Gati Limited: Evolution of a Third Party Logistics Organization Our proposal to the customer is value for money. We provide multiple options to our customers and facilitate them to choose what they wants based on price and performance. We handle 1.5 million packages in a month across 29 states in India. ach shipment has an assured delivery date. !ati is probably the only company in the world which prints the promised delivery date on the docket. We are aware of the transportation needs" we understand the geography of India" and we have developed e#cellent connectivity across the country thus enabling us to provide unparalleled service to our customers. $ahendra % &garwal" $'" !&(I !ati started operations in 19)9 as a door*to*door cargo company. & division of (ransport +orporation of India ,(+I-" it was the result of &garwals conscious decision after he returned from the /nited 0tates with a degree in management. &garwal wanted to be in the transport busi ness" eve n though it wa s cons ide red to be one for thos e wi th modest education. (+I" which wa s &gar wa l s fami ly busi ness" ha d half a doen operat ing manufacturing units. When he oined (+I in 19)3" it was one of the top three transport companies in India. 4is aim was to rebuild an otherwise successful (+I based on systems and processes and manage it professionally to meet implicit and e#plicit consumer needs. ased on customers feedback and interaction" &garwal felt that" apart from moving cargo" (+I could do something different which customers would value and appreciate. (here were several options6 either tie up with /70 or hive off from (+I and set out on its own with a separate bra nd e8uity. (hu s !at i was introd uce d in the mar ket as a doo r*to *do or car go company with commitment on delivery and money back guarantee. (he first e#p eriment of thi s new bus ines s mod el ,overn ight delivery - was conducted between $adras and $adurai. It" however" did not succeed because the volume was inade8uate and the sector was short. (his did not discourage &garwal. 'eep in his mind" he felt that may be the e#periment had failed but not the concept. Written by 7rofessor . :avichandran" Indian Institute of $anagement" &hmedabad. Indian Institute of Management Ahmedabad IIMA!P"#$
Our proposal to the customer is value for money. We provide multiple options
to our customers and facilitate them to choose what they wants based on price
and performance. We handle 1.5 million packages in a month across 29 states in
India. ach shipment has an assured delivery date. !ati is probably the only
company in the world which prints the promised delivery date on the docket.We are aware of the transportation needs" we understand the geography of
India" and we have developed e#cellent connectivity across the country thus
enabling us to provide unparalleled service to our customers.
$ahendra % &garwal" $'" !&(I
!ati started operations in 19)9 as a door*to*door cargo company. & division of (ransport
+orporation of India ,(+I-" it was the result of &garwals conscious decision after he
returned from the /nited 0tates with a degree in management. &garwal wanted to be in the
transport business" even though it was considered to be one for those with modesteducation. (+I" which was &garwals family business" had half a doen operating
manufacturing units. When he oined (+I in 19)3" it was one of the top three transport
companies in India. 4is aim was to rebuild an otherwise successful (+I based on systems
and processes and manage it professionally to meet implicit and e#plicit consumer needs.
ased on customers feedback and interaction" &garwal felt that" apart from moving cargo"
(+I could do something different which customers would value and appreciate. (here were
several options6 either tie up with /70 or hive off from (+I and set out on its own with a
separate brand e8uity. (hus !ati was introduced in the market as a door*to*door cargo
company with commitment on delivery and money back guarantee.
(he first e#periment of this new business model ,overnight delivery- was conducted
between $adras and $adurai. It" however" did not succeed because the volume was
inade8uate and the sector was short. (his did not discourage &garwal. 'eep in his mind" he
felt that may be the e#periment had failed but not the concept.
Written by 7rofessor . :avichandran" Indian Institute of $anagement" &hmedabad.
+ases of the Indian Institute of $anagement" &hmedabad" are prepared as a basis for class discussion.
+ases are not designed to present illustrations of either correct or incorrect handling of administrative
problems.
+opyright < 233= by the Indian Institute of $anagement" &hmedabad
&garwal was very keen on making a second attempt. 4e had e#tensive discussionsinternally on the nature of the company" policy and procedures" infrastructure" etc. &fter
detailed planning for si# months !ati was launched in 19)9 in four stations6 4yderabad"
$adras" angalore" and 4osur.
(o give an Indian name to the operations" several 0anskrit*based names were shortlisted.
>inally" the name !ati was selected to reflect and represent speed with direction.
&garwal was aware that !ati was a late entrant to the generic cargo business. (o make
progress" the business needed to be conducted with a different perspective. !ati was
willing to wait to generate surplus from the business. &garwal chose time bound" point topoint delivery" premium priced cargo management service. With this offering" !ati
introduced the concept of e#press cargo in the Indian conte#t.
In the beginning ,19)9- it was difficult to get premium rate for such service. (here was not
enough traffic on all routes. Only a few routes attracted good traffic. &garwals
determination kept the company going. 4e gave more priority to timely delivery ,to ensure
customer satisfaction- than the cost of delivery reflected by vehicle underutiliation. Often"
vehicles were dispatched with low or moderate capacity. It took roughly four years to
stabilie the differentiated e#press cargo business from simple cargo business.
&garwal says6
!ati was started in 19)9 as a division of (+I. It became a separate company after
a period of si# years ,199?-. In 199?" (+I was a :s. 233 crore company and !ati
was doing :s. 1) crore. I opted for transport business to satisfy my ambition and
desire to do something different from normal and routine. (ransport business
was considered to be a routine business with no scope for value addition. I
wanted to revolutionie this business by offering value added services with
highest 8uality. $y aim was to be a pioneering leader and business entity in this
segment. We wanted to redefine service in this business and stay ahead ofcompetition. (hat has been the focus of !ati.
(here were several challenges in establishing this business. (he first one was to manage a
service channel whether there was enough traffic ,load- or otherwise. When the load was
low" keeping vehicles plying re8uired tremendous business commitment to customer
service levels promised.
!ati operated its business with a group of front*end entrepreneurial delivery set*up.
$embers of this set*up were known as !ati &ssociates ,!&s-. (his concept was new. (here
was no familiarity and no benchmarks. (here were also issues related to who would financethe vehicles owned by !&. What should be the appropriate compensation@revenue for !&A
>inally &garwal decided to encourage unemployed graduates with entrepreneurship
8ualities as !&. & !ati associate bought no capital to the business but only commitment
and enthusiasm. 4e was trained and motivated by !ati. 4e was assured a net revenue of
:s. )333 a month ,in 199?-. & financial arrangement ensured over a period of time" !&sowned the vehicles they have been using on behalf of !ati.
(he ne#t challenge was to get customers. 0everal advertisements were released. !ati
announced a money back guarantee scheme when delivery promises were not met. !ati
took payment from corporate clients only after producing proof of delivery. (hough a
genuine service orientation to customers" and commitment to e#cellence in e#ecution ,by
investing on people and infrastructure-" !ati got a foothold in the market. !ati also
invested substantial resources in customer relationship marketing through regular
customer meets and customer carnivals. (his was a new strategy to the industry and
resulted in creating a uni8ue market for !ati.
etween 199? and 199)" competition slowly emerged. (he !ati model was cloned by several
retail courier operators. (he uni8ue product offering by !ati became a commodity.
(herefore" premium pricing was no more feasible. (here was erosion in the market share
,up to =3 per cent-. +ompetitors started recruiting !ati employees.
In 199?" !ati introduced desk*to*desk service to meet the price sensitive customer market.
'esk to desk cargo was placed between regular transportation and premium cargo.
7remium cargo was ne#t day delivery. 'esk to desk was delivered within four days. 0oon
desk to desk business started growing at the e#pense of premium ,this was realied by !atimanagement only in 2333-. +onse8uently in 2331" the desk*to*desk segment was merged
with the premium segment.
In the words of B7 ,>inance-6
When !ati was formed &garwal was (+Is $'. 4e" being an entrepreneur with
innovative mind" identified a market segment in transportation business ,desk
to desk cargo6 this is a service in which the parcel is picked up from the
customers location and delivered at the desired location within a stipulated
time- with premium pricing. (he delivery time commitment took precedenceover truck utiliation and hence the cost of service delivery. (his was core to
!ati.
etween 199) and 2331" !ati e#panded rapidly in business and revenue. It had grown to
operating in 13 regions in 2331 from 2 in 199?. +ourier business had already become
operational. International operation to 0&&:+ countries was in place. 0hipping business"
earlier handled by (+I" became a part of !ati. (+I 4ighways was taken over by !ati. y
2331" !ati was using several modes or a combination of modes to give customers a choice
on service ,product" volume" and time- at an appropriate price.
In October 199?" !ati formally separated from (+I. &ll business relationships were
redefined. >ormal legal separation took place in &pril 199= ,through a de*merger process-.
Originally !ati targeted packets up to ?3 kg. only. (herefore" it was named as !ati 0mall
+argo 0ervices ,199;-. & rebranding e#ercise was done with inputs from the e#us 8uity&dvertising !roup and !ati was established as a small cargo specialist and renamed as !ati
+argo $anagement 0ervices. (his was later renamed as !ati +orporation and finally !ati
Ctd. ,>or a detailed description of product and services offered by !ati see &ppendi# 1.-
Gati !usiness Model
0everal innovative methods characteried the way in which !ati approached its business.
>or e#ample" customers were billed only after the proof of delivery was made available to
them. >rom the beginning !ati never operated the transport vehicles on its own. It
developed a set of business partners called !ati &ssociates to handle the physical logisticsoperations. (he compensation plan was designed to provide a win*win situation for both
!ati and !ati &ssociates.
ased on the volume of traffic and the origin and destination information" !ati
systematically developed relationships with airlines and railways to use their cargo
capacity to deliver products and services. !ati had a long term contract on cargo capacity
with Indian &irlines and other airlines on the first flight from specific origin to destination
for a fi#ed price no matter what the actual traffic was. (his enabled !ati to deliver priority
and courier bookings with remarkable ease and accuracy. (he commitment to Indian
&irlines on account of this contract was :s. 1.5 crore@month.
#plaining the strategic intent in such an alliance" &garwal said6
oth !ati and I& see tremendous potential from this alliance as domestic air
cargo movement is estimated at 553 tonnes@day of which I& carries
appro#imately ;33 tonnes. 7rivate operators carry appro#imately 153 tonnes a
day. :esearch shows that about 133 tonnes a day are as yet untapped for
movement by air. (his market is e#pected to grow by leaps and bounds with
most manufacturers looking for faster movement to contain inventory cost.
esides two other players in the industry" !ati also has clearance from the'irector !eneral of +ivil &viation for flying its own cargo aircraft but we have
taken a conscious decision to go ahead in our contract with I& as we feel that"
with self*owned operation" the fleet would be limited to 2D5 aircraft while I&s
fleet of 5) aircraft provides a very wide reach to suit the needs of all kinds of
customers. (here is certainly a lot of merit in this strategy as !ati services 553
locations through 153 branches spread all over with one waybill. With this
alliance the users of e#press services can certainly look forward to the best
ased on detailed analysis" !ati found that it was economically viable to use the railway
network to move its cargo. &fter prolonged negotiation with Indian :ailways. !ati signed a
three year. (he contract was motivated by !atis ability to service three different market
segments with greater efficiency6 some air cargo ,urgent on time to deliver" but bulky-"
some surface cargo ,both retail and maor accounts-" and transport market ,price sensitivesegment-.
(he railway contract was not without risks. ach train cost !ati :s. 13 lakh. It re8uired
moving one train every week which was possible only when ;3 mt@day of cargo was
mobilied. (he e#pected revenue from a train load was :s. 1) lakh. (he best route was
'elhi*$adras. 7reudices from railways prevented its operations. (he ombay*+alcutta
route was operational for si# months. (he 'elhi*ombay route was not received well as the
distance was not large enough to shift prime customers to the rail mode.
$ovement through the railway network could not be sustained because even in the bestroute ,ombay*+alcutta-" there was no return load. (he contract stipulated a fi#ed payment
to railways. +ollection did not match with the commitment. on*availability of load
delayed shipments and delivery commitments could not be met" leading to reduced traffic.
0ome in !ati argued the railways business failed because !ati never sold the product or a
service but inadvertently started selling the mode ,rail- of transport. +ustomers were
unwilling to pay a premium price for what was perceived by them as slow mode of
transport.
efore !ati undertook organiation restructuring railways was managed as a proect. &fter
restructuring there was no clarity as who was responsible for what of this product. (hisfurther led to lower collection and non*profitable operations. ventually" !ati abandoned
the initiative. (here was a feeling of unease among senior e#ecutives that a potentially good
proect was not well managed and a great business opportunity was lost.
(' in Gati
!ati believed in long term employee relationship. Organiational commitment" win*win
situation" multiskilling of employees" and long term employment were the key ingredients
of human relations function. &ttitude was given more importance in employee recruitment
than 8ualification and e#pertise.
G On every possible occasion" &garwal made it e#plicit that !ati was a caring
organiation. Wherever possible" food was cooked and served to employees in all !ati
offices. While the informal set and atmosphere worked well for 8uite some time" maor
reforms were initiated between 2333 and 233; to enhance competitiveness of !ati in the
changing business environment.
G &garwal himself personally met the family members of an employee in case he@she lost
life in a ,maor- road accident. (his was systematically followed up. (oday ,2335-"
where &garwal cannot visit the family of the victim" a senior employee of the companyis deputed.
G $ost of the !ati employees ,until 199?- were inherited from (+I. (here was a need to
enhance their competency level. $anagement graduates and engineers were recruited
from the campuses and placed in e#ecutive or managerial cadre. (o keep a check on the
number of employees" a performance*based separation scheme was implemented. (heseparated employees were given option" opportunity" and financial support to work for
!ati as entrepreneurs.
G (he gender mi# in !ati was skewed towards males. Bery few women worked for !ati.
(o bring an element of improvement in social behaviour within !ati ,in terms of spoken
language" manners" etc.- women employees were inducted as management and
graduate trainees ,this initiative was based on the hope and assumption that" in the
presence of women" male employees would tend to be more gentleH-. (he entry*level
8ualification was increased from school pass ,higher secondary 8ualified- to graduation.
G :ecruitment was need based. &dvertisements" using manpower consultants" and
visiting campuses were the modes of recruitment. /nderstanding of the service
industry" ability to sell a product" innovativeness" business knowledge and e#posure to
functional areas of business" softer skills ,like communication and sensitivity-" and
ability to work in a team were the range of skills sought in a fresh recruit.
G very new entrant went through a seven*day induction course" at a place other than
his@her place of posting. 0tandard training modules on marketing" customer orientation"
and service 8uality were routinely offered. 0everal e#ecutives were nominated for
management courses in reputed Indian educational institutions.
G (he performance appraisal system was changed from the managing director reviewing
the performance with every regional manager to a broadbased open appraisal system.
(wo broadbased review committees did the appraisal. & central review committee and
a regional review committee reviewed the performance of every manager along with
the managing director in an open environment.
G Welfare measures included financial support on a need basis. &ll employees and family
including parents were covered through insurance policies. >or staff" all statutory
re8uirements were provided. :emuneration and perks for senior e#ecutives werecomparable with the best in the industry.
'eorganization in )**"
'uring 2331*233;" !ati undertook a maor organiation restructuring e#ercise. (his was
motivated by several business reasons.
efore reorganiation" !atis operations were divided into 13 regions. ach region was like
an independent business unit and was managed by a regional manager. (he regional
manager was incharge of all activities related to the management of the region. (his createda vast pool of generalists in the company. ecause of increased and intense competition"
!ati needed to sharply focus on marketing and delivery. >or e#ample" the regional head
could spend only a limited amount of time with his clients because of his other
responsibilities of managing the region.
(he monitoring ,business- mechanism was at the regional level. While at best regionalperformance could be monitored and possibly corrected" it left several gaps in
understanding how a product or service was doing across the country. &t best it was
possible to discuss the performance variation of product and services across the regions. It
was not possible to develop a holistic view of the product and service and enhance
performance or modify the features.
!ati had evolved on employee trust. $ost senior managers were groomed by &garwal.
(hey all had oined at the operating level and had moved up to assume larger
responsibilities as the business e#panded. (here was a lack of formal systems approach and
professional orientation.
&garwal was of the opinion that" given the sie of !ati and growing business compulsions"
marketing and services could no more be bundled. & need to focus sharper on these
activities with specialied manpower was articulated within the organiation.
In the revised organiation structure" marketing and services ,operations- were vertically
separated across the company. 0ervices like information technology" finance" and 4: which
were used by every product in !ati became corporate functions. In the new set*up" there
were five ones6 north" south" east" west" and central. (hey were primarily marketing
offices. (hey looked after all marketing aspects of all products in a one. 0ervices and theassociated infrastructure were renamed as divisions. (he division heads were responsible
for operational efficiency and service reliability. oth divisional heads and onal heads
were e#pected to work as internal customers. (he service heads looked after all !ati
products. ,0ee #hibits ? and 5 for the revised organiation structure and the value chain
concept.-
(he number of branches was rationalied to =2 from 1)3. (he new operating units were
called e#press centres ,+-. 0maller branches ,of the old system- were converted to depots.
ach + was a hub for several depots. Operation" sales" and financial accounting were
administered at the + level. In essence" the reorganiation aimed to convert !ati from aresource based" activity oriented organiation to market focused" process oriented
commercial entity.
(he conse8uences of restructuring were deep and felt across the organiation. 0ome of the
most important issues are captured here.
G arlier" !ati was a corporate office driven organiation. ow every division and one
was e#pected to set its targets ,in consultation with the corporate office-. (he ones
should manage their funds. (he ones can resolve structural issues" modify procedures"
refund customer ,claim- settlement" and damages. Birtually they are independentsubect to broad policy issues.
person is responsible for service as well. 4ow to resolve this conflict in
perceptionA
(here should be one person to lead. Kou cannot have two independent streams
of authority. (he present structure would work only when the professionalmaturity of the individuals are high.
arlier" I used to make instantaneous decisions. >or e#ample" if I have enough
material I would organie a truck immediately to satisfy customer re8uirement
and meet delivery commitment. ow" I need to depend on service. 0imilarly"
client settlement would also involve several steps and several people and their
udgment.
Gati Online Initiative
(he !ati online proect was conceptualied in 2333. (he obective was to develop a web*
enabled information technology platform to support operations. efore this initiative !ati
had developed a software and implemented it on >o#7ro. It was based on the latest
information technology. Over a period of time" better and safe technology had evolved and
!ati wanted to take advantage of it.
(here was another problem6 the software was operational at the local offices in a
decentralied mode. It was not possible to establish centralied control on data and
operational features. 'ecentralied operation allowed the front*end employees at branches
to offer differentiated pricing. 4owever" because of lack of control and data integrity in thesystem" financial benefits did not accrue to !ati. 0ome pilferage was possible. (he new
software was e#pected to plug these holes.
(he option of using a readily available software was considered. ased on the peculiarities
of operations and after carefully evaluating several vendors" !ati decided to develop a
customied solution itself.
!ati engaged the services of a reputed I( company to develop a software. (his company
had very little e#perience in developing customied solutions" even though it was a well*
known computer training organiation. !ati wanted a software" which would track allactivities from receiving a document until settlement of accounts related to the document.
(he company envisaged the proect as an e#tension of Oracle >inancials. Its idea was to
customie Oracle >inancials to !ati re8uirements. &s an e#tension it planned to capture the
operational aspects. (he company spent about nine months in understanding Oracle
>inancials from this perspective. 4owever" &garwal and others realied that this approach
was unlikely to meet the re8uirements of !ati and was not in tune with what !ati wanted.
+onse8uently" the contract with the company was terminated. !ati had lost about a year in
initiating activities related to developing its own software.
&garwal and B.(. 7awar who was in charge of the !ati online proect engaged 0atyam onthe software development proect. 0atyam broadly understood the re8uirements and
started negotiating the proect details. &garwal was keen to have the ob completed in 15
months. 0atyam" however" needed at least 2? months. &fter prolonged negotiations and
substantially modifying the system re8uirements and reporting formats" Lune 2332 was
fi#ed as the target date for completion of the proect which was named !atiMweb. (he
proect comprised three different components6 !$0 ,!ati nterprise $anagement0ystem-" Oracle >inancials" and Oracle +:$. !$0 was the main application which was
to be custom built covering all activities of !ati. (his in turn was to be interfaced with
Oracle >inancials for financial reporting and +:$ for the contact centres.
>or 0atyam" this proect was the first of its kind. (he proect envisaged about 2333 man
months effort. (he proect was monitored from day one ,$arch 2331-. (en months passed
by and in Lanuary 2332" 0atyam reported that the proect was too big and could not be
delivered by Lune 2332. Ceft with no alternative" !ati settled for reduced scope of the
applicationN 0atyam was to make this available by Lune 233;. 4owever" the change in time*
frame resulted in a price increase of around ?2 per cent to !ati. 0atyam met the new targetdate successfully. In the opinion of 7awar" what was planned as a 15*month proect was
e#tended to 2 months with substantial reduction in scope.
& detailed systems study was done. ased on data elements" process mapping was done.
(he user groups validated this regularly. 0oftware development was in small units or
modules. &s and when a module was ready it was tested individually for logic and with
user groups and the !ati I( team for operational clarity and consistency. (he units
corresponded to loading" unloading" goods delivery and generation of proof of delivery"
etc. (here were more than 1333 modules and units. (he units" when developed" were not
based on a public system re8uirement document. (his document was getting evolved between the user" the implementation team" and 0atyam and" therefore" there was no single
scope document for the system.
(he proect envisaged about 2333 man months of work. It had a budget of :s. ;.5 crore
which was subse8uently revised to :s. 5 crore. >or 0atyam this was moderate revenue. >or
a comparable proect its billing would have been /0 13 million. It agreed to do this proect
at this price because of the relationship between &garwal and the +O of 0atyam. esides"
this was the first proect of this kind for 0atyam.
7roect implementation progressed as planned. !ati and 0atyam worked as one team. oth!ati functionaries and I( personnel were involved in the design and testing of the entire
application product and the interfaces. In order to ensure that this web*based proect
became a reality" a wide area network of 123P locations were set up including I7 phones
between various locations. &lso a fully redundant data centre was created at the head office
in 0ecunderabad. very employee in !ati was trained on the new system. In addition" a
computer based training module was created for the benefit of users.
&ll the modules were tested. (he proect team had planned the system for about ;33
concurrent ,simultaneous- users. (he software performed as e#pected on all test conditions.
(he system went live on Luly ;" 233;. &s soon as the system went live it crashed. (here wasa complete system failure. othing worked. &ccording to B( 7awar6
We were shocked. We did not know what went wrong. We have heard of :7
implementation failure. (his one was utter failure. othing worked. We had
created so much hype about this software" it was impossible to imagine its
failure. We contacted technical e#perts" e#ecutives in charge of proectimplementation" software e#perts" and hardware consultants to figure out what
went wrong.
0ince there was no back*up" operations came to a grinding halt. ased on a wide range of
consultations" !ati took the all*important decision to go ahead with implementation.
Immediately on deciding to go ahead" a recovery plan was put in place within a day by the
proect team in consultation with senior members of the organiation. It was decided to
retain the new system for some activities and continue with >o#pro for other activities for a
short term. 7art of the operations ,like generating some documents- was manual.
& detailed study led to the following conclusions for the system crash. (he number of
concurrent users was much more than what was planned. &ctually it was =33 plus users as
against a plan of ;33. 0atyam had no prior e#posure in designing and developing such a
huge on line transaction processing ,OC(7- system. It had underestimated the sie of the
server re8uired for such an application. (his created a problem on response time. ¬her
cause was the program coding which was seen as non*optimal to handle so many
concurrent users in an OC(7 system.
(he recovery team 8uickly upgraded the hardware and did a lot of fine*tuning of thesoftware code. y 0eptember 233; the system stabilied and the new system was in place
and fully functional. While the recovery operation was technical" management and
implementation of the recovery re8uired encouragement" motivation" and a spirit to fight
back.
:esponding to a 8uery whether the crash could have been avoided if the implementation
was on a phased manner region*wise" 7awar said6
We wanted to have a big bang implementation on day one ,Luly ;" 233;- at the
national level. (herefore" regional or phased implementation was out ofconsideration. (here was also a possibility of running the operations parallel for
a while and then switching over to the new system. We avoided this strategy to
resist the tendency to stay with the old system. 0ince we tested the program
logic at every stage" we were confident of its implementation. We grossly went
wrong in estimating the number of simultaneous concurrent users in the system.
!atis I( department took over the entire software from 0atyam in &ugust 233; to fine tune
and complete the work according to the original scope. (he I( department employed 3
people across the country in two different categories. (he first set consisted of employees in
the field who supported day*to*day operations ,internal customer support engineers-. (heirprime ob was system upkeep" installing software" ensure network connectivity" training"
etc. (he second set of employees in the head office included software developers" database
administrators" and system and network administrators.
!$0 generated a summary report of all transactions carried out during the 2?*hour cycle
at more than ;33 !ati locations. (his summary report known as ': ,daily businessreport- is very e#haustive and provides insight into business generated" collection"
outstanding" arrival and delivery service levels" customer calls" etc. &ll these information is
available for the day" for the month" and actuals vs. budget wherever applicable. (his
information is available for various products of !ati and importantly this can be viewed by
a specific location or one or on an all*India basis. ': is one of the reports from a stack of
more than 233 transactional and $I0 reports available in !$0 catering to the needs of
both frontline and senior management.
Oracle >inancials and Oracle +:$ were was success from the time they were launched.
Oracle >inancials was used for balance sheet purposes" and the contact centre modules of+:$ were used at various call centres of !ati. +:$ was used for capturing the interaction
with customers and automatically escalating any issue not resolved within the pre*defined
timeframe to various levels up to the managing director.
arcode scanners are used to support operations. 0ince !ati billed customers based on
proof of delivery ,7O'-" 7O's are scanned and stored in the database. +ustomers can view
the 7O's online.
(o illustrate the change in the working style as a conse8uence of this new network and
online information system" !.0. :avi %umar" I( chief" gave a few e#amples.
When a customer calls" our front*end staff can give complete history about the
shipment" revenue" accounts receivable" service 8uality" and any complaints. !ati would
be able to tailor its response to individual customer re8uirements. (hus the power of
customied decision making is transferred to the front*end.
Online information can be used to improve efficiency in planning. arlier" the return
truckload was filled based on availability. (oday the system has information on cargo
available at destination. &ccordingly" dispatch planning can be made more systematic
and meaningful.
Online information enabled sharing vital tracking information to customers via e*
mail@0$0. &lso it enabled !ati to implement e*billing for its contractual customers.
0hould there be a delay in a truck arrival or departure the earlier system had no way of
tracking the cascading effect on the distribution network. ecause of the new system not
only the effect can be tracked but a contingency plan can also be generated" evaluated"
and implemented. It is now routine to do route planning" route mapping" and material
In 233;" tracking was at the docket level. In near future" !ati would move to package level
tracking which would provide more consumer confidence and a better tracking on the
system.
%ustomer +ervice at Gati
(he entire customer service" complaint monitoring and resolution" and service 8uality
initiatives are handled from the corporate office in 0ecunderabad. (his is coordinated by a
senior e#ecutive" who defined his ob as follows6
$y ob in customer service is to be proactive in handling a potential deviation
and take necessary corrective actions arising out of the deviations" and to ensure
that similar deviations do not occur in future.
Ceveraging technology for information" i.e. providing service and relevantinformation with the obective of keeping the customer focused on his core
business.
!ati operated call centres on 2? # basis to receive" respond" and monitor customer
complaints. >or the first time in this industry a toll free number was made available to
customers. (he customer service team has about 133 people located at nine call centres all
over the country. $onitoring of the service 8uality was being done in 0ecunderabad. If for
some reason a customer complaint was not resolved in reasonable time it is usually
escalated to the ne#t level for possible resolution.
very complaint is captured in a database to evolve a better understanding of the patterns
of complaints" what is !atis response in the resolution of the complaints" and time taken to
resolve it. (he nature of complaints is analysed to form a basis for preventive actions and
systemic improvements.
& customer service e#ecutive says6
$anaging customer e#pectation is the key to our success in this business. >or
e#ample" when we know a vehicle is delayed owing to traffic conditions" we
anticipate the impact of this delay on our service delivery and alert the customeron the impending delay so that he can activate his contingency plan. Often we
accept consignments with a re8uirement of cash on delivery. We alert the
receiver to keep ade8uate cash ready and update him on the status of the
consignment. (his improves customer satisfaction" shortens the delivery cycle
time Q.a win*win situation for all concerned.
+ontinuing on managing customer e#pectations the head of service 8uality said6
We are in a business where direct value addition by our activities to our
customer looks apparently marginal. ut" the conse8uences of delayed or latedelivery to the consumer may be significant. &s a third party logistics company
we must be sensitive to this and do everything possible to meet the promise.
(hat is the reason why a customer is buying our e#pertise and willing to pay for
our services. Our elaborate monitoring systems are meant to facilitate this
process.
very vehicle is monitored by the elaborate computer communication system. 0hould there be a delay counter*actions are implemented and in the eventuality of real delay customer
and concerned departments are routinely altered for possible remedial measures. (he
technology network is considered to be superior in the industry. +ustomer survey is done
once a 8uarter to identify status and improvement areas.
&t the aggregate level !ati recorded 93 per cent punctuality on arrival. (wo*thirds of
shipments due for noon delivery were actually delivered. 0eventy per cent of the shipments
met time target on a day*to*day basis.
Transformation from +uvidha to ,i--
In 2333" !ati launched 0uvidha" a premium cargo ,courier- product" to be managed and
operated by the same team which was in*charge of the cargo business. >or various reasons"
attention on 0uvidha was not ade8uate. +onse8uently" delivery performance suffered and
hence ability to sell the product was poor. 0uvidha was started as an e#tension of business
cargo which essentially meant movement of documents. /nfortunately" the delivery team
did not pay e8ual attention to small cargo" small documents" and small parcels. !ati never
took advantage of midnight flights to deliver documents the ne#t day. (his was primarily
because !ati as an organiation was used to the mindset of moving shipments one day after
they were booked. +onse8uently" delivery promises could not be kept. +ompetition wasintense and delivery before 13.;3 a.m. ne#t day was increasingly difficult. >or !ati" courier
service was an e#tension of its cargo business. >or customers" it was a prime way of moving
documents. &lso" alternative vendors were available for customers.
!ati offered 0uvidha to realie higher revenue. !ati had developed a good customer base
and an e#cellent logistic infrastructure and was fulfilling a specific felt need. +onnecting the
infrastructure with specific industry need was also logical. Initially 0uvidha was a
reasonable success. 4owever" because of lack of focused attention on 0uvidha" the product
was losing market share.
!ati was one of the first companies to use 2 kg. and 5 kg. bo#es to capture the retail courier
market. (his product was offered at a fi#ed price. (his also did not take off and died a
natural death. $arketing and operations blamed each other.
!ati decided in 233? to revamp the courier business and take it forward with a strong brand
image. In order to operationalie this idea" professionals from the courier industry were
hired. 0uvidha was reorganied on several dimensions. >irst the name was changed to Jipp
as it was felt that 0uvidha was a generic name used by banks" railways" etc. 0uvidha did not
have a good brand recall. Jipp was considered to be contemporary and a tune with !ati.
(he ne#t area of reorganiation was to create a separate team which would be responsible
for delivery from end to end. (his meant a separate marketing team" focused operational
team" and dedicated customer care and monitoring team.
0ome of the activities related to Jipp such as pick up" sorting" and delivery were
outsourced. Jipp was to use the !ati network wherever it was appropriate and operate onits own network whenever necessary for purposes of speed. >or e#ample" Jipp products
would be in a separate bag. (hey would be handled separately at the airport itself to reduce
transit time. (o a large e#tent" the Jipp team was different. (here was to be a core market
team responsible for product positioning" pricing" and promotion. &s of now" the e#press
centre managers would handle Jipp as well.
+ommenting on the performance of 0uvidha" the incharge of Jipp said6
0omehow !ati was not able to focus and deliver small RcourierS packets even
though our track record is e#cellent on cargo business. lue 'art is able todeliver this product with enviable accuracy. Interestingly" lue 'art has not
been able to replicate our success in cargo business. We Rlue 'art and !atiS
have similar infrastructure" market conditions" and other resources. It appears
both organiations have developed their own mindsets in handling respective
businesses. Operationally" it should not make any difference to handle these
businesses given the infrastructure and system. In every advanced country
multiple products are handled using the same infrastructure with e#ceptional
efficiency. $aybe Indian organiations ,especially !ati- need to develop that
maturity.
&s Jipp is a reorganied version of 0uvidha ,which was withdrawn- certain apprehensions
were envisaged in ac8uiring new customers. !ati planned to respond to this with a two*
pronged strategy6
G #tensive market research to understand what new features may add value to the
product from the consumer point of view.
G (o add volume" !ati was planning to target a range of new customers and hoped" based
on the positive market feedback and image" to get back the traditional !ati customers.
(he product e#tensions of Jipp specifically targeted three maor segments6 education
,students-" pharma companies" and e*commerce business community.
>or the academic community" the product offering would include responding to mass
mailing of prospectus and applications related to course admission. 0pecialied collection
bo#es of !ati would enable students to return application forms to academic institutions.
(his was e#pected to be a big business opportunity in the near future.
(o the pharma industry" product offerings would include cold chain bo#es to carry medical
samples" blood samples" and vaccines which needed to be kept in a controlled environment.
When introduced !ati would be the first company to tap this market. (his is perceived to
be a difficult and challenging market segment.
$oving further on the value chain !ati planned to sell envelopes and bo#es at very
discounted price. 'rop bo#es across the country would facilitate collection and simplify theoperational processes. +ustomers are e#pected to use these envelopes to send materials
across the country. Jipp team is working closely with e*commerce community team to
identify their needs" and convert them to business opportunities.
Investment in the Jipp proect is e#pected to be higher because of technical e8uipment and
new and dedicated team members. (he business is e#pected to generate surplus from the
second year. In order to contain cost" outsourcing of collection" delivery" and movement is
being actively considered.
Jipp is e#pected to generate about 13 per cent of !atis business in the ne#t 2*; years. (he
gross margin is e#pected to be 53 per cent with a profit margin of 15 per cent. 0umming upthe Jipp plan" the business manager said6
ecause of 0uvidha history" response within !ati for Jipp is somewhat
subdued. (he enthusiasm of the team would be visible when the proect is
making an impact. We have reengineered our customers" network" people and
process. ew market segments e.g. mass mailing" have been identified. (he
network itself is a maor challenge. (here is clear risk involved in this business.
>or all practical purposes this is not a redesigned product. It is a new business
itself.
Gati !rand
(raditionally !ati has been operating with a philosophy of one product suitable for all
markets. Often the market reach and presence is moderated by the product scope and
utility. &ccording to $ano &garwal" 4ead +orporate +ommunications and $arketing6
(he first step towards building a brand for !ati would be to design products
based on consumer e#pectation and market gap. 0everal companies need
distribution help in a particular geographical area. !ati should e#plore possible
opportunities and launch product,s- which would suit specific sets or group ofcustomers. (herefore" the key to marketing is a single generic product with
multiple variations to suit different market segments.
(he communication strategy at !ati is based on building relationship with customers. !ati
wants to position itself as an organiation which can collaborate and work on holistic
solutions to meet customers" logistic needs6
(o create such an image a series of social events would be planned with
customer. It could be an invitation for a regional cultural festival ,like the
avratri in !uarat-N it can be moonlight dinner" a movie in a theatre e#clusivelyfor !ati business associates and customers. In all these meetings there would be
no mention of business. It is e#pected that such e#perience would provide a
warm and cordial beginning when the sales team visits the customer to solicit
business. It is hoped such a preparation would create a conducive climate for
positive business decisions. (his would be the basis on which the !ati brand
would be built.
Mr. Arthur/s Action Plan
In order to globalie !ati" &garwal has been e#ploring business opportunities in 0outh ast
&sia" $iddle ast" and other countries. 4e was keen to recruit e#pertise to upgrade !ati
operations in India. One such find was &rthur 0imon ertie who oined !ati in 2331. ertie
had worked for >ederal #press before oining !ati. &s chief business chain officer"
customer service" logistics" domestic" and international operations reported to him.
0peaking on the business priority areas for !ati" ertie said6
(he number one priority for !ati is customer relationship. We must provide a
solution to all customer re8uirements ,e#press cargo and courier-. ased on our
relationship we need to broaden our customer base" e#cel in service 8uality" and
deepen the e#isting relationship to increase revenue and profitability.
(here is tremendous scope to revamp infrastructure Rwhich meant network
rationaliationS. (his is the foundation to !atis cost advantage. (he purpose is
to increase productivity in material handling by automation. &ttention to details
and accuracy in what is being done is another area of opportunity. (he scope ofcost reduction is at least 16. !ati uses only =5 per cent of the capacity of vehicles
deployed. (here is scope to rationalie branches" modify and restructure routes.
!ati has a great business opportunity in packaging. (he packaging industry in
the country is in primitive stage. (he margins in this business are good.
7ackaging is a natural e#tension of transportation. (he recent e#periments on
&lphonso mango e#port and the Laipur e#periment on art pieces are
encouraging. 0pare part management" bulk handling" and reverse logistics are
future business areas.
!ati has a great role to play in goods movement in 0&&:+ countries. When free
trade one is in place" material would seamlessly move from 0ri Canka"
$alaysia" (hailand" 4ong %ong" /0" and urope. We can imagine a situation
where we bring material to ombay or $adras from 'ubai and take it to
(hailand via +olombo or otherwise.
(here would be a reverse material flow as well. +reating and managing
warehouses would provide an opportunity to move from mere transport to
logistics. (herefore" we are building several ultra modern warehouses. /p to :s.
133 crore would be invested in building ?5 warehouses in the ne#t three years.
Quality of services at competitive value Analyse customer needs and find solutions to satisfy themProvide timely and correct information and avoid surprisesPrompt resolution of compliances and create an environment of mutual respect
2. Provide timely and accurate MIS of business costs and profits and help continuousimprovement in performance.
!. Achieve operational efficiency by correct operational balances "ith the help of uniform accurateand timely information.
#. $ontrol revenue lea%a&es and costs and improve profitability.
'. $entrali(ed information "hich is consistent throu&hout the or&ani(ation.
-ppendix 1: Gati Product(. /er'ice(. and 0e(ource(
Gati Expre((,ati 68press is a leader in retail e8press car&o "ith special treatment of time)sensitive and hi&h value
car&o. Some of the salient features of this service include>
? -oor pic%)up and door delivery? Physical proof of delivery? @eather)proof containeri(ed movement? 7ne)time loc% for tamper proof transit
Gati Priorit,ati in alliance "ith Indian Airlines provides an undisputed advanta&e in car&o deliveries on prioritybasis across the country. ,ati offers a unique moneybac% &uarantee for any delayed delivery of car&ounder this service. Service features include>
? Service throu&h assured space in !# desi&nated sectors throu&h 1' air operation centres? 2#8 service centres at maBor air transit centres
? Multimodal connectivity to enable fastest transit for non)airport locations? $ontainers and pallets offered for bul% car&o
Gati ipp,ati provides Cipp as a courier service for time sensitive small documents and non)documents. Cippdocuments and non)documents are delivered across the country in 2# to #D hours dependin& uponthe location. Moreover the deliveries are made by 11 am. Suvidha offers customi(ed 2%& and '%&bo8es for hi&h value shipments "ith provision for insurance on such shipments and options for acceptin& cash or draft on deliveries.
Gati ogi(tic(,ati "ith a decade of pioneerin& leadership in lo&istics solutions provides "ith a robust platform tointe&rate physical transportation and distribution net"or%. Services under ,ati o&istics include the
follo"in&>
Transportation Management-esi&nin& customi(ed transportation solutions for reliable and cost optimi(ation throu&h multimodalinte&rated distribution system. This includes inbound and outbound transportation assured space inIndian Airlines fli&hts refri&erated truc%s etc.
Distribution Management ,ati applies the Ehub and spo%e modelF to provide fle8ible made)to)order solutions to helpconsi&nments reach the remotest corners of the country. This includes route plannin& and other ancillary activities.
Warehousing and Inventory Management
The "eb enabled "arehouse mana&ement soft"are a first in India provides functionality and fle8ibilityto mana&e "arehouse operations in a most efficient manner.
*eady to use "arehouses at strate&ic locations3isibility of stoc% at multiple locations*eservations and bac%order prioriti(ationMIS report &eneration
$all $entre /er'ice(,ati has set up ten call centres at various strate&ic locations. 6ach call centre is bac%ed by automatedcall distribution 9A$-: technolo&y and a "ell trained dedicated "or%force. ,ati also provides a toll freenumber facility.
0ound the $loc Part( 5an 6anagement,ati mana&es critical parts movement. It offers 2#8!G' access "ith the advanta&e of sharedinfrastructure on both space and cost.
*inancial /er'ice(,ati ensures delivery a&ainst cash5--5cheque. In addition ,ati offers invoicin& billin& ban%in&assistance and payment collection a&ainst delivery as per individual customer requirements.
Infra(tructure,ATI plans to invest H1 million in to mechatronic state)of)the)art "arehouses. ,ati plans to have"arehouse area around 2 million square feet by 2J.
0each,ati covers 'J# of G2 districts in India. It has a &lobal presence throu&h its international divisions.
and *leet,ati uses closed truc%s of various si(es for transportation and distribution. ,ati has more than 2vehicles at its disposal. ,ati also has containers and refri&erated truc%s to meet specific requirements.
6arine *leet,ati has a fleet of four vessels of 11 2 # and J!J -@T. All of these are t"in dec%er for dry car&o shipment. T"o vessels e8clusively service the Andaman and 0icobar Islands. *est are usedin international trade to South 6ast Asia $hina -ubai Australia etc.
7arehou(e(,ati has "arehouses in Mumbai 9Kalamboli and 3i%hroli: $hennai =an&alore Ahmedabad -elhiKol%ata and uc%no". 7ver and above these ,ati has more than 2 stora&e locations across India.
Tie8p(,ati has an e8clusive tie)up "ith Indian Airlines for providin& assured space in all its fli&hts. ,atiMillennium parcel e8press a co)enterprise of ,ati and Indian *ail"ays &ives ,ati the benefit to carryshipments throu&hout the country.
E9uipment,atis "arehouses are equipped "ith for% lifts hydraulic pallet truc%s hand trollies drum trollies taper rollers and Sura%sha ba&s for hi&her security to deliver better quality service.
Gati International,ati International provides a sin&le "indo" solution for &lobal car&o movement and distribution needsof the customer.
Gati $oa(t to $oa(tTo spread its net"or% to the islands ,ati started coast to coast services. ,ati $oast to $oast providesthe most economical mode of transportation and one of the best multi)modal services.
/unda;olida <eli'erThe Sunday5holiday delivery is a special service from ,ati throu&h "hich it offers the choice of havin&the car&o delivered at e8tra cost even on Sunday or any holiday.
International Operation(: @e are the bi&&est net"or% in the country. It ma%es tremendous sense tobe in the international business. @hat moves "ithin country also moves out and vice versa. ,oods donot move only "ithin metros.
Experience +ith Indian -irline(: @hen "e "anted to partner "ith Indian Airlines in 1JJG it "anted acommitment of ! MT on specified routes. This "as bi& ris%. If "e had not ta%en the ris% "e "ouldnot have been a pioneer in air car&o business.
Opinion on 5u(ine((: 6very business at the be&innin& may not be profitable. The lac% of surplusshould ma%e us to "or% hard and be smart. This "ould enable us to ali&n the or&ani(ation 9business:priorities "ith customer requirements.
I never mana&ed the company from a mar%etin& perspective. I believe in deliverin& &ood services"hich meet customer requirements. To some e8tent I "as involved in mar%etin& services.
On people and their care: I am in the service industry. I travel 1' days a month. In the serviceindustry if you are not people oriented you cannot survive. I learned from my father that ri&ht attitude is
more important than ri&ht education. 6ducation can be imparted but not attitude.
On *ailure(: @hen "e si&ned the contract "ith Indian Airlines in 1JJG "e lost heavily for si8 months.I started a ne"spaper business in 4yderabad. It "as a failure. I lost *s. #.' crore in 1D months. Therail"ay e8periment "as a failure. =ut none of these discoura&ed me. 6ach e8periment &ave metremendous learnin&. I learned the value of partnership and the need for balance of po"er inpartnership.
/peed in <eci(ion 6aing: I used to believe ma%in& quic% decisions is important. 7ften they turnedout to be decisions in haste. Today I am more matured in my approach to business decisions.
5u(ine(( 6odel: In partnership business also you commit resources. In manufacturin& you createcapacity and "ait for the mar%et to respond. There is al"ays a ris% in any investment. @e "ere not
buildin& "arehouses on our o"n. $ustomers used to as% for this facility. @e sa" a merit in thisinvestment and hence the decision.
$u(tomer (er'ice: ,old is priority hence first fli&ht. Silver is subsequent fli&ht and hence less priority.0oon delivery is more e8pensive than evenin& delivery 9only t"o)thirds of the price:. The customer needs to decide "hat he "ants and "hat price he is "illin& to pay.
0e(tructuring: *estructurin& &ave us focus on mar%etin& and operations. @e have also formed abusiness chain &roup to monitor the business as a "hole. This is a 1')member team consistin& of fiveservice heads five 9mar%etin& heads: domestic heads and three maBor product heads.
$elebration: @e celebrate ,ati foundation day on 0ovember 1#. @e a"ard best performin& (onesand divisions. @e also have a national conference lastin& 2)! days every quarter for business leaders
and t"ice a year for shared services. =esides every functional team conducts an internal seminar and"or%shop in their areas. 7n Lanuary 2G every year families of ,ati &o on an annual picnic.
ipp: I am reconciled to the idea of splittin& the car&o and courier business. =ecause they "ere notisolated earlier 9maybe: they did not perform "ell. The day ,ati uses the same infrastructure 9peopleprocess technolo&y: to drive a ran&e of products "e can pride ourselves as a process)orientedor&ani(ation. Maybe "e are not ready for it as of no" 92':. So the most sensible thin& "ould be toseparate them no" and mana&e them effectively. Subsequently they can be brou&ht under the sameumbrella.
$ore of Gati: 7ur core is not mar%etin&. It is our ability to provide service delivery.
$ompetition: International players are in this country "ith deep poc%et and &ood technolo&y. Theyare determined to be in this mar%et. Some bi& business houses have also started lo&istics operation.
$ompliance: @e are very strict on re&ulations and compliances. 7ur vehicles are usually notinspected because of our reputation. The seal on the vehicle is opened only at the destination 9JJ per cent:
6aret and Indu(tr: The pie is becomin& bi&&er. @e have several unreliable estimates. 68pressbusiness is estimated to be "orth *s.1 crore. The &ro"th rate is 2' per cent 9four times the ,-P&ro"th:.
5u(ine(( 6ix: The main business is e8press. Cipp truc%in& solution international are all about ' per cent of our revenue. o&istics is about 1 per cent. In the ne8t five years "e e8pect the situation to becompletely different. All business se&ments "ould dramatically increase in si(e. 4o"ever priority9e8press car&o: "ould dominate ,ati business.
Gati 8/P: @e are the only company "hich &ives assured delivery. If "e do not meet customer e8pectation "ithin dimensions of service quality and promise money is returned. *epeated failures donot undermine the resolve to succeed.
