The visionary at the center of this tale is Dhirubhai Ambani, late chairman of Reliance Industries Ltd., by far the largest private enterprise in India. During the first 25 years of his career, Ambani built Reliance from scratch into a global corporation with revenue of $23bn - a figure equal to 3.5 percent of India's entire GDP. The only Indian company to ever make the Fortune Global 500 list, Reliance has interests in oil and gas, refining, petrochemicals, textiles and more.
About four years ago, Ambani decided the time was right to enter the telecommunications business. "The regulatory framework for telecom was opening up and the government was looking at regulation differently so that it was more accessible for private operators," explains Jimmy Mogal, vice president of corporate communications at Reliance Infocomm.
But the real driver was Ambani's vision: to enable the average Indian to make a phone call to or from anywhere in India for less than it would cost to mail a post card - or about one U.S. cent. "He said that if we could not do this, then he would not even consider starting this business," Mogal says.
The implications of this vision were huge. At the time, India had several wireless phone providers, but service generally was limited to zones around large cities and it was too expensive for most people to afford. Ambani knew that providing reliable service throughout the country at a very low price would be possible only if Reliance had its own nationwide network and did not have to lease capacity from other providers. In addition, the Reliance team quickly concluded that this project would require the latest CDMA2000 technology. This was because the company wanted to be ready for next generation 3G phones and also because it wanted to be the first telecommunications company in India to target the entire business sector. CDMA not only enables greater, more reliable voice capacity, it also supports always-on data transmission speeds 10 times faster than was available with competing GSM technology.
These very ambitious criteria meant that Reliance would have to lay thousands of miles of fiber optic cable across the length and breadth of India. "It was a massive undertaking, but you can see from looking at our other businesses that everything Reliance does, it does at a very large scale," says Mogal.
Within two years 60,000 kilometers of cable had been laid, criss-crossing and connecting India's cities and countryside. In October 2002, plans were frenetically moving forward toward a Dec. 28 launch of Reliance Infocomm. This date was very important to the Reliance team members because their revered and legendary chairman had died the prior July. Dec. 28 was Ambani's birthday and everyone was determined to launch on that date as the best possible way to honor his memory.
It was in late October, about 45 days prior to launch, that Sitaram Geddam, founder and CTO of 7Hills Business Solutions, received a phone call. "I remember I was watching television at my home in Washington, DC, on a Sunday morning when the call came in," he says. "They told me that if 7Hills could commit to a Dec. 28 launch date, the contract was ours, and that we would need to start the next day." Geddam accepted and left immediately for India, still almost in shock. 7Hills, which provides supply-chain consulting and a supply-chain execution suite called eBizNET, had talked to Reliance months earlier but nothing had come of the discussions. Reliance had indicated it was going to handle logistics in-house using SAP software, Geddam explains, which also provided its enterprise backbone. "We had assumed the project, from our perspective, was dead," he says.
Prior to this, 7Hills had completed several major projects in Asia, but none were anywhere near the scope of the Reliance project. "When we got the phone call, we didn't really understand how big the project was," says Geddam. "We thought it was primarily providing warehouse management, but it turned out to be a whole lot more."
A whole lot that had to be done very quickly in a country where the infrastructure is challenging, at best, and with a software that never had been tested with the volume of data and number of users that this project would require.
Fortunately, 7Hills was not alone. It had made its original proposal to Reliance in conjunction with TNT Logistics. The two companies had partnered in other projects, including a logistics system for Telstra, Australia's largest cellular company, and already had a solid working relationship. Harry Lagad, who then was head of TNT's Malaysian operations, was brought in to head up TNT's part of the operation. It too had "closed the books" on this proposal when earlier discussions had gone nowhere, Lagad says.
A Turnkey Project
At that time, TNT had extensive operations in Asia, but no 3PL operations in India. "I didn't really stop to question whether we could do this or not," says Lagad. "I was too excited and challenged by the opportunity. And I knew that if we did pull it off, we would put TNT on the Indian map."
The two providers were given a mandate of rolling out the entire supply chain in 45 days. "That involved not only designing the supply chain, but also designing the IT system to suit Reliance's products and integrating with numerous other systems," says Lagad. They also had to locate and set up 36 warehouses across the whole of India, all of which had to be wired with radio frequency and equipped with the eBizNET software.
The transportation piece was equally demanding. Reliance's initial model was based on delivering phones direct to the customer's home within a day of their ordering it. So in addition to a fleet of 1,500 long-haul trucks, TNT needed to set up an extensive courier system for the warehouse-to-home delivery.
7Hills also faced a huge job. While installing its software suite at the warehouses, it also had to create interfaces with various Reliance enterprise systems and with its phone activation system. Every phone had to be activated before it left the warehouse so that it would arrive ready to use. "We had to let them know which serial numbers were ready to be delivered and they had to confirm back to us that those phones had been activated and could be released," says Geddam.
Critical to both companies was Reliance's requirement that each individual phone be traced by serial number from the time it left the plant in Korea to the time in was put in the end user's hand. This meant maintaining a huge database because Reliance planned to deliver millions of phones during the rollout and wanted real-time status. "We had to make sure our software could pretty much operate in a 100 percent real-time environment," says Geddam. "Reliance wanted to be able to track, at any given time, a single phone anywhere from the manufacturer's door to the end customer, and they wanted that information on a single server at their headquarters in Mumbai and available to other systems. So the information had to be consistent in SAP and in all of their customer-facing solutions."
Both companies had to find, hire and train employees as well as train existing Reliance workers who would interface with eBizNET. "During the run-up period we set up pilot sites within Reliance offices so that not only logistics people, but people from sales and marketing and even top management could come in and play around with real-life scenarios of getting the phones from Korea," says Lagad.
Workers were hired from India's many technical schools and from a whole range of industries. "Wherever we found qualified people that we could get by offering them money, we took them on," says Lagad. TNT and 7Hills hired about 200 people including more than 70 "super users" of the system - specialists with strong IT backgrounds. "We deployed these guys at each site on every shift so we had 24-hour coverage to protect the system from going down."
The thing to understand, adds Geddam, is that Reliance viewed this as a turnkey project. "We were responsible for the entire IT logistics infrastructure," he says. "We had to do everything, from planning and installing all the hardware to making sure each warehouse was wired and had an operating local area network. We had to see that each warehouse had the right number of label printers and the right number of computer terminals based on the volumes it would handle. This meant we had to take all of Reliance's sales projections and translate that into hardware requirements, which was pretty challenging because they themselves did not have a very good feel for how it would turn out. And, of course, we were responsible for getting the entire system up and running.
"To tell you the truth, when I got the call I had no idea," he says. "It was only after I walked in the door and started sitting through meetings that I realized they were asking us to do the whole thing." 7Hills is a relatively small company, he adds. "When we got the call we only had about 50 people in the company so we had to scale up very quickly. What was really surprising to us is that we were doing such a large project in India. If we had imagined doing a project of this scale, we would have pictured it in Europe or the U.S."
To make this even more challenging, Lagad notes, they were setting all of this up using a communications network that was dependent mostly on telephone lines and some satellite service as backup. In a few rare cases, they also were able to use the fiber optic cable that Reliance was turning on in stages.
During this period, "there were many sleepless nights and frustrating moments when arguments took place and ideas were tossed around," says Lagad. "Reliance made significant changes to the business model about 15 times during the period of 45 days - they would completely change their mind about the way they wanted to do certain things, or they would change manufacturers - and we just had to work through it. We had people rewriting operating manuals as the changes came through. Says 7Hills project manager Vikas Jain, "We had programmers working 24 hour shifts." It was not unusual, he says, to have meetings at midnight or 3 a.m., some of which included the Reliance chairman. "We all felt the frustrations, but everyone was excited by the project and we made sure that we worked as a team to deliver."
By launch date the warehouses were up and operating. TNT had contracted with Transport Corporation of India, the country's largest trucking company, to provide transportation from seven airports to the warehouses. It also had hired a courier company and countless delivery persons to do the last-mile delivery.
To begin with, Reliance brought in phones only from two suppliers in Korea, LG and Samsung. Customers had a choice of only two handsets, though some phones were coded to work in only certain geographic areas, which was another complicating factor in distribution.
Phones came in on chartered 747 jets; there were no partial shipments. Typically there were two shipments per week of about 100,000 phones each. Reliance required that tracking begin at the manufacturer's dock, so TNT's and 7Hills' preparations had included sending people to Korea to work with the manufacturers. "They designed the packaging and barcode labels for the phones to be sure they could be interpreted correctly at all stages with single or multiple scans, as required by the 7Hills software," says Lagad.
Before these planes ever left Korea, an advance ship notice listing all the phone serial numbers was sent by flat file from the manufacturer to the eBizNET system. The phones were packed on pallets, which were labeled with a 2D barcode. "The design was that we would only need to scan the pallet barcode during receiving and that would be tied to the serial numbers," Geddam says. Employees were equipped with rugged PDAs from Symbol Technologies for this task. Information scanned was sent back to eBizNET and matched up with the ASN from Korea. Any exceptions were reported by individual phone serial number.
After the phones were scanned they were loaded onto designated trucks, with phones that were coded for specific regions being directed only to those regions. ASNs that tied a trailer number to specific phone serial numbers were then sent to each warehouse. The trucks were security sealed and moved in convoy with an armed escort. "Trucks would move in convoy as long as possible, then break up to go to individual warehouses around the country," says Lagad. "At every stage we had a backup system where if a truck broke down it could be replaced within three to four hours."
Tracking en route was provided by portable GPS equipment. "Reliance had bought GPS equipment that could be transferred from truck to truck," says Lagad. But when volume peaked, there was not enough equipment to go around. "At one time, volume became so great that we had to rely on the armed guard calling us from every gas station to tell us where the truck was," says Lagad. About 1,500 long-haul trucks were in service delivering phones from airports to warehouses on a daily basis.
Once trucks arrived at a warehouse, they were scanned into locations and made available for order fulfillment and delivery. After orders were picked and the phones activated, each phone had to be put in a plastic bag with appropriate literature and labeled with the recipient's address. This was again scanned and the serial number recorded before being loaded onto a courier truck. These trucks took the phones to drop-off points where they were handed over to delivery persons who took them to the customer's home. The delivery person was responsible for collecting a customer signature as proof of delivery, which was brought back to the courier hub, then to individual warehouses, where it was scanned into the eBizNET system. "This flow looks very simple, but in a country like India it was probably the most complicated flow we have dealt with," says Lagad.
In fact, it became clear pretty quickly that it was too complicated. "There were just too many problems with home delivery," says Lagad. One difficulty was that Reliance insisted that the phone be handed over to the person who had ordered it. This meant that the person had to be at home. If not, the delivery person would refuse to leave the phone. The second problem, explains Lagad, was that phones were paid for in advance. "People had paid close to 10,000 rupees (US $220), which is a hefty sum in this economy," says Lagad. "If there were delays, it created anxiety in the marketplace." This occasionally led to fisticuffs or to a phone being snatched from the hand of a delivery person.
Reliance rapidly learned and adapted. "We quickly picked up on the learning that customers were more comfortable buying from a company store where there was someone to dialog with them and answer their questions," says Mogal. "Hence, we changed course midway in the distribution process. We very quickly developed stores all over the country, where someone can purchase a handset, pay their bill, and ask questions about service." These stores have two other aspects as well: a coffee shop and a broadband center. In addition, Reliance has thousands of dealers around the country where phones can be purchased.
Despite the problems with home delivery, TNT had a good performance record, Lagad says. Of 3 million phones delivered under the direct-to-home model, the total loss was 144 phones. "In a Six Sigma environment, that is about Five Sigma," he says.
Today TNT ships consumer phones to the Reliance outlets and the Reliance outlets do the local distribution to dealers. 7Hills integrated eBizNET into the point-of-sale system at the stores, and replenishment occurs daily. "This is a simpler model," says Geddam. "Instead of having to deliver individual phones, we now ship maybe 50 to 100 phones each day to the retail stores. The product mix is greater now, however, as Reliance buys from more suppliers and offers more models. Corporate customers that purchase multiple phones typically receive their shipment directly from the warehouse.
Home delivery was not the only challenge in the early days. About 10 days after going live, two of the main systems that were supporting the customer database and allocation of phone numbers went down. "Overnight we had to go to a complete manual system," "Lagad says. "We were picking stock from manual, handwritten orders. The only system running at that time was eBizNET, but because it was unplugged from the main system we had to do all the work manually and then key it into eBizNET to keep the database up to date. What had happened was that Reliance had not anticipated how the volume would impact these other systems, which just were not able to scale." The technical people had to build a work-around, which took about two weeks. Then, when new software was brought in to replace the systems that had crashed, new interfaces and processes had to be developed. "All of this put a lot of extra burden on our systems," says Lagad. "That was the most challenging period of this or of any other implementation I have been through."
Volume began at about 10,000 phones per day and reached peaks of 100,000 to 120,000 phones per day about five months into the project. From the start, the nature of this contract had been to set up the supply chain, get it operating smoothly and then turn it over to Reliance. This was done in March 2003. TNT is no longer actively involved, though 7Hills still has super users stationed at the warehouses and a small support crew.
Reliance has sold and delivered 7 million handsets to date, capturing 23 percent of the market, and sees no reduction in demand. It only recently has introduced a pre-paid service, says Mogal, which is more popular in India than post-paid. "We believe the only way forward is up," he says.
Most importantly, Dhirubhai Ambani's vision has been realized. Today anyone in India can make a phone call to anywhere else for about a penny a minute. Moreover, Reliance customers have wireless access to the internet at speeds of 115 kbps, twice as fast as a conventional 56K modem .
"The thing that most impressed me most about this whole experience was the sheer courage that Reliance showed in taking on the challenge of rolling out a nationwide phone service in a country where none of the experienced mobile providers had wanted to go - and doing it in such a way that it is affordable to the common man," says Lagad. "The second thing is the amount of teamwork from multiple organizations that occurred to make this happen. It is a really significant achievement."
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