Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

Big City Supply Chains

Best in class global supply chains

Which enterprises come to mind when you think of cutting-edge supply chains? I suspect Mumbai Dabbawalas is not one of them.

For those of you who are unfamiliar with the organization, dabbawalas are workers who deliver home-cooked lunches to people in the teeming Indian city of Mumbai. That sounds mundane, but the dabbawalas have been studied by legions of experts in the west. The reason for this interest is that these largely illiterate individuals are part of a cooperative that has been using a color coded distribution system for decades to deliver millions of meals every day with eye-popping efficiency.  The cooperative’s supply chain has even been given the six-sigma designation.

I was reminded of these entrepreneurs when I read last week’s excellent post by Jordan Kass on the growth of mega cities (Modern Day Supply Chains, Mega Cities and the Future). With some 16 million inhabitants and growing, Mumbai certainly falls into the mega category. As Jordan pointed out in his blog, experts predict that in the next five years there will be 23 of these urban behemoths, and most of them will be in developing countries.

Growth-hungry companies in the west regard these countries as top targets for generating new business. To succeed, however, they will need to adapt a supply chain culture that is rooted in western practices.

For example, some companies have built automated distribution centers in India, only to find that their investments were wasted owing to a lack of local expertise and supporting infrastructure. Also, although India is a vast market for consumer goods, its intricate patchwork of mom-and-pop outlets is not compatible with a distribution system based on Costco-style product warehouses. In the words of Mumbai-based Future Logistics, one of India’s largest logistics service providers, “India is a multicultural, heterogeneous country with consumer tastes changing every few kilometers.”

Moreover, in this highly fragmented market there are few channel masters to take the lead in developing more technically able supply chains. The lack of leaders with the market muscle to promote the adoption of innovations such as radio frequency identification technology makes it more difficult to close the technology gap.

Research carried out at the Indian School of Business in Hyderabad suggests that for modern retail distribution centers to be successful in India, they should carry a range of items that the mom-and-pop outlets need. In other words, large-scale DCs along the lines of those found in countries such as the United States, but attuned to the communities they serve. Such a DC might carry items ranging from personal hygiene products to bikes, and be sized according to the demands of the local population.

Supply chains forged in the west need not be redundant in developing nations. The challenge is to develop hybrids that fit the specific needs of the diverse range of customers in low-income markets. Companies that can achieve this will be richly rewarded.

This is particularly true in the age of the mega cities. The sheer scale of these conurbations and the social challenges they face – in Mumbai as estimated 54% of residents are slum dwellers – require a new breed of supply chain solutions.

At least one big city has recognized this need. The City of Bogota, Colombia, recently signed a four-year agreement with the Center for Latin American Logistics Innovation that creates a special research unit to focus on logistics excellence in the city and surrounding regions. One of the objectives is to improve the availability of fresh food by increasing the efficiency of the city’s supply chains. The strategy will not only provide more nutritious edibles for Bogota residents, it will increase the profitability of local growers and retailers.

Government officials in Bogota have realized that well-run supply chains make major cities tick, and are conduits to billions of end customers for the businesses that vitalize urban economies.

To capture these opportunities enterprises from developed countries have to rethink the way they define best-in-class. Perhaps Mumbai’s dabbawala cooperative is not a bad place to start.