Blue Dart 191109

MANAGING SERVICE PROMISESA CASE STUDY OF BLUE-DART DHL COURIER SERVICE

SUJIT SENGUPTA

PROFESSOR (MARKETING)

IILM INSTITUTE FOR HIGHER EDUCATION

3 LODI INSTITUTIONAL AREA

NEW DELHI- 110003

CONTENTS

1. MANAGING SERVICE PROMISES – A CASE STUDY OF BLUE-DART – DHL COURIER SERVICE

2. QUESTIONS FOR ASSIGNMENT

3. TEACHING NOTES

4. ANNEXURE I – OVERVIEW OF COURIER INDUSTRY

5. ANNEXURE II – BLUE-DART & DHL COMPANY PROFILE

6. EXHIBITS - I

7. EXHIBIT- II

8. EXHIBIT - III

MANAGING SERVICE PROMISES:

BLUE DART- DHL COURIER SERVICE

Sourav Ganguli, a fourth year architecture student based in Kolkata took over charge, as editor, of producing the first journal of the architecture department of his college. The journal has been published and immensely appreciated by his professors. A hundred copies are to be despatched to collaborating foreign universities and overseas patrons, many of whom constitute the alumni of the college. The college would have opted for the cheaper state-run air-mail (Speed Post) over the private carriers which are five times more expensive when sending out copies abroad, but Sourav succeeded in convincing the college authorities on the appeal that DHL- Blue Dart was a faster and more reliable option. The college agreed to this proposal, and released the requisite amount of funds for the circulation, with the pre-condition however, that only four shipments be sent out as a trial to begin with. Sourav books the shipments, but a lot is at stake for him – the journal is not only his labour of love, but he and his team had to raise funds to get extra copies printed since the college granted limited resources for this exercise.

The following sequence of events ensues when Sourav intends to track the delivery of the consignment at www.bluedart.com:

• 28 July, 2008: Four shipments are booked, one each to Brisbane, Connecticut, London and Edinburgh from Calcutta, total amounting to approximately Rs.5000/-. Sourav retains the airway-bills for further reference. He is asked by the agent manning the DHL- Blue Dart outlet to retain the airway-bills for further reference. He is informed that the bar code signifying the airway-bill numbers are sufficient to track the status of the shipments and their delivery right from his computer using DHL-Blue Dart’s internet-based tracking system.

• 29 July to 02 August: Sourav tries to trace the movement of the four shipments from the DHL website by using the airway-bill numbers, but the website returns “Unable to track shipment” every time.

• 02 August- Early in the day:

Sourav sends an email to DHL customer-care, quoting just the airway-bill numbers (as instructed at the outlet) and asking for the status of the shipments. The response of the DHL customer-care executive is: “We request you to please provide us with the pickup date”.

• 02 August – Later in the day: Since the airway-bills are not at hand at the moment, Sourav is not sure if the shipments were booked on the 28th or the 29th July. He therefore writes back to the customer-care executive, and requests him to check against both the dates.

• 04 August:

Blue Dart customer-care executive: "We thank you for writing to us. Please confirm the exact booking date and the exact outlet from where the shipment was booked.”Sourav (after confirming with his team):“Exact Date: 28th July, Exact Outlet: Jadavpur University Campus, Calcutta.”

• 05 August:

Blue Dart: “Please note that we are unable to locate the shipments. We would therefore request you to please get in touch with your booking counter to check further. Thank you for your understanding.”

Sourav was not in Kolkata, having joined an architectural firm in Delhi for his internship, and personally checking with the counter was no longer possible. He was frustrated with the entire process and wrote back:

Sourav: “Thank you very much for your failed effort to track the consignments. In spite of providing you with all possible details, the best you can suggest is to go to the counter personally and enquire. The quality of your services leaves much to be desired. Government air-mail seems to be a much better as well as cheaper option, which I will definitely consider when sending out an overseas consignment next time around. In the meanwhile, I suggest you shut down your online tracking system, which seems to be a dummy programmed to return "Unable to track shipment" every time you press the track button.”

• 18 August:

3 weeks have elapsed since the couriers were dispatched, and 2 weeks since Sourav’s last mail to the Blue Dart employee. DHL writes back all of a sudden.

DHL: “This is to inform you that we have received information from Blue Dart that the airway bills were franchise booking and as per concerned person of franchise the shipments did not travel on these airway bill numbers. Please hold as we are further checking whether the same was forwarded on new numbers or did not travel at all *. We will keep you updated with further information.”

The above communication does not hold any meaning or information as far as Sourav is concerned.

• 19 August :

DHL: “Please note we have checked with Blue Dart and the franchise confirmed that the shipment were not forwarded on the given airway bill from their end. Hence there are no updates for the shipment. Kindly check at your end only whether these shipments were forwarded on different airway bill numbers. Also note we have closed the file, in case you need to reopen file please do so with further instructions.”

• 20 August:

Sourav: “Thanks for keeping the so called "FILE" open for so long, though I wonder what good it has served, apart from doing more rounds between Blue Dart and DHL than a pensioner’s file does in the Revenue department. As far as I am concerned, I am done dealing with DHL in the future.”

Sourav is admonished by his college superiors –the same who were reluctant in the first place to consider Blue Dart-DHL instead of Speed Post- for unnecessarily spending extra funds for a private courier, which could not even track the shipments. The rest of the copies of the journal (ninety-six in number) are sent out using the time-tested Speed Post, and Sourav, thoroughly frustrated with this experience, vows never to patronise Blue Dart-DHL in the future. As it turned out finally, the consignments did indeed reach the destination. This was communicated by the recipients individually to Sourav, but the company itself had no clue about the delivery. The entire online support and customer service set up of DHL - Blue Dart turned out to be a futile exercise.

Subsequent Events:

Professor Dasgupta is Sourav’s uncle and a professor at a prominent B-School in New Delhi. He gets to know of Sourav’s encounter with the courier company. Having held a very senior managerial position in a prominent multi-national before retiring from service and taking up academics as an assignment, he completely believes in teaching from experience and real life examples, both of which he has in plenty. In Sourav’s story, he perceives a potential case-study and a lesson for his students in services marketing and customer handling. His students might some day face similar problems when they join the industry, and therefore an insight into how a prominent courier company handles or mishandles them would be a lesson in point. In order to compile a comprehensive case study, though, he needs to take the matter to

a logical conclusion. He therefore decides to reopen Sourav’s case through an acquaintance of his in DHL, in order that the real issues that Blue Dart-DHL had hitherto hushed up in typical customer-care lingo, come to light. The following course of events now unfolds:

• 01 October: Prof. Dasgupta writes to the AGM-Logistics (North & East) of DHL, relating his nephew’s experience and expressing his intention of developing a case-study based on it for his marketing of services lectures. He also marks a copy of this mail to a very senior employee of Blue Dart, the Vice President (North), whose email-id he has obtained from an acquaintance. The AGM-Logistics immediately responds, saying that there are ‘different business units to cater to different issues’, and the specific problem regarding Sourav does not fall within the scope of his business unit (BU), and therefore, he would have ‘very limited knowledge about the root cause of the problem’. He even gives a list of the various BU’s in DHL that Prof. Dasgupta could possibly approach.

• 02 October: Prof. Dasgupta is appalled at the attitude of the AGM-Logistics, which closely reflected that of the customer-care. He shoots off an angry response to the AGM, (with cc to the VP as above) saying that the list of Business Units is of no concern to him, and that his response, as a manager, leaves much to be desired. The VP-North now steps into the conversation, quickly accepting that the AGM’s response should have been better, and forwards the case to the Vice President – Customer Service of Blue Dart, who is in effect the national head of customer-service related issues.

• 03 October: The VP-CS calls up Prof. Dasgupta and thanks him for bringing up the matter, and asks for more details. Prof. Dasgupta gives her Sourav’s number, and Sourav is now contacted by telephone for the first time, and by none other than the national head of customer service. The VP-CS sounds very apologetic about the entire ordeal, and requests Sourav to email her the entire transcript of his communications with the customer-care, also asking for the names of the specific personnel involved, so that she can institute a thorough investigation and get back to him at the earliest. Her tone is determined, and this comes as a relief to Sourav who had until now interacted with only customer-care executives who had no clue about what they were themselves talking about. Sourav does as requested, and also points out four specific points of his grievance:

o Firstly, the non-functionality of the online tracking system.

o Secondly , DHL and BLUEDART bungling the matter between them and blaming it on causes like ‘franchisee booking’ over which they have no control, when the customer is hardly concerned with how the internal systems should function between Blue Dart and DHL.

o Thirdly , asking the customer to go and enquire personally at the counter, when he has paid high shipment prices in expectation of online tracking.

o Finally, 'closing the file' without providing any concrete solution.

• 04 October: The VP-CS responds with the following email:

Dear Sourav, I thank you most sincerely for bringing this incident to our attention and forwarding all the mails exchanged between you, DHL & Blue Dart. We value all feedback. It helps us to continuously assess the quality of service and response we provide our customers with. The insights you have provided will be of invaluable help to us. On behalf of Blue Dart Express please accept my sincere apologies for the inconvenience it has caused you, this incident pains me too, as Blue Dart has been founded on strong principles of service excellence.

I am getting this incident thoroughly investigated; I am marking a copy of my mail to the Regional Head, Eastern Region based at Kolkata to take necessary corrective action and to ensure no such re-occurrences. I once again thank you for availing of our services and even more so for bringing this incident to our attention for action. I look forward to your continuing relationship with Blue Dart.

Best Regards, VP – Customer Service

• 25 October: The case is presumably investigated in the meanwhile. On 25th October, Sourav once again receives a call from the VP-CS, who puts the line on conference with the Regional Head of Eastern Region (RH-E) based in Kolkata.

o Initially, the VP-CS offers her apologies for the inconvenience caused, and asserts that this was a stray case which is unlikely to happen in the future. In fact, she had confirmed with her

overseas counterparts that the consignments had indeed reached on time.

o Sourav tells her that he was not awaiting this confirmation for three months. He knew that already from other sources. What he really wanted to know was where the system went wrong. The VP-CS sounds reluctant to explain further, masking this under a barrage of apologies.

o Upon insistence however, the RH-E reveals that the airway bill numbers that Sourav had been given had been changed to other numbers in transit, and therefore, the ‘no result’ message in the tracking system.

o Upon further prodding by Sourav as to whether such a change in the airway bill number was common procedure, the RH-E explains that airway bills are often changed at various hubs or spokes of their network. This is necessitated by mutilation or damage of the original airway bill in transit and handling. Often the change may occur at the franchisee booking counter itself, upon which it is the franchisee’s responsibility to inform the customer of the same.

o Upon Sourav’s enquiry as to whether there was any procedure in place to insulate the customer against any inconvenience due to this change, the RH-E replies that general procedure involves updation of their records so that when the customer accesses the online tracking system with his airway bill, the query is automatically redirected to the newly assigned airway bill. Failing this, the customer is intimated by telephone regarding the change in the number, so that he can track using the correct number. In Sourav’s particular case, none of this was observed by the specific personnel responsible for handling the transit of packages and updating the records at every hub or node.

o Upon being asked by Sourav whether any actions had been taken against such employees, the RH-E replies that more often than not, such operations are relegated to outsourced personnel instead of employees. However, the particular agencies/individuals involved had been issued show-cause notices for their laxity in the particular case.

o The conference concluded with a further tissue of apologies and assurances from the VP-CS, and Sourav accepting them for all their sincerity.

• Pursuant to this conversation, Sourav writes a final conciliatory mail to the Vice President, the transcript of which follows:

o Dear Ma’am,

At the conclusion of this matter, I must appreciate your taking up my case at your level and getting it investigated. I would like to add that your verbal reassurance has, to a great extent, reduced the skepticism I had developed regarding your services after the string of conversation I had had with your customer care employees, and that I may indeed remain a Bluedart/DHL customer now and in the future. However, without wanting to sound critical or lecturing, I must add that a vice-presidential apology, howsoever sincere, can not be a solution to all such similar lapses due to human error on part of outsourced personnel (as you say happened in this case) that must be taking place. From my limited understanding of such matters, and purely from a customer's point of view, I would suggest that you compare your operations process with that of your business partner DHL, whose brand name and expertise in the industry contributes a lot towards your own customer base, and whose handling of similar problems worldwide may perhaps provide you with some insights as to how you can improve or revise your own service model in the country. After all, when you market your services as 'DHL-Blue Dart', one expects, and I hope justifiably so, the very best of courier service that the world has to offer.

In this festive season, I would indeed like to end on a warm note. Here's wishing that this Diwali usher in many more satisfied customers for a more customer-committed Bluedart.

Regards,Sourav Ganguli.

Conclusion:

It may be said of this case that ‘all’s well that ends well’. Sourav was given a satisfactory, though late and reluctant, explanation from a service provider which had failed to deliver their promises, but had charged for them nevertheless. Prof. Dasgupta got an excellent insight into the working of a

leading courier company and could identify the hidden seams at which their apparently seamless method of functioning may crack leading to disastrous results. His findings proved out to be most educative for his students. And above all, Blue Dart-DHL reclaimed an almost lost customer, even if it be at the price, as Sourav himself put it, of a ‘Vice-Presidential apology’ and intervention.

Assignment questions:

1. This case discusses the anguish of a customer who was denied a ‘value-added service’, and whose enquiries led to the exposure of major operational flaws in the working of a leading and respectable service provider. How do you think the situation should have been handled, and at which stage, to avoid this?

2. A company offering services like courier through the franchisee model is prone to service failures as the case of Blue Dart shows. What in your understanding are the reasons for this?

3. An email from Blue Dart reads: “Please note that we are unable to locate the shipments. We would therefore request you to please get in touch with your booking counter to check further. Thank you for your understanding”. From a customer’s standpoint, do you think such ‘standard responses’ to service failures are appropriate, and serve their purpose? As a service provider, what alternative course of action would you suggest and why?

4. What are the specific areas where such a company (i.e., one that operates on a model similar to Blue Dart) should improve to ensure service quality, and how? Suggest innovative ideas for such a company, to ensure that its customers are at ease.

5. Assuming that Blue Dart- DHL handled over 1.2 million packages per day in 2008, what percentage of these would represent an acceptable rate of error? What steps should a company ideally take in case of a service failure?

ANNEXURE I: OVERVIEW OF COURIER INDUSTRY

COURIER IN THE PRESENT DAY

The advent of telecommunications and information technology has dramatically redefined, as well as specialized, the role of both the ordinary mail and the courier. They are no longer a means of conveying information which can otherwise more easily be conveyed at the speed of light by the many electronic means which are available. Gone are the days when the college student had to wait for the ‘money order’ to arrive from home, so that he could tender his fees in time, or the ‘telegram’ to arrive that would bring the good tidings about ailing grandma’s medical situation. E-banking and the mobile phone have taken care of that. The letter ‘e’ has been relentlessly prefixing itself to all our activities, and outmoding the conventional methods.

Ordinary postal services are today, at least in the cities, and increasingly in the villages, used mostly at leisure, to send out a Christmas card or a Diwali greeting over long distances, when the delivery date and security of the package is not of great concern, and that too by those not yet familiar with the ‘e-card’. On the occasions when an important document needs to be sent out, one generally does not entrust it to the ‘snail-mail’, but rather goes in for a courier.

The role of ‘Courier’, as a form of mail, has thus become restricted as well as specialized to the transference of important and essential documents, messages and packages, which need to be delivered in their original and physical form and that too within a given time limit. Couriers are distinguished from ordinary mail services by features such as speed, security and committed delivery times. As a premium service, couriers are usually more expensive than usual mail services, and their use is typically restricted to packages where one or more of these features are considered important enough to warrant the cost. It is a specialized service with authenticated signatures. It has tracking service with each service being treated as a specific individual case. Dedicated timely deliverance is its primary hallmark. These features do cost a bit extra but with so many features available, the cost gets leveraged.

In general a courier company performs on various scales. To begin with, it can be inter-city and intra-city. From there onwards, a courier company can work on regional, national and even international level. Today the huge global companies have their own fleet of trucks and aircrafts solely for the purpose of transporting and logistics whereas the mode of operation in cities is influenced by bicycle, motorcycle and delivery vans. The transporting methodology involves truck owners operating in tandem with the major

logistics companies. A major part of the logistics are even outsourced to other agencies specialized in handling them.

THE COURIER INDUSTRY IN INDIA

The ‘post-office’, situated anywhere, in any town or hamlet in India, with its associated paraphernalia of mail-vans, cycle-mounted postmen and red-painted post boxes, has been an immensely powerful symbol of a vast and far reaching infrastructure that delivers any letter dropped into that cylindrical red box, to its desired destination, howsoever remote, provided it has a proper PINCODE, and an adequate number of stamps. Very little of this symbolism remains in urban India, where a thriving technology-driven courier industry has given rise to an entire generation of Indians who have never been to a post office, but only driven past one. However, in the larger stadium of rural India, the red post-box still remains as potent a symbol as it was when the British installed it more than a century ago, mainly owing to the fact that courier providers have simply not been able to penetrate the multitude of remote villages that comprises greater India. To put it in a nutshell, both the courier as well as the postal systems are thriving in their own domains, and increasingly trying to encroach upon the other’s. They are both surviving on a network – the post office on its network on the ground, and the courier on its network of cables – the digital network.

Private entrepreneurs also for a long time have been delivering packages by locally known ‘angadias’. Many small firms and even individuals have traditionally run services for small businesses and continue to do so even now.

The Indian courier industry, which started barely 20 years ago, is today a Rs.7000-crore industry, which is growing at the rate of 25% a year. A host of big, medium and small providers operate in the Indian market, like

a. DHLb. Elbeec. Blue Dartd. DTDCe. FedExf. Overnite Expressg. BlazeFlashh. First Flight

to name a few. Many factors have contributed towards this huge spread. Economic growth, technological advancements, escalation of industrial sector, increase in export and import and large scale effects of liberalization are few of the major reasons. In the earlier days, the major courier players were centered in major metros because of their better connectivity with

airports, docks and railways. But with India rapidly becoming a major economic force, more and more companies are covering cities, towns and rural areas under their wide network. Despite that development, the large and medium sized companies are still largely based in the metro cities of India.

Speed Post operated by the Indian Postal Service was introduced in August 1986 and has become a major player in the domestic express industry. It provides time-bound and express delivery of letters, documents and parcels in India and abroad. It continues to thrive in the express industry for more than 20 years with monthly volumes exceeding 15 million articles. It ushered in an era with ‘One India, One Rate’ scheme @ Rs.25/- for all destinations across India, North to South, East to West. It also provides ‘Home-collection’, credit facility, on-line tracking, account management and personalized services to corporate and regular customers.

MARKET OPPORTUNITIES:

Being non-regulated, there are no licenses needed to enter this industry. It provides much scope for entry of the organized sector. International tie-ups can enable the industry to derive synergies from their global counterparts and thus have an edge over others in terms of the standard of service provided. Today, the organized sector controls 60% of the courier industry’s total market.

The entry barriers are huge as the courier companies are required to make a lot of investment in establishing a national network and for it the requisite infrastructure and technology in terms of VSAT, WANs and LANs have to be set up. Such infrastructure has to be set up, regardless of the volume of business, if the quality of service has to be world standard and as such it thrives on economies of scale. Hence the business becomes profitable only after a few years when there is a sizeable customer base

The courier industry thrives on logistics – whether it be the logistics of network and ground coverage, number of aircraft or transport vehicles or the number of personnel employed. Weak logistical support tends to decrease the quality of the service product.

Outsourcing and Enfranchising: Due to the sheer pressure of logistics handling, the companies are required to outsource much of the groundwork like booking counter operation, hub-to-hub transport, data-entry and distribution to other companies who specialize in such activities, thereby keeping themselves free to handle their core competencies.

E-Commerce and Value-added Services: The development of e-commerce has given an opportunity to the companies to enable customers to deal with them on the internet. For example, Courier companies offer a

variety of web-based services like tracking on net and mobile phones, online billing and waybill generation, Schedule-a-Pickup etc.

Backward Integration: The courier companies cease to be reliant on others for the services they need and are integrating backwards. The huge distribution networks exemplify this and the number of vehicles (including aircraft) owned by these companies. For example, FedEx which serves in about 211 countries has about 36,000 vehicles and 585 cargo aircrafts.

Brand image of the company plays an important role and it takes years to develop. In an industry such as courier service, the evaluation is based mostly on search i.e. only after the service is purchased. People would thus prefer to continue dealing with companies they have dealt with before. This is because they would not necessarily trust some new company to deliver their parcels safely. The other factor is the relations with government agencies (Customs, Octroi etc.) which also have to be developed over a period of time.

Challenges in Quality Control: As shall be more evident from the particular case in hand, companies which run on such vast logistics and depend upon personnel extraneous to their organization (like outsourced staff, franchisees) always run the risk of not being able to effectively monitor the quality of the services that are being provided in their name.

New Technology: The companies also need to be constantly in touch with the latest technology to help them provide the best service possible, else the essentially tech-savvy consumer who goes in for courier shall easily shift his loyalty to a company more in sync with latest technologies.

ANNEXURE II: DHL AND BLUE DART (COMPANY PROFILE)

DHL stands for Dalsey, Hillblom and Lynn. The founding partners set up the company in the year 1969 by personally shipping papers by airplane from San Francisco to Honolulu, beginning customs clearance of a ship’s cargo before the actual arrival of the ship at the harbour. This reduced dramatically the waiting time, and was a novel concept then, which grew into an entire international air express and rapid delivery industry. By 1988, DHL was present in 170 countries with 16000 employees. By the end of 2002, DHL had been completely acquired by Deutsche Post World Net, a stakeholder in other courier companies as well, and by 2003, Deutsche Post consolidated all of its express and logistics activities into one single brand – DHL. Today, DHL’s expertise is pooled from a number of major companies acquired by Deutsche Post World Net, like Exel (which itself had 111000 employees in 135 countries to pool into the DHL cartel at the time of its acquisition in 2005), Deutsche Post Europe Express, Danzas and Air Express International to name a few. As of date, DHL’s international network links more than 220 countries and is supported by 1,50,000 employees.

BLUE DART is India’s largest domestic express company, founded in 1983. It is today South Asia’s premier courier and integrated express package distribution company. The company became the Global Service Participant of Federal Express International Inc. USA. Under an agreement between the two companies, all international shipments of Blue Dart were distributed through the Federal Express' system and all Federal Express' in bound shipments to India were delivered through Blue Dart's network. The above arrangement continued until the year 2002. The later developments are as follows:

Blue Dart Express Ltd. signed a Sales Alliance Agreement with DHL in 2002 with 81% equity holding. Blue Dart chose to ally with DHL as it is the #1 international air express company in the world, with superior hi-tech on-ground infrastructure, unmatched cross-border specialization, greater flexibility of its network and the strongest brand recognition in India and in the world. The coming together of the world's No. 1 international air express service provider and India's No. 1 domestic express services provider was a logical step in a win-win relationship to benefit all the parties involved, the customer and the stakeholders of both organizations. The head quarters of the company are at Mumbai.

Blue Dart Aviation Ltd. was created with a 40% holding by Blue Dart Express primarily to support the growing demands of Blue Dart Express Ltd. In an express industry where growth, year over year, consistently exceeded 35%, the management viewed the delivery capabilities of the domestic airlines inadequate and a limitation to the explosive growth of air express.

Blue Dart has a unique domestic infrastructure and is the only domestic cargo airline in the SAARC region, with a fleet of 3 Boeing 757 and 3 Boeing 737 freighters. Blue Dart Aviation operates freighters to handle time-sensitive, express packages. Its aircrafts are strategically positioned in Kolkata, Chennai and Bangalore, in close proximity to the countries of Bangladesh, Sri Lanka and the Maldives. The head quarters of the company are at Chennai.

Advantage Alliance: Blue Dart perceived that the alliance would bring the DHL advantage to Blue Dart's customers, resulting in greater customer satisfaction being the world's leading express and logistics company offering customers innovative and customized solutions from a single source. With global expertise in solutions, express, air and ocean freight and overland transport DHL combined worldwide coverage with an in-depth understanding of local markets. Apart from the logistics, DHL’s brand image also played a crucial role towards this partnership. DHL on its part saw, in this partnership, a scope to make use of Blue Dart’s experience in and understanding of the Indian market and its existing vast network of branches spread all over the country. In addition, the alliance provided both organizations with the flexibility to grow their individual businesses unhindered. As a result of this partnership or alliance, an Indian customer wishing to send a consignment abroad can now do so at any of Blue Dart’s numerous franchisee outlets in the country.

Today, Blue Dart has an extensive domestic network, covering 21,077 locations, most of which are scattered across India and controlled from 6 regions –

a. South- Chennai & Bangalore

b. West- Mumbai & Ahmedabad

c. North- Delhi

d. East- Kolkata

Directly under the jurisdiction of the Regions are the Branches or Area Service Centres. In a city like Delhi the number of branches are 9.

Blue Dart’s market share of the organized courier industry is 46%.

Modes of Operation:

Mainstream companies provide a variety of services. Courier services in India can be segregated in few categories. Basically, it begins with intra-city services which are about speedy delivery of mails and goods within the city.

Broadening the services, inter-city services are covered. Normally this is termed as surface cargo services where short distance and bulk loads are handled. Surface mode service is performed through two ways: firstly, on road (by bus or vehicle) and secondly on track (by train) services. The products are normally delivered door to door. Air express and air cargo services are used to send parcel outside India. The air express service is usually a day faster compared to air cargo. Air express is used by the people who need to send their significant documents across India or the world in urgency; whereas air cargo includes weighty loads and security objects. They provide both national and international services. Courier companies work in tandem with the foremost airlines and in sync with their well tuned, well associated set of connections the timely deliverance and protected service is guaranteed. Few other variants of services could be express services, ocean freight, industry solutions, logistic solutions and shipping tools. These particular services are individual to a company's area of specialization and diversification.

The Distribution Network:

The Blue Dart Express’s distribution network operates on a hub & spoke system. Hubs are major locations in different zones which collect the items sent from the spokes, i.e. other locations within its territory. From one hub the items are sent to other hubs & from there the items are again sent to the respective destination locations (spokes). Blue Dart serves more than 1200 locations, more than 12000 network routes and each location is connected to a hub or a spoke of the network. There are 8 hubs – Bombay, Calcutta, New Delhi, Lucknow, Madras, Hyderabad, Bangalore & Erode. For example, if a document is to be sent from Bhubaneswar to Allahabad, then the document would first go to Calcutta, from there to New Delhi, from there to Lucknow & finally to Allhabad. The entire process would take less than 72 hours.

The System of Franchisees:

However, at the level of the customer, the hub does not operate. At the very grassroot level or bottom of the hierarchy exist the courier outlets. Many of these outlets are enfranchised to private operators by the parent company – here Blue Dart-DHL. This system of franchisees is a solution to the logistical challenge posed by the large and populous cities, where it becomes almost impossible, and in fact unviable for the company to run self-owned outlets. By deputing the work of receiving the orders at the customer level to enfranchised outlets, the company not only saves on manpower, but also is able to reach out to more customers. It is often common to find not just one, but multiple franchisee outlets of the same company in the same locality or market. The driving idea behind the franchisees is to reach out to the smallest towns, even if it means just delivering to those places without a return traffic. Setting up a courier franchisee does not require much

infrastructure, and in India, it is not uncommon to find a telephone-booth or a grocery shop doubling up as a courier booking point. Blue Dart has heavily relied upon its franchisee model in its domestic business, and after the partnership with DHL, this model has been extended to encompass international orders also. There are, however, certain drawbacks of the franchisee model of operation, most obvious of which is the difficulty in monitoring the quality of services provided by the franchisee, and ascertaining whether such quality is at par with the company’s standards. Moreover, it is common in India to come across a franchisee, which, though officially selling Blue Dart or DHL products, often works as agents for smaller local companies as well. These local companies, whose prices are cheaper, tend to lure away a potential Blue Dart or DHL customers (who might not be too quality conscious) into their fold at these very outlets which serve multiple providers.

The distribution process, between the customer and the destination, can therefore be summarised diagrammatically in Exhibit I.

Pricing Strategy:

Blue Dart classifies its products into documents & non-documents. For example, for documents it may keep revenue target of Rs. 48 per ½ kg on an average, for non-documents it keeps revenue target of Rs. 63 per kg. Blue Dart’s customer base is mostly institutional. It follows a differential pricing system. Depending on the volume of business a client generates, it gives discount. Major clients are charged at a much lower price than Rs. 48 (or Rs. 63). Other customers are charged higher. Sometimes Blue Dart is forced to increase price for smaller customers to retain big customers. Despite this, Blue Dart rarely loses customers, because of the services it provides.

In comparison to competitors, it must be noted that Blue Dart-DHL tariff is 5- 6 times higher than the competing organized sector industry players such as First Flight, DTDC etc and only marginally below the most expensive courier in the market, ie, FedEx. The chart in Exhibit II elucidates the point.

Complaint Handling:

In case of non-delivery/non-receipt or other complaints, customers have to make their complaints within 7 days beyond which time the company does not entertain any such complaints. A comparison of the no. of packages handled by Blue Dart with its nearest rival is given in Exhibit III.

Tracking Tools:

Blue Dart has a series of track & trace software which is part of its value added services. Internally it is networked with its offices all over the country.

Its internal track & trace software is called COSMAT – II (the earlier version was COSMAT – I) whereby it can keep track of its dispatches & whether delivery is on schedule or not. Details of a consignment are updated at every stage of transit on the interlinked server, and the customer, sitting at home, can monitor the progress of the same. Document/Package can be traced through the Blue Dart receipt number (also called ‘waybill number’ or ‘reference number’, or any unique number associated with the document/package. Every envelope is assigned a consignment number which is printed on the customer’s copy of the receipt also, and which is required to be fed into the tracking system to generate the status of the package. Email-based support is also available to the customer for queries regarding his consignment.Bluedart uses a range of 6 tracking tools, each especially designed to meet

the needs of the different industries & services. These services are offered at the website www.bluedart.com. These enable the customer to track each and every move, from the time the shipment leaves the desk till the time it reaches its destination.

1. Trackdart– it tracks multiple shipments simultaneously by directly logging in.

2. Maildart – it tracks the status of shipments using e-mail.

3. Mobiledart –it tracks the status of shipments using SMS over mobile phones or using WAP enabled mobile phones.

4. Internetdart – acts as a Personal Organiser for the shipments. Gives the status of all shipments sent during a given period.

5. Packtrack – it is a simple ‘plug–and-play’ applications .This application can be customised for own needs. Direct linkage to Blue Dart database so the queries are answered at lightning speed. Enables customer build own database of shipment details.

6. Shoptrack – It’s an invaluable CRM online tool for all e-business portals. Offers results in XML, TEXT or HTML formats.

Timelines:

For metros, delivery is made within 48 hours, for major towns 72 hours, for minor towns 96 hours. The Blue Dart-DHL distribution network operates on a hub & spoke system, as already mentioned earlier.

Exhibit I: Hub and Spoke Model

Diagram: Flow of package between customer and destination

(Note: S denotes Spoke, F denotes franchise outlet. Franchisee outlets themselves often serve as the delivery agents.)

Exhibit II: Market Prices

0

500

1000

1500

2000

2500

Comparative Prices (INR) of different couriers for 500 gm parcel

Kolkata-London 525 455 1033 2111 2224

Kolkata-Connecticut 750 375 1033 2186 2288

Speed Post

SAL* First FlightBlueDart-

DHLFedEx

• Surface Air Lift – A service introduced by the post office that combines air transportation with surface transportation as far as possible, thereby significantly reducing tariff, though compromising on time.

Following is the tariff for a 250 gram document package from Kolkata to New Delhi:

Speed Post DTDC Blazeflash Blue DartKolkata- New Delhi

Rs.70/- Rs.70/- Rs.40/- Rs.70/-

Exhibit III: Packages handled

A comparison of the number of packages handled per day with their nearest rival DTDC courieris given below:

Inbound Outbound TotalBlue Dart- DHL 5,00,000 7,50,000 12,50,000DTDC 11,00,000 12,000 11,12,000

The glaring difference in the inbound packages for DTDC is their ability to provide service in the smaller towns.

TEACHING NOTES

MANAGING SERVICE PROMISESA CASE STUDY OF BLUE-DART DHL COURIER SERVICE

SUJIT SENGUPTA

PROFESSOR (MARKETING)

IILM INSTITUTE FOR HIGHER EDUCATION

3 LODI INSTITUTIONAL AREA

NEW DELHI- 110003

CONTENTS

A. CASE SYNOPSIS

B. ANSWER KEY TO ASSIGNMENT QUESTIONS

1) This case discusses the anguish of a customer who was denied a ‘value-added service’, and whose enquiries led to the exposure of major operational flaws in the working of a leading and respectable service provider. How do you think the situation should have been handled, and at which stage, to avoid this?

2) A company offering services like courier through the franchisee model is prone to service failures as the case of Blue Dart shows. What in your understanding are the reasons for this?

3) An email from Blue Dart reads: “Please note that we are unable to locate the shipments. We would therefore request you to please get in touch with your booking counter to check further. Thank you for your understanding”. From a customer’s standpoint, do you think such ‘standard responses’ to service failures are appropriate, and serve their purpose? As a service provider, what alternative course of action would you suggest and why?

4) What are the specific areas where such a company (i.e., one that operates on a model similar to Blue Dart) should improve to ensure service quality, and how? Suggest innovative ideas for such a company, to ensure that its customers are at ease.

5) Assuming that Blue Dart- DHL handled over 1.2 million packages per day in 2008, what percentage of these would represent an acceptable rate of error? What steps should a company ideally take in case of a service failure?

C. CONCLUSIONS

D. ANNEXURE I - FISH BONE DIAGRAM

E. ANNEXURE II - PARETO DIAGRAM

F. ANNEXURE III – BLUE PRINTING OF DHL- BLUE DART SERVICE

A. CASE SYNOPSIS:

A fourth year architecture student Sourav, took over the charge of producing the first journal of the architecture department of his college along with his team in the beginning of this year. He also has a flair for writing, hence has been elected by his team mates the editor of this journal. The journal has been published and hugely appreciated by his professors. Now, a hundred copies are to be dispatched to collaborating foreign universities and overseas patrons, many of whom constitute the alumni of his college. The college would have opted for the cheaper government air-mail (Speed Post) when sending out copies abroad, but Sourav has succeeded in convincing his college authorities to go in for Blue Dart- DHL, which is five times more expensive than government mail. A lot is at stake for Sourav – the journal is not only his labour of love, he and his team had to raise fund to get extra copies printed since the college granted limited resources for this exercise. He plans to reach out to overseas student alumni and well known architects through this first effort of his department and create his own network which he knows is essential to start a career in any field. Besides, Blue Dart- DHL is a faster and more reliable option.

The case depicts the student’s plight in tracking the four parcels overseas. Though the consignments did reach the destination as was communicated by the recipients individually, Sourav was convinced of the ineptitude demonstrated by the Blue Dart- DHL alliance, the former a no. 1 courier in the South East Asian Region and the latter a world famous courier service company. It was a loss of face for Sourav with the college authorities as he had succeeded in convincing them on the appeal that DHL- Blue Dart was a faster and more reliable option. He was curious to find out what possibly went wrong. The entire online support and customer service set up of DHL - Blue Dart was non-functional, and the company was clueless regarding its own failures.

The case has to be handed over to the participants after completion of the following chapters:

• Design and Managing Service Processes

• Service Quality Measurement & Control

• Managing Relationships and Building Loyalty

• Managing Service Promises

The class should begin with a discussion of the case. Students may form small groups amongst themselves and attempt to answer the assignment questions. Here Blue Dart-DHL is an excellent service company one with a service record that is supposedly outstanding.

B. ANSWER KEY TO ASSIGNMENT QUESTIONS

Q1. This case discusses the anguish of a customer who was denied a ‘value-added service’, and whose enquiries led to the exposure of major operational flaws in the working of a leading and respectable service provider. How do you think the situation should have been handled, and at which stage, to avoid this?

A1. Service selling rests firmly on a skill, a promise, an experience and the evidence provided by satisfied customers. So it depends much more on people than on product selling.

Services are a people intensive industry. The first few moments of customers’ interaction with the service provider creates a perception in their mind as to how good or bad the service is. Here, the tone of the service providers’ communication from the very beginning sounded like ‘a couldn’t care less’ lingo, lackadaisical. Therefore, the situation should have been arrested at the moment of truth itself. The customer service personnel should have done the requisite research on the air-way bill number, instead of pressing the customer for the same, and then got back to him with concrete information regarding the whereabouts of the consignments. If necessary, he should have performed the liaison with the franchisee outlets himself, without involving the customer. In the given case, the customer service executive, by showing his inability to deliver the required service has had to bear the responsibility of exposing service flaws of the whole organisation.

Q2. A company offering services like courier through the franchisee model is prone to service failures as the case of Blue Dart shows. What in your understanding are the reasons for this?

A2. The service failure may be accounted for under the heads of

Operational Flaw

Flaws in Customer Handling

A detailed discussion of the two is given below:

OPERATIONAL FLAW:

A thorough reading of the case reveals that the original cause of the customer’s grievance – that of non-traceability of the shipments- was operational in nature, as was explained later in the conference call. The change in airway bill was a common occurrence and there was a system in place to deal with it, as conceded by the Regional Head, but this system was not followed. However, this was made more aggravating for the customer by the complete ineptitude with which the customer care interacted with the customer. The operational flaws may be summarised thus:

Not updating the online tracking system upon change of airway bill.

Not informing the customer of this change either, so that he could search using the new airway bill number.

Lack of surveillance exercised over the outsourced personnel responsible for the above tasks.

Lack of communication and transparency between operations and customer care to the effect that the latter was unable to get to the root of the problem and find out the new airway bill number.

Lack of communication and transparency between franchisee and company, and also absence of surveillance over franchisee’s quality of operations, to the effect that the franchisee reports that the ‘shipment did not travel on the given airway bill’, but has no clue whatsoever as to which airway bill it did travel on.

The various tools to address the service quality pertaining to operational problems are:

1. Fishbone diagram

2. Pareto analysis

3. Service Blueprinting

An analysis of the cause and effect from the Fishbone diagram as shown in Annexure I reveals that the error had occurred at the franchisee action

point where the change/ mutilation of the airway bill led to the failure in the tracking system.

The Pareto diagram in Annexure II demonstrates the category wise importance of the vital few and the useful many in the service delivery process of courier industry.

Further analysis can be obtained by Blueprinting; a critical tool that visualizes the service delivery process and allows one to identify fail points that can lead to the cause in both the front stage and back stage of customer interaction. Quality is not delivered by people; it is delivered by process.

FAIL POINTS in the Blueprint are for studying improvements in a service delivery process. Annexure III has identified the following four reasons for the process to fail.

F1: Fail point 1- occurred when the Air way bill no. was not that of DHL (the franchisee may be of other courier service company also).DHL may perform periodic audits to ensure that the Blue Dart franchise providing DHL services is issuing only DHL airway bill numbers and not any other invalid reference numbers. They may also be supplied with printed bar codes. Additionally, DHL must provide training to franchise employees, to ensure that they understand the overall process and the relevance of the airway bill numbers.

F2: Fail Point 2- occurred when either a wrong air way bill no. was transferred to Back Office (B/O) or it got MUTILATED as it happened in this case. One solution would be for DHL to provide franchises with an integrated customer front-end and back-office system, which while generating customer receipts, communicates simultaneously to the back-office, and hence ensures that no communication gap exists between the two occurrences. Also, since a manual interface is removed, it is no longer error-prone.

F3: Fail Point 3- When back-office does not update the website. From a customer perspective, the website can report when the status was last updated, so that the customer knows if the status is not updated, or whether there is a delay in the delivery of the package. From a back-office perspective, DHL can devise notifications on a per package basis which are triggered at a periodic level if updates from the back-office do not occur. This would provide a level of control where all packages pending updates are identified, back-office failure sites responsible for those identified and corrective actions as required taken.

F4: Fail point 4- When there is missort resulting in delay in delivery.

FLAWS IN CUSTOMER HANDLING:

DIALOGUE POINTS in the Blueprint are carefully written scripts that are required while answering embarrassing or demanding questions by customers which the front liners are unable to do themselves.Every moment of truth occurring in the Blueprint (Annexure III) and identified as ‘P” can be considered to be a Dialogue point because these are the points where customer interacts with service provider either physically or through e- mails, letters. phone etc. Dialogue points need to be identified so that properly scripted answers can be prepared for all types of customer questions. Improperly answered questions are undesirable as they tend to:

1) Offend the customers2) May make him loose faith in the organization.3) Questions to which answers are not scripted may also put the

employees in a fix and embarrassing situation.

Q3. An email from Blue Dart reads: “Please note that we are unable to locate the shipments. We would therefore request you to please get in touch with your booking counter to check further. Thank you for your understanding”. From a customer’s standpoint, do you think such ‘standard responses’ to service failures are appropriate, and serve their purpose? As a service provider, what alternative course of action would you suggest and why?

A3. The strongest impact on the overall feeling about Blue Dart was the negative content of the phone conversation and the e-mail. The goodwill gestures that arrived pretty late would have cemented Sourav’s loyalty much more effectively had the front liners been trained to communicate properly and correctly.

A student may use here once again the critical Blueprinting tool. In this situation standard scripted replies, just like computer-generated auto-responses, are often offensive to the recipients, and generally counter-productive. This area could also be identified as a DIALOGUE POINTS and carefully drafted replies must be provided while answering embarrassing or demanding questions by customers which the front liners are unable to do themselves. Every moment of truth occurring in the Blueprint (Annexure III) and identified as ‘P” is considered to be a Dialogue point because these are the points where customer interacts with service provider either physically or through e- mails, letters. phone etc. Similar Dialogue points need to be identified for all types of customer questions.

Q4. What are the specific areas where such a company (i.e., one that operates on a model similar to Blue Dart) should improve to ensure service quality, and how? Suggest innovative ideas for such a company, to ensure that its customers are at ease.

A4. To ensure service quality, the following points should be considered:

1. The strategy that DHL-Blue Dart is following is not customer oriented. Management should focus on customer interaction and customer-relationships by working on two major components of service quality:

RELIABILITY:Delivering on promises i.e ability to perform the promised service dependably and accurately.

RESPONSIVENESS:Being willing to help i.e willingness to help customers and provide prompt service.

2. For good customer interaction, proper customer contact training should be provided to the employees to create successful moments of truth. The front office should be well trained and efficient enough to handle non-anticipated customer problems and demands. The executives should be given training sessions again with exact roles and responsibility. They should also undergo sessions on how to deal with customers in an empathizing manner.

3. No doubt rapid expansion of a business format can be achieved by franchising resulting in rapid volume growth and adapts to local knowledge and conditions but a greater degree of surveillance should be exercised over franchisee outlets and carefully studying the fail points. The quality of service provided by the outsourced personnel for logistical operations or the lack of it reflects on the image of the company, making the customer the ultimate sufferer.

4. The shipment tracking needs to be made real time. If it is to be promoted as a distinctive feature of the service provider, then more focus should be given to this service even by the franchisee.

5. Cost-effectiveness : Charging five times more than competitors, they still lose track of shipments. The competitive advantage should be perceptible.

Making a service promise would help Blue Dart towards providing service excellence. The various approaches for managing service promises are:

Managing horizontal communications i.e transmitting information across functional boundaries to align function with customer expectations.

There should be free flow of communication between various functional boundaries like sales, operations, support etc., so that shipment records are not lost. The following incidences demonstrate the lack in communication.

At the very beginning Sourav has been told that the airway bills are sufficient for future reference and for tracking online, but when contacted the first thing the executive asks are other details before finally he tells him that they are unable to track the shipments themselves. It gives away an attitude of negligence and laziness and lack of sensitivity dealing with a customer.

“Kindly check at your end only” shows that they are neither apologetic, nor responsible on their part. Informing Sourav that consignment was not forwarded does not show a responsible behaviour.

The customer care failed to give any concrete information about the successful delivery of the shipment. They should have taken more effort from their own side instead of asking the customer to go and find out from the outlet himself.

• Improving customer education i.e providing customer with information about the service process;

Why tell Sourav about DHL’s internal system of operation? A customer is not concerned at all whether the service provider operates through a franchisee or not. It doesn’t help him in any way. This shows that DHL is trying to give excuses, as if it is not actually a fault of theirs, and as a result diluting its brand value. The blame game also belies the must-have quality of a service provider of repute, its accountability.

• Managing the service promise i.e coordinating the vows made by all employees.

The closing mail from the executive shows Blue Dart’s extreme high handedness. Is the service provider doing any favour to the customer by responding to his queries while charging him a large amount for the service which it has failed to provide? The statement, “Also note that we have closed the file,” is not only unnecessary, it adds to the agony of the customer who is already harassed by the deficiency of service.

And this, when the customer care hasn’t uttered the simple word `sorry’ even once.

Given the fact that the service provider has been unable to confirm the delivery due to whatever technical glitch, a polite apology is not only a desirable response from the executive, it is a must. An ideal response should have been:

Thanking Sourav for bringing up this lapse to their attention, accepting the fault as their own, and apologizing for the same, with the assurance that such will never happen again and urging Sourav to remain a DHL customer. Refunding the courier charges paid and possibly offering a discount of 20% for the next five shipments are, means to convert dissatisfaction to satisfaction. This should preferably come from a highly placed executive at least from a Regional Head level.

− Even when Sourav’s uncle took up the matter with an employee of the level of AGM, he displayed the same lackadaisical tendency to shirk responsibility as his subordinates in customer-care by asking him to lodge his complaint with the correct business unit. This only brings to fore the lethargy that prevails throughout the rank and file of the organization.

• Resetting customer expectations i.e telling customer the firm can no longer provide the expected service. Had Blue Dart cared and taken pain to discover by themselves where the error had occurred and informed Sourav that the parcels would reach but with some delay, the frustration he underwent could possibly have been avoided.

Innovative ideas may be left to the imagination of the students.

Q5. Assuming that Blue Dart-DHL handled over 1.2 million packages per day in 2008, what percentage of these would represent an acceptable rate of error? What steps should a company ideally take in case of a service failure?

A5. The customer-reported failure rate on delivery of these packages is about 0.05%. In other words, 600 packages per day will probably fail to be delivered on time. What might be the customer cost (unabsorbed by Blue Dart) for these 600 packages? Let us assume the actual failure rate is higher, but customers do not report these failures because they don’t incur

any cost (i.e getting the package a day or two late or several hours late, makes no difference to the customer). When a failure is reported, then it would seem that the failure probably does have a customer cost. Why else would a customer take the time (a cost) to report it? If we assume Blue Dart was to return the money to the customer by providing a money back guarantee at Rs.230/- per package, this would amount to a staggering Rs. 41.4 million in a year, as most people do not bother to complain of delays exceeding 4- 5 days.

Service is based on a promised based on something that will be done. Courier companies thrive on economies of scale. Therefore, service failures should be covered under suitable ‘money-back’ policies. Whenever a service failure occurs, the company need not wait for the customer to point it out, for the customer might not always be vigilant, more so because of the faith he has in the company. A voluntary note of apology, along with the refund for the booking amount, coupled with perhaps free coupons, could be mailed to the customer even if he does not demand them. This would put the company in a better light in the eyes of the customer and give the impression of commitment towards the customers. When there is a pressure on the company to pay out for delivery lapses, they would take adequate measures to improve the process.

C. CONCLUSION

The courier industry provides a service that is becoming more and more essential for the common consumer by the passing day. The processes and methods that they employ for their operations are bound to be complex and error-prone, given the vast logistics that they encompass. It is imperative therefore that leading players in this business identify the lacunae that creep into their processes and lead to a disparity between what is promised and what is delivered. The challenges that differentiate goods and service marketing are in the variability in specifications and delivery. As it is difficult to make service delivery process uniform across different locations of the same organisation, outlets and more importantly the franchisee, standardisation and quality control are needless to say prime importance. What is of even greater importance is the value attributed to the customer, from which stems, and which in turn stems, the organisation’s behaviour towards the customer. If the anguish endured by a customer in dealing with one of the world’s foremost service providers serves as a modest lesson in customer interaction and organisational behaviour, then this case shall be deemed to have been successful in its scope and endeavour.

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX