Jaipur Rugs: A Gargantuan Feat of Logistical Finesse
Socent Hobbs
Posted: Oct 1 2013 By Andrew Hobbs
A Jaipur Rugs Company weaver in the village of Narhet near Jaipur, India.
Before Jaipur Rugs built its social impact empire the rug industry in India, like many others, exploited the village artisans who form the most critical part of the manufacturing process. Village rug weavers took a lot of risk and received little pay. These weavers had to purchase the handloom, source raw materials and find buyers for their products. Not surprisingly traders took advantage of the artisans’ desperation and position of relative weakness. Weavers did not have the time or ability to seek out competitive bids for purchasing their rugs, nor did they purchase raw materials with any scale that could leverage discounts. As a result weavers overpaid for material inputs and were underpaid for their exquisite outputs. Weavers were squeezed on both ends of the value chain, despite the fact that within this value chain, they added the most value!
Jaipur Rugs Company determined to rectify this injustice. Jaipur Rugs Company set out to launch a simple business model, cut out the exploitative middlemen who paid so little for the weavers’ rugs and thereby give the weavers a greater share of rug industry earnings. Yetthe founder of Jaipur Rugs Company, Mr N. K Chaudhary, realized very quickly that Jaipur Rugs Company could do much more. After all middlemen were not the only ones putting the squeeze on weavers. Jaipur Rugs decided to focus on weavers’ input costs in addition to increasing their earnings on the output side. Jaipur Rugs started providing handlooms, raw materials and training, all free of cost to weavers. The net effect of Jaipur Rugs efforts has been to increase weavers’ daily earnings by 300% from 50 rupees to 150 rupees, all while eliminating any need for tremendously burdensome financial investment in materials and looms by the weavers themselves. At the same time Jaipur Rugs Company has built a thriving business empire, becoming the largest producer of Rugs in India. Jaipur Rugs has leveraged its size to bargain on the cost of raw materials and handlooms in a way that individual weavers never could. Furthermore Jaipur Rugs sells almost exclusively to foreign markets, exporting its rugs to the United States, Europe and other developed markets where the intricately hand woven rugs command a premium price.
All in all the concept behind the model is elegant in its simplicity. Nevertheless, execution of the model is anything but simple. Jaipur Rugs coordinates over 40,000 weavers and employees in over 400 villages. For every loom they must provide rug designs, thread in the right color and material, and quality control supervision. For every weaver they must keep track of inches of rug woven and deliver training upon request. At the corporate level Jaipur Rugs must juggle orders and inventory. Rugs take many months to weave and complete and the speed at which they are completed can vary dramatically on the complexity of the design and the skill of the weaver. Nevertheless Jaipur Rugs must be able to make commitments to time sensitive buyers in developed markets. The company monitors weaving progress on every loom, estimates when rugs will be finished, evaluates loom performance and assigns new designs in the pipeline to looms that are expected to be able to complete the product on schedule. Suffice it to say that coordinating all these tasks across 40,000 weavers, 400 villages and tens of thousands of looms while growing to reach another 60,000 weavers in 7 years is beyond extraordinary. It requires nothing less than a gargantuan feat of logistical finesse.
