Teaching Note

Rajashree Cement: Engine on Load1

Abstract
The market share for cement transportation by rail had declined from 56% to 43%
over the past decade. In an attempt to arrest the sliding market share, the Indian
Railways (IR) wished to focus more on customer service by expanding the scope of
its offer to a third party logistics service provider. The client system was in the private
sector (unlike the other major commodities carried by IR) and hence was more
demanding and representative of the future orientation of industrial activity in India.
Cement had to reach the retail customer, due to which the distribution side had
reasonable scope for a third party logistics service provider.
This case examines what the IR can do in the context of a large scale modern cement
plant, called Rajashree Cement (RC), in terms of operations at a specific client site.
This had implications for infrastructure, services, organization and information
systems. A new concept called Engine on Load (EOL) was being experimented by RC
and the IR to improve the throughput of bulk cement from the Malkhaid plant of RC
to the Bangalore market. After three months of EOL, executives from RC and IR were
reviewing (i) whether to continue with the EOL system or not and (ii) if to continue,
what should be the terms of the contract between RC and IR. This would have
implications for IRs service levels to their clients.

Questions for Discussion

1. Should RC and SCR have the option of declaring a trip as 'not-for-EOL'? Can this
be unilaterally decided or should it be a joint decision? What should be the
required advance notice?
2. From the time the rake reaches the terminal, what should be the guaranteed time
for engine availability? What should the penalty be on RC if load is not
available? What should the penalty be on SCR if engine is not available?
(Currently there is no penalty on SCR).
3. What steps should RC take to ensure timely loading at the terminal?
4. What steps should SCR take to ensure EOL, and by implication powering the
incoming train with an appropriate engine?
5. Is the issue EOL or timely availability of engine? Incoming and outgoing engines
need not be the same, should SCR want the flexibility.
6. What performance measures should be used for IR to improve customer service
and position itself as a third party logistics solution provider?

Analysis
1. Analysis of the Engine On Load Experiment
(i)

Analysis of the EOL experiment (based on exhibit 14 of the case) until

end December, 2003 showed that out of 78 rake movements, 45 had
the EOL, while 33 were mutually (between RC and SCR) decided as
not for EOL as shown in the table below. Out of these 33, 27 were
because the incoming engine to Malkhaid would not have been capable
of powering the loaded rake. The remaining were on account of RC not
being ready with the cement stocks. For the EOL, it had been mutually
agreed that three hours would be the total time in which RC would
complete the loading of the incoming rake. (The three hours was the
lower bound of the time taken for an engine to pick up a task
subsequent to the one just completed, during the normal assignment
process). An hourly penalty of Rs 3800 would accrue if this was
exceeded. This can be viewed in the context of the two types of
engines that were used. The indigenous engines in a twin set cost Rs 80
million and a recent import cost Rs 140 million. At a 10 per cent cost
of capital, the engine cost per hour was about Rs 900 and Rs 1600
respectively.

Table: Statement of Turn Around Time

Transit
Engine
Prior
Malkhaid Dodballap
Unloadi
Loadin Arrival
Turn Around No of to
ur
to
ng
After
Status
Rakes Loadin g
Dodballap to
Loading
g
Malkhaid
ur
Hrs
Hrs
Hrs
Hrs
Hrs
Hrs
Turn around
status prior to
109 5:15
4:38
12:52
34:24
29:48
10:13
15.09.03
(01.04.03 to
12.09.03)
Turn around
status
from
15.09.03
to
31.12.03
Rakes on
which
45
00:32 4:35
00:32
40:06
31:03
19:13
EOL
availed
Rakes on
which
33
4:30
4:11
8:00
32:00
30:26
10:30
EOL not
availed

Total
Turn
Around
Hrs

97:11

96:00

89:36

2.

(ii)

Out of the 45 EOL movements, none was done in three hours and the
average was nearly six hours. This included an average of 32 minutes
of preparation prior to loading, 4 hours and 35 minutes of loading, and
32 minutes of wait after loading. Prior to the EOL experiment, the total
rake time at Malkhaid was an average of nearly 23 hours, including 5
hours and 15 minutes of preparation prior to loading, 4 hours and 38
minutes of loading and 12 hours and 52 minutes of waiting for engine
after loading. Consequent on the EOL system, not only the waiting for
engine was eliminated, but also the idling time before loading was
minimized due to RC becoming more disciplined about keeping stocks
ready for loading.

(iii)

The overall turnaround time due to the EOL, however, reduced from
97 hours to just 96 hours. To be able to move 70,000 tons per month,
the target turnaround time was 75 hours. In fact, the overall turnaround
time of the rakes on which EOL was not availed turned out to be better
at nearly 90 hours. However, a deeper analysis of the data showed that
rakes were made to wait at Dodballapur due to lower market demand
resulting in lower storage space for the unloaded bulk cement, in the
latter part of the experimental period, at which time also more rakes
were nominated as EOL. Hence, EOL rakes had an average of 19 hours
and 13 minutes rather than the 10 hours and 30 minutes for the non
EOL rakes for the time taken for unloading at Dodballapur. Another
phenomenon was the increase in transit times from Malkhaid to
Dodballapur for EOL rakes as compared to the non EOL rakes. The
EOL rakes had an average of 40 hours and 6 minutes, while it was 32
hours for the non EOL rakes. The cause here was simple to analyse.
Many times, the incoming engine was really not ready to handle the
outgoing load as per normal requirements of fuel and maintenance, and
had to be changed enroute during the loaded movement.

(iv)

It was thus clear that to increase the throughput per rake, the focus had
to be not just at Malkhaid as a terminal, but the entire circuit. With
improvements in the transit times and unloading times, it would be
possible to bring the turnaround time to about 78 hours.

Decision Issues
The key decision issues (already given in the case) arising out of this
experiment were:
(i)

(ii)

(iii)

Should RC and SCR have the option of declaring a trip as not for EOL?
Can this be unilaterally decided or should it be a joint decision? What
should be the required advance notice?
From the time the rake reaches the terminal, what should be the
guaranteed time for engine availability? What should the penalty be on
RC if load is not available? What should the penalty be on SCR if
engine is not available? (Currently there was no penalty on SCR).
What steps should RC take to ensure timely loading at the terminal?

(iv)
(v)

(vi)

What steps should SCR take to ensure EOL, and by implication

powering the incoming train with an appropriate engine?
Is the issue EOL or timely availability of engine (incoming and
outgoing engines need not be the same, should SCR want the
flexibility)?
To improve customer service towards becoming a third party logistics
service provider, should not SCR (and thus, IR) focus on guaranteed
total (a) delivery time from Malkhaid (origin) to Dodballapur
(destination) and (b) turnaround time for the whole circuit?

With the above analysis of the EOL experiment, the class can be directed to
each of the above issues, either for a decision, or for additional information
requirements. Usually, different perspectives would enable a good discussion,
especially on (ii) and (vi).
3.

Implications for IR
The above had implications for IR, in terms of infrastructure, services,
organisation and IT.
(i)

Infrastructure: IR needed to analyse and provide for the customer

requirements right from origin to destination, and the full circuit in
situations of wagons owned by the customer. The availability of the
appropriate locomotives, line capacity and terminal capacity were key
components. The issue of locomotives was critical, since the track
terrain over the entire circuit had differing power requirements over
various segments. The tendency to optimize the power led to engine
changes along the route, affecting the turnaround time.
In terms of line capacity, bottlenecks in various segments of a circuit
should be addressed so that delays due to enroute congestion are
minimized. For the terminal capacity, while usually customers make
the investments, IR should consider these in a partnership mode, in
order to evolve towards a third party logistics provider.

(ii)

Services: While IR did (and commendably) provide services like

transportation and maintenance to the rake, it needed to look at other
services like unloading at terminals and secondary transportation to the
customers customer. At a next level, quicker claims processing,
insurance and even financing could be considered. This would enable
IR to move closer to being a third party logistics player.

(iii)

Organization: This was a critical area since the zonal, divisional and
departmental boundaries affected coordinated service provisioning. For
example, the lack of information sharing between SWR and SCR
increased the turnaround time due to insufficient operational
preparedness in taking over of trains. This was also true at a divisional
level. To deal with this issue, RC had its own staff to gather
information from the neighbouring division control office regarding
the movements of its rakes so that the Malkhaid plant could be better

prepared for loading the rake on arrival. The departmental boundaries

had a consequence on bureaucratically specified maintenance norms,
rather than being a function specific circuits, wagon quality and
commodities being carried. An appropriate analysis could come up
with a reduced maintenance requirement for this circuit.
(iv)

4.

Information Systems: Availability of advance information regarding

the wagon supply and tracking of loads would enable better planning
and resource allocation on the part of the cement industry. The recently
installed Freight Operations Information System (FOIS) in the IR
could be leveraged for this. The FOIS had three main modules, the first
focusing on rakes, the second on wagons, and the third on terminals.
While all customer interfacing functions were a part of the system, the
actual use still focussed on internal operational efficiency as a
substitute to the manual systems. Tactical and strategic use of the
system to transcend intra organisational barriers and integrating with
the customers was yet to happen, though technically feasible.

Conclusions
(i)

(ii)

(iii)

The EOL concept was still not implementable in all situations. 33 out
of 78 possible situations could not take advantage of this, 27 of which
were due to engine incompatibility.
This case brings out the imperative need for IR to refocus on traffic
from just the originating terminal, to the commodity movement from
origin to destination, and then the entire circuit, for smooth operations.
The EOL is thus just a limited concept.
This brings out the intrinsic infrastructural, service, organisational and
information systems gaps in IR.

In the more common situation of industrial customers seeking to increase throughput,

they would just seek more allotment of rakes, for which the IR, had their current,
albeit, slow but steady systems of response. In this situation of rakes owned by the
customer, the customer had a direct stake in achieving the increased throughput with
the same rakes, since they also gained financially. The partnership had an important
role in driving potential third party logistics services by the IR.