The effect of digitizing one organization, on over a billion people

How will the Railways overcome its lagging infrastructure to help India realize its economic ambitions?

Moving 23 million passengers per day across a network long enough to circle the Earth 1.5 times, the Indian Railways is a mammoth undertaking1. It is India’s largest and the world’s eighth largest employer with a 1.3 million workforce moving 2.6 million tons of freight operating 19,000 trains per day1. As India looks to accelerate its growth story, infrastructure across the transportation sector has emerged as it’s Achilles heel. While top industrial houses like Mahindra, ITC, Birla and others digitize their supply chains, the railways is the bottleneck that lags behind, still operating with colonial-era infrastructure2, 3. Freight costs in India account for 14% of its GDP, compared to 8-10% share in advanced economies, highlighting glaring inefficiencies4. The need for an upgrade and investment is further underscored by the country’s mission to increase share of rail in all freight movement, up from 35% to 45%4. The increase is a critical piece in India’s commitment to combat climate change as seen in its ambitious stance on the Paris Climate Change Accord5. The lack of modernization in Indian railways not only impacts commerce and industry, but also affects passenger movement. IRCTC.co.in, the online ticketing platform of the railways is the tenth most visited website in the country with 1.2 million hits per minute6. The platform has been plagued by a dismal user experience emerging as a consistent source of anger and frustration among its massive user base7.

 

In an effort to combat the concern of its trailing position in modernization of its technology infrastructure, the organization is now taking concrete steps to shed its stone-age rapport. For passengers, it has begun work on the revamp of the platform and is planning to finally roll out mobile applications to ease the booking process7. On the commerce front, under the initiative to improve ease of doing business in the country, the railways announced the launch of Digital Contract, in April earlier this year. With 100 per cent e-tenders and e-auctions already assimilated into the system, the railways is further planning to build on these initiatives to achieve seamless flow of material, finances and information8. The system includes digitisation of processes such as bill submission, inspection, dispatches, receipt, bill passing and bill payments, warranty monitoring and the use of analytics for increasing supply chain efficiency in real time. With the new system, the railways is betting on the digitization push to enable use of analytics for decision-making, reduce inventories and shorten procurement cycle time8. The expected gains from the system are expected to improve the performance of the organization’s supply chain which involves numerous stakeholders spanning across an enormous geography, parts of which suffer from challenging physical as well as information connectivity. Enhancements in performance of the railways is expected to have a ripple effect in the India’s commerce with a large number of industries and companies expected to gain from the acquired competence and gain in efficiency.

 

While the steps taken by the railways towards digitization are commendable, especially in context of its sheer scale and existing infrastructure, it has a long way to go considering the large gap that it needs to cover to meet the needs and demands of Indian commerce. The current scope of its efforts has been focussed on software oriented solutions building basic tools to bring the various stakeholders on the same wavelength for information flow. It will soon have to work towards adopting tools such as AI and machine learning, to forecast demand, supply gaps and customer preferences, among other things. Adopting these technologies could help it achieve significant gains in operational capacity as well as financial efficiency. On the hardware front, it could gain from implementing more POS machines for vending, ticketing and other purposes that could further improve operations and potentially automate information sharing. In addition, it could work towards deploying sensors or RFID trackers along its network to track real time movements of not just certain trains, but also specific commodities or items to help delivery real time information about exact location of any item at any given time, thus truly proliferating the entire supply chain with information and valuable data points.

 

Going forward, it would be exciting to see the execution of these ambition plans. What would be the challenges that the railways would face in implementing the new systems at such a large scale? What are the best ways to roll out the systems across its large workforce? (Many of whom are not used to using technology and information systems in day-to-day work) How can this be rolled out best to outside stakeholders such as vendors, contractors in far flung areas to ensure adoption?

 

(word count: 782 words)

 

Sources

  1. https://www.worldfinance.com/infrastructure-investment/government-policy/indias-train-problems-are-derailing-its-economy
  2. http://www.moneycontrol.com/news/trends/features-2/heresimpactdigitizationmanufacturingindia-982097.html
  3. https://retail.franchiseindia.com/interview/retail-people/profiles/Digitization-of-supply-chain-increases-availability-of-goods-Hirihally-Purushothama.i1204/
  4. http://www.worldbank.org/en/topic/ict/brief/unlocking-the-potential-of-freight-logistics-in-india
  5. https://www.theguardian.com/environment/2016/oct/02/india-paris-climate-change-agreement-un-narendra-modi
  6. https://www.alexa.com/siteinfo/irctc.co.in
  7. http://indiatoday.intoday.in/technology/story/new-user-interface-on-irctc-ticket-website-no-longer-available/1/420934.html
  8. http://www.thehindubusinessline.com/economy/logistics/railways-supply-chain-to-go-digital/article9626481.ece

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4 thoughts on “The effect of digitizing one organization, on over a billion people

  1. Very interesting article, Kunal! I’m left wondering why the investment in better technology hasn’t already been made. Were the railroads already at maximum capacity with existing demand, in which case there was no incentive to increase demand through better customer service? Or were they already at full utilization, in which case there were no opportunities to optimize schedules to increase rail usage and train trips? It sounds like the answer is neither.

    Timing aside, your analysis suggests the benefits of technology advances for Indian Railways are vast: route optimization, increased capacity, lower inventory costs, tracking services. I think the best way to roll out the changes would be for Railways to share some of the financial benefits (increased revenue, lower unit costs) with the external stakeholders you mention. For example, if Railway benefits from all customers booking online, it could offer an incentive to do so. For individual passengers, this could be a free concession. For business freight customers, it could be a freight discount. This kind of value sharing between players of a supply chain promotes cooperation among them and makes every player better off.

  2. Just by looking at some quick Wikipedia data, for 2015-16 we have $26 bn revenues for 8.1 bn passengers, which works out to about $3.2 usd per passenger. This sounds rather expensive for a country with a gdp per capita of around $1850 usd/yr. Deutsche Bahn carried 2 bn passengers with 300k employees in 2013 (they probably became more efficient since then). Would you say the high number of employees (1.3 Mn) is a roadblock for the Indian Railways’s profitability? If costs went down, then so could ticket prices (since this is a public service) and more people could ride.

    Coming back to the question, I think digitization would be a great tool for overhead simplification and not just customer service. The gains from these efficiencies could be returned to the passengers through lower prices or higher investment in the network. Of course, this reorganization would require immense amounts of political effort (which may be better spent elsewhere) and training for employees to utilize these technologies.

  3. This makes for a great read, Kunal, and you touch upon some very important points.

    Traditionally, the Railways has been hampered by two major constraints:

    (A) The Railways has often served as the epitome of socialist India, with the smallest price hike leading to political gridlock. As a result, any expenditure on the Railways was essentially an expense, since the money could never be recovered by raising consumer fares.

    (B) While the size of the Railways workforce is often referred to, what is less spoken about is its organizational structure. Reporting to the Parliament of India is the Railway Board, headed by the Railway Minister but also comprising 14 other officials with responsibilities ranging from infrastructure & engineering to staff & rolling stock. There is no geographic division of responsibilities and often an overlap in functions when it comes to taking transformational decisions. As a result, the Board is known for being, historically, one of the most ‘bureaucratic’ set-ups in India.

    Driving change in the Indian Railways, hence, is never about financial or technological transformation but is instead routed in driving political and structural change.

    To answer your question, the best way to roll out change will be to have any initiative championed via a hub and spoke model. At the Centre will be an assigned member of the Board who is responsible for budgetary support and decisions that require political support. The spoke, meanwhile, will be represented by the head of the Railways in the region SUPPORTED BY the state government. State governments have a huge incentive to support Railways modernization since an upgrade in Railways services is a) a major plus point when it comes to fighting elections (Railways are, after all, the means of transportation for the typical voter) and b) a key attraction for manufacturing businesses looking for attractive destinations. With the growth of competitive federalism in India, states now compete not with other countries, but with each other to attract investments.

    As you mentioned, the Indian Railways have over a period of time become archaic. As a result, benefits from modernization will be tremendous and instantly recognizable and realizable to external stakeholders. Meanwhile, for vendors and contractors who enable the execution of modernization initiatives, the size of the Railways pie is so huge that there is large financial incentive to support any actions in this direction.

  4. Great article, Kunal! I think it will be an interesting challenge to manage the cost of digitization of this rail, as keeping the railway system affordable is probably a higher priority for most natives than keeping it advanced. That said, I’d also like to add another perspective to the comment list that has me strongly in favor of digitization. I recently saw the movie, Lion, where the protagonist Sheru, is displaced from his hometown of Ganesh Talai after falling asleep on a train. As a result, he has no idea how far he is from home and his life is changed forever.

    More than 80,000 children in India are lost each year, many due to similar circumstances as Sheru. It is a massive problem in India, as orphan/lost children are often abused by natives, forced into child labor, and forever separated from their families. A neat side effect of digitizing India is that it may help resolve some of these situations quite easily and address an ongoing social concern that has the ability to make a huge impact in the lives of many children and their families. In addition to all of the benefits you have mentioned regarding commerce, tracking shipments, passenger convenience with regard to both time estimates and ticketing, I felt that this too was a nice by-product to add to the list.

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