Incentive Program for Transportation and Logistics Industry

8/14/2019 Incentive Program for Transportation and Logistics Industry

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Incentive Program for Transportation

And Logistics Industry

Submitted in partial fulfilment of the requirements

for Master of Management Studies

(M.M.S)

(2012-2014)

Under the guidance of

Prof. P.G. Kane

SUBMITTED BY

Name: Niket Naik

Roll No: M-12-37

Batch: 2012 - 2014

IES Management College and Research Centre,

Bandra, Mumbai


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IES Management College and Research Centre

Bandra, Mumbai

MAY JUNE 2013

Students Declaration

I hereby declare that this report, submitted in partial fulfilment of the requirement for the

award for the Master of Management Studies, to IES Management College and Research

Centre is my original work and not used anywhere for award of any degree or diploma or

fellowship or for similar titles or prizes.

I further certify that without any objection or condition subject to the permission of the

company where I did my summer project, I grant the rights to IES Management College

and Research Centre to publish any part of the project if they deem fit in

journals/Magazines and newspapers etc. without my permission.

Place : Mumbai

Date : 25-07-2013 --------------------------------

Signature

Name : Niket Naik

Class : MMSII

Roll No. : M-12-37


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Certificate from the company

This is to certify that the dissertation submitted in partial fulfillment for the award of

Master of Management Studies of IES Management College and Research Centre

is a result of the bonafide research work carried out by Mr. Niket Naik under my

supervision and guidance. No part of this report has been submitted for award of

any other degree, diploma, fellowship or other similar titles or prizes. The work has

also not been published in any journals/Magazines.

Date: 25-07-2013 Industry guide

Signature of the Industry Guide: ______________

Name of Industry Guide: Mr Jayesh Patil

Company: Future Supply Chain

Place: Mumbai Designation: General Manager


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Certificate from the Faculty Guide

This is to certify that the dissertation submitted in partial fulfillment for the award of

Master of Management Studies of IES Management College and Research Centre

is a result of the bonafide research work carried out by Mr. Niket Naik under my

supervision and guidance. No part of this report has been submitted for award of

any other degree, diploma, fellowship or other similar titles or prizes. The work has

also not been published in any journals/Magazines.

Date: 25-07-2013 Faculty guide

Signature of the Faculty Guide: ______________

Name of Faculty Guide: Prof. P.G. Kane

Place: Mumbai

IES Management College and Research Centre


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Acknowledgement

On the very outset of this report, I express my sincere thanks to my project guide, Mr

Jayesh Patil, General Manager, Express Logistics, Future Supply Chains, for guiding me

right form the inception till the successful completion of the project. I sincerely

acknowledge him for extending his valuable guidance, support for literature, critical

reviews of project and the report and above all the moral support he has provided to me

with all stages of this project.

I am ineffably indebted to MrBhushan Watghare and Mr Yogesh Ganjewar for theirconscientious guidance and encouragement to accomplish this assignment.

I am extremely thankful and pay my gratitude to my faculty guide Prof. P.G. Kane for his

valuable guidance and support on completion of this project in its presently.

I would also like to thank Miss Shalini Bodra, HR Department, for her help and

cooperation throughout our project.

I extend my gratitude to Indian Education Societys Management College and

Research Centre for giving me this opportunity.

Last but not least gratitude goes to all of my friends and family members who directly or

indirectly helped me to complete this project report.

Any omission in this brief acknowledgement does not mean lack of gratitude.

Thanking You

(Niket Naik)


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Table of contents

Page No.

CHAPTER I : Executive Summary 1

(Max-2-3 pages)

Introduction to the Industry 3

Introduction to the Company 6

Introduction to the Project 8

CHAPTER II : Objectives 28

Methodology 29

Sampling Design and Sample Size 30

Scope and Limitations 37

CHAPTER III : Analysis & Findings 38

(Only graphs)

CHAPTER IV : Conclusions 43

Recommendations 43

ANNEXURES : Questionnaire 44

Tables 44

References and Bibliography 46


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LIST OF FIGURES, TABLES, GRAPHS

SR

NOFIGURES PAGE

NO

1 NMC CONTROL ROOM 13

2 WAR ROOM DASHBOARD 14

3 VTS DEVICE 15

4 CURRENT TIME REPORT 16

5 TRIP REPORT 17

6 VEHICLE MOVEMENT TRACKING 18

7 DRIVER REGISTRATION FORM 24

8 SCORE CARD 25

SR

NOTABLES PAGE

NO1 ROUTEWISE CALCULATION OF

INCENTIVES32

2 QUARTERLY INCENTIVES AFTERPENALTY/DEPS

33

3 PER TRIP BASIS (A) 35

4 PER TRIP BASIS (B) 35

SR NO GRAPHS PAGE NO

1 EXISTING SITUATION 19

2 HALTS 38

3 TRAFFIC 38

4 ROAD CONDITIONS 39

5 DELAYS AT CHECKPOST 396 DELAYS IN PAYMENT FROM VENDORS 40

7 CRITICAL REGION 40

8 VEHICLE BREAKDOWN 41

9 POLITICAL ISSUES 41

10 REST 42

11 DELAYS IN DEPARTING FROM ORIGINHUB

42

12 DELAYS IN REPORTING AFTER REACHING

HUB

42


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Chapter 1

1.1 Executive summary

Logistics is an industry in which efficiency of a company depends on whether they delivergoods or consignments of their partners or clients on time.

In present conditions this is a challenge especially in countries like India where there are

issues regarding poor infrastructure.

Delivering goods on time largely depend on vendors who take up contracts. But the

consignments have to be eventually transported by goods carriers. Hence the drivers of the

carriers need to be efficient and punctual.

Providing incentives to drivers motivate drivers to deliver goods on time.

Considering all these aspects a driver incentive program is designed which aims at creating

a model to provide incentives to drivers if they deliver goods on time.

To develop this model the existing situation was studied (This included operations

related to loading and unloading of consignment and various other operations at their

Hub such as PTL technology and TMS systems as well as functioning of NMC

(Network Monitoring Cell))and root causes of delay were found out. Some of these

reasons or causes were controllable while some were not.

To analyse and support these causes, a questionnaire was designed and a survey was

conducted consisting of feedback from drivers.

The results of the survey were analysed and the approach towards designing this model

was finalized.

It was observed that delay in on time arrivals was related to operational parameters like

route distance, transit time etc. hence the final incentive was calculated based on these

parameters.

Some other factors like Damages, Excess, Pilferage, Shorts or DEPS also had to be

considered.

Thus to create this incentive model all the 150 plus transit routes were studied and

incentives were calculated. The format was presented in an excel sheet.


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There were three main approaches

1. Flat rates

2. Based on distance travelled

3. Scale based

A second alternative was developing a model based on drivers performance irrespective of

their routes or distance travelled. This model was on motivational factors.

So a driver incentivizing model called Inam was proposed.

There were three stages according to this model

1. Registration

2. Evaluation

3. Appraisal

In registration drivers had to register every month. This helped in generating a driver

database.

In evaluation drivers were evaluated on the basis of on ratio of time arrivals to total arrivals

as well as material handling.

In appraisal a grade will be given to drivers and incentive will be awarded based on that

particular grade.

Some other forms of appraisal such as awarding trophy to the best performer or providing

some tangible benefits will be considered.

The last stage in this project was to calculate the estimated cost to company, how to roll

out this scheme and its impact on the existing situation. and suggest some

recommendations related to the process.


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1.2 Introduction to Industry

1.2.1 Logistics

Logistics is themanagement of the flow ofresourcesbetween the point of origin and thepoint of consumption in order to meet some requirements, for example, of customers or

corporations. The resources managed in logistics can include physical items, such as food,

materials, equipment, liquids, and staff, as well as abstract items, such as time,

information, particles, and energy. The logistics of physical items usually involves the

integration of information flow,material handling,production,packaging,inventory,

transportation,warehousing,and oftensecurity.The complexity of logistics can be

modelled, analysed, visualized, and optimized by dedicated simulation software. The

minimization of the use of resources is a common motivation.

According to the Council of Logistics Management, logistics includes the integrated

planning, control, realization, and monitoring of all internal and network-wide material,

part, and product flow, including the necessary information flow, in industrial and trading

companies along the complete value-added chain (and product life cycle) for the purpose

of conforming to customer requirements.

Logistics is the process of planning, implementing, and controlling the effective and

efficient flow of goods and services from the point of origin to the point of consumption.

Logistics management

Logistics management is the part ofsupply chain management thatplans,implements,and

controls theefficient,effective,forward, and reverse flow and storage ofgoods,services,

and relatedinformationbetween thepoint of origin and thepoint of consumption in order

to meet customer's requirements. A professional working in the field of logistics

management is called a logistician. Logistics is divided into four major categories -

1. Materials management

2. Channel management

3. Distribution (or physical distribution)

4. Supply-chain management
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Industry Snapshot

The Indian Logistics Industry is estimated at US$ 125 billion in 2010

Generated employment for 45 million people

The industry is expected to grow annually at the rate of 15- 20 per cent, reaching

revenues of approximately $ 385bn by 2015.

Highly Unorganized with organized sector responsible only for 6%

Market share of organised logistics players is also expected to double to

approximately 12 per cent by 2015

The size of the 3PL industry is estimated to be~US$1.5 bn in FY11 (1% of logisticscost).

The share of 3PL services is expected to increase from 6% in FY06 to 13% in

FY11, at a CAGR of 25%

Logistics costs are 10-20% of GDP

Indian Infrastructure is rated 54th among the 59 countries -- Road : 56/59, Rail:

25/59, Seaport: 51/59, Airport: 40/59

Several factors helped the growth of logistics industry in India over the decade that

includes changing tax system, rapid growth in industries such as automobile,

pharmaceuticals, FMCG and retail. However, major sectors that are investing huge

amounts in logistics industry are aviation, metal & mining and consumer durables. With

increasing competition and cost, focus on outsourcing, entry of foreign players is having

positive impact on the industry. Three major contributors for the growth of the logistic

industry are emergence of organized retail, increase in foreign trade and India becoming

soon the manufacturing hub. As per the World Banks Logistics Performance Index 2010,

India is placed at 47thposition out of 155 countries.


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1.2.2 Supply chain management

Supply chain management (SCM) is the management of an interconnected or interlinked

network, channel and nodebusinesses involved in the provision ofproduct andservicepackages required by the end customers in asupply chain.Supply chain management spans

the movement and storage ofraw materials,work-in-process inventory, and finished goods

from point of origin to point of consumption. It is also defined as the "design, planning,

execution, control, and monitoring of supply chain activities with the objective of creating

net value, building a competitive infrastructure, leveraging worldwide logistics,

synchronizing supply with demand and measuring performance globally."

SCM draws heavily from the areas ofoperations management,logistics,procurement,and

information technology,and strives for an integrated approach.

Supply chain management is a cross-functional approach that includes managing the

movement of raw materials into an organization, certain aspects of the internal processing

of materials into finished goods, and the movement of finished goods out of the

organization and towards the end consumer. As organizations strive to focus on core

competencies and becoming more flexible, they reduce their ownership of raw materialssources and distribution channels. These functions are increasingly being outsourced to

other firms that can perform the activities better or more cost effectively. The effect is to

increase the number of organizations involved in satisfying customer demand, while

reducing managerial control of daily logistics operations. Less control and more supply

chain partners led to the creation of the concept of supply chain management. The purpose

of supply chain management is to improve trust and collaboration among supply chain

partners, thus improving inventory visibility and the velocity of inventory movement.

Organizations increasingly find that they must rely on effective supply chains, or networks,

to compete in the global market and networked economy. In recent decades, globalization,

outsourcing, andinformation technology have enabled many organizations to successfully

operate collaborative supply networks in which each specialized business partner focuses

on only a few key strategic activities.
https://en.wikipedia.org/wiki/Businesshttps://en.wikipedia.org/wiki/Product_%28business%29https://en.wikipedia.org/wiki/Service_%28economics%29https://en.wikipedia.org/wiki/Supply_chainhttps://en.wikipedia.org/wiki/Raw_materialhttps://en.wikipedia.org/wiki/Operations_managementhttps://en.wikipedia.org/wiki/Logisticshttps://en.wikipedia.org/wiki/Procurementhttps://en.wikipedia.org/wiki/Information_technologyhttps://en.wikipedia.org/wiki/Information_technologyhttps://en.wikipedia.org/wiki/Information_technologyhttps://en.wikipedia.org/wiki/Information_technologyhttps://en.wikipedia.org/wiki/Procurementhttps://en.wikipedia.org/wiki/Logisticshttps://en.wikipedia.org/wiki/Operations_managementhttps://en.wikipedia.org/wiki/Raw_materialhttps://en.wikipedia.org/wiki/Supply_chainhttps://en.wikipedia.org/wiki/Service_%28economics%29https://en.wikipedia.org/wiki/Product_%28business%29https://en.wikipedia.org/wiki/Business


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1.3 introduction to company

Future supply chain (FSC)

FSC is India's first fully integrated and IT enabled end- to- end Supply Chain and Logistics

company in India that delivers the shortest Time- to- Market and the lowest Cost- to-

Market. FSC has been a pioneer and leader in modernising logistics and supply chain in

India.FSC Supply Chain Solutions has established capabilities to study customer's supply

chain processes and re-engineer, build & implement customised Supply Chain Solutions

through scientific Supply Chain Management.

Vision and mission

To increase the revenues and profitability of our customers by lowering the Time- to-

Market and Cost- to- Market through our integrated SCM solutions (SC Design,

Movement, Storage and Inventory Management).

FSCSupply Chain Services includeFSC Contract Logistics,FSC Express Logistics and

FSC International Logistics.

FSC Express Logistics

Express Logistics is an integrated time- definite movement solutions catering to First Mile,

Long Haul, Intermediate and Last Mile delivery across India

FSC Express Logistics has proven expertise in Network Modelling and Design, Route

Planning and Optimisation, Load Optimisation and Vehicle Re-engineering. FSC Express

Logistics has been Indias first service provider to successfully implement Vehicle

Tracking System. It enables customers to view the real time location of their consignments

online on the India map.

FSC Express Logistics partners with its customers to provide effective solutions which

enable customers to manage variability and reduce uncertainty in their logistics and supply

chain; thereby enabling them to effectively reduce their Time- to- Market and Cost- to-
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Market. This has been achieved by fully integrating Express Logistics services with

Technology, Automation, Infrastructure, People, Processes, Knowhow and Network.

FSC contract logistics

Integrated state- of- the- art Warehousing and Distribution services is a core competency ofFSC Contract Logistics.

Key Competencies

1. Integration of Infrastructure, Technology, Automation, People, Processes, Knowhow

and Expertise leading to higher Fill- rates and therefore greater Profitability

2. Ability to manage large Distribution Centres and Scale- up at short noticeExtremely high Throughput Handling capabilities

3. Pioneers in Indianised and Indigenised implementation of global best practices

4. Integrated with a Robust Distribution and Last Mile fulfilment Network providing

end- to- end solutions.

FSC international logistics

FSC International is the Import Export logistics services. FSC International Features andBenefits

1. Freight Forwarding & Customs Clearance Services

2. Import and Export across South East (by Air and Ocean) to and from India

Through a network of Select Agents

3. Strong Relationships with Shipping Lines and Container Freight Stations

FSC brand distribution

FSC Brand Distribution Services Ltd. was started about 2 years ago. It is a 100% wholly

owned subsidiary of Future Supply Chains. FSC BDS (FSC Brand Distribution) is a

pioneering effort into organised distribution of FMCG brands to Modern Trade at a pan

India level.


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1.4 Introduction to the project

Driver Incentive Program

A. overview

1. Currently no drivers are being paid for their performance in terms of transit times they

achieve per route.

2. Incentivizing model to distribute on time performance benefits to these drivers

3. Various parameters are to be analysed such as route distance, route transit times, actual

transits, DEPS etc.

4. Weightage scale to be devised accordingly

B. results expected

1. Design and launch of incentivizing model

Critical success factors

1. Identification of critical paths and transit time required.

2. Development of a measurement scale

3. Involvement of drivers

Project strategy

1. To study various routes, their transit times and the distance to be covered.

2. To collect inputs from drivers and other employees associated with express logistics.

3. To develop the incentivizing Model such that the cost to be incurred is considered and

check its practicability.


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approach

Existing arrival departure situation

Defining root cause for the situation

Finding probable solution

Knowing drivers expectation

Designing basic driver incentive program

Checking cost impact and practicability


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1.4.1 Hub/Branch Operations and existing situation

A] Hub/Branch Process

The following is an overview of Hub and Branch Operations

1. Consignment coming in to HUB

Unloading the Consignment:

1. Check the Manifest and unload the Consignment as per the CN number and lot.

2. Checking is done manually.

3. Supervisors need to ensure the proper Consignment unloading in presence of security

officer.

4. If any DEPS found note it down on Manifest and click photograph.

5. Put the unloaded Consignment at the defined section at hub.

6. Give copy of Manifest to security for the entry.

Entry in transport management system (TMS):

1. The hub/branch which sends Consignment to concern hub put the details in TMS.

2. So the receiving branch has all the details of that particular vehicle arriving at the hub.

3. Once vehicle arrives at hub administrator need to put an entry in the TMS about arrival

of vehicle and rest of the details get imported.

Damages, Excess, Pilferage, Shortage (DEPS) Registration:

1. Register the DEPS and categorize it in TMS.

2. In case of shortage, send mail to previous branch/hub.

3. In case of pilferage, coordinate with vigilance team.

DEPS Closing:

1. A report is circulated every month which accounts the DEPS in the previous month.

2. Against the POD the DEPS is closed, it means if customer has put the remark that goods

have received in proper condition then only the DEPS are closed on TMS


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2. Consignment OUT from Hub

Receiving from Branch:

1. Consignment moves from branch to concern hub.

2. Branch gives details about the LR (Lorry Receipt) to hub.

3. At hub the Consignment is separated as per the delivery location.

TMS Process:

1. Loading sheet is prepared.

2. Based on the above loading sheet final loading sheet is prepared which is free from the

DEPS.

3. After the final loading sheet the Manifest is prepared and finally VHC (Vehicle Hire

Contract) is prepared.

4. A single VHC contains multiple Manifests.

5. A single manifest contains multiple CN numbers.

Vehicle Loading:

1. As per the loading sheet and manifest the vehicle is loaded.

2. Count of Consignment is done manually.

3. It is checked against the manifest.

4. Supervisors need to ensure the proper Consignment loading in presence of security

officer.


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Branch Process

Consignment IN to Branch:

1. PDA collects Consignment and delivers it to branch along with LR sheet.

2. At branch the Consignment is manually counted and checked against the LR sheet.

3. LR sheet is handover to the administration department for entry to the TMS.

TMS Process:

1. Consignment details are entered in TMS as per the LR/CN number.

2. It is passed then to concern Hub.

Consignment OUT from Branch:

1. Consignment to be moved out for delivery is separated as per the location.

2. Entry of the CN number of that Consignment is put in TMS.

3. DRS (Delivery RUN sheet) prepared and handover it to PDA for delivery.

Data entry Operation:

1. On Consignment delivery the POD are collected from PDA.

2. As per the LR/CN number the information is entered in TMS.

3. POD are scanned and saved for documentation.

4. POD status (Good/Bad) is entered in TMS.

5. A report generated sent to HO.


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B] Study of Network Monitoring Cell (NMC) System:

Figure 1NMC Control / War Room

Due to importance of Transit Time, continuous monitoring of all the vehicles

is necessary for time-period of 24*7. This is done with the help of NMC (Network

Monitoring Cell) system, which shows the updated status of the vehicles every 3

minutes. FSCS has purchased this system from M/s Novire Technologies: Leader in

Asset Tracking and Management. Along with generating various reports such as

Current Status Report, this system also sends alerts in case of diversion from

scheduled route, crossing safety speed limit etc. Currently there are about 110

vehicles on 65 different routes across nation. The vehicle tracking is done with the

help of GPS and assuming the geo-fencing of hubs & branches up to range of 1 km.

Therefore any vehicle within range of 1 km from hub / branch would be reflected

on map as to be standing inside branch / hub. NMC System controller of FSCS has

the access to all the vehicles across nation whereas the vendors have the access to

information regarding their respective vehicles.


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Different colors are used for the vehicles depending upon their status as

mentioned below:

1. Red: For the vehicles whose data hasnt been received for about more than 2

hours

2. Brown:For the vehicles whose ETA (Expected Time of Arrival) has been

delayed by more than 5 hours

3. Orange:For the vehicles whose ETA (Expected Time of Arrival) has been

delayed by more than 3 hours but less than 5 hours

4. Black: For vehicles running as per ETA

Figure 2War Room Dashboard


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Besides tracking the vehicle movements, the scope of work of NMC system controller

also involves follow-up with vendors, drivers, touching points, branches & hubs for

verification of system data and delivery expedition.

The operation cycle of technology used in NMC system is as below:

Satellite Vehicle GPRS -> Novire Control Centre -> Computer at NMC Room

A GPS tracking device is installed in transporters vehicle and records the co -

ordinates. The tracking device has a built in capability to send messages over the

GSM network to servers which in turn use the same data to show on a map.

Customer simply needs to login to Novires website with unique username and

password to locate their vehicle.

Figure 3VTS Device


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Figure 4Current Time Report

Some of the salient features of this tracking service are:

1. Maintaining 24 * 7 back office support center

2. Ability to analyze data and develop specific MIS reports

3. Ability to customize hardware / applications / report

NMC System generates various reports for different objectives. Some of the

reports are as mentioned below:

1) VTS Reports: They include the analysis of completed trips. Various reports

under this category are:

1. Zone Performance Report

2. Hub Performance Report


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3. Vendor Performance Report

4. Exception Report

5. Trip Report (For completed trips)

6. War Room Tabular (For ongoing trips)

Figure 5Trip Report

1) DMRV Report: It serves for the following:

1. Analysis of completed trips

2. Register remarks in MIS

3. Escalation to daily hub operation and management

2) Expected Arrival Report: Its done to


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1. Monitor the vehicles in transit

2. Check whether the vehicle is on time or not

In short, the first & foremost objective of NMC system is to monitor vehicles

through a central location to ensure on time arrival and departure of vehicles.

Hence its also called as Express Control Room.

Figure 6vehicle movement tracking


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Existing arrival situation

The on time arrival for express logistics in FSC stands at 37% on a pan India level. One

of the reasons for less on time arrivals is time lag which is caused while delivering goods.

This time lag occurs partially due to delay in hub operations and partially due to delay in

transportation.

This delay in transportation can be addressed through a driver incentive program which

motivates drivers to deliver goods on time.

Graph 1- Existing Arrival Solution

Defining root cause

There are ten major causes of delay. Some of them are due to genuine reasons while some

of them can be converted into straight line improvement.

There causes are mentioned in the project scope and are classified as follows.


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Causes of delay

can be converted genuine

into straight line reasons

improvement

1. traffic jam 1. road conditions

2. halts 2. no entry zones

3. delays at checkpost 3. political issues

4. fuel consumption 4. vehicle breakdown

5. speed limitations

6. delay in getting advance bhatta

Finding probable solution

The causes mentioned above which can be converted into straight line improvement can be

solved through providing incentives to drivers. The solution to all these causes except fuel

consumptionis time managementon the part of drivers.

Drivers can manage their fuel expenses through additional expenses provided to them in

the form of incentives.

Drivers expectations:

To know drivers expectations a questionnaire has been designed to get feedback from

drivers.

The questions mentioned in this questionnaire are related to the causes of delay which

could be solved by providing incentives.

Analysis of data obtained by conducting the survey


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1. How many halts do you take on average?

Drivers are taking more halts than required even on shorter routes.

If incentive is provided then the number of halts can be reduced and time can be saved.

2. Do you always get affected by traffic?

The intensity of traffic varies depending on route.

The more the route distance the more is the effect of traffic on delivery.

3. How are the road conditions on your route?

Some drivers say roads are good and a few say they are excellent.

These drivers can improve on their transit time by focusing on other areas of delays.

4. How long do you wait at the check post?

Most of the drivers spend more than 1 hour at check post.

If incentive is provided they can push for speedy clearance at check post.

5. Do you get late in getting advance payment from vendors?

Majority say there are no issues related to payment from vendors and advance payment is

not an issue.

6. Is there any critical region on your route?

Almost all routes have critical region.

On time arrivals depend on how drivers overcome these regions.

7. Is vehicle breakdown a cause of late delivery?

This point was to check whether there are any problems from vehicles provided to vendors.

Majority say no.

8. If there are political issues do they affect your transport?


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Only those drivers who travel towards the east or those who have had past experience said

yes

9. Are you getting enough rest before travelling?

Drivers get enough rest before travelling

10. Do you get late while departing from origin hub?

This point was to check whether there were any delays due to hub operations

Although drivers have said that there are delays, there are no further delays from their side.

11. How long do you take to report at hub/branch after entering the premises?

Drivers generally take more than 1 hour to report after they enter the premises

This delay can be reduced.

Based on the survey conducted the following can be interpreted

Causes of delay

Can be solved through incentives Cannot be solved through incentives

1. halts 1. road conditions

2. traffic 2. vehicle break down

3. delays at check post 3. political issues

4. delays in advance payment 4. rest

5. delay in departing from hub 5. critical region

6. delay in reporting at the premises

Most of the causes which can be solved through incentives depend on operational

parameters like route distance. Hence approach 1 is based on operational parameters.

Incentives can also be given based on drivers performance irrespective of their routes.

1.4.2 Inam a driver incentive scheme


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With an intention to develop a competition among drivers, a second version of driver

incentive program is proposed. This scheme will be implemented on a monthly basis.

Drivers operating on line haul as well as feeder routes are eligible for this scheme.

Steps Registration

Evaluation

Appraisal

Stage 1: Registration

Each driver has to first register to be eligible for this scheme. Registration will be done in

a team of two. The registration period will be 3 weeks.

Since drivers are not permanent, registration will help generate a temporary database. If in

between a driver backs out then his team mate will be allowed to work with a new team

mate.

Drivers who fail to register will not be eligible for this scheme.

Registrations will take place at all the hubs. Registration of drivers will be done at

particular hub depending on vendor controlling location. An individual employee can

look after the registration and evaluation as an administrative staff.

During registration a unique registration number will be given to the team of drivers.

(Example: BWKL0001 will be a code given to the first team operating between Bhiwandi

and Kolkata). In case of change of vehicle during a month, the driver has to mention it

to the administrative staff and get it approved. The following is an example of Driver

Registration Form.

Figure 7- Driver Registration Form:


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INAMa driver incentive scheme

Driver Registration form

Registration no: __________________ Vendor name: __________________

Route: __________________ Vendor code: __________________

Hub: __________________ Vehicle no: __________________

Personal Details

Driver 1

Photo

Name: _______________________________________________________________________

Address: _______________________________________________________________________

_______________________________________________________________________

Driving Liscence no: __________________________

Contact no: __________________________

Age : ____

Sign: __________________

Stage 2: Evaluation


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This scheme will run on monthly basis. Points will be given to drivers based on the

following disciplines

On time arrival

On time arrivals can be calculated depending on ratio of on time arrivals to trips completed

and equivalent score will be given out of 25. Trips which are not completed will not be

considered since the reasons for incomplete trips can be due to unavoidable circumstances.

Similarly on time arrivals for the return trip can be calculated.

The following is an example of a score card to be given to drivers.

Registration no: BWKL0001 Vehicle no WB11B5150

ON TIME ARRIVALS

Bhiwandi Kolkata Month Jan

On time arrivals Trips completed Score Out of

9 12 19 25

Kolkata Bhiwandi

On time Trips completed Score Out of

10 12 21 25

Grade

TOTAL 40 50

Figure 7- scorecard

The final scorecard can be as mentioned above

In case of a tie then the following order will be considered

On time arrivals>route distance

Stage 3: Appraisal


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The final score of drivers performance will be calculated at the end of the every month

and grades will be given to drivers.

Depending on their grades the following rewards will be given to the teams.

Flat rates:

Grade Reward Amount

A+ Felicitation + cash prize 5000

A Felicitation + cash prize 3000

B Cash prize 1500

C Cash prize 750

Variable rates:

An incentive of Rs 50 can be provided per point earned.

Therefore for example if a driver earns 50 points then an incentive of 50*50=2500 will be

awarded to him.

Quarterly incentive:

Each driver will be given bonus score depending on grade every month.

A table for bonus is as given below.

Grade Bonus Points

A+ 20

A 15

B 10

C 5

Bonus points given per month will be complied on a quarterly basis and incentive will be

given @ RS 50 per point.

Driver of the month


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The team of drivers who earns a grade A+ will be felicitated by giving a trophy and their

photo will be printed on pamphlets distributed to drivers along with other documents while

visiting hubs and branches all over India. They will be known as drivers of the month.

The team which gets grade A will be felicitated in the same way.

The teams from grade B will be awarded a cash prize of Rs 1500 and remaining teams will

be awarded a cash prize of Rs 750.

Highlights

1. Registration will be done every time before start of the contest. Since drivers keep on

changing, it can help in keeping a record of drivers working at present.

2. Each and every driver irrespective of their grade will be given incentive. No driver will

go empty handed. This will help motivate the drivers to do well and create a competitive

atmosphere.

Other benefits

There are some intangible/tangible benefits which can be provided to the drivers.

Setting up restrooms at various hubs can provide drivers which much needed rest and

recreation.

Setting up wash rooms and toilets for drivers can help in maintaining sanitation.

Chapter 2


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2.1 Objectives

Project objectives

Designing a basic driver incentive program and check its cost impact and practicability.

Resources

Route distance, route transit times, actual transit times, DEPS (Damages, extra, pilferage,

shorts), budget.

Beginning assumptions

Full truck load, mileage, single one way route are the basic assumptions considered in

designing the basic model.

Full truck load indicates that the truck is full to its capacity.

Project strategy

1. To study various routes, their transit times and the distance to be covered.

2. To collect inputs from drivers and other employees associated with express logistics.

3. To develop the incentivizing Model such that the cost to be incurred is considered and

check its practicability.

Communication strategy

1. To develop a process to collect information

2. To provide analysis and regular evaluation of the information collected.

3. To provide recommendations to senior management

2.2 Methodology


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The system of collecting data for research projects is known as research methodology. The

data maybe collected for either Theoretical or Practical research for example Management

Research which maybe strategically conceptualized along with operational planning

methods and change management.

Formulating of research along with sampling is followed by surveys and scaling. The last 2

stages are data analysis and findings which are organized carefully into graphs and tables,

so that only important relevant data is shown.

Research Methodology is primarily of 2 types:

1. Qualitative: Describes the qualities or attributes about a

particular object.

Eg: Big, circular, robust, weak, heavy, etc to describe an object.

2. Quantitative: Describes data that can be measured.

Eg: Area, dimensions, weight, cost, etc to describe an object.

The data collection method for which is of two types:

1. Primary data collection

2. Secondary Data collection

Primary Data Collection:It is a method of data collection in which the researcher or

analyst collects data on his own through questionnaire, surveys, interviews, etc.

Secondary Data Collection:It is a method of data collection in which the researcher or

analyst collects data through external sources such as libraries, data read through systems,

books, filed records, etc.

It is available effortlessly and rapidly. It is not current data and though old, it might be the

only source for carrying out the research, typically in a production or manufacturing

organization.

Data Collection Method:Primary data collection, quantitative

type.

Data Source:NMC system.

Sample:To study the various routes along with their distance

and transit time and driver details.


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Sample Size:150 routes and 70 drivers.

2.3 Sampling Design and Sample Size

The data collected is primary data. The sample size for this project consisted of 70 drivers

and 150 routes. These drivers operate on long hauls as well as short hauls. A majority of

drivers (65) operate from Bhiwandi while the remaining drivers were considered for a pan

India Program.

The sample include data consisting of transport routes along with their transit time, their

route distance, on time arrivals and departures, DEPS, no of vehicles, their number and

code etc.

Designing a basic driver incentive program (various approaches)

Paying money to drivers for safe and on time delivery is an acceptable way of motivating

drivers to deliver goods on time. But it is not the only way of helping them.

One method used by many companies to make on time delivery efforts successful is to

launch a driver incentive program. But the basis of this program is not merely on time

delivery = reward. The main purpose of this program is to develop a culture amongthe drivers to be punctual.

There are a number of incentives which can help in developing this culture among the

drivers.

Some of these incentives include recognition among peers, tangible rewards such as

prize or trophy and monetary benefits. In this project we are focusing on monetary

benefits for truck drivers i.e. how money can help motivate them to deliver goods on time.

If an incentive plan is designed for truck drivers such it increases with efficiency of

delivery then it can help in timely delivery of goods, improving operations of the company

and help retain drivers for the vendors.

Drivers generally consider pay rates to be low and not enough for their expenses. Pay

rates range from flat rates to rates based on parameters i.e. percentage of distance or

any other parameter like transit time.


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The incentive scheme should be such that good performance over a consistent period

should give more benefits to the drivers. It should help solve problems of the driver on a

daily basis.

Flat rate basis

As per this scheme incentives are calculated on predetermined rates i.e. (for example

Rs100 for distance covered 0 to 500) and this can vary depending on transit time.

The incentive can be calculated based on comparison between actual time taken and

standard transit time.

Parameter basis

This scheme is designed based on the parameter to be considered for example distance,

transit time etc. more the distance more is the incentive or if the actual time < transit time

then incentive increases.

The incentives calculated on the above basis can be further increased depending on

quarterly or yearly performance (for example if a driver is earning 1500 a month then on

quarterly basis he can earn 1500*3=4500+10% of 4500=4950)

Financial monetary schemes

Drivers can be given financial investment schemes which can benefit them (for example

more returns on their investment or more interest for investment). Instead of providing

incentives we can ask them to invest and ensure healthy return on investment.

Tangible benefits

Sometimes the needs of drivers exceed beyond money. Hence in this case the company can

provide other benefits such as cell phone connectivity or they can give rewards or seasonal

gifts to the drivers.

Penalty

A driver can be charged with a penalty if he creates a delay in delivery of goods.

Penalty is generally charged on the basis of transit time.


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It can be charged on a factor derived from deviation from transit time. (For example a

driver is earning Rs1500 if he is on time and transit time is of 3 hours. If he is 2 hours late

then he will be charged Rs1000 and will be paid only Rs500. If he is 3 hours late then he

will be charged Rs1500 and he wont be paid any incentive. If he is 5 hours late then he

will be charged Rs3000 and has to pay a fine of Rs 1500).

In this basic driver incentive program, incentive is calculated depending on distance

travelled per month. This distance travelled can be calculated through actual route distance

and number of scheduled trips.

An abstract of this program is as shown below.

Route wise calculation of incentives:

Table 1- Routewise calculation of incentives

routewise calculation of incentives : 3 approaches

20 A pproach1 Approach2 Approach3

route code route route type distance in kms scheduled trips no of vehicles trips/vehicle distance/veh/mth % of dist flat rates scale based

S0415 BRGH-KGPB-KOLH Short Haul 200 30 1 30 6000 1200 1000 1065S0414 KOLH-KGPB-BRGH Short Haul 200 30 1 30 6000 1200 1000 1065

S0411 PNQC-PNQH-BWDH Short Haul 220 30 2 15 3300 660 750 660

S0410 BWDH-PNQC Short Haul 220 30 2 15 3300 660 750 660

S0376 RNCB-JSPB-BRGH Short Haul 225 30 1 30 6750 1350 1000 1178

S0375 BRGH-JSPB-RNCB Short Haul 225 30 1 30 6750 1350 1000 1178


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2. for quarterly incentive on scale basis an additional incentive of 5% will be awarded on

distance greater than 900

but less than 8000 and 10% on distance greater than 8000

3. for quarterly incentive on % of distance basis an additional 10% of quarterly incentive

will be awarded

kms 900-7999 >8000

incentive 5% extra 10% extra

incentive after

penalty :

1. Incentive will be awarded based on the delay in hrs.

2. Only genuine reasons (e.g. Political disturbance) will be considered while awarding incentive

3. no incentive will be awarded for delay of 10 hours or more

4. Delay due to hub operations will be

considered.

Incentive after DEPS:

1. DEPS i.e. (damages, excess, pilferage and shortage) is considered as a single parameter.

2. no incentive will be awarded for DEPS of 25% or more

3. Genuine reasons will be considered (e.g. Political disturbance) will be considered

4. DEPS due to hub operations will be also be

considered.

Expected Cost to Company (per month):


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1. Percentage of distance: Rs 629436

2. Flat rates : Rs 429200

3. Scale Based : Rs 547317

Second alternative (per trip basis):

The previous incentives were calculated on monthly basis. An alternative to this is that

incentives can be calculated on per trip basis. For variable rates penalty will be charged

@20% only on incentives above Rs 500 on a per trip basis. For flat rates penalty will be

charged on all rates @20% of incentive. The following are the incentives which are

calculated.

Table 3- Per trip basis (a)

route code route route type distance in kms scheduled trips incentive/trip incentive/month no of vehicles total incentive /route

S0415 BRGH-KGPB-KOLH Short Haul 200 30 100 3000 1 3000

S0414 KOLH-KGPB-BRGH Short Haul 200 30 100 3000 1 3000

S0411 PNQC-PNQH-BWDH Short Haul 220 30 110 3300 2 6600

S0410 BWDH-PNQC Short Haul 220 30 110 3300 2 6600

S0376 RNCB-JSPB-BRGH Short Haul 225 30 113 3375 1 3375

S0375 BRGH-JSPB-RNCB Short Haul 225 30 113 3375 1 3375

Table 3- Per trip basis (b)

distance in kms incentive/trip penalty/trip scheduled trips incentive/month no of vehicle total incentive/month

200 250 50 30 7500 1 7500

200 250 50 30 7500 1 7500

220 250 50 30 7500 2 15000

220 250 50 30 7500 2 15000

225 250 50 30 7500 1 7500

225 250 50 30 7500 1 7500

Expected Cost to Company in Rs


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1. Variable Rates: 3814110

2. Flat Rates: 15588750

Third alternative (on basis of turnaround time)

Another alternative can be based on turnaround time since each driver completes different

number of trips on different routes

Example

TRIPS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

TAT TOTA

1 100 105 110 114 119 124 129 134 139 143 148 153 158 163 168 172 177 182 187 192 197 201 206 211 216 221 226 230 235 240 5100

2 200 220 240 260 280 300 320 340 360 380 400 420 440 460 480 5100

3 300 347 393 440 487 533 580 627 673 721 5100

4 449 542 635 729 822 915 1008 5100

5 500 640 780 920 1060 1200 5100

6 600 810 1020 1230 1440 5100

7 785 1112 1438 1765 5100

8 1000 1700 2400 5100

9 1000 1700 2400 5100

Incremental scheme

1) Incentive is calculated on a per trip basis.

2) Incentive increases after every trip as shown in the table.

3) If a driver fails to reach on time on a particular day then incentive given will be equivalent to that given on 1st trip and the cycle will continue.

4) Total incentive which a driver can earn every month=Rs 5100

Total incentive which a driver can earn every year=Rs 61200

Expected Cost to Company: Rs 204000

Note: The cost to company is calculated based on data which does not remain

constant. Hence the CTC calculated is the maximum possible CTC which can be

incurred.


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2.4 Scope and Limitations

Project scope

Project scope includes

Causes that can be converted into straight line improvement such as

- Traffic jam

- Unnecessary halts

- Delays at check post

- Fuel consumption

- Speed Limitations

Project scope does not include

Genuine reasons such as

- Poor road conditions

- No entry zones

- Political issues

- Vehicle Breakdown

- Delay in advance payment from vendor

Limitations

A major limitation of this project is that its CTC (cost to company) will keep on

fluctuating since it depends on parameters like scheduled trips, and number of vehicles

which keep on changing.


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On time delivery also depends on efficiency in Hub operations which is not included in

this project.

Chapter 3

3.1 Analysis and Findings (graphs)

Based on the questionnaire designed a survey with sample size consisting of 70 drivers was

conducted. The major heads of the questionnaire along with their findings and analysis is

as shown below

Halts remain the most important issue when it comes to reducing time delay.


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If halts are reduced then consignments can reach their destination on

time.

The transit time is set after considering traffic. Hence further delay due to traffic is not

acceptable

Although road conditions are poor, it is not in companys hands to improve or fix the roa


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Check post form a major obstacle during transportation. Drivers can speed up clearances at

check posts.


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Although there is delay in getting payments from vendors, drivers generally blame hub

officials for the delay.

Critical region is a region which cannot be moved or shifted. If there exist a region then

drivers can speed things up so that they can reach and leave this region early.


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Vehicle breakdown generally does not happen and in rarest of rare cases it is the vendor

who takes the responsibility.

Managing political issues is not in the hands of company. Hence not much can be done.

Rest here indicates whether drivers are physically and mentally fit to drive the vehicles.


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Even after completing all formalities at hubs drivers take time to depart from the hub.

Just as drivers take

time to depart, they

take more time to

report at the hub.

Chapter 4

4.1 Conclusion

1. The following can be one of the many ways through which an incentive program can be

designed.

Incentive program is designed using two approaches

1. Operational (routes, distance, transit time)

2. Motivational (Inam a driver incentive program)


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Operations form back end of the project whereas marketing and incentives through human

resource will form the front end of the project.

4.2 recommendations

1. More focus should be given on tangible as well as intangible benefits and the company

should send a message that they care for welfare of drivers.

Annexures (questionnaire)


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Future Supply Chain Solutions Limited

Feedback Form

Driver's Name:- Vendor's Name :-

Mobile no :- Route :-

Questionnaire:-

1. How many halts do you take on average?

a) 1 c) 3

b) 2 d) > 3

2. Do you always get affected by traffi c?

a) Yes b) No

3. How are the road conditions on your route?

a) Excellent b) Good

c) Bad d) Worse

4. How long do you wait at check post?

a) Less than 1 hour b) Between 1 to 3 hours

c) Between 3 to 5 hours d) More than 5 hours

5. Do you get late in getting advance payment from vendor?

a) Always b) Often

c) Sometimes d) Never

6. Is there a specific region on the route where you face problems?

a) Yes b) No

7. Is vehicle breakdown a cause of late del ivery?

a) Always b) Often


8. If there are political issues do they affect your transport?

a) Always b) Often


9. Are you getting enough rest before travelling?

a) Yes b) No

10. Do you get late while departing from origin hub?

a) Yes b) No

11. How long do you take to report at the hub/branch after entering the premises?

a) Less than 1 hour b) Between 1 to 2 hours

c) Between 2 to 3 hours d) More than 3 hours

12. According to you what should be the solution for on time arrivals?

___________________________________________________________

___________________________________________________________

13. Any other feedback you would like to give?

____________________________________________________________

____________________________________________________________

Signature:________________ Date:________________

Driver of the month


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Drivers Of The Month (Photos)

Inam a driver incentive scheme

Instructions:

Registration Score card

1) Regi strati on wi ll be done in a team of two. 1) Dependi ng on the Score a Grade wi ll be al loted.

2) Forms will be filled separately. 2) Incentive to be awarded will depend on

the rank alloted.

3) Drivers should report every month

to update their registration.

Evaluation Appraisal

1) Drivers will be Evaluated on the basis of 1) Incentive to be awarded.

1. On time arrivals 2) Top 10 drivers will be declared as

drivers of the month.

2. In case of a tie

'On time arrivals' > 'Route Distance'

References and Bibliography


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1. Google

2. Wikipedia

3. Future Supply Chain (Website)

4. Future Supply Chain (Data)

5. Network Monitoring Cell (Data)

Documents

Incentive Program for Transportation and Logistics Industry