Outsourcing - Workshop Accounts

 

Outsourcing - Workshop Accounts  

• Source: Rolling Stock Code 2022 -11th chapter - Capacity Optimization and Product Development 

 

Background: 

 

• In this dynamic world, new products emerge and old ones disappeared.  

 

• Demand shifts from one product to another. 

 

• Innovation alters methods of production and so on.  (Examples is Vande Bharat Trainsets/DPRS- Distributed Power Rolling Stock) 

 

• However to meet such rapid changes in technology and to meet the wide changes in the product matrix or quantum of Outturn, out age old Production Units and Workshops (3 to 4 decades) are not ready. 

 

• Moreover such changes are notified only during the year in question and not having sufficient time for advance planning. 

• So it is necessary to create flexible structures with complete freedom to adopt strategies like outsourcing, staff multi-tasking, multi-skilling, flexible deployment of manpower amongst different shops within the PU/Workshop to match capacity with demand etc. 

 

• In PUs/Workshops, final assembly and production of certain critical sub-assemblies and components has to be done in-house. 

So that, non-critical jobs can be outsourced and the staff that may be rendered excess in these shops to be re-deployed in assembly and critical items of work.  

Need to Outsource: Where the outsourcing the work to other agencies become inescapable under circumstances such as: 

1. No possibility of getting the work in other Railway Workshops with known capacity & capability for the Product. 

2. Sudden spurt in the requirement of components/sub-assemblies far beyond the capacity of the shops. 

3. Reduction of staff in Non Core shops (due to shifting to Core shops) 

4. Introduction of new mateial/technology for which skills/capacity/equipmet may not be available within the PU/Workshop. 

5. Economy in Cost due to large scale of production with the supplier. 

6. Short-term or One time jobs - For which permanent capacity cannot be feasible. 

7. Requiring heavy infrastructure which may not commensurate with the quantity required by Railways.  

Under the above circumstances, the Shopin-charge should decide to opt for Outsourcing.  

• Outsourcing - Two types  

1. Outsourcing to Units outside the Railway Workshop  

 

2.  Outsourcing for Works within the Railway Workshop premises

Outsourcing to Units Outside the Railway Workshop

• Approval of the PU/Workshop In-charge  

 

• Finance Concurrence required.  

 

• Certain excluded items - finalized by Zonal Railways only with Finance concurrence. 

 

• Pricing: In-house manufacturing cost minus  over heads plus overheads at commercial rates  for cost comparison purpose.  

Outsourcing for works within the Railway Workshop premises 

 

• In case of certain assemblies, sub-assemblies and critical items and their testing. (because quality is important) 

• Control of quality of workmanshipi through stage inspections. 

 

• Specilized large-scale infrastructure needed for the manufacturing process not available with vendors. 

 

• The costly specilized equipment not useful for other than Railway works. In such cases, it will inflate the vendors bid price which will ultimately get loaded on the cost of production. 

 

• Logistiical problems and disproportionate transportation costs.  

Safeguards to avoid contract disputes - If Work is outsourced within the Railway Premises: 

1. Separation: Work area for the Contractor and Railways 

2. Defining Shared machine and equipment time available to the Contractor to avoid mix up. 

3. Raw materials and consumables to be supplied by the Railways - Stock should be kept separately and accounted for. 

4. Consumption norms for raw materials and consumables for eachh item issued to the Contractor by the Railways 

5. Agreement - signed by the Contractor and Shop In-charge 

6. Accounted and documented of Electric power, water and utilities incl: tools provided by  Railways 

7. Control of quality of workmanship by Inspection 

8. Accountal of Scrap / left over material to be returned by the Contractor and kept separate 

9. Industrial safety standards as prevailing in the shop – equally applies to the workers engaged by the Contractor. 

10. Compliance of all legal provisions. 

 

Check List

 

 

Check list for precautions to be taken before contract is awarded for outsourcing work inside the workshop with outside labour.
Sl.  No.	Precaution to be taken	Yes	No
1	Separate work area for Contractor
2	Requirement of Railway supplied consumables – like special electrodes, water, electricity etc. been computed and listed
3	Material requirement for outsourced job been separately worked out
4	Machine hours for use of Railway equipment for the job been computed and listed
5	Payment to contract workers is being made through bank, in a transparent manner or not
6	Separate ID for workers of Contractor
7	Accountal of contractor supplied items, raw materials and consumables
8	Proper Railways supervision on the work.
9	Complying of all legal provisions
Note: The answer to all the items is to be ‘yes’,  Before outsourcing Contract is awarded.

 

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