1. SUPPLY CHAIN PROCESS IN STEEL
SECTOR

2. STEEL
TATA
STEEL
JSW
ESSAR
STEEL

3. 12%
15%
5%
16%
52%
CRUDE STEEL PRODUCTION IN FY-16
Tata Steel
JSW
Essar
SAIL
Others

4. RAW MATERIALS
 Iron ore
 Coal
 Sand
 Flux (Limestone and dolomite)
 Water
Companies prefer to have their own Iron Ore
and Coal Mines

5. PROCUREMENT OF R.M (TATA Steel)
 Owns Iron ore mines in Noamundi,
Joda, Khoondbond, Katamati in India
 Control over mines in Canada, Ivory
Coast, Mozambique, South Africa etc
 Own Coal mines in Bokaro & Jharia

6. PROCUREMENT OF R.M (JSW)
 Owns Iron ore mines in Bellary
(Karnataka) & Goa in India
 Control over mines in Chile &
Mozambique
 Own Coal mines in Boithra in Jharkhand
and some mines in USA
 Imports iron ore from China and South
Korea

7. PROCUREMENT OF R.M (Essar Steel)
 Owns Iron ore mines in Dabuna
(Chattisgarh) & Koira (Orissa) in India
 Imports iron ore from South Africa and
Baharain
 Own Coal mines in Mahan (M.P) &
Tokisud (Jharkhand)

8. Capital Equipment Purchase
 Heavy one time investment required
 Long lead time of 12-18 months
 Long Operating life of Equipment
 Need to forecast demand before making buy
decision
 The purchase should be in alignment with future
goals of organization

9. Capital Equipment Purchase
Consideration in source Selection:
 Engineering features
 Power ratings
 Vendor capability
 Lead time
 After sales service

10. Capital Equipment Purchase
Economic considerations:
 Life time of Machine
 Break even Point
 Return on investment

11. Capital Equipment Purchase
Major Suppliers of Capital Equipments
TATA Steel JSW Essar Steel
BHEL BHEL BHEL
Cummins Cummins Cummins
Lakshmi Machine
works
Hercules Hoist Ltd Electromech
Electromech K.D.Capital
Equipment
Imports
Godrej Imports
Imports

12. Strategic Sourcing
Feeds to develop Procurement Strategy
Procurement
Strategy
Product
Categories
Business
Objectives
Global
Best
practices
Global
Benchmark
s

13. Strategic Sourcing
Individualistic Sourcing
- Negotiations with Vendors
- Little knowledge about the commodity
Cross functional Sourcing
- Considered Total cost of ownership
- Made advantage of Volume buy
Integrated Sourcing
- Long term contracts with vendors
- Multi functional team for sourcing

14. Strategic sourcing (TATA Steel)

15. Strategic sourcing (TATA Steel)

16. Strategic sourcing (TATA Steel)
Benefits:
 Single global operating model
 Established global spend visibility
 Improved cross department
information sharing
 Increased TCO savings from
$300mn to $700 mn
 Reduced departmental cost by 15%
 Reduced raw material cost by 33%
 Reduced cost of spare parts by
25%

17. Strategic sourcing (JSW)
Head
User Dept
Commodity
Manager
Purchase
Manager
Production
Manager
Expert
group
Segment
Steering
Committee

18.  Started buying Iron ore from Goa instead of getting
from Orrisa for its Dolva plant
 Imported Iron Ore and made saving of Rs.140
Crore per million tonnes
Strategic sourcing (JSW)

19. Strategic sourcing (Essar Steel)
Secondary
Items:
Purchasing
dept supports
user dept
e.g. Medicines
Core Items:
Purchasing
dept focuses on
Vendor
management
General Items:
Centralized
purchasing at
high volume
e.g. Laptops
Commodity:
Purchasing
dept prefers
long term
contracts
Savings Potential
Complexity
Of
Commodity

20. Warehousing
 Warehouse inside manufacturing unit
 Dispatch to customer done from Warehouse directly
 FIFO method used (some exceptions exist)

21. Warehousing

22. Warehousing

23. Inventory Management
Raw Materials:
 EOQ Model
 A B C Model
 High magnitude of safety stock
 High inventory carrying cost
Finished Goods:
 FIFO
 Tagging F.G

24. Inventory Management
Inventory turnover ratios
0
1
2
3
4
5
6
7
8
9
10
15-16 14-15 13-14 12-13 11-12
Tata Steel
JSW
Essar Steel

25. TATA Ryerson
 JV between TATA and Ryerson Tull of USA
 TATA Steel outsourced Logistics to TATA Ryerson
 Serves major clients like TVS, Honda, Bajaj,
Whirlpool, LG etc

26. JSW Shoppe
 Retail store for MSME’s
 Started in 2007
 400 Retail outlets under Franchisee
 More than 50% shops in Rural area

27. Essar Hypermarket
 Shifted from B2B to B2C
 Retail store for Steel Products
 Started in 2006
 520 Retail outlets
 Revenue of Rs. 4600 Crore in 2015-16
 Expects 6700 Crore ($ 1 bn) Revenue in 2016-17

28. ERP Systems (TATA Steel)
 Uses SAP
 Assembling data from multiple systems was tedious
task
 Integrated Information flow from India, Europe and
Thailand
 Spare parts reduced from 850,000 to 300,000
 Annual savings of 100 mn Pounds which include 20
mn Inventory carrying cost

29. ERP Systems (JSW Steel)
 Uses SAP platform
 Encompassing ERP, SCM & BI
 Improved Information Technology – Operational
Technology (IT-OT) integration
 Better Order to Cash and Plan to Produce Cycles
 Started extending Information system to Dealers &
Retailers

30. ERP Systems (Essar Steel)
 Use SAP platform (Earlier used “Variant
Configuration” Tool now use “ Max attention”
 Integrated SAP Platform with Oracle Exadata
Database machine
 Improved Database response time by 8-15% ;
runtime transactions by 12-15% & Reduced Storage
space by 30%
 Saved $1.62 mn in licensing & $1.3 mn in
maintenance

31. Future Scope
 Crude steel production in India expected to reach
300 MT by 2025
 Auto Industry expected to reach by $250-270 Bn
(Currently $74 bn)
 Capital goods market expected to grow by 14-15%
 High growth in Infrastructure
 Per capita steel consumption expected to increase
to 14 Kg (Currently 12 Kg)

32. Planned Capacity additions
Existing
Capacity
Brownfield
Expansion
Greenfield
Expansion
Expected
Capacity
TATA Steel 9.7 0.4 10 20.1
JSW 14.3 3.8 0 18.1
Essar Steel 10 1.46 0 11.46

33. THANK YOU