REG NO.

81798 EPLSCM-
BATCH1 2016-17

A STUDY ON COST OF POOR

QUALITY IN LOGISTICS

Mayank Kumar
XLRI, JAMSHEDPUR
REG NO.81798 EPLSCM- BATCH1
2016-17
UNDER THE GUIDANCE OF
Dr. T.A.S. Vijayaraghavan
Table of Contents

OVERVIEW OF STEEL SECTOR ................................................................................................................................................. 2

OPPORTUNITIES FOR GROWTH OF IRON AND STEEL IN PRIVATE SECTOR ......................................................................... 7

JSL INTRODUCTION ............................................................................................................................................................... 9

EVOLUTION OF STAINLESS STEEL ........................................................................................................................................ 13

INDIAN STAINLESS STEEL SCENARIO ................................................................................................................................... 18

GLOBAL STAINLESS STEEL SCENARIO .................................................................................................................................. 18

BUSINESS HIGHLIGHTS (JSHL STANDALONE ........................................................................................................................ 19

ABSTRACT ............................................................................................................................................................................. 19

SIGNIFICANCE OF STUDY ...................................................................................................................................................... 20

RESEARCH OBJECTIVES ......................................................................................................................................................... 21

SCOPE OF STUDY .................................................................................................................................................................. 21

THEORITICAL FRAMEWORK ................................................................................................................................................. 22

RESEARCH METHODOLOGY ................................................................................................................................................. 23

DATA ANALYSIS & INTERPRETATION ................................................................................................................................... 27

FINDINGS & SUGGESTION .................................................................................................................................................... 38

CONCLUSION ........................................................................................................................................................................ 39

1
OVERVIEW OF STEEL SECTOR

Global scenario

In 2016, the world crude steel production reached 1630 million tons (mt) and showed a growth of 0.6%
over 2015.
China remained worlds largest crude steel producer in 2016 (808 mt) followed by Japan (105 mt),
India (96 mt) and the USA (79 mt).
World Steel Association has projected Indian steel demand to grow by 6.1% in 2017 and by 7.1% in
2018 while globally; steel demand has been projected to grow by 1.3% in 2017 and by 0.9% in 2018.
Chinese steel use is projected to show nil growth in 2017 and decline by 2% in 2018.
Per capita finished steel consumption in 2016 is placed at 208 kg for world and 493 kg for China by
World Steel Association.

Domestic Scenario

The Indian steel industry has entered into a new development stage, post de-regulation, riding high on
the resurgent economy and rising demand for steel.
Rapid rise in production has resulted in India becoming the 3rd largest producer of crude steel in 2015
as well as in 2016. The country was the largest producer of sponge iron or DRI in the world during the
period 2003-2015 and emerged as the 2nd largest global producer of DRI in 2016 (after Iran). India is
also the 3rd largest finished steel consumer in the world and maintained this status in 2016. Such
rankings are based on provisional data released by the World Steel Association for the above year.
In a de-regulated, liberalized economic/market scenario like India the Governments role is that of a
facilitator which lays down the policy guidelines and establishes the institutional mechanism/structure
for creating conducive environment for improving efficiency and performance of the steel sector.
In this role, the Government has released the National Steel Policy 2017, which has laid down the
broad roadmap for encouraging long term growth for the Indian steel industry, both on demand and
supply sides, by 2030-31. The said Policy is an updated version of National Steel Policy 2005 which
was released earlier and provided a long-term growth perspective for the domestic iron and steel
industry by 2019-20.

2
 The Government has also announced a policy for providing preference to domestically manufactured
Iron & Steel products in Government procurement. This policy seeks to accomplish PMs vision of
Make in India with objective of nation building and encourage domestic manufacturing and is
applicable on all government tenders where price bid is yet to be opened. Further, the Policy provides a
minimum value addition of 15% in notified steel products which are covered under preferential
procurement. In order to provide flexibility, Ministry of Steel may review specified steel products and
the minimum value addition criterion.

Production

Steel industry was de-licensed and de-controlled in 1991 & 1992 respectively.
India is currently the 3rd largest producer of crude steel in the world.
In 2016-17 (prov.), production for sale of total finished steel (alloy + non alloy) was 100.74 mt, a
growth of 10.7% over 2015-16.
Production for sale of Pig Iron in 2016-17 (prov.) was 9.39 mt, a growth of 1.8% over 2015-16.
India was the largest producer of sponge iron in the world during the period 2003-2015 and was the
2nd largest producer in 2016 (after Iran). The coal based route accounted for 79% of total sponge iron
production in the country in 2016-17 (prov.).
Data on production / production for sale of pig iron, sponge iron and total finished steel (alloy/stainless
+ non-alloy) are given below for last five years and April-May 2017:

Indian steel industry :(in million tons)

Category 2012-13 2013-14 2014-15 2015-16 2016-17 April-May 2017

6.87 7.95 9.694 9.228 9.391 1.53

Pig Iron production for sale

Sponge Iron production 23.01 22.87 24.24 22.43 24.39 4.23

Total finished steel

production for sale 81.68 87.67 92.16 90.98 100.74 17.48
(alloy/stainless +non alloy)

3
 Graph Representing Production of Indian steel industries (in Million Tons)

Demand-Availability

Industry dynamics including demand availability of iron and steel in the country are largely
determined by market forces and gaps in demand-availability are met mostly through imports.
Interface with consumers exists by way of meeting of the Steel Consumers Council, which is
conducted on regular basis.
Interface helps in redressing availability problems, complaints related to quality.

Steel Prices

Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are determined by
the interplay of market forces.

4
 Domestic steel prices are influenced by trends in raw material prices, demand supply conditions in
the market, international price trends among others.
An Inter-Ministerial Group (IMG) is functioning in the Ministry of Steel, under the Chairmanship of
Secretary (Steel) to monitor and coordinate major steel investments in the country.
As a facilitator, the Government monitors the steel market conditions and adopts fiscal and other policy
measures based on its assessment. Currently, GST of 18% is applicable on steel and there is no export
duty on steel items. The government has also imposed export duty of 30% on all forms of iron ore
except low grade (below Fe 58%) iron ore lump & fines and iron ore pellets both of which have nil
export duty.
In view of rising imports, the Government had earlier raised import duty on most steel items twice,
each time by 2.5% and imposed a gamut of measures including anti-dumping and safeguard duties on a
host of applicable iron and steel items. In a further move to curb steel imports, the Indian government
banned the production and sale of steel products that does not meet Bureau of Indian Standard (BIS)
approval and to check the sale of defective and sub-standard stainless steel products used for making
utensils and various kitchen appliances, it issued the Stainless Steel (Quality Control) Order, 2016 for
products used in making utensils and kitchen appliances, that will help filter imports of the metal.
Again, in February 2016, the Indian Government had imposed the Minimum Import Price (MIP)
condition on 173 steel products. The MIP was extended thrice and ceased to be effective in February
2017. Currently, a mix of anti-dumping /safeguard and other measures are in place on a range of steel
items to control the inflow of cheap steel. Further, a Steel Price Monitoring Committee has been
constituted by the Government with the aim to monitor price rationalization, analyze price fluctuations
and advise all concerned regarding any irrational price behavior of steel commodity.

Imports
Iron & steel are freely importable as per the extant policy.
Data on import of total finished steel (alloy/stainless + non alloy) is given below for last five years and
April-May 2017:

5
 Indian steel industry : Imports (in million tons)
2012- 2013- 2014- 2015- 2016-
Category April-May 2017
13 14 15 16 17
Total finished steel
production for sale
7.93 5.45 9.32 11.71 7.23 1.06
(alloy/stainless +non
alloy)

Graph Representing Import of Iron & Steel (in Million Tons)

Exports

Iron & steel are freely exportable.

India emerged as a net exporter of total finished steel in 2016-17 (prov.)
Data on export of total finished steel (alloy/stainless + non alloy) is given below for last five years and
April-May 2017:

6
 Indian steel industry : Exports (in million tons)
2012- 2013- 2014- 2015- 2016-
Category April-May 2017
13 14 15 16 17
Total finished steel
production for sale
5.37 5.99 5.59 4.08 8.24 1.38
(alloy/stainless +non
alloy)

Graph Representing Export of Iron & Steel (in Million Tons)

OPPORTUNITIES FOR GROWTH OF IRON AND STEEL IN PRIVATE SECTOR

The new industrial policy regime

The New Industrial policy opened up the Indian iron and steel industry for private investment by (a) removing
it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports

7
of foreign technology as well as foreign direct investment are now freely permitted up to certain limits under
an automatic route.
Ministry of Steel plays the role of a facilitator, providing broad directions and assistance to new and existing
steel plants, in the liberalized scenario.

The growth profile

(i) Steel: The liberalization of industrial policy and other initiatives taken by the Government have given a
definite impetus for entry, participation and growth of the private sector in the steel industry. While the
existing units are being modernized /expanded, a large number of new steel plants have also come up in
different parts of the country based on modern, cost effective, state of-the-art technologies. In the last few
years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to set up fresh
Greenfield projects in different states of the country.
Crude steel capacity was 126.33 mt in 2016-17 (prov.), up by 3.6% over 2015-16 in India, which emerged as
the 3rd largest producer of crude steel in the world in 2016 as per provisional ranking released by the World
Steel Association, has to its credit, the capability to produce a variety of grades and that too, of international
quality standards. The country is expected to become the 2nd largest producer of crude steel in the world soon.

(ii) Pig Iron: India is also an important producer of pig iron. Post-liberalization, with setting up several units in
the private sector, not only imports have drastically reduced but also India has turned out to be a net exporter
of pig iron. The private sector accounted for 92% of total production for sale of pig iron in the country in
2016-17 (prov.). The production for sale of pig iron has increased from 1.6 mt in 1991-92 to 9.39 mt in 2016-
17 (prov.).

(iii) Sponge Iron: India, worlds 2nd largest producer of sponge iron (2016, prov.), has a host of coal based
units located in the mineral-rich states of the country. Over the years, the coal based route has emerged as a
key contributor and accounted for 79% of total sponge iron production in the country. Capacity in sponge iron
making too has increased over the years and stood at around 43 mt (2015-16).

8
JSL INTRODUCTION

Jindal Stainless Ltd was founded by Shri O.P Jindal in 1970, Jindal Stainless is one of the largest stainless
steel conglomerates in India and ranks amongst the top 10 stainless steel conglomerates in the world. Its not
only the magnitude of JSL operations that determines their credibility and name, but they remain inspired by
their vision for innovation and enriching lives. Jindal Stainless Group has an annual crude steel capacity of 1.8
MTPA and the group has an annual turnover of Rs 16,500 crores.

The Hisar plant was established in 1975 when Shri O.P Jindal, envisioned a self-reliant India for meeting its
stainless steel demand. Stainless steel then was no less than a luxury metal and India was completely
dependent on imports to fulfill its demand, which imports attracted duties of up to 300%. It was Shri O.P
Jindals vision and his pioneering spirit that led to the establishment of the Hisar plant, Indias first stainless
steel manufacturing unit.

JSHL was formerly part of Jindal Stainless Limited and pursuant to the approval of the composite scheme of
arrangement by Honble High Court of Punjab & Haryana at Chandigarh, the Hisar plant was transferred from
Jindal Stainless Limited to JSHL.

Since its inception, Hisar plant was integrated on a strategy of both, backward and forward integration, starting
from mining, melting, casting, hot rolling to cold rolling and other value additions. Today, it is a fully
integrated Stainless Steel plant with a capacity of 800,000 TPA. It is also the worlds largest producer of

9
Stainless Steel strips for razor blades and Indias largest producer of coin blanks, serving the needs of Indian
and International mints.

Our Specialty product division caters to the high end precision and specialty stainless steel requirements of
reputed Indian and International customers. The product range includes Slabs & Blooms, Hot Rolled Coils,
Strips, Plates, Coin Blanks, Precision Strips and Cold Rolled Coils.

Going forward, the Company plans to continue its focus on development of new value added stainless steel
grades, process improvements and customer satisfaction through developing customized products matching
their specific requirements. Simultaneously, continuous measures are being undertaken to reduce cost in
different production processes.

Some group of companies

JINDAL STAINLESS CORPORATE MANAGEMENT SERVICES PRIVATE LIMITED acts as an

internal advisor and provides necessary advisory and back-end support services to the Jindal Stainless
Group Companies. As an advisory company, JSCMS functions closely with Directors, Business Heads
and other Functional Heads of Jindal Stainless Group Companies to support them and drive seamless
flow of business operations.

JINDAL COKE LIMITED is a company incorporated on 2nd December, 2014 under the companies
Act, 2013, and has its registered office at O.P. Jindal Marg, Hisar, Haryana. It proposes to engage in
the business of manufacturing, processing, finishing and dealing in all kinds and forms of coke and
coke products at a facility with a capacity of 0.43 million metric tonnes p.a. to be developed at
Kalinganagar Industrial Complex, Duburi, Jajpur, Odisha. It has also acquired inter alia the coke oven
undertaking from Jindal Stainless Limited pursuant to the Composite Scheme of Arrangement among
Jindal Stainless Limited, Jindal Stainless (Hisar) Limited, Jindal United Steel Limited and Jindal Coke
Limited.

JINDAL UNITED STEEL LTD is a company incorporated on 1st December, 2014 under the
Companies Act, 2013 and has its registered office at O.P. Jindal Marg, Hisar, Haryana. It proposes to
engage in the business of manufacturing, processing, refining, smelting, importing, exporting,
marketing and distribution of all kinds and forms of iron and steel including tools and alloy steels,
stainless and all other special steels. It has also acquired inter alia the HSM Plant from Jindal Stainless
Limited pursuant to the Composite Scheme of Arrangement among Jindal Stainless Limited, Jindal
Stainless (Hisar) Limited, Jindal United Steel Limited and Jindal Coke Limited.

10
Jindal Stainless Products

SLABS cast in single strand slab caster of steel melt shop. Liquid steel is produced through electric arc
furnace-AOD Convertor/VOD-Ladle refining furnace route. Slab manufacturing range as below:

Product Max Width (mm) Thickness (mm)

Slab 1280 200

BLOOMS cast from twin stand bloom caster at Steel Melt Shop. Liquid steel is produced through
electric arc furnace-AOD convertor-ladle refining furnace route.
Size : 200 mm sq. & 260 x 200 mm sq. (on request)
HR COILS
HR Black : As cast/ ground slabs are first heated and soaked in reheating furnace, rolled in roughing
mill to intermediate thickness and then to the final thickness in the steckel mill.
HRAP : Hot Rolled coils are annealed & pickled in continuous Annealing-Pickling lines having scale
breaker, shot blasting unit, Electrolytic Sulphuric Acid and Mixed Acid bath.
HRAP coils have a cleaner surface & have improved mechanical properties for downstream processing.

HR manufacturing range as below:

Thickness (mm)
Product Max Width (mm)
Min Max

Hot Rolled Coil 1270 2 12

HRAP Coil 1270 2.5 8

CR COILS facility is equipped with all state-of-art facilities like 20-Hi-Sendzimier cold rolling mill
with IMR Shifting, Mill Tilting and Shape meter advantages for higher degree of Shape & profile
correction. The CR Annealing & Pickling line is on environment friendly LPG fuel with better and
fastest temperature control associated with Electrolytic and Acid Pickling with very high control of
pickling process. The online Skin Pass and Tension Leveling has made this line capable of producing

11
 finished 2B/2D product at par with international quality. The on-line automatic surface inspection
system also provides a very high resolution surface quality. There is provision of offline Skin Pass
Mills which helps to cater high luster requirements also. Other facilities include Bright Annealing units
(under commissioning phase) in cracked ammonia atmosphere and Strip Grinding line to produce
desired surface finishes.
CR manufacturing range as below:

Thickness (mm)
Product Max Width (mm)
Min Max
1000 0.5 3.15
CRAP Coil
1250 0.5 3.15

PLATES: No1 finish plates are produced after annealing and pickling or by cutting hot rolled annealed
pickled coils to desired lengths. Plates manufacturing range as below:

Thickness (mm)
Product Max Width (mm)
Min Max
Plates 1250 4 80

COIN BLANKS: Jindal Stainless has been supplying Stainless Steel coins blanks to the Indian
Government Mint and Foreign Mints for making coins. The company has the capability of producing
high quality Stainless Steel and non-ferrous coin blanks. The present installed capacity for coin
blanking is 10,000 metric tons per annum.

PRECISION STRIPS are rolled up to 0.05 mm in thickness. These strips are often the starting material
for industries like Automotive, Electronics and Telecommunication, Health & Hygiene, Consumer
Durables and Petrochemical Industry and exported as well. The customized chemical composition,
extra-ordinary mechanical properties and precise dimensional and shape tolerance makes JSL Precision
Strips special.

BLADE STEEL: The razor blade cold rolled strips of up to 0.076 mm thickness are produced in SPD
division at JSL Hisar and supplied to leading Indian and international razor blade manufacturers.

12
EVOLUTION OF STAINLESS STEEL

In early 20th century researchers worked around the world in the development of new, stainless and acid
resistant steels, especially for the chemical industry. Then already known nickel and chromium steels were for
the increasing demands of the chemical industry prone to corrosion and brittleness.

Strauss and Maurer, the fathers of the stainless steel, reduce the carbon content to below one percent. First they
combined chromium and nickel as alloying elements, and developed a suitable method for the heat treatment
to improve corrosion resistance and strength of the steel. Thus began the worldwide success of stainless steels.

The rapid success of the stainless steel market in the 20s of the last century was the development of an
economic process for its production and processing with major challenges. Thus, the first stainless steels were
also produced in oil-fired, tilting pans. Only the invention of induction melting furnaces simplified the process.
Early 60s was the melting technique in a two stage process - changed - with optional vacuum (VOD) or argon
(AOD). The new production technique lowered the cost of production and at the same time extended the range
of properties sustainably. In the 80's were created with the introduction of the continuous casting method, the
conditions for a near net shape casting - another quality and commercial milestone. Computer-aided control
engineering drove the reproducibility of stainless steel products and much to advance further the growing
technological differentiation opened up new application areas.

13
New production methods for growing demand

The rapid success of the stainless steel market in the 20s of the last century was the development of an
economic process for its production and processing with major challenges. Thus, the first stainless steels were
also produced in oil-fired, tilting pans. Only the invention of induction melting furnaces simplified the
process. Early 60s was the melting technique in a two stage process - changed - with optional vacuum (VOD)
or argon (AOD). The new production technique lowered the cost of production and at the same time extended
the range of properties sustainably. In the 80's were created with the introduction of the continuous casting
method, the conditions for a near net shape casting - another quality and commercial milestone. Computer-
aided control engineering drove the reproducibility of stainless steel products and much to advance further the
growing technological differentiation opened up new application areas.
The rapid success of stainless steels can be seen impressively by the production volumes.18,000 kg of anno
1914 the demand surged to 56 tons in the following year. 1950, the worldwide production amount is 1.0
million tons in 1987 already 8.2 million tonnes, 2005 even 24.7 milliontons. 2011 a total of 33.8 were million
tonnes of stainless steel produced. The current significance of the material can also be seen on the internet:
Only the Google search engine refers to 320,000 posts about the term "stainless steel". Whether in industry,
research, mechanical engineering, architecture and construction, medicine, environment or everyday -
excluding stainless steel, the world is no longer conceivable.

Chemical industry as an engine of material development

Driving force behind the invention of stainless steel was the chemical industry, the overheated gases and
vapors studied resistant materials for equipment and components. Parallel to the differentiation of the alloy
variants in subsequent years new techniques and products have been developed. Increasingly gained weld
ability and formability of the new material in importance. Growing system sizes in the chemical industry
demanded from plates, welded vessel and longitudinally welded pipes to connect the devices. In quick
succession, boilers, columns, heat exchangers, centrifuges, transport and storage tanks, valves or pumps came
from stainless steel, acid-and heat-resistant stainless steel on the market. Whether for the production and
processing of acids, hydrogenation of coal or tar distillation of liquid mixtures, for textile fiber production,
petrochemical, mineral recovery, the solid-liquid separation in wastewater treatment plants or in the food and
beverage industry: The application range of chemical resistant and temperature resistant stainless steels is now
almost limitless. A significant contribution to safety in making stainless steel tankers with multi-shell tanks for
the transport of chemicals, gases, or frozen foods. In oil production for piping are also increasingly ferritic-
austenitic duplex steels. These in 1933 discovered stainless steels are much stronger than other stainless steels.

14
They withstand the mechanical stresses caused by waves, currents, and external pressure of up to 3,000 meters
water depth, as well as chemical attack inside the pipe by the pumped oil or natural gas and salt water on the
outside wall of the tubes. Their higher basic strength also allows thinner walls compared to conventional
austenitic stainless steels. End of the 80s was developed with Lean Duplex an alternative to the established
duplex steel and austenitic stainless steels. Thanks to its lower nickel content of the material won 1.4362 early
21st Century the face of volatile nickel prices in importance. Compared with conventional heat exchangers
made of stainless steel plate heat exchanger tubes can from lean duplex sheets - with the same performance -
reduce size, weight and costs. Except in chemical environments lean duplex is processed in the construction
industry increasingly.

Timeless aesthetics, sustainable technology in construction

Only a few years after its invention, stainless steel as a building material has inspired the imagination of
architects and planners. The tallest buildings in each of the past 100 years were given by their stainless steel
distinctive touch: It all started in 1929, the Chrysler Building in New York, its hood still adorn 4500 large-
sized stainless steel shingles. The Petronas Towers in Kuala Lumpur, the Atomism in Brussels, the Burj
Khalifa in Dubai or the new landmark of New York, the One World Trade Center, underline with stainless
steel their undying importance. In 1976, the heavily corroded metal skeleton of the American Statue of Liberty
has been replaced with stainless steel. Today the material in architecture is omnipresent. Its fascinating looks
and unparalleled functionality inspired to produce new applications both indoors and outdoors.

Stainless, maintain and service, weather resistant and in the highest degree - also in combination with other
materials - durable, stainless steel makes itself through long life and minimum maintenance costs paid term.
Whether as structural, corrosion-resistant concrete and masonry reinforcement, protective faade, conventional
roof cover, green roof, lightning protection, ceiling or floor, in swimming pools, for renovation, for elevators,
escalators, doors or gates, balustrades or as a multifunctional, increasingly even medialized Cases car parks,
hotels, stadiums, train stations or airports cover Stainless steels from the full range of architecture. The used
products are as diverse as the applications and versions. Plates, grilles, panels, fabrics, braids, hollow profiles,
rods, wires, screws, clips or point holder, natural, matt, embossed, brushed, colored, with innovative surface
coatings against graffiti, fingerprints, with lotus effect or with integrated LEDs - stainless steel makes it
possible. In architecture, stainless steel is a synonym for creative expression and sustainability. Competing
with composite materials, stainless steels especially score also by their complete recyclability without loss of
quality. In the current debate on climate and energy savings are the ecological balance of the material, its
increased use an extra boost.

15
Robust all-rounder for automotive and railway construction

Recognized early and the car industry the potential of stainless steel. 1936 Ford produced in Detroit prototype
of six stainless steel bodies. Since the 50s exhaust parts are made of stainless steel. In the late 60s, Porsche's
legendary 911 in a variant of stainless steel, which can be seen today in the German Museum in Munich?
Latest high quality exhaust systems are constructed entirely of stainless steel. In systems for fuel injection,
particulate filtration or gas treatment of high-performance material has long been indispensable: the prevailing
extreme conditions - temperatures up to 700 C, pressures up to 3 bar, aggressive media and mechanical
vibrations - he holds any other building material permanently Stand A holistic view of material production,
component manufacturing, life and makes recycling stainless steel in vehicle into a tireless driver of new
developments. Due to its high elongation values and strengths, he is being used increasingly as reinforcement
for A-and B-pillars, roll bar, protection and frame components. The thin and so lightweight components reduce
material costs, vehicle weight and fuel consumption with this efficient property profile Stainless steel is also
the world of rail vehicles on the train.1934 Edward G. Budd, Philadelphia, the famous, only 104-ton
Burlington Zephyr built with diesel locomotive and three carriages.

For the body of innovative train, he used 23 tons of cold-rolled stainless steel. In order for this, designed for 72
passengers train was a real lightweight and twice as fast as conventional trains were powered by steam
locomotives. He was the icon of technology, now part of the permanent exhibition at the Museum of Science
and Industry in Chicago. In the 50s, from high-alloy steel turbine blades set in the first driven by gas turbine
engines set new standards. For rail vehicles of the latest generation of innovative lightweight construction
concept is more relevant than ever: strength at low thickness, crash and fire resistance of stainless steel make
today become the leading material for all kinds of sophisticated but also economic body structures. For the
high-quality look of the stainless steel can often be dispensed with exterior painting, which also accounts for
the usual regular repainting. -Passed a surface protects the car in front of graffiti and makes them less sensitive
to overall vandalism.

Sterility of Medicine, beverage and food industries

Shortly after the discovery of stainless steels the early '20s has been increasingly recognized its importance for
medical equipment, tools and facilities. The decisive factor here was its resistance to high temperatures and
aggressive chemicals, even common withstand sterilization and disinfection problems. Despite mechanical,

16
thermal and chemical stress, the duration of smooth, hard material surface is not rough or cracked, so that even
with intensive use any bacteria and fungi colonize. In 1926, the first implants of stainless steel were developed.
Even today, artificial knee joints of stainless steel meet the current state of research.

The strict hygiene regulations for surgical instruments and surgical equipment apply analogously in the food
and beverage industry. Here also ensures the specific surface properties of the material, a smooth, aseptic
cleaning and reliably prevented that a nutrient medium for microorganisms is formed. In the dairy and meat
industry makes these good ductility and seamless manufacturing the material for hygienic engineering and
economic production processes. Kitchens, dairies, breweries, wineries and juice manufacturers use for decades
in stainless steel. His extraordinary chemical and thermal stability - even under extreme temperature
fluctuations, such as those required for the sterilization of milk or pasteurized fruit juices - thanks to the
extensive use of stainless steel for manufacturing, storage and transport of acidic products. Since it is
completely inert and therefore tasteless addition, it does not affect taste or appearance of the produce.

Material for new lifestyle

The amazing range of properties and the eye-catching presence in architecture and technology paved stainless
steels early on the way to the household: in 1921, the first stainless steel cutlery, more and more everyday
objects appeared followed. In the 50's were designed by the pioneer of industrial design, Wilhelm Wagenfeld,
a variety of legendary commodities made from stainless steel. The organic shape of its industrially produced
cutlery, bowls, egg cups, salt and pepper shakers, butter dishes and vases brought him as the modern-sounding
material worldwide recognition. Formative influence also had the pruritic designs Scandinavian designers that
are of the unpretentious character of stainless steels congenial. 1956 revolutionized the first stainless steel
razor blades from Wilkinson Sword, the beard trimming. In 1958, the triumph of the machine began with
drums made of stainless steel. At the same time sinks were from the easy-care, durable materials bare the
quintessence of modern kitchen equipment. Unstoppable stainless steel conquered with quality seal from now
on its leading role as a material for cookware, kitchen appliances, fittings, sanitary ware, radiators, appliances
and accessories for the kitchen and bathroom. His timeless aesthetics, durability and easy care functionality
make it the classics of modern life.

High performance for high-tech industries

In the energy industry, clean room technology, environmental technology and telecommunications and
electronics, the resistance of stainless steel against corrosion various stresses regularly sets new standards.
Whether the power plant or Windradbau, in heat exchangers or flue gas filters for solar panels or biogas
plants -: The high-tech material is exactly adjusted by individual alloys on the increasing demands In

17
telecommunications, paper-thin stainless steel foils and precision strips are used, which are coated with
nickel and gold in the nanometer range. Up to 10 million circuits must make it stamped snap discs reliably.

INDIAN STAINLESS STEEL SCENARIO

Domestic stainless steel production continues to grow steadily on back of demand from Architecture,
Building & construction and Automotive, Road & Transport segment. The total stainless steel melt
production in India was 3.3 MT registering a growth of 1.4% compared to last year (2015). India continues
to be the fourth largest producer and third largest consumer of stainless steel. The demand for the industrial
grade stainless steel product was reduced during FY 15-16 due to moderate industrial activity which is
likely to pick up this year on back of improved industrial production. Railway is likely to be one of the key
sectors for the growth of stainless steel consumption in India. Indian auto sector is also expected to
contribute to the stainless steel growth as auto majors expect a double digit growth with key player lining
up their new production facilities. Infrastructure sector will be also the big propeller of stainless steel
demand as the government plans to invest USD 7.34 billion for the development of 100 smart cities across
the country.
Introduction of quality control order this year will ensure the availability of quality products in the market
and phase out substandard goods. Unwarranted imports from china and ASEAN countries continue to
remain challenge for domestic stainless industries, highest ever import of 5,32,033 MT flat products were
registered in 2015-16. Import from china increased nearly about 20% over last year and contributed over
50% of the total imports into India. While trade remedial measures in the form of anti-dumping duties have
been imposed, these have been largely ineffective due to circumvention. Countervailing duty investigation
against import from china is underway and industry expects a prompt remedial action. An increase in basic
custom duties on finished goods and lowering of duty on inputs would provide a significant relief to
industry.

GLOBAL STAINLESS STEEL SCENARIO

The global stainless steel melt shop production as per the national stainless steel forum (ISSF) for year
2015 saw a dip of 0.3% YoY to 41.5 MT from 41.7 MT in year 2014. Noticeably, the production increased
in Asia by 1.4% whereas production in china stagnated. The Chinese economy grew at 6.9%, the lowest in
25 years. The weakness in global economy is also reflected on the demand side. CRU estimates that the

18
consumption of cold rolled flat product would increase by barely 1% in 2016 globally. Major quantum of
growth will come from matured market in Western Europe and North America, as well as in India.
Declining nickel prices contribute to a fall in prices of nickel bearing stainless steel. Nickel prices saw a
decline of almost 32% since 2015. Buyer were forced to reassess the inventory holding strategy and hard to
push back their buying decision.

BUSINESS HIGHLIGHTS (JSHL STANDALONE)

JSHLS gross revenue for the financial year ended on 31 st March, 2016 stood at Rs. 7091 crore as against
Rs. 8145 crore for the financial year ended on 31 st march, 2015. Profit before depreciation, interest,
exceptional item and taxes (EBIDTA) stood at Rs. 800.72 crore as against Rs. 712.89 crore in FY 14-15.
Net profit/(loss) stood at Rs. 14.59 crore as compared to Rs. 12.32 crore of last year. The company incurred
interest cost of Rs. 470.78 crore in comparison to Rs. 447.24 crore in FY 14-15 and exceptional loss of
Rs.44.96 crore as against gain of Rs. 15.97 crore in FY 14-15. During the first quarter of the current year,
the gross revenue, EBIDTA and profit after tax of the company was Rs. 1497.09 crore, Rs. 237.76 crore
and Rs. 49.43 crore respectively.

ABSTRACT

Quality is the assurance of adherence to the customer specifications and it is a measure of excellence or a state
of being free from defects, deficiencies and significant variation from standards. Customer specification of the
product/services can be met by strictly adhering to the quality control measures in the operational process and
can be ensured in a cost effective manner only if the quality of each and every process in the organization is
well defined and ensured without any lapses. Every activity in the supply chain line to be critically verified to
identify the quality deviations incurring additional expense or loss to the organization. This is in line with the
continual improvement principle of TQM philosophy. The cost of quality management system acts as the most
significant tool in measuring, monitoring, controlling and decision making activities in a firm which aims on
business excellence.

19
SIGNIFICANCE OF THE STUDY
Many researchers were pointed out the requirement of analyzing all elements of quality costs to make optimal
decisions that leads to competitive advantages in the highly customer driven modern market. Bramford (2006)
emphasize the quality cost analysis can be used as an effective tool for management only when all quality cost
elements are captured. Improvements the conventional model with the incorporation of additional cost
categories was made by many researchers. Modaress & Ansari (1987) incorporated two additional dimensions
viz, cost of quality design and cost of inefficient utilization. The losses incurred due to the internal
inefficiencies were studied by Dahlgaard etal (1992). Sandoval-Chavez (1998) presented a modified COQ
model with the inclusion of three elements underutilization of installed capacity, inadequate material
handling and poor service delivery. Giakatis (2000) analyzed the losses incurred against operational and design
losses. Gary Cockins (2006) has explained the difficulty in measuring hidden costs. Yang (2008) attempted to
quantify lost sales as estimated hidden cost. Soo-Jin Chea (2011) presented an action research study of
tracking hidden quality costs in operational process with a focus on the resistance of employees towards
implementation of COQ system.
The significance of tracking and gathering hidden quality cost data were explained by Kume (1985), Sandoval
(1998), Giakatis etal (2010) , Johannes Freiesleben and Suresh Krishna(2010) . Even though these studies were
well appreciated by the quality practitioners, not much practical studies found available in the literature with
comprehensive data collection and analysis of all costs including hidden costs incurred against all quality
improvement activities in the
Organization.
The practical studies in the case of hidden costs of quality are limited to hidden failure costs (Suresh Krishna-
2006) and hidden costs in the manufacturing process (SooJin-Chea-2011). Not many studies are in place on
opportunity costs also. Any activity which is not performed well in right time always incurs a loss to the
organization. Opportunity costs are the losses incurred against a missed out opportunity of doing things right at
first time. It is actually the measure of internal inefficiencies and its analysis will provide immense
opportunities for improvement.
Hence an attempt is made in this research to unveil all hidden quality costs right from the customer
requirement analysis to after delivery support, in Jindal Stainless Ltd. In the current era, the analysis of each
individual stage in the supply chain ranging from raw material acquisition to final delivery of the product is
equally important

20
RESEARCH OBJECTIVE

The objective of this study is to identify measure and quantify all the hidden elements direct, indirect and
invisible elements of quality costs in logistics activities in the JSL. Further the importance of such an analysis
is ascertained by quantifying the impacts of hidden costs on the overall quality cost as well as on the
organizational bottom line.
To devise a logistics strategy and aim a suitable compromise between three main objectives: capital
reduction, cost reduction and service level improvement.

Capital reduction: The first objective is to reduce as much as possible the level of investment in logistics
system. For example, using contracted carriers instead of privately owned vehicles.

Cost reduction: To minimize the total cost associated with transportation and storage. For example,
continuous utilization of the vehicles, avoid halting detention charges due to poor dispatch planning,
reducing TAT hrs, minimization of dead freights incurred and on time placement of vehicles to keep the
adequate inventory level etc.

Service level improvement: The level of logistics service greatly influences the customer satisfaction
which in turns has the major impact on revenues. Thus improving the logistics service level may increase
revenues. For example, on time delivery, transit status and safe delivery.

SCOPE OF THE STUDY

Logistics deals with the planning and control of material flows and related information in industries. Its
mission is to get the right materials to the right place at the right time, while optimizing a given performance
measure (eg. minimizing
Total operating cost).
The key issue is to decide how and when raw materials, semi-finished and finished goods should be acquired,
moved and stored. This study provides the details of the waste cost incurred in logistics planning for both the
inbound and outbound process of Jindal stainless Ltd.
JSL main actions and initiatives in continuous improvement include: using Total Cost of Ownership
methodology, leveraging their scale by collective buying; regularly challenging their main key performance

21
indicators (KPIs) for improvement; and making sure to use best-in-class processes. Together, these methods
have enabled to reduce variable costs.

Benefits of our philosophy:

Improved buy-in and delivery from the internal/External business units.

Increased internal/External business unit satisfaction.
Ensures availability of goods and services.
Increased responsiveness to operation requirement.
Promotes teamwork across the supply chain.
Standardized and Streamlined Processes.
Quality Assurance.
Lower overall total cost and increased value.
Vendor/Customer satisfaction.
Analyze and minimize waste cost in logistics operation.

Maximum utilization of transportation services at a lower cost.

THEORITICAL FRAME WORK

Transportation model in JSL

Transportation is a key logistic function involving removal and relocation of material assets,
production in progress, and finished products in vehicles using an established transportation
technology.

Modes of transportation used in JSL:

Air
Truck/Trailers
Rail
Water
About 80% of material flow in JSL is through road transportation and remaining 20% includes air, rail &

22
 water. There is a vital role of the transportation service within the JSL premises; JSL utilizes company
controlled transportation with 5 years of long term contractual agreement for the internal shifting of material
within the plant. This gain better operating performance, greater availability & capacity of transportation
services at a lower cost. Approx. 40 dedicated fleets (larger/smaller) are involved in the internal activity of
material handling and shifting between the CR & HR division.
JSHL has a transport union available with a large number of fleets which operates dedicatedly for the JSL to
meet the dispatch target. Almost 70% of total dispatch quantity is carried through union vehicles and rest 30%
is utilized through contracted transporters depending on the market availability. As the Hisar market is not
that vital in presence of industries so availability of market vehicle is really a concern and dependency on
contractual transportation only may not be reliable. Seeking the market constraint JSHL formed the transport
union and utilizes the fleets for to & from movement of material from Plant to customer/warehouses and vice
versa.
JSHL conducts reverse auction half yearly where freight rates are decided and the same rates are applicable
for transport union vehicles also. Major advantage of this strategy is the flexible utilization of fleets and
centralized logistics approach for all the warehouses.

RESEARCH METHODOLOGY
The following methodology was adapted in this study:
1. Identification of all processes and quality cost elements in logistics activities, Comprehensive data
collection and quantification, Grouping in to direct and hidden Cost of Quality.
2. Analysis of impact of hidden COPQ on total logistics cost and also on organizational bottom line.
3. Comparison of traditional COQ system with enhanced COQ with hidden costs included. Personal
interviews and discussions with the employees in each section were carried out to list out all processes, its
input, output and control process as per the process cost model and all the activities in each process in the
supply chain line is identified. Every activity is then analyzed critically to identify the quality lapses in each,
which leads to an additional expense or loss to the organization. The missed out opportunities for
improvement also listed out. The additional resources utilized in each of these instances are systematically
identified and quantified using the records like log books, registers, time study, personal interviews, sap data
etc. to get the cost incurred in each. Then these cost elements are classified into direct and indirect costs.
Further detailed comparative analysis is carried out between them. Finally the impact of indirect and hidden
quality cost elements on the overall logistics quality cost and to the organizational bottom line are analyzed.

23
 Total Cost of Quality

Cost of Non Conformance (CONC) Opportunity Cost (OC)

Direct Hidden

Internal Failure cost (IFC) External Failure Cost (EFC)

Fig1: Categorization of quality cost elements

DATA COLLECTION & CATEGORIZATION

The research has been carried out in steel industry engaged in the manufacturing of stainless steel products
which is already having ISO 9001:2008 certification. The PAF model of quality costing is already in practice
in this firm with emphasis only on traditional P-A-F elements of quality costs which are easily and directly
measurable. During this study, a comprehensive data collection strategy has been adopted for gathering
information on various quality cost elements in each activity. For this, the Process Cost Model approach has
been adopted, where in logistics functional area is treated as a set of processes with definite input, output and
control processes. Each process is critically analyzed to gather maximum information on quality deviation
against all the activities which make the process complete. Then the cost incurred including indirect and
hidden against these quality deviations are quantified using the records of additional resource utilization in this
regard. Lost opportunities in each process also identified and corresponding cost data captured and quantified.
The elements of costs of non-conformance identified and analyzed in this research are listed in Table below.
Table 1: Direct cost Elements

DIRECT NON CONFORMANCE COST (CONC-D)

INTERNAL FAILURE COST (IFC-D) EXTERNAL FAILURE COST (EFC-D)
Transit Losses Delay in insurance survey

24
 Internal trouble shooting-Vehicle
breakdown, material Expenditure on customer services
unavailability etc.
Material Rejection Material return
Rework Replacement of defective products
Dead freight Vehicle placement delay
Unavailability of material Skewed demand
FTL issue Force majeure
Double delivery plan Order Cancellation
Interest on non-moving inventory Payment issues
Increased Truck turnaround time
Detention charges
Dead freight

The hidden quality cost elements are identified by extensive information collection by interviews, log books,
records and registers kept in various activity centers with entry of time study, reports, dispatch logbooks,
complaint log books, minutes of meetings etc. and the cost elements identified in this study are listed below.

Table 2: Hidden cost Elements

HIDDEN NON CONFORMANCE COST (CONC-H)

INTERNAL FAILURE COST (IFC-H)
Document Procedure
Dispatch Planning/Order
management error
Raw material planning error lead
to extra raw material cost
Improper Lashing/Covering
arrangement
Delivery delay
Loading/Unloading issues
EXTERNAL FAILURE COST (EFC-H)
Emergency dispatches
Improper manpower utilization
Lack of product safety knowledge
Lack of preventive maintenance of
vehicles
Discount claims
Extended delivery requested

25
Similarly lost opportunities due to incapability of the system as well as inefficiencies are also listed out in each
process and measurement techniques are devised by extensive data collection against each element identified
after rigorous discussions with the authorities concerned. The identified Opportunity Cost (OC) elements with
details are listed in below table.

Table 3: Opportunity cost Elements

Utilization below the vehicle capacity of due to

Underutilization of vehicle
capacity
Loss due to delay payment
Demurrage/detention charges
Excess financial charges by bank
Emergency dispatches
Late delivery
Sundry debtors
Lost sales
insufficient customer orders, coil breakups,
balanced quantity of raw materials,
consumables or work force as well as planning
inefficiencies.
Delayed payments to the vendors and loss of
mutual trust results in delay in vehicle
placement.
Demurrage/Detention charges on loading or
unloading of materials. Also results in extra
documentation , Follow up time etc.
Penalties imposed by banks against insufficiency
of documents for financial clearances.
Extra shipping costs to meet customer urgency
and to cop up with delayed dispatches.
Liquidate damages (LD)imposed by customer on
late deliveries, part deliveries, delay in after sale
support etc.
Payment realization delays results in
accumulation of sundry debtors and loss of
interest or availability of sufficient fund flow.
Poor performances in product and service leads
to customer dissatisfaction which in turn results
in reduction in market share.

26
DATA ANALYSIS & INTERPRETATION

Introduction
Analysis and Interpretation is the process of identifying strength and weakness of a firm by properly
establishing relationship between two items. It is useful for decision making and there are number of methods
& techniques which are generally used in analysis of financial services.
The analysis and interpretation of data is the most skilled task in the research process.
Meaning of Analysis:-
Analysis is the process by which the whole body of gathered data facts, figures and ideas is converted into
meaningful and useable information. The data is placed on its appropriate setting and consistent relationship
drawing general inferences.
Following is the procedure involved in the integrated operations of analysis of data:
1. Classification of data.
2. Tabulation of data.
3. Statistical analysis of data.

Meaning of Interpretation:-
Interpretation refers to the relationship with the collected data. Its the mechanism through which the factor that
appears to explain what has been observed by researcher during the course of a research.
Based on the data collected, different quality cost elements are grouped into different cost categories and
computed for a period of 2 consecutive years. Only data for three elements (TAT Delay, Delivery Delay and
Delay in vehicle placement) are collected and analyzed due to time constraint.

Table No 4-Table showing interest loss due to delay in vehicle placement

Cost of FG holding= Avg. Cost of Material*Qty.
Annual Interest eligible= Cost of FG holding*18%
Per day interest= Annual interest eligible/365
Interest loss= Per day interest*Delay in vehicle placement (days)

27
 YEAR 2017
Delays in
Cost (Avg. Per day
Vehicle Annual Interest Interest
Qty (MT) material interest in
Placement (18% PA) INR loss in INR
cost*Qty) INR INR
(Days)
1 40419 3637745730 654794231 1793957 1793957
2 18614 1675293570 301552843 826172 1652344
3 6306 567540000 102157200 279883 839648
4 2152 193680000 34862400 95513 382054
5 1398 125820000 22647600 62048 310241
6 721 64890000 11680200 32001 192003
7 249 22410000 4033800 11052 77361
8 104 9360000 1684800 4616 36927
9 124 11160000 2008800 5504 49532
10 106 9540000 1717200 4705 47047
11 28 2520000 453600 1243 13670
12 52 4680000 842400 2308 27695
13 27 2430000 437400 1198 15579
14 51 4590000 826200 2264 31690
15 34 3060000 550800 1509 22636
16 7 630000 113400 311 4971
17 23 2070000 372600 1021 17354
18 4 360000 64800 178 3196
19 25 2250000 405000 1110 21082
20 13 1170000 210600 577 11540
21 15 1350000 243000 666 13981
22 7 620010 111602 306 6727
25 18 1638540 294937 808 20201
26 5 446850 80433 220 5729
29 125 11232000 2021760 5539 160633
TOTAL 70628 6356486700 1144167606 8892503 5757797

YEAR 2016
Delays in Annual
Perday Interest
Vehicle Cost (Avg. material Interest
Qty (MT) interest loss in
Placement cost*Qty) INR (18% PA)
in INR INR
(Days) INR
1 35192 3167280000 570110400 1561946 1561946
2 14513 1306170000 235110600 644139 1288277
3 5099 458910000 82603800 226312 678935

28
 4 1800 162000000 29160000 79890 319562
5 1100 99000000 17820000 48822 244110
6 521 46890000 8440200 23124 138743
7 158 14220000 2559600 7013 49088
8 84 7560000 1360800 3728 29826
9 114 10260000 1846800 5060 45538
10 76 6840000 1231200 3373 33732
11 15 1350000 243000 666 7323
12 44 3960000 712800 1953 23435
13 20 1800000 324000 888 11540
14 44 3960000 712800 1953 27340
15 32 2880000 518400 1420 21304
16 7 630000 113400 311 4971
17 22 1980000 356400 976 16599
19 12 1080000 194400 533 10119
20 15 1350000 243000 666 13315
21 20 1800000 324000 888 18641
22 7 620010 111602 306 6727
25 18 1638540 294937 808 20201
30 25 2250000 405000 1110 33288
29 0 0 0 0 0
TOTAL 58938 5304428550 954797139 7220442 4604560

Analysis:-

From the below table it can be analyzed that there is an increasing level in the rate of interest loss to annual
interest is 48.23% during the year 2016.Whereas there it has been increased to 50.32% in the year 2017.

Annual Interest (18% Interest %age of Interest

Year
PA) INR loss in INR loss
2016 954797139 4604560 48.23%
2017 1144167606 5757797 50.32%

29
 Graph showing rate of interest loss to annual interest

Interpretation:

From the above graph it can be inferred that due to the increase in vehicle placement delay there has been slight
increase in the level of inventory holding quantity affecting the interest loss from the material sales cost in year
2016 to 2017.

Table No 5- Showing interest loss and detention loss due to increased truck turnaround time

Cost of FG holding= Avg. Cost of Material*Qty.

Annual Interest eligible= Cost of FG holding*18%
Per day interest= Annual interest eligible/365
Interest loss= Per day interest*TAT delay (days)
Detention= Qty.*TAT delay days*30

30
 YR 2017
TAT
Delays Qty Interest Per day Interest Detention
(Days) (MT) Total Cost Cost interest Loss (@Rs30/day/MT)
1 66242 5961780000 1073120400 2940056 2940056 1987260
2 12218 1099620000 197931600 542278 1084557 733080
3 2240 201600000 36288000 99419 298258 201600
4 481 43290000 7792200 21348 85394 57720
0 103 9270000 1668600 4572 0 0
Total 81284 7315560000 1316800800 3607673 4408264 2979660

YR 2016
TAT
Delays Interest Per day Interest Detention
(Days) Qty (MT) Total Cost Cost interest Loss (@Rs30/day/MT)
1 48242 4341780000 781520400 2141152 2141152 1447260
2 8218 739622880 133132118 364746 729491 493082
3 1640 147600000 26568000 72789 218367 147600
4 350 31500000 5670000 15534 62137 42000
0 71 6346440 1142359 3130 0 0
Total 58520.55 5266849320 948032878 2597350 3151147 2129941.92

Analysis:-
From the below table it can be analyzed that there is an increasing level in the rate of detention loss by 16.63 %
between year 2016 & 2017
Total Total Total Increase
% age
Detention Detention detention in
increase in
paid in Yr. paid in Yr. paid in detention
detention
2016 2017 two years charges
2129941.92 2979660 5109602 849718 16.63%

31
 Graph showing detention charges trend between two consecutive years

Interpretation:

From the above graph it can be inferred that due to the operational inefficiency vehicle detained at plant
premises resulting in increasing level of detention charges liability to the company and simultaneously resulting
in interest loss on material sales revenue.

32
 Table No 6- Showing interest loss due to delay in delivery

YR 2016
Delivery
delays Qty Annual Perday Interest
(days) (MT) Total Cost Interest interest loss
1 4795 431532180 77675792 212810 212810
2 1786 160765560 28937801 79282 158563
3 554 49874580 8977424 24596 73787
Total 7135 642172320 115591018 761848 445161

YR 2017
Delivery
delays Qty Annual Perday Interest
(days) (MT) Total Cost Interest interest loss
1 7195 647550000 116559000 319340 319340
2 2679 241110000 43399800 118904 237807
3 831 74790000 13462200 36883 110648
Total 10705 963450000 173421000 475126 667795

Analysis:-

From the below table it can be analyzed that there is an increasing level in the rate of interest loss by 20%
between year 2016 & 2017.

Total
Total Total Increase
Interest
Interest Interest in %age
loss in
loss Yr loss Yr interest increase
two
2016 2017 loss
years
445161 667795 1112956 222634 20.00%

33
 Graph showing interest loss due to delivery delay.

Interpretation:

From the above graph it can be inferred that due to the transporter inefficiency delay in delivery resulted in
increasing level of interest loss to the company on total cost of material.

Table No 7- Showing Dead freight cost for FY 2016-2017

FY 16- DEAD FREIGHT DEAD FREIGHT IN

17 (In Rs.) Total Freight %AGE
APR 541333 70453080.92 0.77%
MAY 653025 35491282.02 1.84%
JUN 223109 10909033.97 2.05%
JUL 437529 14918406.4 2.93%
AUG 421995 24805937.32 1.70%

34
 SEP 506044 289077483.7 0.18%
OCT 400511 153075950.4 0.26%
NOV 311216 38427774.71 0.81%
DEC 475313 29378885.76 1.62%
JAN 555820 51582278.99 1.08%
FEB 604513 40836354.78 1.48%
MARCH 785025 65151789.64 1.20%

Analysis:-

From the above table dead freight cost to company is analyzed for FY 2016-2017 compared to total freight cost.
Dead freight is the amount paid by or recoverable from a transporter for such part of the vehicle fails to utilize;
or termed unutilized full truck load.

Graph showing percentage of dead freight to total freight. (FY 16-17)

35
 Table No 8- Showing Dead freight cost for FY 2015-2016

DEAD
DEAD FREIGHT IN
FY 15-16 FREIGHT Total Freight
%AGE
(In Rs.)
APR 542839.715 64210937.95 0.85%
MAY 557720.36 32676823.36 1.71%
JUN 190892.0604 9841039.544 1.94%
JUL 390450.8796 13804747.36 2.83%
AUG 380470.692 22723478.88 1.67%
SEP 446938.0608 263465218.6 0.17%
OCT 338992.5104 138089814.9 0.25%
NOV 157686.848 35380452.18 0.45%
DEC 306677.8028 26775916.48 1.15%
JAN 485786.68 46532373.88 1.04%
FEB 525028.9208 37598031.85 1.40%
MARCH 700556.31 59682296.9 1.17%

Analysis:-

From the above table dead freight cost to company is analyzed for FY 2015-2016 compared to total freight cost.
Dead freight is the amount paid by or recoverable from a transporter for such part of the vehicle fails to utilize;
or termed unutilized full truck load.

36
 Graph showing percentage of dead freight to total freight. (FY 15-16)

Interpretation:

From the above graph it can be inferred that due to the inefficient planning, skewed demand, urgent order and
meeting annual target result in increased level of dead freight cost during Q3 & Q4 in both the financial year.
Even the moving average in both the years is almost same reflecting no improvement in dead freight trend.

37
FINDINGS & SUGGESTIONS

The company is having increase in sales of their products during both the years of the study.

There is no mark able development in increasing the efficiency of transportation. It indicates

inefficiency of management in turning of their inventory into sales.

The company should adopt sophisticated techniques to manage its logistics operations in a better

manner.

The TAT delay in the study reflects the need of improvement in internal operation within the different

departments.

Company should take measures for proper planning of the orders to avoid dead freight losses in the

transportation of material and utilization of the vehicle resources with full capacity.

There is a need to develop good communication system between various departments like marketing,

planning, procurement, and production and distributions functions.

The logistics team should focus on the ontime delivery and regular tracking of transit material to meet

the customer expectation.

38
CONCLUSION

In this study, a comprehensive analysis of few cost elements which contributes to the quality of logistics
services in the supply chain line of Jindal stainless (Hisar) ltd has been conducted. Depth analysis of all
activities in the whole logistics operation is done to track and measure the hidden elements of quality cost
including the opportunity cost elements.
The study findings points out the fact that the hidden cost of quality is more than 2 times higher than the direct
quality cost elements in the JSHL and most of these hidden costs can be reduced or even eliminated by proper
tracking and understanding the root causes. This study highlights the inadequacy of traditional cost of quality
system in tracking and assessing the overall costs of quality. In order to assess the overall cost of quality, the
hidden costs also has to be identified, quantified, measured and analyzed. For tracing the hidden quality costs, it
is necessary to move beyond the data produced by the traditional accounting system. This also gives an insight
to the huge impact of hidden quality costs to the organizational bottom line and points out the gold mine of
improvements. Using this data the company can formulate survival strategies in the highly intensive
competitive market scenario. Future studies in this field are recommended with the study of impacts of hidden
elements on overall quality cost and development of a quality cost expert system with inclusion of hidden and
opportunity cost elements.

39