PREPARED FOR: MS. MANJIRI DIGHE
Steel industry is in its best position in last decades Demand expectations for steel products are rapidly growing. Shares of steel industries are also in a high pace . 6th consecutive years of growth in supply and demand. Many merger and acquisitions. Steel production and consumption will be supported by continuous economic growth.
Steel industry is in its best position in last decades Demand expectations for steel products are rapidly growing. Shares of steel industries are also in a high pace . 6th consecutive years of growth in supply and demand. Many merger and acquisitions. Steel production and consumption will be supported by continuous economic growth.
Bokaro Steel Plant: Steel manufacturer.
Essar Steel: Producer of sponge iron, steel and iron ore pellets.
Jindal Iron & Steel: Producer of galvanized steel products.
Jindal Steel & Power: Manufacturer of mild steel slabs and sponge iron.
Steel Authority of India: Manufacturer of steel and iron.
Tata Steel: Producer and supplier of wire rods, bars, and steel flats.
Vizag Steel: Producer of pig iron and steel.
Indian Steel Till the 1990s the steel industry of India was regulated and controlled by government policies.
India has set a vision to be an economically developed nation by 2020. The steel industry is expected to play a major role.
After the economic reforms of the early 1990s, the Indian steel industry has evolved significantly to conform to global standards.
Ideally, we should increase our steel production capacity — we are a net importer of steel — so that rather than exporting iron ore, we can add value to it.
India should also look at investing in exploring new mines.
The major aspects that are expected to play a significant role in the growth of the steel industry in India are -
Abundant availability of iron ore in the country The country has well established facilities.
The major sectors where consumption of steel is expected to grow in the coming years are -
Construction Housing Ground transportation Hi-tech engineering industries such as power generation,
petrochemicals, fertilizers
The potential for the growth of consumption of steel in the rural areas of India for purposes like rural housing, rural infrastructure, etc is high which needs to be tapped efficiently.
Tata Steel
Tata Steel, formerly known as TISCO is the world‘s sixth largest steel company with an annual crude steel capacity of 30 (MTPA)
It is the second largest private sector steel company in India in terms of domestic production. Ranked 315th on Fortune Global 500
Based in Jamshedpur, Jharkhand, India. Through investments in Corus, Millennium Steel (renamed Tata
Steel Thailand) and NatSteel Holdings, Singapore. Tata Steel has created a manufacturing and marketing network
in Europe, South East Asia and the pacific-rim countries. Tata Steel Thailand is the largest producer of long steel products
in Thailand, with a manufacturing capacity of 1.7 MTPA.
Global Points of Presence of TATA STEEL
TATA Steel’s Growth Strategy1990 - Company re-engineered its business processesestablished its cost leadership in a liberalized scenario
and modernized its operationssteel industry scenario changed dramatically in 2003Company realized the need to grow in size and
regional diversity to match global playersIn 2005, the Company made long term plans of
becoming a 50 million tonne steel producer by 2015
Responsibility Centers
Revenue Center:-
– Output is measured in monetary terms.
– No formal attempt to relate input (i.e. expenses or costs) to output.
RUPEE EARNED 2008 - 2009
Expense Centers
Raw Material Consumed
Raw Materials consumption showed significant increase over the previous year mainly due to higher prices of Coal and Coke and also due to higher production resulting from the commissioning of ‘H’ Blast Furnace as well as other facilities and operational improvements.
Payments to and Provisions For Employees
The increase of staff cost over is due to the revised wages, arrears and impact of change in discounting rate for valuation of employee benefits
Conversion Charges
Conversion charges increased by 22% over FY 08 mainly due to an increase in the conversion activities at the Long Products division as well as an increase in the conversion of tin coated products.
Stores And Spares Consumed
Stores consumption has gone up by 33% as compared to FY08 primarily on account of higher production which was due to the commissioning of ‘H’ Blast Furnace as well as other facilities and operational improvements and an increase in the price of operational refractories in Steel melting shops.
Purchase of Power
There was an increase in expenses related to the purchase of power at the Jamshedpur Works during the year as fourth unit of Tata Power was shutdown for maintenance activities and the Company (Tata Steel) had to purchase power at higher rate from alternate sources. Increase in production, increase in sale of power to other consumers also led to higher purchase of power.
Other Expenses
Other expenses have gone up mainly due to consultancy charges, exchange fluctuation on raw material supplies, port charges due to increased exports, increase in brand equity payment, software development charges, packing charges due to increase in prices of steel packing materials and higher payments for contractual jobs.
Research And Development Centers
Research was carried out in the areas of raw materials including iron ore, coal, coke, ferro chrome and titania, blast furnace productivity, Steelmaking, product development, process improvement, coatings.
BENEFITS– 8% ash in coal maintaining yield
– Complete benefi ciation of iron ore
– Improving blast furnace productivity
– Lowering phosphorus in Steelmaking
– Flat Products for automobiles
Some Major New Products Developed Through NewTechnology Absorption
– CBQ tubes and TFF tubes for two wheelers
– Tubes for hydro forming for Tata Motors Ltd. – NANO Cars
– As drawn and As welded Prop. Shaft tubes for Ashok Leyland Ltd., Tata Motors Ltd.
– Thin wall exhaust tubes for Ashok Leyland Ltd., Tata Motors Ltd.
– Bright normalized tubes for Automobile application.
– St 45 grade of boiler tubes/pipes.
• Economic Value Added (EVA) is defined as the excess of Return on Invested Capital (ROIC) over weighted average cost of Capital (WACC); viz
• The EVA spread was 22.23% as compared to 23.54% in the previous year. The calculation of EVA spread is as follows:
Information Technology
– Implementing Supply Chain Management system using i2 for Flat Products.
– Migration of systems from IBM mainframe and shutdown of the mainframe will result in recurring savings of Rs. 4.5 crores p.a.
– Design and implementation of Simplified Drum Buffer Rope based Order Promising System for Wires and Tubes Division.
– Business process improvement for NatSteel Asia (Singapore), Tata Steel Thailand and Tata Steel (India).
– Implementing SAP at SIW (Thailand), Tata Bluescope and a Wires Division plant.
Company has place adequate internal control systems and procedures commensurate with the size and nature of its business.
The effectiveness of the internal controls is continuously monitored by the Corporate Audit Division of the Company.
Corporate Audit’s main objective is to provide to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organisation’s risk management, control and governance processes.
Internal Controls & Systems
Objectives of Corporate Audit’s
• Identify cation and management of Risks.
• Resources are acquired economically, used efficiently and safeguarded adequately.
• Significant financial , managerial and operating information is relevant, accurate, reliable and is provided timely.
• Improving management control, business targets and profitability, process efficiency and the organization’s image, are communicated to the appropriate level of management.
• Employees’ actions are in accordance with the Company’s policies, procedures, Tata Code of Conduct and applicable laws and regulations.
SCM at TATA Steel
ObjectivesOptimize pre and post-production inventory
levelsObtain greater efficiency from laborObtain greater efficiency from equipment and
space
Supply Chain Planning Processes
Demand PlanningMaterial Requirement PlanningDemand Forecasting
Supplier Plant Warehouse Logistics Retailer
ProductionPlan
ComponentRequirement
Order Management
Fluxes Coal
Sinter plant
COKE Plant
Blast Furnace
LD1
LD2
Continuous Billet Caster
BilletsWire Mill
Merchant mill
Wire rodsRebars
Slab caster
Steelmakers are often faced with the following Questions:
Can we plan in advance but finally deliver only against Order?
Can we do this with minimal inventory?Can we deliver 100% based on promise?Can we both reduce the lead time & inventory
simultaneously?
“i2 Solutions” for Tata Steel has enabled best practices including :
Improved delivery performance to customer Reduced manufacturing and inventory costs Increased efficiency in supplier relationships Optimised product mix Reduced order lead time.
Out Bound Supply Chain
Outbound supply chain was completely revamped.
New Distribution Network was set up to cater mainly to rebars and GP/GC sheets, enhanced the reach for our products.
Sales of Tata TISCON through this system was almost thrice compared to previous year.
Results of Effective SCM
Reduced inventory levels by 10-15%
Reduced markdown & scrap by 10-15%
Improved delivery reliability by 95-95%
Used resources10-20% more efficiently
Reduced transportation cost by 10-15%
Reduced cycle time by 10-20%
Reduced outages to 0-5%
Porter Five Forces Model
Entry barriers: High
Capital RequirementEconomies of scaleGovernment PolicyProduct differentiationGlobal Steel majors Arcelor- Mittal & POSCO
plan to enter Indian Steel Industry.
Competition: High
Large producing countries like china influence global prices
Branding is not common and there is little differentiation
The 4 major domestic rivals are SAIL, JSW, ISPAT & ESSAR STEEL.
Porter Five Forces Model
Bargaining power of suppliers: High It is low for the fully integrated steel plants – Tata
steel Domestic raw material sources are insufficient, so
import is essential Globally, top 3 mining giants BHP billiton, CVRD &
rio tinto supply nearly2/3 of the processed iron ore to steel mills and command very high bargaining power.
Tata Steel has forayed into Backward Integration.
Porter Five Forces Model
Threat of substitutes: Low Plastics and aluminum pose a threat to Indian steel in
one of its biggest markets — automotive manufacture.
However, at present in India the high cost of electricity for extraction and purification of aluminum weighs against viable use of aluminium for the automobile industry.
Porter Five Forces Model
Bargaining power of Consumers: Mixed
High - automobiles, oil & gas, shipping, consumer durables & power generation sectors
Low – small & retail consumers.
Porter Five Forces Model
Strategic Business Units
Bearings DivisionFerro Alloys and Minerals DivisionAgrico DivisionTata Growth Shop (TGS)Tubes DivisionWire Division
Energy Efficient Operations at Tata Steel
Tata Steel Harvests Hydrogen
Implications of Hydrogen Harvesting
• Clean fuel source at low cost using waste heat & waste water.
• Useful in transport & other industries.
• Potential process of increasing revenue & added benefits in terms of carbon credits &patents.
• The gas can be used as a fuel in drying furnaces, reheating furnaces, ladle pre-heaters, captive power plants, etc. With this, consumption of coal and other fossil fuels reduces and CO2 emissions can come down by about 25kg / tone of steel.
Organization Structure
PEP @ TATA Steel
PEP focuses on :
3 Basic Fundamentals:
Component 1: Conventional
Appraisal
3 Components
Component ii: Managerial Style Feedback
Procedure
Component iii: Internal
Customers Assessment
TOP Program• Impact to the bottom line with minimum
investment & minimum time.
• Short term AIM : Improvements in quality & Reduction in cost
• Long term AIM : high rates of Performance Improvement
Procedure
• Unit team with a unit leader & 2 facilitators
• Unit team objective : explore ideas to reduce cost by 40%.
• Team has to identify Key performance indicators & elements that have an impact on them.
Phases
• Phase 1 : individual components of larger cost elements were identified.
e.g. Fuel cost
• Phase 2 : ideas to achieve the target
• Phase 3 : implementation of the ideas.
• Savings of Rs.87 million against targeted Rs. 40 million.
Balance Scorecard
Marketing & Sales : Tata Steel Wire Division
MCS In Indian Steel Industry
Steel ProducersMain Producers • Steel Authority of India Ltd. (SAIL) • Rashtriya Ispat Nigam Ltd.(RINL) • TATA Steel Ltd.(TSL)
Major Producers • JSW Steel Ltd. • ESSAR Steel Ltd. • Ispat Industries Ltd. • Jindal Steel & Power Ltd.
Organizational Structure
Performance Appraisal In RINL• two types of performance appraisal on the basis of post of
the RINL’s employee – Executive performance appraisal system (level E-0 to E-4 )
• Appraisee write his view over the actual achievement for the Key performance area / Task and Target assigned to him for the year.
• Both appraisee and reporting officer sit together• Rating between 1 to5 are given to the appraisee by the Reporting
Officer and Reviewing Officer
– Non-executive performance appraisal system• Rating are given by both Reporting and Reviewing officers on the
basis of performance of the appraisee• O / A / B / C / C- Grades are given • If grade is C- , then appraisee is interviewed by the Head of
Department
JSW Steel Ltd.
• JSW steel 4.8MTPA • 3MTPA addition from 10april 2010• Strategy for recession• shut downed two Blast Furnaces temporarily &
postponed the expansion project • adopted two pronged strategy of reducing the cost
and finding new customers & markets • Implemented low conversion cost, rich product mix,
locational advantages and swift change in marketing strategies
Recommendations
• Entrepreneurship approach instead of managerial approach-led slow growth
• Emphasis on cost reduction
• Targeting b2c segment (emotional)
• Less tapped rural potential
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