Report on

Re-engineering the Purchase

Process of
Indian Railways

Submitted by-Pankaj Kumar (CM14223)

Submitted to- Dr. Radha Kanwal
Class- BE Chemical +MBA (5th)
 TABLE OF CONTENTS
TABLE OF CONTENTS...................................................................................................................................1
TABLE OF FIGURES.......................................................................................................................................2
ACKNOWLEDGEMENT.................................................................................................................................3
ABSTRACT.......................................................................................................................................................4
Chapter 1............................................................................................................................................................5
INRODUCTION................................................................................................................................................5
1.1 Re-engineering.........................................................................................................................................5

1.2 Methodology.............................................................................................................................................6

Chapter 2............................................................................................................................................................8
PRESENT SYSTEM OF PURCHASE MODEL OF INDIAN RAILWAYS...................................................8
2.1 Flow chart.................................................................................................................................................8

2.2 Problems with the present purchase system:............................................................................................9

Chapter 3..........................................................................................................................................................10
ANALYSIS AND MODIFICATION IN THE EXISTING PROCESS..........................................................10
3.1 Data from various zones.........................................................................................................................11

3.1.1 Data from SCR.................................................................................................................................11

3.1.2 Data from ER...................................................................................................................................12

3.1.3 Data from NWR...............................................................................................................................13

3.1.4 Data from NR...................................................................................................................................14

3.1.5 Data comparison of four Zones.......................................................................................................15

3.2.1 Data Analysis...................................................................................................................................15

3.2.2 Stepwise analysis.............................................................................................................................15

Chapter 4..........................................................................................................................................................17
RE-DESIGN OF PURCHASE PROCESS......................................................................................................17
4.1 Elimination of redundant and unnecessary steps....................................................................................17

4.2 Suggestions:............................................................................................................................................18

Chapter 5..........................................................................................................................................................19
CONCLUSION................................................................................................................................................19
REFRENCES……………………………………………………………………………………………………………19
1
 TABLE OF FIGURES

Figure 1: flowchart showing present purchase process......................................................................................8

Figure 2 : bar chart showing number of days required for steps A to F in the purchase process....................11
Figure 3: bar chart showing number of days required for steps G to M..........................................................11
Figure 4: bar chart showing number of days required for steps A to F...........................................................12
Figure 5: flowchart showing number of days required for steps G to M.........................................................12
Figure 6: bar chart showing number of days required for steps A to F...........................................................13
Figure 7: bar chart showing number of days required for steps G to M..........................................................13
Figure 8: bar chart showing number of days required for steps A to F...........................................................14
Figure 9: flowchart showing number of days required for steps G to M.........................................................14
Figure 10: flowchart comparing the complete process time for four zones.....................................................15

2
ABSTRACT

Purchase activities all over the Indian railway are dealt with by Stores Department having followed certain
procedure on the basis of stores code and instructions issued by the Railway board from time to time.
Although these instructions have stood the test of time, the last decade has seen spurts in information
technology all over the world. Railway is facing mounting competition from other sector of transport
industries and on the other hand expectation of the customers is rising high. The need of the hour is to keep
pace with the time and lower the production cost and increases the productivity to make entire business cost
effective. This necessitates study in depth to identify the redundancy in the present system and reengineering
the same.

This project analyses and reengineers the purchase process of Indian Railways by examining the existing
purchase process of Indian Railways and collecting data from different zones. All purchase steps were
studied with their respective time duration. Then processes were plotted with respect to time duration for
different PL groups.

The study reveals the inordinate delays & unnecessary approvals in the purchase process. These steps cause
time and cost inefficiencies during the purchase process. The team applied Business Process Reengineering
(BPR) principles to reengineer the existing purchase process of Indian Railways.

The proposed reengineered model attempts to reduce time cost and hence money cost, and human resource
involved. The net effect endeavours to improve efficiency and effectiveness, and enabling the organization
to earn itself the envious status of a vibrant, dynamic and progressive concern.

3
Chapter 1

INRODUCTION

On IR 3Lakh items are stocked for various activities in the Railway system, procurement of which incurs
30% of the total working expenses. Like any other industry or commercial organization IR needs material of
Right quality, Right quantity at Right place and Right Time. Materials if not available in time affect the
function of user department directly or indirectly leading to dissatisfaction at the customers end. The
existing system of procurement of stores requires intervention of IT expertise to curtail the high lead time
and placement of Orders should be made ensuring compliance.

In the existing system file moves from desk to desk like a chain. The strength of the chain is the strength of
its weakest link. With the same analogy if one activity is delayed it invariably delays the whole process. The
purpose of the study is to identify such delays or redundancy in the system, analyse the same and suggest
ways to remove them.

1.1 Re-engineering
Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic
improvements in critical, contemporary measures of performance such as cost, quality, service and speed.
The concept advocates that organisations go back to the basics and re-examine their very roots. It doesn’t
believe in small improvements. Rather it aims at total reinvention.

In today’s ever-changing world, the only thing that doesn’t change is ‘change ‘itself. In a world increasingly
driven by the three Cs: Customer, Competition and Change, organisations are on the lookout for new
solutions for their organisational problems. Recently, some of the more successful organizations in the world
seem to have hit upon an incredible solution: Process Reengineering

Process Reengineering

Process Reengineering is the analysis and design of workflows and processes within an organization. A
business process is a set of logically related tasks performed to achieve a defined business outcome. Re-
engineering is the basis for many recent developments in management. It began as a private sector technique
to help organizations fundamentally rethink how they do their working order to dramatically improve
customer service, cut operational costs, and become world-class competitors. A key stimulus for
reengineering has been the continuing development and deployment of sophisticated information systems
and networks. Leading organizations are becoming bolder in using this technology to support innovative
organisational processes, rather than refining current ways of doing work.

Process Reengineering is basically the fundamental rethinking and radical redesign, made to an
organization’s existing resources. It is an approach for redesigning the way work is done to better support
the organization's mission and reduce costs. Reengineering starts with a high-level assessment of the

4
organization's mission, strategic goals, and customer needs. Basic questions are asked, such as "Does our
mission need to be redefined? Are our strategic goals aligned with our mission? Who are our customers?"
An organization may find that it is operating on questionable assumptions, particularly in terms of the wants
and needs of its customers. Only after the organization rethinks what it should be doing, does it go on to
decide how best to do it. Within the framework of this basic assessment of mission and goals, reengineering
focuses on the organization's business processes—the steps and procedures that govern how resources are
used to create products and services that meet the needs of particular customers. As a structured ordering of
work steps across time and place, a process can be decomposed into specific activities, measured, modelled,
and improved. It can also be completely redesigned or eliminated altogether. Reengineering identifies,
analyses, and redesigns an organization's core processes with the aim of achieving dramatic improvements
in critical performance measures, such as cost, quality, service, and speed. Reengineering recognizes that an
organization's business processes are usually fragmented into sub-processes and tasks that are carried out by
several specialized functional areas within the organization. Often, no one is responsible for the overall
performance of the entire process. Reengineering maintains that optimizing the performance of sub-
processes can result in some benefits, but cannot yield dramatic improvements if the process itself is
fundamentally inefficient and outmoded. For that reason, reengineering focuses on redesigning the process
as a whole in order to achieve the greatest possible benefits to the organization and their customers. This
drive for realizing dramatic improvements by fundamentally rethinking how the organization's work should
be done distinguishes reengineering from process improvement efforts that focus on functional or
incremental improvement.

1.2 Methodology
The following modus-operandi was pursued for the purchase process re-engineering

1. Determine Customer Requirements & Goals for the Process

2. Map and Measure the Existing Process.
3. Analyse and Modify Existing Process
4. Design a Re-engineered process
5. Implement the Re-engineered process.

MISSION

The project team learned that to address customer concerns, the purchase process of Store Department
should be directed towards the vision to "SERVE" the customer by delivering:

SPEED Via a streamlined process with fewer steps, fewer approvals, and a
dramatic reduction in the time to place orders and receive goods.

EASE via a system that is transparent, flexible, scalable and simple to use

REFOCUSED by creating a purchasing organization that plays a strategic

ROLES role in the management of the entire process

VALUE by consolidating the purchasing power to ensure good service, guarantee full value
for every Rupee spent, and reduce the cost of some goods

EFFICIENCY by implementing a system that tracks all purchase

transactions, applies purchases to the right project, eliminates
5
 the need for shadow systems, and provides the tools for units
to financially manage their purchasing

The mission is to purchase the goods

1. Of Right Quality,
2. In Right Quantity,
3. Of Right Reliability
4. At the Right Time (i.e., delivered when and where needed)
5. For the Right Price (i.e., full value for each rupee spent)
6. From the Right Source

Goals of the redesign effort include:

 Greatly improved customer satisfaction and

 substantially lower transaction costs,
 simultaneously abiding by the Guiding Principles of Public Procurement which are as follows:

1. Fairness,
2. Competition
3. Transparency
4. Maximizing Economy, Efficiency and Effectiveness

6
Chapter 2

PRESENT SYSTEM OF PURCHASE MODEL OF INDIAN

RAILWAYS

In the present system, for most of the items related to maintenance & repair of rolling stock, the demand is
fairly constant and proportionate to the outturn, which is known well in advance from fixed production
targets. For these items every Railways procure their requirement separately on yearly basis except for some
of the items like brake blocks which is procured through Railways Board. However, most of the high
value/high volume (i.e. “A” category items) are purchased separately by Zonal Railways with supplies to
respective Depots in multiple lots for further distribution to attached Workshops/Sheds. Most of these “A”
category items are procured from approved sources which are limited in number with Multiple sourcing
being done while entering into contract to ensure assured supplies for improving the availability.

2.1 Flow chart

Correction of AAC
Generation of ES Consolidation of Qty approval and
at depot and
at EDP centre demand at HQ purchase proposal
Accounts vetting

Technical Preparation of
Tender Opening Floating of tender
suitability tender schedule

Acceptance by
TC proceedings Draft PO PO vetting by
Competent
and T.C. signature preparation accounts
Authority

Acceptance and R- Delivery of

Issue of R.O Release of PO
note preparation material

Figure 1: flowchart showing present purchase process

7
2.2 Problems with the present purchase system:

1. Unnecessary file movements

2. Sub-optimal utilization of IT: Collection of EMD, Tender fee should be routed through e-transaction
like NEFT, RTGS and not through Demand Draft. So that, vendors can’t be escaped from paying the
required fee.

3. Lack of punitive action, accountability in purchase process: It is observed that certain steps in the
purchase process take more time than required. To curb these delaying tendencies, a standard time-
chart like citizen charter should be prepared and non-adherence must be dealt with imposition of
penalty.

4. Poor vendor base: Presently, vendor development is being done by RDSO whereas procurements are
done by stores department. In some cases, certain items can be purchased timely and cheaply from
local vendors but due to Railway Board’s guidelines for safety items, procurement must be done only
from RDSO approved sources. Thus, it is suggested that vendor development should also be handled
by stores department of each zone. Besides that, a comprehensive vendor rating system should also
be developed, based on vendors past performance. It will solve the problem of awarding contract to
less reliable vendor.

8
Chapter 3

ANALYSIS AND MODIFICATION IN THE EXISTING

PROCESS
In order to understand the existing process of purchase, data has been collected from four different zones i.e.
SCR, ER, NWR, NR. The data has been presented as per the PL groups. While collecting data, the various
steps involved in the purchase process were identified and the respective time taken for each step has been
noted. The following are the identified steps:-

A: Generation of ES in EDP centre / advance intimation to depot - Correction of AAC at depot. / AES generation at
Depot

B: Correction of AAC at depot. / AES generation at Depot - Account vetting at Depot

C:Account vetting at Depot - Submission of demand in HQ and Consolidation,

D: Submission of demand in HQ and Consolidation - EAC approval

E: EAC approval - Purchase proposal/Description vetting,

F: Purchase proposal/Description vetting - Preparation of tender schedule and floating of tender

G: Preparation of tender schedule and floating of tender - Tender Opening,

H: Tender Opening - Technical Suitability,

I: Technical Suitability - TC proceedings / T.C. signature,

J: TC proceedings / T.C. signature - Acceptance by competent authority

K: Acceptance by competent authority - Draft PO preparation,

L: Draft PO preparation - PO vetting by accounts,

M: PO vetting by accounts - Release of PO

9
3.1 Data from various zones
3.1.1 Data from SCR
140

120
40
100
30
No. of days

80 21
65 12
27 F
4 6
6 E
60 2 6
5 6 D
6 C
5 3
3
40 2 B
2
1
58 A
52
20 34 39

0
10 to 19 20 to 29 30 to 39 50 to 59

PL group

Figure 2 : bar chart showing number of days required for steps A to F in the purchase process

180
160 5
38
140 25
4
120 21
No. of days

45 5
100 2 M
60
3 4 L
80 12
3 23 K
67
60 22 9 J
25
9 13 I
40 4 10 1 H
20 36 31 38 32 G
0
10 to 19 20 to 29 30 to 39 50 to 59

PL group

Figure 3: bar chart showing number of days required for steps G to M

10
3.1.2 Data from ER

250

200

68 18
No. of days

150 50 25
26 F
11 18 E
8 29 15 21
18 7 D
100
8 C
33 52 14 46
61 B
20 31 A
50 19 16
16 14
45 34 41
28 25
0
10 to 19 20 to 29 30 to 39 50 to 59 80 to 89

PL group

Figure 4: bar chart showing number of days required for steps A to F

250

18
200 17
3 20
13 22
19 12 20
5 5
3
13 6
No. of days

150 4 M
126 L
104 90 K
100 94 108
J
I
H
50 25 12 13 30 G
17
38 42 35 45 34
0
10 to 19 20 to 29 30 to 39 50 to 59 80 to 89

PL group

Figure 5: flowchart showing number of days required for steps G to M

11
3.1.3 Data from NWR

350

300

250

8 136
No. of days

200 6
3 F
150 28
126 13 E
29 D
100 A+B+C
5
9 120
74 153
32
50
76
45 37
24
0
10 to 19 30 to 39 40 to 49 80 to 89 M&P

PL group

Figure 6: bar chart showing number of days required for steps A to F

300

250 8
4
35
200
No. of days

17 41 M
15 10
150 L
21 30 133 25 J+K
6
43 12 I
100 60 9
0 39
H
46 G
46 13 41
50 21
12 18
43 54
28 31 35
0
10 to 19 30 to 39 40 to 49 80 to 89 M&P

PL group

Figure 7: bar chart showing number of days required for steps G to M

12
3.1.4 Data from NR

300

27 12
250
21
20
200
9
No. of days

125
150 F
15 D+E
14 121 190
15 C
100 B
48 A
78
50 13
7
54 40 10
18 28
0
10 to 19 30 to 39 40 to 49 80 to 89

PL group

Figure 8: bar chart showing number of days required for steps A to F

250

200 8
12
3
5
7
No. of days

150 30 M
L
8 12
124 30 13 K
10
100 1 10 15 J
5
11 I
52 41 32 H
50 10 G
11 11 10
39 35 35 35
0
10 to 19 30 to 39 40 to 49 80 to 89

PL group

Figure 9: flowchart showing number of days required for steps G to M

13
3.1.5 Data comparison of four Zones

500

432
450

401
385

380
367

365
400

361
356
347

324
350

293
282

281
271
269
No. of days

300
220

250

213
SCR
200 ER
NWR
150 NR
100
50
0
10 to 19 20 to 29 30 to 39 40 to 49 50 to 59 80 to 89

PL group

Figure 10: flowchart comparing the complete process time for four zones

3.2.1 Data Analysis

In the data shown in section 3.1 various processes involved in the purchase process and the respective time
taken by them to be completed is studied and presented. Data shows that approximately 40% time is taken
till the preparation of purchase proposal that is the quantity needs to be purchased. This section deals with
the analysis of the data shown in the previous section and identifies the delays. The reasons behind the
delays are examined. Suggestions and recommendations have also been mentioned related to the findings
from the data.

3.2.2 Stepwise analysis

Generation of estimate sheet to demand submission in Head quarter

From the data collected, it is analysed that the average time taken from Generation of Estimation sheet to
demand submission in HQ is approximately 80 to 90 days. This process takes a lot of time and can be
reduced.

The present process varies from zone to zone, for example, in some zonal railways the Estimation sheet (ES)
is prepared in the EDP centre and it is sent to the depot for correction The depot then sends the corrected
sheet back to the headquarter but in some railway it is generated in EDP centre and then it is directly sent to
the head quarter.
14
It should be understood that the MMIS software presently available in all depots along with the fact that
depots have better connection with the user departments gives the depots an upper hand in having
knowledge of the demands. Therefore, the demand should be generated in the depot itself and sent to the
head quarter. This would not only save time but also stop unnecessary movement of the file and hence lower
the cost of ordering. And routing through EDP centre is also redundant.

Similarly in some zones quantity vetting is done at depot level and in some Zones it is done at headquarter
level, and also for some zones it is done at both the levels and the average time taken for vetting is
approximately 10 days. This vetting can be done only at Depot level and it can be done in 3-5 days.

The vetted demand is sent to HQ manually. If it can be accessed electronically considerable amount of time
can be saved. An online platform for sending demands can be effortlessly created which would drastically
reduce this lead time.

The re-designed process can take only 20 days from a Maximum of 80 days.

Consolidation of demands to floating of tender

The data shows that the time required from consolidation of demands at HQ to floating of tender is around
55 to 65 days.

By increasing human efforts and using accountability measures the entire process can be reduced.

Tender floating to PO release

As seen from the data, the steps from tender floating to PO release takes around 190 days.

According to GFR the time for tender floating to tender opening should be 21 days. It can be seen from the
data that this process approximately takes 37 days however it can be reduced to 10 days.

It has been observed that during the TC proceedings there is unnecessary file movement which consumes
approximately 65 to 80 days. This can be effectively reduced by using the IREPS to within 20 days.

As vetting has already been done during the initial stages, there is no need of PO vetting and hence draft PO
step is also redundant. However PO vetting can be included only when TC recommendations are modified
by CA. Due to this the number of days can be effectively reduced from 40 days to 10 days.

15
Chapter 4

RE-DESIGN OF PURCHASE PROCESS

4.1 Elimination of redundant and unnecessary steps

E/S Correction
49 D 37 D Consolidation
Advance Generation of AAC and
of demand in
intimation in EDP Quantity
HQ
centre vetting in
depot
10 D 30 D

2D
E/S Generation in depot Quantity vetting in EAC approval/
15 D 3D depot Purchase proposal

25 D 32 D
Preparation of tender schedule
and floating of tender
10 D 37 D

Tender opening

15 D 15 D

10 D 20 D

P.O Vetting Draft Acceptance TC study Technical

by Account P.O by CA and TC suitability
sign
14 D 18 D 14 D 10 D 80 D
P.O
10 D
issued

Existing process (TOTAL NO OF DAYS – 336 D)

Re engineered process (TOTAL NO OF DAYS – 120 D)

Figure 11: flowchart comparing older process and the newly re-engineered process

16
4.2 Suggestions:

 Homogenous items from same vendor can be clubbed.

 Decentralization of Purchase Powers at functional levels.
 Digitized drawings should be made available to stores department along with purchase restrictions,
so that need to send the file to user department can be reduced.
 Presently quantity approval & mode of tendering approval are done separately, these can be clubbed.
Approval by competent authority should be in one go and not piece-meal.
 Streamlining of panels or periodic review should be practiced. This will solve problem of:
a. non-competitive rates,
b. Improper response
c. Insufficient Offers
d. Single Offer
 Strong Punitive Action: Railways often fail to take strong punitive action. It should be taken to send
a strong message for serious business.
 Many times PO is not placed as per firms offer; this leads to-Return of PO by firm & unnecessary
communication regarding clarification for DP/Inspection/Payment terms etc.
Solution:
a. We should send counter offer as per our requirement, if firm doesn’t agree then bypass L1 and go
to L2.
b. Firms should offer PO on a standard format as per their T& Cs in conformance with IRs
requirements.
 There are many office orders, Railway Board orders/guidelines that were issued to a particular case.
How to link them while taking decision is a big issue. All these orders and guidelines should be
compiled for quick disposal of cases,
 Post Contract: Standard online formats should be made available for Purchase Order (PO)
modification, Extension of Delivery Period (DP) etc. So that, pending request can be known
immediately.
 Finance member of tender committee should ensure that there would be no alteration in quantity
after tender committee approval.
 Like works tenders, exemption of tender fee for NSIC (National Small Industries Corporation) firms,
should be removed. Since, in present system, there is no database for NSIC and it is impossible to
check proper authenticity of NSIC firms at the time of tender fee collection.
 In case of purchase of such items where source approval by RDSO is must, security deposit should
be exempted up to 50 lacs INR tender value.
 Limited tender upper ceiling limit should be enhanced from 15 lacs to 50 lacs INR.
 M & P cases takes lot of time in deciding technical features. So, user department should be interacted
through firms by various processes like pre bidding query etc. This would result in avoidance of
multiple times invitation of tenders.

17
Chapter 5

CONCLUSION

The discussion and the improvement suggested through the re-engineering of the present procurement cycle
can increase the efficiency and effectiveness of Materials Management Department on Indian Railways in
meeting the service levels desired by consuming departments as well as integrating the suppliers into the
overall supply chain.

Project has identified the delay in various steps and suggested various measures to reduce it by eliminating
some steps and by use of IT application. It also requires personal efforts and accountability measures to
increase the efficiency of the process.

Presently few steps are automated but a complete system transformation is required to achieve an efficient
and fast purchase process.

REFRENCES

1.Indian Railway official website-

http://www.indianrail.gov.in/enquiry/StaticPages/StaticEnquiry.jsp?StaticPage=index.html

"Zones and their Divisions in Indian Railways" (PDF). Indian Railways. Archived from the
original (PDF) on 19 March 2015. Retrieved 26 August 2011.

2.  "[IRFCA] Indian Railways FAQ: IR History: Early Days

1". www.irfca.org. Archived from the original on 7 March 2005. Retrieved 3 January 2014.

3. Wikipedia contributors. (2019, February 23). Indian Railways. In Wikipedia, The Free
Encyclopedia. Retrieved 05:55, February 27, 2019,
from https://en.wikipedia.org/w/index.php?title=Indian_Railways&oldid=884676201

18