Bicara Bisnis

BOP business models: the dabbawala's distribution chain

The case of the dabbawalla's food distribution system has been commented recently for The Economist and analyzed in a Harvard Business Review case study. This bottom-of-pyramid (BOP) business model appeared as an "emerging strategy" (Mintzberg, 1985) in 1890, originally created by a single person, who was hired to carry and deliver home-made meals to a prosperous banker in Mumbay (Bombay).

Thanks to business-to-business and word-of-mouth referrals, the dabbawala delivery system grew rapidly, reaching 175,000 customers and employing 5,142 dabbawalas in 2003. It is currently expanding with modifications to other Indian cities such as Pune, Chennai, Delhi and Hyderabad.

The "value creation engine" of the dabbawala business model is a highly organized distribution chain, managed by 5 to 8-people strong teams coordinated by only two levels of management: team leaders or mukadams and an executive committee that deals with the railroads and clients.

Each day, the dabbawalas provide 350,000 home-cooked meals to their customers in Mumbai, from their homes to their workplaces at a price of about 10 dollars a month and with a Six-Sigma level of accuracy.

The dabbawala workforce has very low formal education -grammar school-, an average age of 55 years and makes an entry salary of 2,000 rupees and a regular salary of 5,000 rupees -both well above poverty level in India- enjoying employment for life and self-sustained retirement.

Based on cultural bonds and very simple, low technology -which is now including cell phones to SMS the dababwala- such as bycicles, tin lunch boxes (called dabbas) and crates to carry the dabbas in the train.

How could the dabbawala business model principles and lessons be applied to our PII/IMD projects?