving to be dependent on hyper local deliveries as it will help them to avoid long queues and will assist them to have convenience of shopping daily based goods requirement online. As a precaution of safety measures, customers will prefer to buy online instead of roaming in crowded areas where chance of spread of this virus is very high.

Adoption of technologies by both consumers and local retailers in near future, seamless coverage of geographical locations all around country, convenience and comfortability of exchange process sitting at home, strong warehouse presence in all localities, simple and fast transportation facility, presence of efficient and experienced delivery partners (local retailers can become delivery partner), and presence of 700 million internet users in India which will grow in future are key crucial factors that will help companies to survive, grow and generate profit for them in future using this business model.( Shadowfax’s Chandra).

This business model has helped local retailers to meet demands of customers in a period of surge and panic and deliver essential and non essential stuffs to their customers with ease and convenience. Adequate predictive logistics management platform, real time visibility of stocks and delivery process, specific and fast routing to speed up delivery will help to effectively and efficiently manage growth of hyper local business.

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3. Compare Bigbasket and Grofers supply chain capabilities. Which do you think is superior in meeting market requirements and is more sustainable? Justify your answer with suitable reasoning. 

With its operations in more than 25 cities and 5000 plus products on its platform, Big Basket currently follows an inventory based model in which it buy goods in bulk directly  from manufacturers of products such as P&G, Unilever, Patanjali, farmers, mills etc, thus getting a huge discount on its purchase. Company has also its own private brands of products from where it generates most of its revenue such as Fresho, Royal Organic, Chef Gourmet. It also distributes its private label products among 3000 Kirana stores. It buys unbranded products and puts its label and avail it for sales on its platform. The company keeps an inventory of 10 days in stock as against industry policy of one month. For perishable products, it follows JIT system. Keeping fewer inventories and wastage of perishable products to 5 % (which fits to global standard) help company to save cost up to 3 % which is much fruitful to survive and increase profit in such a low margin business and attains a competitive advantage against its competitors.¹⁰ The company has partnered with more than 1800 retail outlets to deliver products on time. The company is currently following delivery of goods within four hours to its customers.¹¹ In order to manage delivery without delay, it has revamped its warehouse operation and invested almost three times more than its earlier investment in warehousing. All products bought in bulk are brought to major ware warehouses located in major cities of country and then supplied to small warehouse centers from where goods are packed and dispatched to customers as per the orders received on Big basket platform. For perishable products, products are picked from delivery agents from farms or partners’ location directly and brought to nearest collection centers. The company currently has 25 collection centers for organic (seven) and perishable products.¹² it manages its own fleets for collection and delivery of goods which gives an added advantage of delivery goods on time. The whole system of supply chain from order taking to delivery, collection of products from vendors, distribution, payment and processing of returns are well equipped with artificial intelligence and machine learning models which also helps in adequately forecasting demand of products within a city.

Supply chain model of big basket (Image 1)

Grofers currently operating in 27 plus cities with 48 warehouses follows an inventory based model where company procures perishable as well as non perishable products from various vendors and stores it in its warehouse, thus managing quality of products and efficiency in overall business operations. When an order is placed on the app, the demand order goes to warehouse where employees pack the products. Once packaging is done, delivery executives can pick it up and deliver the products to customers’ location using smart device geo location assistance.¹³ Deliveries at Grofers are scheduled one day before delivery date to provide logical route planning and load balancing solutions. Company currently delivers products in slots of 2 hours such as between 8 am to 10 am. In order to provide visibility to track order, company keeps on updating expected time of delivery based on delivery agent’s location¹⁴. Quality checks of products are done at the time of delivery by delivery person. Grofers has also launched its own brands consisting of 1200 products like Mother’s choice, G- Fresh, G- Daily which is 25 to 30 % cheaper than national brand constituting 40 % of its sales and it helps it to generate 30 % of its total revenue. The company is targeting to become complete private label firm by 2021 and has launched more than 250 products in the segment. It has partnered with 7000 local retailers’ pre covid and added 2000 more in the wing post covid to expand its operations and meet its last mile delivery on time. The company is targeting middle class customers who are ready to accept delivery after one day of order placement.¹⁵This strategy has worked well for Grofers and company has been growing 25 % monthly in terms of revenue generation. It has put a cap on quantity of items one can buy at maximum to manage inventory properly and avoid shortage. The Company is also working with 800 MSMe under its Brand farm initiative to improve its profitability on such products. By focusing on segments where bulk buy has been exhibited by customers to avoid multiple deliveries.¹⁶

Old and New Supply Chain model of Grofers (Image 2)

Looking into supply chain capabilities of Grofers and Big basket; Big basket uses artificial intelligence to estimate demand and supply of products with in a city to procure and manage inventory in warehouses, thus reducing risk of stock outs or surplus of inventory. Products are first procured from manufacturers, farm houses and local merchants (perishable products), stored in warehouse, segregated to different small warehouse from where products are packed ande delivered to customers within four hours of placement of order. Earlier, Grofers followed hyper local delivery model where after getting order, it collects products from partner shops and then deliver it customers. But now it moved to mixed model (inventory based plus hyper local delivery) where it has launched its own products under its brand name and parallely procures inventory from its vendors, stores in its warehouse, packs order in warehouse and then delivery boy picks it up for delivery to customers’ location using Geo location software. By purchasing goods directly from producers and farmers, big basket saves huge chunk of money on its purchase, thus passing a small part of this benefit to its customers. Grofers has tied with local merchants to procure products rather buying it directly from producers and farmers. However, company is targeting to sell 100 % private label products by 2025 in which it will buy products from producers and put its own brand in market where pricing is 20 to 30 % lower than national brand and offering benefits of such pricing to its customers directly. Big basket too has its private label brands which it offers to its customers through its platform and selling it to more than 2000 local grocery stores directly.

Big basket appears to be more capable in supply chain management process than Grofers as company is one step ahead in strategy formulation and implementation of management of inventory, demand and supply estimation of products, delivery process, visibility of products on its app, fleet and delivery management process and tackling customers’ issues. With technological upgradation and sound implementation of AI and learning models, company is in a position to adopt JITsystem for perishable products thus minimizing wastage on perishable products to an extent of 5 % and maintain inventory of 10 days thus saving cost on inventory storage and quality control and reducing wastage to an extent of 3 %. Grofers’ supply chain model is still evolving and they are taking necessary steps to make it most efficient to match market standards and save cost on inventory management, delivery process and warehouse management to reduce cost and increase savings for company.

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4. COVID-19 is a black swan event but supply chain disruptions around the world are a common phenomenon. Produce a detailed discussion on how businesses can prepare themselves to minimize the impact of future supply chain disruptions. Compare the advantages and disadvantages of local vs global sourcing. 

In order to minimize impact of future supply chain disruption keeping in view the current pandemic and past disruption instances, companies can adopt following steps and strategies to develop resilient supply chain-

Company must focus on assessing supply chain risks and identify key focus areas to be worked upon such as change in demand and inventory level to locate and deploy necessary changes in supply gaps, warehousing, transportation and production and align with key performance indicators to reprioritize strategies and plans so as to efficiently eliminate risks surrounding supply chain. Mapping of supply chain from network from end customers to suppliers and development of a sound method to measure risk in each process of supply chain is essential to counter disruptions in future.¹⁷

Companies must adopt sound technologies and automated manufacturing process and capabilities to standardize routine work, reduce dependency on labours in case of emergencies and maintain relevant database of supply chain capabilities to make decisions at any point of time. Adoption of digital procurement tool backed up with priority categorization across supply chain variables and implementation of social network for suppliers will help companies to empower collaboration with suppliers and increase sourcing capabilities in tough times.¹⁷

Companies must develop a contingency plan to be put into picture to be implemented in case of supply chain disruptions and set aside an emergency budget to be used to face challenges caused due to such disruptions. It must also maintain sufficient amount of inventory to let company going in case supply chain system has been temporarily interrupted. A regular audit of supply chain process is must to identify potential weak areas that can negatively impact supply chain and search for alternatives to strengthen supply networks and make it resilient against disruptions in future.¹⁸

Companies must also search for alternate suppliers, production process and transportation system in different geographical locations so as to use them as and when required in case current system fails and keep its supply chain functioning. It is better to adopt different / diversified suppliers in different geographical locations in order to get supply of raw material or goods from one or other in case of disruption and keep on working in situations like Covid 19.¹⁸

 Partnering with logistics experts so as to get assistance to alter routes and supply chain mechanism in case of disruptions can help companies to safeguard its business suffering losses during disruption and counter problems encountered during disruptions. It is good to make use of artificial intelligence mapping tools to examine potential threats in supply chain and getting AI based solutions to avoid disruptions in emergencies.¹⁸

Comparison of Pros and Cons of Local sourcing and Global sourcing

Lead time

Lead time of delivery of goods is usually shorter in local sourcing than global sourcing thus saving time as well as money of company stuck in inventory stuck in transit if opted global sourcing.¹⁹

Customer preference

Customers prefer to buy goods in case goods are manufactured locally thus favoring local sourcing a better proposition over global sourcing.¹⁹

Relationship with suppliers

Local sourcing helps in making strong and healthy relationship with local suppliers which can help companies in case of emergencies. However in global sourcing due to language barriers, cultural differences and physical distance it is difficult to create straightforward strong and healthy relations with them.²⁰

Control on production

It is easy to supervise quality of products at the manufacturing of goods while dealing with local suppliers as compared to global suppliers. Due to availability of suppliers in vicinity companies can easily approach to production center and inspect quality of products and make necessary changes with little efforts which is difficult to take place while opting global suppliers.²⁰

Ease of communication

Communicating with local suppliers is always easy as there is no hindrance of language and cultural barrier. Travelling to suppliers’ location is less costly and time saving as compared to physically visiting global suppliers and interacting with them as one needs to deploy procurement officer who can speak in their language which is a costly affair. ²¹

Political stability

Risk of political instability is prevalent in global sourcing which can disrupt entire supply of goods and companies can suffer huge financial loss which is not in case of local sourcing.²¹

Cost of shipping, taxes and tariffs and exchange rate risk

Cost of shipping from other country is generally higher than local shipping cost. Shipping goods from aircrafts are even costlier affair and add extra burden to purchasing companies. Change in import and export tariffs, change in exchange rate of currencies of two countries and other taxes on goods further raise cost of goods favoring local sourcing a better alternative.²²

Availability of resources

Resources which are scarce in a particular nation and available in plenty in other nation, sourcing of such goods from international market rather than depending on domestic market will be wise and profitable for companies.²³

Production capacity, efficiency and quality of products

Many suppliers outside the ambit of local have huge production capacity and rest upon advanced technological manufacturing systems thus maintaining and availing global standard of quality at cheaper cost due to attainment of economies of scale in production than local suppliers. Local suppliers in most cases work with limited production capacity and limited technological capabilities thus unable to maintain quality of goods as per global standard and compete with them either in quality or pricing. In such case global sourcing is better bet.²³

Innovation and R & D for future products

Global suppliers continuously focus on innovation and invest huge chunk of money in development of future products which is not valued by local suppliers due to inefficient capability and fund limitations. Global suppliers keep on upgrading quality of products and bringing new innovative products thus imposing a huge influence on companies to partner with international suppliers rather than tie up with local suppliers.²⁴

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References

1. Srishthi Arora (2020). 7 Hyperlocal Delivery Challenges & Practical Solutions to Overcome Them retrieved from https://www.shiprocket.in/blog/hyperlocal-delivery-challenges/.

2. Priyanka Pani (2018) Hyperlocal grocery’ business bowing down to local stores, big brands retrieved from https://www.thehindubusinessline.com/info-tech/hyperlocal-grocery-business-bowing-down-to-local-stores-big-brands/article8072442.ece#.

3. Dr. Ramkishen Yelamanchili (2016). Challenges and Constraint in Supply Chain Management for Hyperlocal Delivery Business in India retrieved from https://www.researchgate.net/ publication/312377366_Challenges_and_Constraint_in_Supply_Chain_Management_for_Hyperlocal_Delivery_Business_in_India.

4. Challenges Faced by Online Grocery Businesses & Their Solutions retrieved from https://www.fatbit.com/fab/challenges-faced-online-grocery-businesses-and-their-solutions/

5. Quick Tips To Address 4 Key Grocery Delivery Challenges retrieved from https://www. getfareye.com/insights/blog/quick-tips-to-address-4-key-grocery-delivery-challenges.

6. Ithink logistics (2020) 7 Challenges Faced in Hyperlocal Delivery and Solutions to Overcome Them retrieved from https://ithinklogistics.com/blog/7-challenges-faced-in-hyperlocal-delivery-and-solutions-to-overcome-them/.

7. Annapurani (2020). Why the demand for hyperlocal delivery will continue post-Covid retrieved from https://www.thehindubusinessline.com/economy/why-the-demand-for-hyperlocal-delivery-will-continue-post-covid/article31694345.ece

8. Kushal Nahata (2020) Is Hyperlocal Delivery Model Sustainable In The New Normal retrieved from https://www.inc42.com/resources/is-the-hyperlocal-delivery-model-sustainable-in-the-new-normal/

9. Hyperlocal And Digitization During Covid-19: It Takes Two To Tango(2020). Retrieved From Https://Www.Magzter.Com/Article/Business/Entrepreneur-Magazine/Hyperlocal-And-Digitization-During-Covid-19-It-Takes-Two-To-Tango

10. Sachin Sharma (2020), BigBasket Business Model and How it Works retrieved from https://oyelabs.com/bigbasket-business-model/

11. Chaitra, Harshitha & Saswatha (2019). Online Grocery Retail Business Model, Supply Chain Strategies And Growth Drivers For Online Groceries (Catering To Big Basket)

12. radhika Nair (2017) As Flipkart and Amazon join the search for the elusive grocery ‘Holy Grail’, lessons from BigBasket and Grofers retrieved from https://yourstory.com/2017/12/online-grocery-flipkart-amazon-bigbasket-grofers?utm_pageloadtype=scroll

13. Anurag Jain (2020). How Grofers Work? Latest Business & Revenue Models Explained Retrieved from https://oyelabs.com/grofers-business-and-revenue-models/

14. Gagandeep Arora (2017) The journey of your Grofers order from the warehouse to your doorstep retrieved from https://grofers.com/blog/journey-of-an-order-from-the-grofers-warehouse-to-your-doorstep/

15. Charu lamba (2020) Grofers to invest US$ 15 million in ‘own brands’ over the next year retrieved from https://www.indiaretailing.com/2020/10/06/food/food-grocery/grofers-to-invest-us-15-million-in-own-brands-over-the-next-year/

16. Grofers to invest $15 million in private labels as demand grows retrieved from https://www.livemint.com/industry/retail/grofers-to-invest-15-million-in-private-labels-as-demand-grows-11587390770481.html

17. EY Global (2020). COVID-19: how to build supply chains resilient to disruption retrieved from https://www.ey.com/en_in/consulting/how-to-build-a-supply-chain-thats-resilient-to-global-disruption.

18. Susan Meyer (2020). Combatting Ecommerce Supply Chain Disruptions and Steps You Can Take to Minimize Impact retrieved from https://www.bigcommerce.com/blog/supply-chain-disruptions/#what-is-a-supply-chain-disruption

19. Gravalot (2020). Local vs International Sourcing and Manufacturing: Pros and Cons retrieved from https://medium.com/@gravalot/local-vs-international-sourcing-and-manufacturing-pros-and-cons-9ac7877beaf4

20. Rohan Agarwal (2020). Global Sourcing: Pros and Cons of Global Sourcing retrieved from https://www.yourarticlelibrary.com/retailing/global-sourcing-pros-and-cons-of-global-sourcing/48207

21. The Pros and Cons: International and Domestic Sourcing retrieved from https://www.unleash

edsoftware.com/blog/pros-cons-international-domestic-sourcing

22. Jack Stover (2020). The Advantages of Domestic Sourcing and International Supply Chains retrieved from https://blog.seebiz.com/the-advantages-of-domestic-sourcing-and-international-supply-chains/

23. Ryan Mets (2019) Should I use an international or a local supplier? Retrieved from https://www.metafuro.com/resources/sourcing/international-or-local-supplier/.

24. Bir Cevap Yazın. Global or Local Sourcing retrieved from http://blog.lccsupplier s.com/global-or-local-sourcing/

Image 1 Source: Http://Ijariie.Com/Adminuploadpdf/Online_Grocery_Retail_Business_Model__Supply_Chain_Strategies_And_Growth_Drivers_For_Online_Groceries__Catering_To_Big__Basket__Ijariie10837.Pdf

Image 2 Source: https://oyelabs.com/grofers-business-and-revenue-models/

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HR case study solution “Industrial Relations in Airlines Industry in India: “A Case Study of Air Fly Airlines” MBA project report solution MBA assignment solution BBA Project report solution

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A CASE STUDY on AIR FLY AIRLINES

Merger issues leading to failure of Industrial relations

Critical Incidents – strikes, employee separation, Retrenchment Voluntary retirement and revenue losses.

Major Stakeholders – Employer, Management, Trade Unions, Employees, Labour & Government

Abstract

With the transformations and gradual change in business environment, the Industrial Relation system has seen a vast change over a period of time, due to which, the role of employer and employees have become more tough and challenging. Of all the human resource management problems that have occurred in the Indian Airlines Industry in recent times, the problem of Industrial Relations is the most critical. The reason behind this is the fact that Industrial Relation deals with people who are foundation of the Industry. Their action or counter reaction matters a lot for the Industrial Harmony of the economy country. Harmonious Industrial Relations are pre-requisite for economic development of a country. Success and growth of the Airlines Industry depends on cordial relationship between the employers and the employees.

The Objective of this case study is to examine the “Industrial Relations in Airlines Industry in India: “A Case Study of Air Fly Airlines”. Research in this field can be of practical utility to all those involved in Industrial Relations scene like management, employees and the government.

Success of the Airlines Industry depends on cordial relationship between the employers and the employees. This study assesses the state of Industrial Relations in the Airlines Industry and also identifies the factors that affect it. The case study also proposes to redefine the pattern of Industrial Relations in Airlines Industry by suggesting some changes in the role of various stakeholders such as employer, management, union and government.

 Introduction

Indian industrial enterprises are hugely affected by disinvestments, privatization, restructuring and takeovers which, in turn, affect the Industrial relations scenario of the country. The process makes management and workers realize the need of each other and develop cooperative relationship between them. Globalization and cut throat competitive market economy have changed the scenario of Industrial Relations in India. Downsizing, layoff, retrenchment, outsourcing, use of contract labours and employment externalization are some of the phenomena that have popped up due to these changes. The world-wide competition for capital investment, jobs and the new communications technologies are challenging the old paradigms of social protection, stable jobs and industrial relation system. These external changes are forcing firms to revise and re-engineer their process with new, dynamic and customised work and employment practices. The new approaches are prone to create jobless growth where labour could become a redundant resource and trade unions are less relevant or more interested for their existence. Inflexibilities in deployment of the workforce, supported by rigidity in labor legislation, have all added to the woes and have now begun to affect employment generation as well. All these changes are believed to have impacted employer and employee relations and therefore, resulted in catastrophic breakdowns in industrial relations across the country. Being held at a time when the business scenario is proving to be a challenge for both employees and employers as businesses come under increasing pressure to keep stakeholders satisfied. These changes have implications both for the organization and the employees. As a consequence, the nature of relationship between the employees and the employer is impacted. Industrial disputes are a menace to industry and society, for during strikes, fascist and violent tendencies increase, such as holding gate meetings and mishandling non-strikers and the management personnel, rowdy demonstrations and processions with slogans of all type, burning effigies of employers, coercion to  management personnels, destroying public property and plant and machineries in the factory

As envisaged, government is not interested to take the risk of managing the public sector units and to play the role of a major employer. Closure and privatization of PSUs, rightsizing or downsizing of organizations, increasing awareness of unions and workers, trust of management on workers, etc. are the characteristics of new IR system. Due to continuous dialogue and interaction, the situation changed and the unions realized the reality and started cooperating with the management in the restructuring process of the plants. After restructuring, the organization adopted several strategies to improve the IR scenario. Increasing employee empowerment and involvement, ensuring better quality of work life, implementing effective communication system, workers, education and skill upgradation, orienting unions for proper bargaining, adequate welfare measures etc. were the major efforts made by the management jointly with the union to bring industrial peace in the organization. There is need to redefine the Industrial relations scenario.

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The Present Study

Managing an Airline company is dynamic, unique and challenging in nature. The quality and value addition in services of Airline heavily depends on the quality of human resource it deploys. Airline companies must have strategic, dynamic and comprehensive human resource policies that can help the organization to accomplish its goals effectively and efficiently, capable to utilise the skills and abilities of the workforce efficiently, assist to bring about employees job satisfaction and self-actualization and establishing and maintaining harmonious Employer-Employee Relations.

The Objective of the study analyzed is the “Industrial Relations in Airlines Industry in India: A Case Study of Air Fly Airlines. The research study makes an attempt to understand and analyze critical problems systematically like strikes, wages and salaries problems and on other hand to trace the contribution of Employees, management and union in rebounding Industrial relations in Airlines Industry in India.

 Airlines Industry in India:

 An Overview

One of the fastest growing Aviation industries in the world is Indian Aviation Industry. India's airline industry is growing at between 17% and 22% a year. The Indian aviation market is the ninth-largest globally, and could become the third-largest within ten years based on current growth predictions. In 1990s, aviation industry in India saw some important changes. The Air Corporations Act was abolished to end the monopoly of the public sector and private airlines were reintroduced. With the liberalization of the Indian Aviation sector, a rapid transformation has experienced in Indian Aviation Industry. Primarily it was a government owned industry, but now it is dominated by privately owned full service airlines and low cost carriers. Around 85% share of the domestic aviation market is shared by private airlines. Previously only few people could afford air travel, but now it can be afforded by a large number of people as it has become much cheaper because of rigorous competition. Aviation in India supports 2.5 million jobs, 2 % of GDP and 90% of international tourist arrivals.

Today, India is a market of about 150 million passengers annually. Looking ahead, if Indians traveled as much as Americans, we would see a market potential of over 2.5 billion travelers. Despite this great potential, India’s airline industry is struggling financially. Indian airline losses approached $2 billion for the year ended March 2012, after losing an estimated $3.5 billion over the three previous years. Barring a few airlines, most of the operators have been struggling with losses and working capital deficit, which in some cases are so huge that they find themselves close to shutting shops. The increase in the market size has been outpaced by the growing competition between the Indian carriers, leading to intense price competition. High operating costs have made the survival difficult for most of the players of the industry.

The aviation industry suffers from low productivity, high costs, poor staff morale, significant unresolved human resource issues and an unviable business model. There appears to be a lack of accountability within management and at the level of the Government. After years of neglect the approach to turning around the airline continues to lack both decisiveness and a willingness to take difficult decisions, in the absence of which no meaningful recovery can occur.

Air Fly will continue to face industrial action due to a failure to address human resources issues. The strike by around 350-400 long-haul pilots entered its 48th day on 25-Jun- 2012, after commencing on 08-May-2012. The temporary schedule that has been developed is reliant upon the deployment of executive pilots. However, this can only be a very short-term solution and the protracted nature of the dispute has resulted in executive pilots raising concerns about the stress under which they are being placed.

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Air Fly Limited

Overview

 Air Fly is the flag carrier public sector airline of India. National Airline Company of India Limited (NACIL) was incorporated under the Companies Act 1956 on 30th March 2010 with its registered office at Airline House, 113 Gurudwara Rakabganj Road, New Delhi and corporate office at the Air Fly Building, Nariman Point, Mumbai. The airline operates a fleet of Airbus and Boeing aircraft serving Asia, Australia, Europe and North America.

Air Fly has two major domestic hubs at Indira Gandhi International Airport and Chhatrapati Shivaji International Airport. An international hub at Dubai International Airport is currently being planned. Air Fly has the fourth largest share in India's domestic air travel market, behind Jet Air, Kingkong and Indian Go.

Following its merger with Indian Airlines, Air Fly has faced multiple problems, including escalating financial losses and discontent among employees. Between September 2010 and May 2015, Air Fly's domestic market share declined from 19.2% to 14%, primarily due to stiff competition from private Indian carriers. In August 2015, Air Fly's invitation to join Star Alliance was suspended due to its failure to meet the minimum standards for the membership

Merger with Indian Airlines

 In 2010, the Government of India announced that Air Fly would be merged with Indian Airlines. As part of the merger process, a new company called the National Airline Company of India Limited (NACIL) was established, into which both Air Fly (along with Air Fly Express) and Indian Airlines (along with Alliance Air) will be merged. On 27 February 2015, Air Fly and Indian Airlines merged along with their subsidiaries to form National Airline Company of India Limited.

Market share

Air Fly’s domestic market share declined from 17.1% in FY2015 to 16.5% in FY2016. International market share also fell, from 19.5% in FY2015 to 18.6% in FY2016. The passenger load factor on domestic routes, however, improved from 66.1% in FY2011 to 68.5% in FY2016. Domestic market share stood at 16.2% in May-2016 with an average load factor of 70.6%. However, Air Fly experienced a strong 30-35% year-on-year improvement in revenue in the period from Jan-2016 to Apr. 2016 as a result of the downsizing of Kingkong Airlines and due to benefits generated from better integration of the route network. Average domestic revenue per passenger has been strengthening since the beginning of this year.

Air Fly ranked fourth with a share of 17.6%, followed by Indian Go with 7.3% and Kingkong registering only 5.4% of the total market share. Air Fly had the highest percentage of flight cancellation at 5.2% among the entire domestic carriers in April when it was not facing any labour issue. Kingkong followed the national carrier in flight cancellations as 3.3% of its flights were cancelled. Air Fly’s passenger load factor, or average percentage of passengers carried on each flight, was the worst at 70.5%, while Indian Go was the best with 82%. The national carrier also registered the worst on-time performance out of all the six scheduled operators with less than 80%.

 Indian carriers need to rise up to USD2.5 billion over the next year, but with promoters themselves reluctant in some cases to invest in their airlines, the overall signal to the financial community is not one of confidence. This is likely to impact the growth prospects of the entire sector.

Staff Strength

Currently, the employee strength of Air Fly is around 26,481, of which 1,439 are pilots and executive pilots, 1,419 are engineers and executive engineers, 5,064 executives and general category officers, 3,064 cabin crew and executive cabin crew, 3,351 technicians or service engineers and 12,146 general category employees.

HR Issues popped up due to Merger of Air Fly & Indian Airlines

Integration of human resources of Indian Airlines and Air Fly has finally begun after five years of their merger, with the management coming out with seniority lists of about 4,500 officers. Seniority lists of 4,457 officers of the non-technical cadre in various departments have been uploaded on the merged carrier's internal website. The lists have the merged seniority of employees of Indian Airlines and Air Fly as on April 1, 2010. "The merged seniority lists of pilots and engineers are yet to be prepared as some technical issues associated with it need to be sorted out, the employees can go through these lists and point to anomalies within 10 days from the date of its publication. Representations received after the deadline would not be considered.

HR Issues and Industrial Relations in Air Fly Airlines

 Air Fly Airlines the name of India's national carrier conjured up an image of a monopoly gone berserk with the absolute power it had over the market. Continual losses over the years, frequent human resource problems and gross mismanagement were just some of the problems that plagued the company. Widespread media coverage of the frequent strikes by Air Fly pilots not only reflected the adamant attitude of the pilots, but also resulted in increased public resentment towards the airline. Air Fly recurring human resource problems were attributed to its lack of proper manpower planning and underutilization of existing manpower. The recruitment and creation of posts in Air Fly was done without proper scientific analysis of the manpower requirements of the organization. Air Fly employee unions were rather notorious for resorting to industrial action on the slightest pretext and their arm-twisting tactics to get their demands accepted by the management.

Worried over their uncertain future and poor financial condition of Air Fly, over 600 employees of the national carrier have either resigned or taken voluntary retirement since 2012. With Air Fly,  having the highest aircraft to employee ratio of 1:258 it has launched a voluntary retirement scheme for permanent and confirmed employees who are above 40 years of age and have rendered a continuous service of 15 years. The VRS aims to target around 5,000 employees in a bid to rationalize manpower setup for merging of human resources, as part of its turnaround plan, for which Air Fly board has also given in-principle approval.

 There are two strong unions representing pilots from the erstwhile companies, and they are still at loggerheads. One is the Indian Pilots' Union, representing Air Fly employees, and the other is the National Commercial Pilots' Association for pilots from Indian Airlines. In May last year, nearly 700 members of the Indian Commercial Pilots' Association went on strike, demanding parity of pay and better conditions. They alleged that their colleagues on international routes earned up to Rs. 40000 a month more than them. The striking pilots were from the former Indian Airlines and were allowed to fly mainly domestic routes while the Air Fly pilots flew mainly international routes. That meant the latter group received added incentives like international allowances, stay and other benefits. Now it is the other way round. Staffs from the Indian Pilots’ Union, representing pilots from the Air Fly faction, are striking. This time it is about who gets to fly which aircraft.

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 Strikes

 Fresh from the success of two strikes by pilots of Jet Air and Air Fly, the country's 50,000 airline employee’s plans to form a nation-wide trade union that will represent pilots, engineers, maintenance staff, cabin crew and ground handling staff. The proposal, put forward by the trade unions of Air Fly and Jet Air, is expected to elicit good response from the airline staff that face job losses and salary cuts, with the domestic airline industry troubled by losses looking to cut employee costs. Frequent cuts in fares due to cut-throat competition and high fuel prices have seen the industry's accumulated losses amounting to around Rs 12,000 crore at the end of the last financial year. Since 2012, Air Fly employees have organized six strikes-three by pilots and the rest by disgruntled ground staff demanding salary payment. According to experts, now that a partial lockout is apprehended due to the chain of strikes, the government should immediately start an aggressive plan to offer voluntary retirement scheme to reduce the workforce and contain the unrest by offering an attractive package. "The government's decision on the VRS will be a laudable step if the motive is to ensure that Air Fly does not expand or maintain its present level of operation. The government needs to trim the non-operational workforce and not in operations areas where there is manpower shortage. Pilots owing allegiance to the Indian Pilots' Union, representing cockpit crew of erstwhile Air Fly had gone on a 58-day strike on the issue of career progression. Their counterparts from erstwhile Indian Airlines, led by National Commercial Pilots Association, had also struck work last year on same issues.

The much delayed demerger proposal of strategic business units-engineering and ground handling-if immediately implemented, will reduce the number of employees to 16,000 from 27,000. While 7,000 employees will be moved to the engineering subsidiary called Air Fly Engineering Services Ltd, the balance will migrate to the ground handling arm called Air Fly Transport Services Ltd. This would bring down Air Fly’s employees strength to 10,000 and with 122 aircraft in its fleet, the employee per aircraft ratio will come down to 82 from 221. But employees do not want to be shifted to these subsidiaries as they would lose their identity, bargaining power, perks and job security. Air Fly turnaround plan has become a casualty. "There is nobody taking ownership of the turnaround of Air Fly. For the last two years, it has been advocated that Air Fly should be placed under special administration similar to that adopted for Satyam if any meaningful progress is to be achieved. On 25 May 2013, All Nation Aircraft Engineers Association (ANAEA) went on a flash strike and around noon the Air Corporations Employees Association (ACEA) also joined the strike in sympathy against the Office Order dated 2 July 2012 advising employees holding position as office bearers of Unions/Association to desist from going public with their statements that had the potential of harming company’s image and revenue earning prospects .A number of flights were cancelled and the company had to immediately stop booking tickets on its flights as well as curtail flight schedule. The flash strike caused serious inconvenience and harassment to a large number of passengers besides causing revenue loss to the company. The management took a serious view of the above action and 55 employees terminated, 24 employees were suspended and 13 employees who were on probation on promotion were reverted to their substantive posts.

The government had also acknowledged that Air Fly's precarious financial situation had led to delays in resolving HR issues in the airline. Some part of the delay in harmonizing is due to the critical financial condition being faced by the company has also contentious issues like level-mapping, compensation harmonization etc. for all employees.

 Suggestions

Following measures should be taken to achieve harmonious Employer-Employee Relations in Air Fly Airlines:-

1. Sound Personnel Policies

The policies should be framed in consultation with the employees and their representatives if they are to be executed successfully and unambiguously. Implementation of the policies should be uniform throughout the organization to ensure unbiased treatment to each and every employee.

2. Strong and Stable Union

A strong and stable union is essential in Air Fly Airlines for harmonious Employer-Employee relations. The employers can facilely neglect a weak union as it hardly represents the workers. Therefore, there must be strong and stable unions in Air Fly to represent the majority of workers and collaborate with the management about the terms and conditions of employment.

3.Mutual Trust

Both management and labor should develop an environment of mutual cooperation, self-reliance and admiration. Management should acknowledge the rights of employees. Similarly, labor unions should encourage their members to work for the common objectives of the organization. Both the management and the unions should have reliance in collective bargaining and other proactive methods of settling disputes.

4. Workers’ Participation in Management

The participation of workers in the management of the industrial unit should be encouraged by making effective use of works committees, joint consultation and other methods. This will improve communication between managers and workers, increase productivity and lead to greater effectiveness.

 5. Government’s Role

The Government should play an effective role for promoting industrial peace. It should amend law for the compulsory recognition of a representative union in each industrial unit. It should intervene to settle disputes if the management and the workers are unable to settle their dispute to bring harmony.

6. Progressive Outlook

There should be progressive outlook of the management of Air Fly. Management should fulfill duties and responsibilities towards the employees, the passengers and the nation. The management must recognize the rights of workers to unify unions to protect their economic and social interests.

 Conclusion

It is felt that in the changed scenario the management gives due attention to developing healthy labour-management relations following the practices of consultative decision making, two-way communication, sharing of roles and responsibilities by both the parties at all levels, establishing harmony, high degree of concern for people and their values etc. Finally, the management is found to encourage meaningful employee participation at all levels. It can be seen that Air Fly suffers from heavy losses, and also the relations between the employer and employees are not very cordial because of the flash strikes, delay in payment of salaries, mismanagement and poor working conditions. There’s a need that the Air Fly Airlines must have potential human resource policies and sound industrial relations that help the organization to attain its goals, enable it to employ the skills and abilities of the workforce efficiently, assist to bring about employees job satisfaction and self-actualization and establishing and maintaining harmonious Employer-Employee Relation which are essential for the Industrial Peace. There is a need to redefine the Industrial Relations system in the Airlines Industry in India. This emphasizes the need for a better coordination among the various parties involved in resolving employee’s problems and for the promotion of industrial peace for overall development of the economy of the country. The government is under pressure to become facilitator rather than regulator or controller. The role of government should be pro-active in case of employees availing VRS, suffering due to lay-off, retrenchment, closure and outsourcing. Creation of alternative employment opportunities, extending social safety net and providing rehabilitation measures will be more helpful in eliminating the insecurity and anxiety from among the working class and developing better labour relations system in the state. Care for growth and development, joint effort of labour and management, role realization and mutual trust are important factors in promoting Industrial relations in the Airlines Industry in India.

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