www.tocpractice.

com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

A century of Trust

Supply Chain & Logistics

Evolution at Tata Steel
Prasanna Kumar Jha
Tata Steel Ltd.

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Prasanna Kumar Jha

21 years of experience in Steel Operations and
Supply Chain Management.
TOCICO Certified Practitioner in Supply Chain
and Project Management. Additionally a certified
Six Sigma Black Belt
Involved in implementation and
institutionalisation of Supply Chain, Logistics and
Project Management solutions at Tata Steel.
Instrumental in implementing Replenishment
solution in Flat Products Division of Tata Steel.
Also involved in execution of around 300
maintenance and sustenance projects using
CCPM.

Head TQM TOC (Tata Steel Ltd.)

Holds a post graduate degree in Business

Management with specialisation in Systems and
Marketing
Theory Of Constraints Practitioners Alliance TOCPA

prasannakjha@gmail.com
pk.jha@tatasteel.com

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Agenda:

Organisation Profile

Supply Chain and Logistics Evolution









Availability- A significant customer need

Problem identification 2006
Understanding root cause
Change in measurement- Commitment to availability
FY10-FY12 Focus on improving channel availability
Availability at Dealers outlets
Transforming distributors and dealers
Effects

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Organisation Profile- Tata Group and Tata Steel Group

UK & Ireland
4 Production facilities

Netherlands
1 Production facility

33 distribution centres

3 distribution centres

USA
Distribution
centres
EU (Excluding UK & Netherlands)
13 distribution centres

Thailand
3 Production facilities

Major Production
facilities

3 distribution centres

Tata Steel, India

India
Capacity: 9.7 mtpa

Singapore
1 Production facility

Turnover US $ 8 Billion

4 distribution centres

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Tata Steel India Products and Customers

Unique offering
Tata Shaktee retail

Focused segment
Auto,
Construction
industries
General
Engineering,
Appliances
Industry

Products
Hot Rolled
(HR) Strips
Cold Rolled
(CR) Sheets

Galvanized
CR Sheets

Flat Products

Application

Housing
Applications

Large construction
projects

Reinforcement bars for

construction

Individual houses
Fastners
Tyre bead wire
Selling by pieces

Construction
electrodes
Springs

Theory Of Constraints Practitioners Alliance TOCPA

Wire Rods

Long Products

Key Customers

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Tata Steel India Retail Sales Channel

PLAN
T

Stock

DISTRIBUTOR

DEALER

70
Distributors
spread
across the
country

7500
Dealers
across
the
country

Theory Of Constraints Practitioners Alliance TOCPA

CONSUMER

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Agenda:

Organisation Profile

Supply Chain and Logistics Evolution









Availability- A significant customer need

Problem identification 2006
Understanding root cause
Change in measurement- Commitment to availability
FY10-FY12 Focus on improving channel availability
Availability at Dealers outlets
Transforming distributors and dealers
Effects

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Availability A Significant customer need

Distributor

Retail network spread: Fy09

Dealer Customers

3200 km

Tata Steel

Poor
Infrastructure

Other Steel
Plants
Needs
Exclusive

Availability

Availability

ROIC

ROIC

Non-exclusive

Availability
1000 2900
KM km

Due to poor infrastructure in India and internal constraints, no steel manufacturers were
offering availability to customers.

INDIA

Availability was not even measured in Tata Steel till FY-06

Customers had no choice but to keep high inventory to protect their interest, even then stockout was common

A Decisive Competitive Edge (DCE) can be created with very high availability with very
low inventory, which no other significant competitor can give
Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Problem Identification - 2006

Voice of Customer strengthened by Customer
Satisfaction survey & QFD
Retail shops We lose sales due to stock outs
because consumers buy the brand whose complete
section-mix is available off-the-shelf.
COUNTERMEASURE
Distributors &
Retailers would keep
more stocks

Situation in 2006

Inventory
(Total 75 Days)
Stock out %

Other Related issues

Tata Steel

Distributor

Retailer

15

25

40

Additional Space for storage

De-gradation of material

30-40%

40-50%

Pilferage

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Understanding Root Cause- 2006

Task force formulation with cross- functional members
1

Conflict

Capacity
Utilization
2

Produce more to reduce fixed

cost

Operation
al
Flexibility

Longer campaigns

Forecast driven Supply Chain Do thicker sections to

Production Plan
increase productivity
Monthly Sales
Forecast

Production
against
Forecast

Sales

Distributor Forecast

Offices /

Mills

Stockyards
Dispatch against
Forecast

Monthly Supply
Against Forecast
Against Order

Distributor
Daily sales

The solution
1. Align measurement systems from customers point of view to
support the above action
2. Supply against actual daily consumption by the customers A
replenishment model
Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Change in measurement Commitment to Availability

Old measurement : Despatch Compliance = Compliance against a
final despatch week at an item level against sales
order or stock transfer order
New measurement : Availability= Physical availability of stock at
distributors/dealers yard at an SKU level for a
month
Example: Distributor stock status for a day
6
11
2
52
19

10 12

16

20 25

153 68 8 147 19
256 48 15 196 26
535 0 344 227 35
103 19 2 69 23

20
22
55
29

DIST Name
DESON MKTG JHARGRAM
NANDAN SAHA STEEL CHANDPARA
BMW VENTURE LTD PATNA
SILIGURI BUILDERS PVT LTD SILIGURI

GRADE 6
FE500D
FE500D
FE500D
500SD

40
40
55
43

Calculation:
stockout day opportunities = 28
stockout days = 1
% stockout = ((28-1)/28)*100 = 96.5%
tockout = ((28-1)/28)*100 = 96.5%

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Supply against actual consumption by customers

Challenges
Consumption variability

Countermeasures
Define buffer stocks based on aggregation principles
Education and training for the sales force, Distributors

Changing roles of
distributors from chasers to
value creators

Provide consumption data daily to Tata Steel to replenish.

IT enablement of data flowing all across the country.

IT for uneducated users

In-house developed accounting package Ex-package for the distributors

with extensive training

Mills

PWH

Distributors

Dealer
s

Daily consumption information

Material flow
Stock buffer

Effects

Reduction in daily sales variability

Ton sold/day

RWH

Customers

Pull based
supply chain

Pre- TOC

Post- TOC

By FY-09:

Remaining problems

Availability:

All links of supply chain

not covered

63% to 80%

System Inventory:
80 to 45 days
Days of a month
Theory Of Constraints Practitioners Alliance TOCPA

Availability at
distributor still much
below target of 95%

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

FY10 to FY12 Focus on improving channel availability

Problem
areas 1

Causal analysis of past period

Fixed production batch

Low Distributor
availability
Low RWH
availability

Transportation
batch

Low PWH
availability

High
RRT

Fixed Production
batch

Consumption
variability exists

Action
Plan

Aligning production to market needs:

Produce only to fill buffer

Stock depletion at Plant Ware House (NBM)

Sep09 days

SKUs

10mm

72%

43%

14%

-25%

-48%

-35%

12mm

22%

35%

38%

50%

55%

54%

16mm

21%

25%

29%

41%

60%

82%

Section change

Challeng Loss of production due to setup

e
Projects to reduce setup time1

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

FY10 to FY12 Focus on improving channel availability

Problem
areas 2
Action
Plan

Large transport batch and

high lead time

Before

Redesigning of supply
network

Leadtime to spoke
: 4 days

Lead time: 9
days

Increased cost:
Lead time: 11-12
days

Challenge

Planned
to
cover
through low inventory
and enhanced sales

Problem
areas 3

Consumption variability

Action
Plan

After

Demand
management
through
protective
capacity and
market
buffer concept

Demand
management
through pricing:

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Changes and its effect in FY11

Pull based supply chain coverage

Mills

PWH

RWH

Distributor
s

Dealer
s

Effects

By FY-11:
Availability:

80% to 98%

Theory Of Constraints Practitioners Alliance TOCPA

Customers

System strengthened for

pull based replenishment

Focused actions
resulted into
coverage of the
entire supply chain
under pull based
replenishment
process

Remaining problems:
Availability at dealers
during FY11 was still
at 94%

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Availability at Dealer Outlets

Customer Need
Availability

Problems/Abnormality
Present Problem:- Large number of Days of stockouts &
Moderately High Month-to-Month Variation in Dealer Availability
(Coefficient of Variation (CV%) is 4.5% (Apr-Oct Fy12)).

Challenges Associated
Large All India Dealer Network of around 3,500 Dealers with a wide Geographic Reach in all Districts.
Buffer Management as per changing consumption trends
Variation and Uncertainties in Transportation leading to high RRT variation (Reliable Replenishment Time).

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Analysis of Dealer Availability FY12

Dealer Stock-Outs

Total No. of

High Stock-Out Days distributorwise for dealers: IT enabled flow disruptor analysis

Distributor

Stock-Out Reason

Counter-measures
Buffer level for New Dealers to be defined as
0.001 for the initial trial period till sales stabilization
Prioritization rules set for Dealers based on
Categorization
IT-enabled Visualization & Monitoring started for
different categories of Dealers.
Flow Disruptor analysis to identify reasons for
Stock-outs on a day to day basis

Buffer color based monitoring

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Transforming Distributors and Dealers

Changing role of the Distributors & Retailers
FROM

TO

Place orders & Follow up

for supplies
Track Inventories
Monitor ROI and
Working Capital

Work Collaboratively with

Tata Steel to
Focus on consumer
sales
Build Brand promise

Key Enablers


Education and training for the sales force, Distributors and Retailers

Distributor & Retailer has to provide consumption data daily for Tata Steel to
replenish accordingly. This was not possible without IT enablement of data
flowing all across the country.

Theory Of Constraints Practitioners Alliance TOCPA

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Visibility across the channel through IT

Challenges Faced

Countermeasures

Spread to Remote locations

where Connectivity is a concern

Mobile based SMS option for the

retailers

Retailers and Distributors were

uneducated

In-house developed accounting package

Ex-package for the distributors

On-line reports helping in Daily Management & War Room Meetings

100%
100%
75%
50%
25%
0%

100%

80%
30%

FY05

30%

80%

FY06
FY07
Target

95%

FY08
Actual

95%

FY09

Data Sending compliance of Retailers

% Daily Compliance

% Daily Compliance

1 Data Sending compliance of distributors

100%

75%

75%
50%
25%
0%

Theory Of Constraints Practitioners Alliance TOCPA

50%
65%
0%

50%

FY07

FY08
Target

FY09
Actual

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Effects
Number of dealers and stock out

95%
100%
98%
90%G
90%
80%
80%
80%
70%
780
750
60%
666
547
50%
FY'08
FY'09
FY'10
FY'11
Availability
Plan Availability

97% 1200
1100
1112 1000
900
800
700
600
500
FY'12
Ratail sales

LP Retai l Sales ('000tons)

LP - % Availabili ty (DDP)

Availability of distributors & retail sales

ROIC at Distributors
35%

Percentage

26%

28%

26%

28% 29%

25%

24%

18%

24%

26%

15%
10%
Fy05

Fy06

Fy07

Plan

Fy08

FY09 FY10 FY11 FY12

Number of stock-out days/ month

32%

30%

20%

Number of stock out at dealers

60000
50000

48870

40000

Good
40987

30000
25457

20000
10000
0

Actual

3000

7794
12081
5663 2125
1322

Plan
Theory Of Constraints Practitioners Alliance TOCPA

Actual

6774
5034

7361

www.tocpractice.com

Sixth International TOCPA Conference

18-19 May, 2013, Moscow, Russia

Challenges Ahead: Sustaining

the organisational energy

Thank you
Will be happy to take any
question
Theory Of Constraints Practitioners Alliance TOCPA