PREPARED FOR: MS. MANJIRI DIGHE

Steel industry is in its best position in last decades Demand expectations for steel products are rapidly growing. Shares of steel industries are also in a high pace . 6th consecutive years of growth in supply and demand. Many merger and acquisitions. Steel production and consumption will be supported by continuous economic growth.

Steel industry is in its best position in last decades Demand expectations for steel products are rapidly growing. Shares of steel industries are also in a high pace . 6th consecutive years of growth in supply and demand. Many merger and acquisitions. Steel production and consumption will be supported by continuous economic growth.

Bokaro Steel Plant: Steel manufacturer.

Essar Steel: Producer of sponge iron, steel and iron ore pellets.

Jindal Iron & Steel: Producer of galvanized steel products.

Jindal Steel & Power: Manufacturer of mild steel slabs and sponge iron.

Steel Authority of India: Manufacturer of steel and iron.

Tata Steel: Producer and supplier of wire rods, bars, and steel flats.

Vizag Steel: Producer of pig iron and steel.

Indian Steel Till the 1990s the steel industry of India was regulated and controlled by government policies.

India has set a vision to be an economically developed nation by 2020. The steel industry is expected to play a major role.

After the economic reforms of the early 1990s, the Indian steel industry has evolved significantly to conform to global standards.

Ideally, we should increase our steel production capacity — we are a net importer of steel — so that rather than exporting iron ore, we can add value to it.

India should also look at investing in exploring new mines.

The major aspects that are expected to play a significant role in the growth of the steel industry in India are -

Abundant availability of iron ore in the country The country has well established facilities.

The major sectors where consumption of steel is expected to grow in the coming years are -

Construction Housing Ground transportation Hi-tech engineering industries such as power generation,

petrochemicals, fertilizers

The potential for the growth of consumption of steel in the rural areas of India for purposes like rural housing, rural infrastructure, etc is high which needs to be tapped efficiently.

Tata Steel

Tata Steel, formerly known as TISCO is the world‘s sixth largest steel company with an annual crude steel capacity of 30 (MTPA)

It is the second largest private sector steel company in India in terms of domestic production. Ranked 315th on Fortune Global 500

Based in Jamshedpur, Jharkhand, India. Through investments in Corus, Millennium Steel (renamed Tata

Steel Thailand) and NatSteel Holdings, Singapore. Tata Steel has created a manufacturing and marketing network

in Europe, South East Asia and the pacific-rim countries. Tata Steel Thailand is the largest producer of long steel products

in Thailand, with a manufacturing capacity of 1.7 MTPA.

Global Points of Presence of TATA STEEL

TATA Steel’s Growth Strategy1990 - Company re-engineered its business processesestablished its cost leadership in a liberalized scenario

and modernized its operationssteel industry scenario changed dramatically in 2003Company realized the need to grow in size and

regional diversity to match global playersIn 2005, the Company made long term plans of

becoming a 50 million tonne steel producer by 2015

Responsibility Centers

Revenue Center:-

– Output is measured in monetary terms.

– No formal attempt to relate input (i.e. expenses or costs) to output.

RUPEE EARNED 2008 - 2009

Expense Centers

Raw Material Consumed

Raw Materials consumption showed significant increase over the previous year mainly due to higher prices of Coal and Coke and also due to higher production resulting from the commissioning of ‘H’ Blast Furnace as well as other facilities and operational improvements.

Payments to and Provisions For Employees

The increase of staff cost over is due to the revised wages, arrears and impact of change in discounting rate for valuation of employee benefits

Conversion Charges

Conversion charges increased by 22% over FY 08 mainly due to an increase in the conversion activities at the Long Products division as well as an increase in the conversion of tin coated products.

Stores And Spares Consumed

Stores consumption has gone up by 33% as compared to FY08 primarily on account of higher production which was due to the commissioning of ‘H’ Blast Furnace as well as other facilities and operational improvements and an increase in the price of operational refractories in Steel melting shops.

Purchase of Power

There was an increase in expenses related to the purchase of power at the Jamshedpur Works during the year as fourth unit of Tata Power was shutdown for maintenance activities and the Company (Tata Steel) had to purchase power at higher rate from alternate sources. Increase in production, increase in sale of power to other consumers also led to higher purchase of power.

Other Expenses

Other expenses have gone up mainly due to consultancy charges, exchange fluctuation on raw material supplies, port charges due to increased exports, increase in brand equity payment, software development charges, packing charges due to increase in prices of steel packing materials and higher payments for contractual jobs.

Research And Development Centers

Research was carried out in the areas of raw materials including iron ore, coal, coke, ferro chrome and titania, blast furnace productivity, Steelmaking, product development, process improvement, coatings.

BENEFITS– 8% ash in coal maintaining yield

– Complete benefi ciation of iron ore

– Improving blast furnace productivity

– Lowering phosphorus in Steelmaking

– Flat Products for automobiles

Some Major New Products Developed Through NewTechnology Absorption

– CBQ tubes and TFF tubes for two wheelers

– Tubes for hydro forming for Tata Motors Ltd. – NANO Cars

– As drawn and As welded Prop. Shaft tubes for Ashok Leyland Ltd., Tata Motors Ltd.

– Thin wall exhaust tubes for Ashok Leyland Ltd., Tata Motors Ltd.

– Bright normalized tubes for Automobile application.

– St 45 grade of boiler tubes/pipes.

• Economic Value Added (EVA) is defined as the excess of Return on Invested Capital (ROIC) over weighted average cost of Capital (WACC); viz

• The EVA spread was 22.23% as compared to 23.54% in the previous year. The calculation of EVA spread is as follows:

Information Technology

– Implementing Supply Chain Management system using i2 for Flat Products.

– Migration of systems from IBM mainframe and shutdown of the mainframe will result in recurring savings of Rs. 4.5 crores p.a.

– Design and implementation of Simplified Drum Buffer Rope based Order Promising System for Wires and Tubes Division.

– Business process improvement for NatSteel Asia (Singapore), Tata Steel Thailand and Tata Steel (India).

– Implementing SAP at SIW (Thailand), Tata Bluescope and a Wires Division plant.

Company has place adequate internal control systems and procedures commensurate with the size and nature of its business.

The effectiveness of the internal controls is continuously monitored by the Corporate Audit Division of the Company.

Corporate Audit’s main objective is to provide to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organisation’s risk management, control and governance processes.

Internal Controls & Systems

Objectives of Corporate Audit’s

• Identify cation and management of Risks.

• Resources are acquired economically, used efficiently and safeguarded adequately.

• Significant financial , managerial and operating information is relevant, accurate, reliable and is provided timely.

• Improving management control, business targets and profitability, process efficiency and the organization’s image, are communicated to the appropriate level of management.

• Employees’ actions are in accordance with the Company’s policies, procedures, Tata Code of Conduct and applicable laws and regulations.

SCM at TATA Steel

ObjectivesOptimize pre and post-production inventory

levelsObtain greater efficiency from laborObtain greater efficiency from equipment and

space

Supply Chain Planning Processes

Demand PlanningMaterial Requirement PlanningDemand Forecasting

Supplier Plant Warehouse Logistics Retailer

ProductionPlan

ComponentRequirement

Order Management

Fluxes Coal

Sinter plant

COKE Plant

Blast Furnace

LD1

LD2

Continuous Billet Caster

BilletsWire Mill

Merchant mill

Wire rodsRebars

Slab caster

Steelmakers are often faced with the following Questions:

Can we plan in advance but finally deliver only against Order?

Can we do this with minimal inventory?Can we deliver 100% based on promise?Can we both reduce the lead time & inventory

simultaneously?

“i2 Solutions” for Tata Steel has enabled best practices including :

Improved delivery performance to customer Reduced manufacturing and inventory costs Increased efficiency in supplier relationships Optimised product mix Reduced order lead time.

Out Bound Supply Chain

Outbound supply chain was completely revamped.

New Distribution Network was set up to cater mainly to rebars and GP/GC sheets, enhanced the reach for our products.

Sales of Tata TISCON through this system was almost thrice compared to previous year.

Results of Effective SCM

Reduced inventory levels by 10-15%

Reduced markdown & scrap by 10-15%

Improved delivery reliability by 95-95%

Used resources10-20% more efficiently

Reduced transportation cost by 10-15%

Reduced cycle time by 10-20%

Reduced outages to 0-5%

Porter Five Forces Model

Entry barriers: High

Capital RequirementEconomies of scaleGovernment PolicyProduct differentiationGlobal Steel majors Arcelor- Mittal & POSCO

plan to enter Indian Steel Industry.

Competition: High

Large producing countries like china influence global prices

Branding is not common and there is little differentiation

The 4 major domestic rivals are SAIL, JSW, ISPAT & ESSAR STEEL.

Porter Five Forces Model

Bargaining power of suppliers: High It is low for the fully integrated steel plants – Tata

steel Domestic raw material sources are insufficient, so

import is essential Globally, top 3 mining giants BHP billiton, CVRD &

rio tinto supply nearly2/3 of the processed iron ore to steel mills and command very high bargaining power.

Tata Steel has forayed into Backward Integration.

Porter Five Forces Model

Threat of substitutes: Low Plastics and aluminum pose a threat to Indian steel in

one of its biggest markets — automotive manufacture.

However, at present in India the high cost of electricity for extraction and purification of aluminum weighs against viable use of aluminium for the automobile industry.

Porter Five Forces Model

Bargaining power of Consumers: Mixed

High - automobiles, oil & gas, shipping, consumer durables & power generation sectors

Low – small & retail consumers.

Porter Five Forces Model

Strategic Business Units

Bearings DivisionFerro Alloys and Minerals DivisionAgrico DivisionTata Growth Shop (TGS)Tubes DivisionWire Division

Energy Efficient Operations at Tata Steel

Tata Steel Harvests Hydrogen

Implications of Hydrogen Harvesting

• Clean fuel source at low cost using waste heat & waste water.

• Useful in transport & other industries.

• Potential process of increasing revenue & added benefits in terms of carbon credits &patents.

• The gas can be used as a fuel in drying furnaces, reheating furnaces, ladle pre-heaters, captive power plants, etc. With this, consumption of coal and other fossil fuels reduces and CO2 emissions can come down by about 25kg / tone of steel.

Organization Structure

PEP @ TATA Steel

PEP focuses on :

3 Basic Fundamentals:

Component 1: Conventional

Appraisal

3 Components

Component ii: Managerial Style Feedback

Procedure

Component iii: Internal

Customers Assessment

TOP Program• Impact to the bottom line with minimum

investment & minimum time.

• Short term AIM : Improvements in quality & Reduction in cost

• Long term AIM : high rates of Performance Improvement

Procedure

• Unit team with a unit leader & 2 facilitators

• Unit team objective : explore ideas to reduce cost by 40%.

• Team has to identify Key performance indicators & elements that have an impact on them.

Phases

• Phase 1 : individual components of larger cost elements were identified.

e.g. Fuel cost

• Phase 2 : ideas to achieve the target

• Phase 3 : implementation of the ideas.

• Savings of Rs.87 million against targeted Rs. 40 million.

Balance Scorecard

Marketing & Sales : Tata Steel Wire Division

MCS In Indian Steel Industry

Steel ProducersMain Producers • Steel Authority of India Ltd. (SAIL) • Rashtriya Ispat Nigam Ltd.(RINL) • TATA Steel Ltd.(TSL)

Major Producers • JSW Steel Ltd. • ESSAR Steel Ltd. • Ispat Industries Ltd. • Jindal Steel & Power Ltd.

Organizational Structure

Performance Appraisal In RINL• two types of performance appraisal on the basis of post of

the RINL’s employee – Executive performance appraisal system (level E-0 to E-4 )

• Appraisee write his view over the actual achievement for the Key performance area / Task and Target assigned to him for the year.

• Both appraisee and reporting officer sit together• Rating between 1 to5 are given to the appraisee by the Reporting

Officer and Reviewing Officer

– Non-executive performance appraisal system• Rating are given by both Reporting and Reviewing officers on the

basis of performance of the appraisee• O / A / B / C / C- Grades are given • If grade is C- , then appraisee is interviewed by the Head of

Department

JSW Steel Ltd.

• JSW steel 4.8MTPA • 3MTPA addition from 10april 2010• Strategy for recession• shut downed two Blast Furnaces temporarily &

postponed the expansion project • adopted two pronged strategy of reducing the cost

and finding new customers & markets • Implemented low conversion cost, rich product mix,

locational advantages and swift change in marketing strategies

Recommendations

• Entrepreneurship approach instead of managerial approach-led slow growth

• Emphasis on cost reduction

• Targeting b2c segment (emotional)

• Less tapped rural potential

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