Bottom of the Pyramid Case Study on Jaipur Rugs

Connecting Rural India to Global Markets Introduction ere Jasper Rugs case explores how a company can benefit the poor by connecting them with global markets. Jasper Rugs makes this connection by building and orchestrating a global supply chain on a massive scale?one focused on developing human capability and skills at the grassroots level, providing steady incomes for rural men and women in the most depressed parts of India and connecting them with markets of the rich, such as the United States.

Thousands of independent workers are organized to produce consistently a very high quality product, on a complex decentralized basis through a system of organization that is unique. The company not only uses traditional weavers but also teaches, in remarkably short time, the craft to people who do not have a tradition of weaving. Raw materials are sourced from around the world, processed into rugs with traditional and new designs in rural India Nile maintaining quality control of end products.

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Jasper Rugs provides a unique and dynamic example of how a profitable commercial connection between the poor and he rich?across the world?can be done. ere Grassroots of a Global Supply Chain Mr.. Sari All is a weaver in Soundboard district, who had been working directly for Pair Rugs since 2006. Within his first 1 h years of working for Jasper Rugs, he bought two new double looms, and said that he earned more income than he did previously when he worked for a middleman.

His wife and two daughters were trained by Jasper Rugs Foundation.

He was happy that his two daughters were Invading because they could earn money in the home without having to work in the fields. His wife also said that she was happy because she could earn money for her Emily and work beside her two daughters. Unauthorized reproduction and distribution is an infringement of copyright. Please contact us for permissions: [email protected]

Com or 734-615-9553. ere All family at home in Soundboard district, Attar Pradesh Published by Globalize, a division of the William Davidson Institute at the University at Michigan. 010 William Davidson Institute. This case was developed by Jennifer Anderson, Nina Henning, Marion Entire and Sahara Senior under the supervision of C. K. Parallax, Paul and Ruth McCracken Distinguished University Professor of Strategy.

Figure 1 CO PAY Jasper Rugs: Connecting Rural India to Global Markets 1-428-849 ere rugs made by Sari All, his family, and thousands of people like them may wind Jp in a living room of a $1. 2 million home in Grosser Points, MI, or gracing a Soho loft in London.

Such is the nature of Jasper Rugs’ knack for tapping the skills of people on the low end of the income scale to create a quality handmade product marketed to people at the opposite end of the income spectrum. Company History and Description And Kosher (N. K.

) Chuddar grew up in a small town in Restaurants, a state in northwestern India. After graduating from the University of Restaurants, Chuddar began his career in his family shoe shop. However, he wanted to do something on his own, and heard that high quality rug weaving was in demand.

He bought two looms and installed them in his home, and fell in love with the weaving business. He quickly learned the technical aspects of weaving from local weavers and expanded his business, adding six more looms in his house, and then more looms in six nearby tillage’s. Chuddar entrepreneurial drive ultimately led him to Jasper, the capital of Restaurants, to pursue a career in the rug export business.

Chuddar and his brother started exporting rugs in 1986.

Both brothers remained in the rug industry but split Jp their business interests in 1999, and after several company name 1 changes, Chuddar registered his export company under the name of Jasper Rugs in 2006. By 2008, Jasper Rugs was the largest manufacturer and exporter of Indian hand knotted rugs, with fiscal 2 year revenue of USED $21 . MM. It was a profitable and fast-growing company, with a Compound Annual Growth Rate of 38% from 2005-2008.

Jasper Rugs produces handmade area rugs, including the hand knotted, hand tufted, and flat Novel styles.

The company prides itself on the design and quality of its finished products. Jasper Rugs operates with the help of a complex web of human resources: Approximately 300 direct, full time employees: – 7 family members – 226 headquarters employees – 70 regional branch office staff, including 40 area commanders Approximately 40,000 contractors (indirect employees): – 28,000 weavers other laborers involve ere Ecosystem of Jasper Rugs in the maturating process ere Jasper Rugs operation is divided into four different entities: Jasper Rugs Company, Jasper Rugs Incorporated, Bonhomie Wools, and Jasper Rugs Foundation.

All entities are held accountable by a member of Chuddar immediate family. The coordination of activities across multiple legal entities gives Jasper Rugs: Access, but not ownership, to specific skills Influence, but not control, over key processes Decentralization of investment allow is a diagram of the various Jasper Rugs entities and how they interact : Figure 2 Diagram of Jasper Rugs Entities Pair Rugs Company ORCA) JAR handles all the operations from raw material procurement to final sale for every market except the 4 United States .

JAR is run by N.

K. Chuddar (CEO) and his eldest son, Hooeys (Director). In addition to the JAR headquarters in Jasper and a showroom for final products in International Home Deco Park (DIP) in Delhi, there are 22 branch offices throughout northern and Nester India. Monika Wools Bonhomie Wools facilitates the wool acquisition process solely for Pair Rugs. Bonhomie Wools is run by Chuddar brother-in-law, Invariant Sara.

Pair Rugs Foundation ROOF) Jasper Rugs Foundation is a non-profit organization established in 2004 to encourage grassroots inflammation of weavers and to improve the welfare of the company’s weavers and their families.

In 2008, the Foundation was UN by Chuddar, with five employees based in the Jasper Rugs headquarters and twelve field employees working with the communities where Jasper Rugs has operations. 3 Pair Rugs, Incorporated JAR, headquartered in Atlanta, Georgia, handles distribution, marketing and sales for the United States.

JAR is run by Chuddar two eldest daughters, CEO Ash Chuddar, and COO Archaic Chuddar. As of July, 2008, the company employed 17 people, mostly in sales positions. Easiness System Building Blocks Four foundational building blocks allow Jasper Rugs to profitably influence quality ND rapidly adjust to marketplace demands, while executing the extremely complex process of handing over raw materials to an autonomous group of individual contractors.

Deeply Rooted Relationships Chuddar built Jasper Rugs by emphasizing family ties and strong personal loyalties. This foundation allows Jasper Rugs to efficiently operate a highly decentralized manufacturing and logistics system. Sides the five Chuddar children that head up different areas of the company, many of the area commanders and entrepreneurs who own the businesses that are key parts of the production processes got their start as weavers for Chuddar.

Driven by Social Values The company’s social values are reflected in its commitment to provide the following: Competitive wages. Wages paid by the company give people options to have a better quality of life than the alternative work available in villages . Investment in skills training.

The main activities of the Jasper Rugs Foundation are to recruit and train new weavers for the company. Because of the social impact that Jasper Rugs has on many regions of the country, the government subsidizes the cost of looms and training in certain regions.

Opportunities for aspiring entrepreneurs. When he recognizes contractors who do good work and have the right attitude, Chuddar believes in giving them loans so that they can become key links in the overall production process. As a result of his recognition of their talents, many contractors see their incomes, social standing, and capabilities multiply. Because Jasper Rugs demonstrates strong social values, its contractors recognize the difference in working for Jasper Rugs versus other companies.

This recognition elevates the relationship between contractors and the company from a contractual agreement to one of multifaceted value for both. These strong relationships help Jasper Rugs influence the quality of its products, despite utilizing such a highly decentralized production process. Reducing Capital Intensity Pair Rugs benefits from a business model focused on converting fixed costs into ‘arable costs, which allows them significant tolerability Work is decentralized: Rug production is done on a “pay for performance” basis, depending on the quality and the quantity produced.

As a result, the company’s largest costs ? labor and raw material ? are variable. Investment is decentralized: By using contractors for its manufacturing operations, Jasper Rugs reduces its capital needs by not owning the key manufacturing assets, such as the dying, washing, machine carding, machine spinning operations, and most weaving looms.

Management influence over key functions is highly leveraged: The company directly employs only 300 people, yet influences 40,000 artisans who act as entrepreneurs and contractors. Access to healthcare and education. The Jasper Rugs Foundation leverages alliances with other Nags that provide health care and education to the weavers. Ay treating his workers fairly, Chuddar creates a feeling of loyalty, which, combined Ninth investments in logistics and quality control systems, and even personalized training in some cases, positively affects the quality of all the key production processes which are outsourced to virtual employees.

Technical Architecture The company’s technical architecture combines information technology (IT) infrastructure, human interaction, loyalty, and training.

Jasper Rugs’ Investment in IT infrastructure includes an Enterprise Resource Planning (ERP) system to optimize its geographically diverse supply chain, allow for the continuity of Nor, institutionalize quality control and achieve scale. The company also focuses on creating well-designed communications networks to deliver raw materials, communicate with weavers, and track the progress of work in remote villages with no electricity.

These communications networks are used by the company’s branch office staff to effectively manage a highly human capital intensive process. One of the company’s most interesting processes is the design and creation of the build sheets, known as “maps”. The maps give the weavers, who generally have minimal education, easily understandable instructions on where to put each strand of different colored PRNG.

Because of the way the maps are designed, a weaver essentially needs no training to produce a new design on a given loom.

This flexibility in Jasper Rugs’ business model means the company can prototype new designs very cheaply, and that its 28,000 weavers can respond fairly quickly to changing customer preferences and business needs. Management Team N. K. Chuddar, Chairman At age 11, Chuddar knew he would do something unique for society, beyond Just working in business. However, at that time he had no idea about the role his business would play for his eventual 40,000 direct and indirect employees, and for the rest of Indian society.

Chuddar philosophy about Nat successful businesses means for society evolved over the years, and includes empowering others, promoting entrepreneurship, and constant learning. Chuddar described: There is a need to transfer more and more ownership to the grassroots level. The business is scaling up each year. We want to develop more good leaders who can make their own right decisions. They can take care of profits and take care of society. Profits mean more efficiency, and better systems.

Villagers often refer to Chuddar as the Gandhi of the rug industry, an honor which he considers the highest form of aspect he can receive. Family All five of Chuddar children chose to work within the family business, and they held many of the senior level management positions Nothing the company. The table below depicts each of their roles within the company. Table 1 Chuddar Children’s Roles Within Jasper Rugs Name of Chuddar Child, in Order of Age Ash Archaic Capita Hooeys Unites CEO, IR COO, JAR Design Director, JAR Wholesome Director, JAR Trainee, Jasper Rugs.

Unites planned to get one year of experience with the company Role Within Business Educational Background Bachelor’s degree from Emory University Bachelor’s degree room North Carolina State University BAA in Textile from the Illinois Institute of Art Two [ears at Boston College Plans to attend Bassoon University in 2009 Branch Managers: each of the 22 branch offices has one branch manager, most of Mom were promoted from weaving and have been with the company for an average of 15 years.

The minimum salary of 5 a branch manager is RSI 8,000 per month (USED $174) , and as high as RSI 50,000 per month (USED $1,087), based on experience.

Area Commanders: responsible tort maintaining communication wit n the weavers in a given area. In 6 2008, there were 40 area commanders, each responsible for an average of 200 looms. Area commanders generally report to a branch manager, but n some cases, the area commanders doubled as branch 7 managers . The minimum salary for an area commander was RSI 5,000 per month (USED $109). JAR Motivators: responsible for: recruiting weavers; managing weaver training; educating weavers on odorous government schemes that provide health insurance, education, loans, etc.

; and maintaining good relationships with the weavers and their families. One Jasper Rugs Foundation motivator typically covers each branch region. A motivator earns between RSI 4,000-RSI 10,000 per month (USED $87 – USED $217). Production he Jasper Rugs production process is a complex system that begins with global sourcing of raw materials and ends with worldwide distribution of the finished products.

In between, the rugs are produced by 28,000 rural artisans across seven states in north and west India, supported by over 12,000 additional 8 production Markers and a comprehensive system of quality control and logistics .

Field Management Three types of employees work outside of the headquarters, either in one of the 22 branch offices, or in the field: branch managers, area commanders, and Jasper Rugs Foundation ROOF) motivators. Figure 3 ere Jasper Rugs Supply Chain Table 2 (below) provides a snapshot of the approximately 40,000 contractors, who contributed to the production of the rugs.

The average income of these workers is compared to similar alternative employment that may be available to them. However, Pair Rugs contractors are ensured a steady income from Jasper Rugs in contrast to the seasonality of many other employment options, and many earn additional income from seasonal agricultural work. Table 2 Snapshot of 40,000 Contractors Production Activity # of Workers Average Monthly Income Alternative Employment Average Monthly Income from Alternative Employment RSI 300* RSI 3000 RSI 3000-4000