Case Study at Lijjat Papad !
Case Study at Lijjat Papad !
Case Study at Lijjat Papad !
Everyone enjoys 'rags to riches' stories and everyone likes tales of stupendous
success achieved through sheer determination. The story of Shri Mahila Griha
Udyog Lijjat Papad is all that and much more.
Today, Lijjat is more than just a household name for 'papad' (India's most
popular crispy bread). Started with a modest loan of Rs 80, the cooperative
now has annual sales exceeding Rs 301 crore (Rs 3.1 billion). What's more
stunning than its stupendous success is its striking simplicity.
And perhaps that is the most interesting lesson managers can pick up from
Shri Mahila Griha Udyog Lijjat Papad. Sticking to its core values for the past
forty years, Lijjat has ensured that every process runs smoothly, members
earn a comfortable profit, agents get their due share, consumers get the
assurance of quality at a good price, and society benefits from its donations to
various causes.
How has all this been possible? Its story shows how an organisation can infuse
Gandhian simplicity in all its activities. Here we look at its distribution cycle.
Every morning a group of women goes to the Lijjat branch to knead dough,
which is then collected by other women who roll it into papads. When these
women come in to collect the dough, they also give in the previous day's
production, which is tested for quality.
Yet another team packs the tested papads. Every member gets her share
of vanai(rolling charge) every day for the work she does and this is possible
only because the rest of the system is geared to support it.
Jyoti Naik, President, Shri Mahila Griha Udyog Lijjat Papad explains how
the system works.
The entire cycle starts with a simple recruitment process. Any woman who
pledges to adopt the institution's values and who has respect for quality can
become a member and co-owner of the organisation.
Packed papads are sealed into a box (each box holds 13.6
kg) and the production from each centre is transported to the depot for that
area. Mumbai alone has sixteen branches and six depots. Each depot stocks
production from the nearby three to four branches -- roughly about 400
boxes.
In some smaller towns or villages, the branch itself serves as the depot. The
depots are our storage areas as well as pick up points for distributors.
Our distributors pick up the quantity of papad they require and pay cash on
delivery because we pay our bens (members are called bens, or sisters) every
day. Since we have an estimate of the quantity each distributor takes, we
produce accordingly. This ensures that we neither stock inventory nor pay
heavily for storage.
Generally each distributor has his three-wheeler and about eight to ten
salesmen to deliver to retail outlets within his territory.
For example, we do not have any centre in Goa, but we have appointed a
distributor for that area to ensure that Lijjat papads reach Goa. Our
communication with distributors is regular through monthly meetings where
we discuss their problems and also the issues that we may have about quality,
price, reach, etc.
Exports
Our exports alone account for Rs 10 crore (Rs 100 million). We are not directly
involved in exporting, but recognised professional merchant exporters (who
also export other food products) place an export order.
Again with exporters, our responsibility ends with delivery. They are, both,
expected and encouraged to check the goods on collection. After that, where
and how they export is their call. At present, 30 per cent to 35 per cent of the
production of Lijjat Papad is being exported, mainly to countries like the
United States, the United Kingdom, the Middle East, Singapore, Hong Kong
and Holland.
Distributing profits
Even a ben who has recently joined gets the same share as others who have
been with us longer. Each branch calculates its profit and divides it equally
among all its members.
Mumbai has 12,000 members, the rest of Maharashtra has 22,000, and
Gujarat has between 5,000 and 7,000 members.
Decentralisation
In two words -- decentralisation works. We, at Lijjat, have never shied away
from sharing power in all our activities. The Sarvodaya philosophy has always
been our ideal.
All sister members of the institution are the owners. As I mentioned earlier, all
profit or loss is shared. Only we have the authority to decide the manner in
which profit or loss should be apportioned among ourselves.
The committee of 21 members manages the affairs of the institution. There are
also Sanchalikas, or supervisors, for each centre to look after the daily affairs
of a centre. But the work of the institution is such that each and every member
can take any initiative or any decision.
At the same time, each and every member has the veto power. All decisions,
major or minor, are based on consensus among members. Any single
member's objection can nullify a decision.
Another important fact about the institution is that no male can become a
member and no male employee whether working or honorary or on salary
basis has voting rights.
Other than following this philosophy for our institutional set up, we have try
to avoid the usual 'management nightmares.' For instance, production is
carried out not in one central location but in hundreds and thousands of
individual homes.
The branch system ensures that every activity happens within its own ambit.
Testing for quality and packaging are done at every branch.
Imagine if all the production from all over India were to be gathered at one
central office where it would be checked for quality, packed, transported to
various depots and distributors, if collection were to be centralised and if
distribution of vanai and profits too were centralised. Wouldn't it be a
logistical nightmare?
Our solution is simple. Let the branch be responsible for all activities from
production to packaging to collection and distribution of vanai and profit for
its particular geographical region. In following this simple system, we don't
solve management problems, but avoid them.
Certain activities, however, are centralised. For one, all raw materials are
purchased in Mumbai and then distributed to the 62 branches to ensure
consistent quality of Lijjat Papad.
Given the vastness of India, every region produces different quality of urad,
rice, spices, et cetera. If procured locally, the final product would never be
consistent in quality and Lijjat would have no USP (unique selling
proposition) in the market.
The other centralised process is the grinding of flour. We own two grinding
mills, one in Vashi (Navi Mumbai) and one in Nashik (in Maharashtra). Since
the raw material is purchased in Mumbai, grinding the flour at our own mills
helps reduce costs.
Pricing of the products is also done at the head office. Lijjat papads all over
India cost Rs 16.25 a kg. This price factors in the cost of raw materials,
transport, taxes, distributors commission, profit percentage and so on.
Driven by values
Every member who joins in pledges, ". . . we will make all-round effort to
ensure that the bens get real fruit of their labour and we will not allow to
happen any type of economic loss to the Institution knowingly, unknowingly,
directly or indirectly. We are aware that it is one of the very important
traditions of our Institution that neither sister-member nor employees take
away wrongfully any money or material from the Institution. Those who take
away money or materials wrongfully from the Institution are either beggars
receiving alms from the bens or thugs and robbers extricating bread from a
sister's mouth."
Among others, the chief value that holds the institution firmly is a sense of
self-dignity and respect. We discourage any kind of class distinction and do
not declare ourselves as an organisation for poor or needy women.
Our thinking is straight. Ours is a business like any other even if the structure
is different. There is no place for feelings of pity, sympathy or charity among
members.
Maintaining proper accounts has always been on our agenda. When we started
out, Chhagan Bapa, our mentor had advised us to maintain accounts daily.
Even today, every branch closes the account book every day. We do not want
to get into monetary hassles because of badly managed accounts.
There is no place for prejudice on the basis of caste or religion, and democracy
in its truest form is encouraged. Following these values ensures that we are
run and perceived as a serious business, not a charity organisation.
Shared destiny
Every member at Lijjat works with a sense of pride in her work. And this pride
comes not only from the fact that we produce a good quality product but also
because we have stuck to our core values.
That, in turn has led to a sense of shared destiny in our institution. Every
woman earns according to the labour she puts in but the profits we make as a
collective effort are shared equally.
Valuing people
Our beginnings were modest. Seven women with no special skills but a strong
determination to earn dignity as individuals went ahead to make a successful
business, doing what they knew best -- rolling papads.
They leveraged their basic skill and turned it into a weapon because they
believed in themselves and in each other. And that's how we function even
today. We believe in each other, in each other's ability and commitment to
take the institution towards progress.
It is this belief that has been the basis of our business model as well.
We understand the family, time and social pressures women face every day.
What we have done is simply to turn these into an advantage and not an
excuse. It serves everyone.
Lijjat helps these women who are not encouraged to work outside their homes,
to contribute to the family income. Our bens take dough home and roll them
into papads when they are free from their domestic chores.
At the same time it is not prudent for the organisation to invest in office
property for so many members. The perfect fit for both is using the members'
homes for the rolling and drying of papads. No additional overhead costs, no
investment either.
Valuing people and under-standing their problems has created for Lijjat a
sound and sustainable business model.
In addition, we have one vehicle per branch, which, at fixed times, brings
the bensand rolled papads to the branch and also drops them back. This is
done for all the bens -- those who mix the dough, do the vanai (rolling),
testing, packaging, etc.
Delivering quality
We proudly claim 'consistently good quality' to be our USP. From the moment
a new member joins, she is repeatedly told to make quality her mantra. At the
training session, bens are taught to make the 'perfect' Lijjat papad. And every
member has absorbed the concept totally.
It is evident in the fact that even without modern machines, every consumer of
Lijjat papad, wherever she is, gets the same consistent quality of papad. How?
Because every ben rolls the papad to the same specification and every lot of
papad goes through testing.
If we find any ben becoming careless about quality, we do not tolerate it. We
give her a warning, then the option to take up any other work like packaging,
testing, etc. and if she still displays a lack of concern for quality, we ask her to
leave the organisation.
Out of one kg dough, we must get at least 800 gm (accounting for loss due to
moisture, etc), otherwise we cut pay. We get papads for testing from all
centres everyday and if we find any deviation from our quality, for example, if
the salt is less or more, etc, we immediately intimate that particular centre to
destroy the entire lot, even if amounts to a million rupees worth of production.
Out of this strong belief in quality delivered at an affordable price comes our
act of ignoring competitors. Lots of companies selling papads have come and
gone. We don't consider them, we only do our own thing. We do not take into
consideration what the competition is doing.
We know that if our quality is good, consumers will buy. Our quality does not
differ whether it is for exports or for the local market. There is just one quality.
And that's good quality. Again and again and again!