Improving the long lead time in the procurement of stores in railways: a case of northern railway

Abstract

The Lead Time in the procurement of stores is very high in Northern Railway. This results into high inventory, stock-outs, unpredictability, obsolescence and low service level. The Lead Time has two broad components. Internal i.e. time between demand generation and order placement and external i.e. time between order placement and the delivery of store. The existing system of procurement is very time consuming and complex. Red tape and redundancies are two areas of concern. The vendors are also not reliable in timely delivery of stores and they take advantage of the virtually non-existent vendor control mechanism. The lean management technique plays a very effective role in removing the wastage from the existing procurement system. The activities that add up nothing to the procurement value chain are proposed to be done away with. Many activities have been simply redesigned to achieve the goal of lower internal lead time. The Six Sigma approach has been shown to be helpful in controlling the variability in the processes. LSL and USL of all the processes that contribute to the internal lead time have been fixed based on the analytical approach as well as judgement based on experience. The present philosophy of sourcing has been critically examined from the angle of optimality of cost as well as delivery time. The much favoured sole-sourcing with competitive bidding has been challenged in the wake of necessity of quicker delivery of material. It has been concluded that the changes in the procurement environment cannot simply suffice for the desired outcome unless a proper mechanism of vendor control system is developed. This thinking has given rise to designing of vendor rating system which along with price forms the backbone of procurement decision. The Analytic Hierarchy Process has been used to allocate purchase order quantity among multiple vendors in a multi-sourcing scenario.