`

Contents
ABSTRACT.............................................................................................................. 2
INTRODUCTION...................................................................................................... 2
METHODOLOGY...................................................................................................... 2
SUPPLY CHAIN PLANNING PROCESS.......................................................................4
OUT BOND SUPPLY CHAIN...................................................................................... 4
PHOENIX i2 technology.................................................................................... 5
TOTAL PRODUCTIVE MAINTENANCE.......................................................................5
RESULTS................................................................................................................. 6
OPERATIONAL RISK................................................................................................ 6
SUGGESTIONS FOR SUPPLY CHAIN EXCELLENCY....................................................6
CONCLUSION......................................................................................................... 7
REFERENCES.......................................................................................................... 8

ABSTRACT
In this paper I have highlighted the usages of an optimized supply chain
process in reducing the cost of production. Tata steel has applied various
optimization techniques to reduce the cost of inventory and to minimize
the overall lead time. Company through these processes are trying to
maximize their profits by integrating the manufacturing and supply chain
process to maintain sustainability and to remain competitive in the
market. Tata steel has tried to predict the future demand so that there can
be a balance between the anticipated demand and inventory cost. Tata
steel through the application of IT is monitoring the sales and demand on
a daily basis so, that they can meet the demand without even incurring a
considerable inventory cost. They have applied both push and pull method
to reduce their cost of production and to also eliminate the demand
uncertainty thus reducing the lead time and also reducing the inventory
control. Company has strived to give delivery performance to the
customers. I have highlighted the results that the company has achieved
by undertaking the strategic technique like i2 and TPM.

INTRODUCTION
Tata steel was established in the year 1907, it was Asias first globally
integrated steel plant having annual crude capacity of around 30million
tonnes annually. At present it is the worlds second most geographically
diversified steel producer having operations in 26 countries, it is also
present in 50 countries globally. The Tata steel group has an annual
turnover of 22.32billion US$ in the year 2015, having more than 80,000
employees globally, it also features in fortune 500 companies. Tata steel
aspires and striving towards attaining the benchmark of value creation
through the excellence in its supply chain by constantly and continuously
optimizing its supply chain lead time and also reducing down the cost
incurred in the entire supply chain process. Tata steel has the honour to be
the first integrated steel conglomerate in the world, outside Japan, to win
the Deming Grand prize 2012 coined by the Japanese union of scientists
and Engineers.
To begin with we need to understand the basics of supply chain; it is
basically the facilities involved in coordinating different functionalities and
activities in producing and delivering the product from the source,
suppliers to the customers. The basic objective is to optimize the pre and
post production yield level of inventory. It helps in achieving greater
efficiency in terms of labour and various equipment and spaces.

METHODOLOGY
The primary objective in supply chain is to optimize the operational cost
and to maximize the overall profitability. We know that supply chain cost is
an essential element in deciding the income of any company specially the
company like Tata steel which relies heavily on an effective supply chain
methodology to achieve its desired target of attaining profitability and
above all decrease the supply lead time which in turn is a great value
edition .The main challenge lies in creating a balance between the cost
incurred in inventory with that of availability to the customers. Through
supply chain optimization we strive to minimize the cost of operating
expenses like transportation which is a vital element in Tata steel supply
chain process, minimizing inventory cost and profit spread through supply
chain is the function of optimization. Tata steel has tried to address the
supply chain optimization through delivering their product through lowest
cost and highest margin of product. By doing so, Tata steel has also made
the customers, party, by offering them the highest quality of the product,
which has been possible by trading off the inventory cost, distribution,
transportation and manufacturing cost .Tata steel off late has been
successful in optimizing the storage and transportation cost by applying
product and packaging size as one of their important tool in cost
optimization.
Tata steel approach has been to forecast the future inventory demand as
precisely as possible by using technique such as Best fit by analysing
the demand based on the past figure and in turn helped them in
predicting future demands. This process actually requires a relatively
small data base and some sorts of manipulation; the uncertainty is
addressed by maintaining a safety stock, and by doing this company is
being able to maintain an effective supply chain. This process helps in
knowing certain answers like , what should be the volume of the steel
,company need to produce ,how much at each plant ,the production
output should be, which plant should be going for the safety stock. What
should be the modalities of transportation to achieve the given lead time?
Tata steel procures its raw materials from various sources across the
world. It procures its iron ore used in steel making from joda east iron ore
mine in Keonghar,joda west mining, Orissa ,chromite mine ,sukhinda,
Orissa,
noamundi
iron
ore
mine,west
singhbhoom
district
,Jharkhand,domardih dolomite quarry ,district sundergarh Orissa,jharia
collieries ,district Dhanbad, these are some of the main source besides
this they have a mines in Canada ,Australia, U.K, Indonesia, African
regions which caters to the need of the raw material of the Tata steel
established in various countries. Tata steel mainly procures coal used in
steel making from Australia, it does so, since the Indian coal has

maximum ash content and it thus gives low calorific value. As a matter of
fact Tata steel incurs 60-70 per cent of its production cost in Raw material
only, which is largely dependent on the mechanism of supply chain. Tata
steel in order to minimize the transportation cost has made sure that so
far as possible their manufacturing units remain in the vicinity of 100 K.M
from the source of its raw material availability. Tata steel due to the
obvious reasons uses all sorts of the modes of transportation .viz. Rail,
road and water. Tata steel has linked its plant with the railway track in
order to ship the large amount of finished products to its various
distributors. It uses water transportation to ship out and ship in, their
finished products and procurement of raw material and coal from abroad.
Tata steel has also devised the mechanism of low cost country sourcing
from the African countries like Mozambique, Nigeria and South Africa
owing to the cheap labour availability comparatively lower transportation
cost

SUPPLY CHAIN PLANNING PROCESS

It comprises of two parts one is material required planning and another is
Demand planning. It covers the various elements or players of supply
chain viz. supplier, plants, ware house, logistic and retailer. Through
extensive planning process Tata steel is being able answer certain
questions like
1. Can they plan the supply process in advance, but can them delivers
them the product only against order at least 50%of the current level?
Here we see that the company is carefully following both push and
pull method to avail the benefits of both the process, here the
company is aiming to reduce the inventory cost and also eliminate
the risk of demand uncertainty.
2. Can the company meet the order with minimal inventories?
Here again the company is extending the first question, they want
to expedite the transportation process with effective optimization
,they want to anticipate the estimation the demand beforehand so
that they can get away with inventory carrying cost.
3. Are they in a position to deliver, what they promise?
Here we gain see that ,they want to answer the equerries that
having taken all the optimization process, are they still in the
position to deliver the product at time, basically they want to make
sure that they dont miss the demands. They want to eliminate the

both excess of stock in and out, excess of both stock in and out
have in past incurred a huge cost in the supply chain
4. Can the company reduce the lead time?
This is again a vital component, meeting the demand at minimal
lead time can give them cost efficiency. This is an important
element of value addition.

OUT BOND SUPPLY CHAIN

Company of late revamped its out bond supply chain, company in the
quest to product its various specialized product .Tata steel followed the
theory of constraint initiative in restructuring the supply chain and
replenishment process .The pilot project under this initiative had given
them the results in optimizing the stock out and has increased sales.
Under this the sales department are offering depending upon their
specialised demand. Thus, replenishment offers are being offered to the
distributors and retailers while vendor are asked to manage inventory
offers to original equipment customers ,they are also asked to cater to the
rapid response offers to identified customers.

PHOENIX i2 technology
Supply chain was redesigned mainly to assure high class service
performance in terms of reliability of the product delivery at significantly
reduced lead time. Various measures adopted were:
Jointly identifying the products covered in the offer
Establishing the reliable replenishment time from the upstream
manufacturing operation to the plant warehouse and finally to the
customers
Establishing the IT network for daily report of consumption and
receipt data by retailer and stockyards
Forecasting the inventory need at different levels depending on
consumption within the reliable replenishment time
Alignment of sales and production planning and logistics to get the
desired optimum results.
Continuous monitoring of service performance.
Tata steel has reaped from these initiatives ,as per the company these
initiatives helped the company in achieving reliability in terms of
delivery at significantly reduced time in some areas ,a significant
decrease in overall system inventory ,it helped in alignment of supply
closely with demand thus reducing the lead time and inventory cost. It

also helped in improving the inventory control at the distributor and

customer levels. Sales of Tata TISCON have increased to thrice in
comparison of the previous years. Above all the cumulative effect of all
these factors led to the increase in overall profitability

TOTAL PRODUCTIVE MAINTENANCE

Tata steel has launched TPM at all its plants in order to increase the
sustainability, competitiveness and to maintain its position as the
lowest cost producer and the most efficient and quality producer.
Various measures have been taken like maximizing the equipment
effectiveness by doing so company can actually increase the
productivity at every stage. Company aimed in TPM to eliminate the
losses incurred in breakdown by regularly and routinely going for the
maintenances of all its equipment thus instead of rectifying an
equipment after its breakdown company through TPM is actually
looking after the health of all its equipment.
Company promotes autonomous maintenance through its day to day
work activities with the help of its workforce.

RESULTS

Inventory level was reduced up to 10-15 per cent

markdown and scrap were reduced to 10-15 per cent
Resources were used 10-12 per cent more efficiently
Delivery reliability was increased up to 90-95 per cent
Outages was reduced up to 5 per cent
cycle time was reduced up to 10-15 per cent
Transportation cost was reduced up to 10-15 per cent.

Of late Tata steel is pursuing to reduce the contact point in order to

optimize the cost of transportation. Company through the implementation
of IT network keeps the tab on the latest demand and level of inventory.

OPERATIONAL RISK
The raw material which accounts for the 60-70 per cent if the cost
sometimes faces a supply disruption due to the various political and
unknown reasons .It has an adverse effect on the supply chain and can
hamper the production and hence demand which in turn would decrease
the overall profitability. In order to overcome this problem company
maintains a significant integration of raw materials for its Indian
operations and various strategic sourcing for other regions .Tata steel

undertakes impairment reviews as per the company policy and it includes

some assumptions .These assumptions sometimes causes risk to the
underlying policy due to the market dynamics. Procurement of raw
material many times faces legal and environmental problem .company is
also taking effort to adopt a policy which could mitigate the underlying
risk

SUGGESTIONS FOR SUPPLY CHAIN EXCELLENCY

Tata steel though has taken a number of initiatives to optimize its supply
chain cost; yet, company should adopt some more policy in order to
further lowering down cost of inventory and to reduce the lead time.
Company need to re-engineer its supply chain order planning and
fulfilment process .As a matter of fact steel industry is facing a low
demand in addition to it china is a potent threat which is producing the
steel at a lower price. Company need to modify its supply chain process to
reduce the overall cost of production. Company need to increase its
supply chain efficiency by the following process:
-enhanced order fulfilment by actually decoupling of semi-finished
products at appropriate intervention points so that it could reduce supply
lead time and enhance the inventory flexibility
-designing and deploying the lean process across the supply chain by
reducing lead-times, working capital and more importantly by improving
the material flow
- Increasing the supply flexibility by extending the product range that can
be exchanged within the TATA steel group so, that they can increase the
value creation and maintain supply continuity.
We can also introduce some strategic sourcing in order to optimize the
supply process. We need to continuously track the result and if needed
carve a new supply structure in order to reduce the overall cost of
production.

CONCLUSION
As we know steel demand is uncertain and due to the increased
competition specially by china company need to reduce the overall cost of
production and optimization of supply chain process is a vital
parameter .we know 60-70 per cent of its cost of production is incurred in
procurement of Raw material and owing to various reason the
procurement sometimes is uncertain so we need to coordinate and
integrate various procurement division in order to meet the demand and
optimizing the supply chain process and reduce the inventory cost.
Company need to reduce the contact point so that they could reduce the

order lead time .company need to continuously improve and re-evaluates

the supply chain process to increase its value addition. Company need to
stay alert to the changing market dynamics and to response though
initiatives that drive change. The ultimate goal is to provide a reliable
supply chain process which could decrease the lead time and reduce the
inventory cost which could in turn decrease the overall cost of production.

REFERENCES
1) http://www.tatasteeleurope.com/en/careers/graduate/programmes/S
upply-Chain
2) http://www.thehindubusinessline.com/todays-paper/tp-logistics/tatasteel-revamping-supply-chain-management/article1740554.ece
3) http://www.powershow.com/view/3b3372M2Y2M/A_PRESENTATION_ON_THE_OPERATIONS_SUPPLY_CHAIN_OF_
TATA_STEEL_powerpoint_ppt_presentation
4) http://www.tatasteel.com/investors/annual-report-201213/html/strat_obj.html
5) TATA Steel in Europe Management Presentations, by Dr. Karl-Urlich
Kohler
6) Reinventing a giant corporation: The case of TATA Steel