SUPPLY CHAIN PROCESS IN

STEEL SECTOR

Group 7:
Unnat Churi (M15009)
Yashodhan Deshmukh (M1501

CRUDE STEEL PRODUCTION IN FY-16

12%
15%
52%

5%
16%

Tata Steel
JSW
Essar
SAIL
Others

RAW MATERIALS

Iron ore
Coal
Sand
Flux (Limestone and dolomite)
Water

Companies prefer to have their own Iron O

and Coal Mines

PROCUREMENT OF R.M (TATA Steel)

Owns Iron ore mines in Noamundi,

Joda, Khoondbond, Katamati in
India
Control over mines in Canada,
Ivory Coast, Mozambique, South
Africa etc
Own Coal mines in Bokaro & Jharia

PROCUREMENT OF R.M (JSW)

Owns Iron ore mines in Bellary
(Karnataka) & Goa in India
Control over mines in Chile &
Mozambique
Own Coal mines in Boithra in
Jharkhand and some mines in USA
Imports iron ore from China and
South Korea

PROCUREMENT OF R.M (Essar

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

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

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

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

Capital Equipment
Purchase
Major Suppliers of Capital
Equipments
TATA Steel
JSW
Essar Steel
BHEL

BHEL

BHEL

Cummins

Cummins

Cummins

Lakshmi
Machine works

Hercules Hoist
Ltd

Electromech

Electromech

K.D.Capital
Equipment

Imports

Godrej

Imports

Imports

Strategic Sourcing
Feeds to develop Procurement
Strategy
Global
Product
Categorie
s

Benchma
rks

Procurement
Strategy

Business
Objective
s

Global
Best
practices

Strategic Sourcing

Strategic sourcing (TATA

Steel)

Strategic sourcing (TATA

Steel)

Strategic sourcing (TATA

Steel)
Benefits:
Single global operating model
Established global spend
visibility
Improved cross department
information sharing
Increased TCO savings from
$300mn to $700 mn
Reduced departmental cost by
15%
Reduced raw material cost by

Strategic sourcing (JSW)

CommodityManager
Production
Manager

Segment
Steering
Committee

Strategic sourcing (JSW)

Started buying Iron ore from Goa
instead of getting from Orrisa for
its Dolva plant
Imported Iron Ore and made
saving of Rs.140 Crore per million
tonnes

Strategic sourcing (Essar

Steel)

Complexity
Of
Commodity

Savings Potential

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

Warehousing

Warehousing

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

Inventory Management
Inventory turnover ratios
10
9
8
7
6
5
4
3
2
1
0
15-16 14-15 13-14 12-13 11-12

Tata Steel
JSW
Essar Steel

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

JSW Shoppe
Retail store for MSMEs
Started in 2007
400 Retail outlets under
Franchisee
More than 50% shops in Rural
area

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

ERP Systems (TATA Steel)

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

ERP Systems (JSW Steel)

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

ERP Systems (Essar Steel)

Use SAP platform (Earlier used
Variant Configuration Tool now use
Max attention
Integrated SAP Platform with Oracle
Exadata Database machine
Improved Database response time by
8-15% ; runtime transactions by 1215% & Reduced Storage space by 30%
Saved $1.62 mn in licensing & $1.3
mn in maintenance

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

Planned Capacity
additions
Existing
Capacity

Brownfiel Greenfiel Expected

d
d
Capacity
Expansion Expansion

TATA Steel

9.7

0.4

10

20.1

JSW

14.3

3.8

18.1

Essar Steel

10

1.46

11.46

THANK YOU