A.
OVERVIEW OF KEY OPERATIONS OF TATA STEEL: Tata Steel is a
subsidiary of
Tata Group headquartered
at Mumbai and running its operations in 26 countries
and commercial presence in 50 countries across the globe. Hence,
making it the second largest geographically spread company in the
world. For
the purpose of
our analysis, we will be restricting to Tata Steel
India
only. A1.

 

Capacity:
Tata Steel Jamshedpur plant, established in 1907 is India’s first
fully integrated
steel plant
that handles from mining to manufacturing to marketing finished products. Its
current product capacity is 10 MTPA and has received
environmental clearance for 11 MTPA production. 1 They have a second 3MTPA
facility at Kalinganagar situated in Odisha and as per the latest news, they
are targeting to
increase its
capacity to 8 MTPA.

 

For
raw materials extraction, they have 9 operating mines at Noamundi, Joda East,
Katamati, Khondbond (Iron ores mines), West Bokaro, Jamadoba Group, Sijua Group
(Colliery). They are also in the business of Ferro
alloys and Minerals with its plants situated at Joda, Bamnipal and
Gopalpur. A2. New Market: World Steel association report suggest
that global
steel production will face a slowdown which would continue till 2035.

 

Thus,
their major focus will be on the Indian Markets as stated by T.V.Narendran, MD,
Tata Steel.3 The company aims to provide value-added and
differentiated products to its customers. · Launched
products like Steel door, Windows, gates, grills and modular furniture for
increasing their presence in the retail consumer business · Launched the brand
“Pravesh” for wood finished steel doors. The business for doors is expected to
worth 5000 crore, which is presently dominated by the local vendors.

 

·
Bringing in new value-added products of Rebars to increase its
market share in construction business. · Introduced smart city
program
with products like smart bus stops, smart garbage bins etc. and received order
from many state governments for the same.2 · Setup a development cell for
Graphene, which has superior properties.

 

The
Indian
market is in
very nascent
stage and the
company will be looking to launch its products early to capture the
market A3. New Products: Tata Steel has a wide portfolio of
products catering to a particular market segment. KEY CUSTOMER SEGMENT PRODUCTS
Automative (OEMs & Auto Ancillaries) CR sheets, coils, tubes, springs,
bearings Construction TMT rebars, steel hollow sections, GC roofing sheets
General Engineering CR sheets and coils, HR sheets and coils,
coated products Industrial Hot rolled coils, wire rods It has also launched
many new products over the past 5 years. One of the
major achievements has been to be the first company in India
to de-commoditize steel and launch branded steel products.

 

Here
is a
list of some
of the
new products that were launched in the last 5 years · Tata
Structure 355 (high strength variant of MPA 355) · Galvanized Corrugated sheets
under Tata Shaktee Brand · Steelium Neo, high end CR-sheet · Galvanova, the
Zincalume brand catering to Appliance and Panel segment A4. Sales and Profit
Growth Rates: Owing to macroeconomic factors, the global growth in
the steel industry was slow and FY15 recorded a rise of a mere 0.6% as
compared to 3.6% in the previous financial year. The
main reason was demand reduction in main emerging markets like China which
recorded a decrease of 3.3% in its demand for FY15. Further with shutting
down of
mines in this year, Tata steel’s raw material costs also rose up significantly
leading to drop in profits.

 

Influx
of cheap products from China and Russia was also a reason for
low profits in FY15. Post that, as the problems have been addressed, the profits
have risen
but they’re still not up to the previous levels. Due
to global
slowdown, the FY15 witnessed lowest increase in demand.

 

FY16
also witnessed India becoming a net importer of steel just after
becoming a net exporter in 2013. India’s net imports stood
at
2.5 million tonnes. These, along with a slowdown in sectors demanding steel
was a reason for low production and sales in 2014-15. Since then, the
production has started to increase and the plant in Kalinganagar is
ramping up
production using latest technologies to TQM to reduce costs and the carbon
footprint. A5.

 

Sustainable
Measures: Tata Steel’s vision and value is to create value in society by
being a corporate
citizen and
hence, sustainability is deep rooted in their culture. The company conducts
periodic sustainability awareness programs for their officers and
external stakeholders like suppliers, community etc. They also run
focused campaigns and celebrate World Environment Day, Earth Day, World Health
Day, Safety week, Biodiversity Day etc.

 

for
awareness on environment,
health and safety issues. June of every year is celebrated as Tata
Sustainability Month for adopting sustainability in their business and
processes and in June 2016, they held a Sustainability Expo for
the first
time. Following are the key aspects of their approach – 1.

 

Stakeholder
Engagement – They value the voices of all their stakeholders –
community, customers, investors and employees so have developed platforms for
them to
periodically share their opinions which are then embedded into their business
objectives and strategies. 2. National and International forums – They take
guidance for implementing
sustainability practices followed by various
industry bodies like the WSA, CII,IIRC, GRI,UNGC and TCFD.4 3.

 

Corporate
sustainability team – This team is responsible for keeping a track
of all the sustainability best practices globally and facilitates
their incorporation in organization processes and value its chain.
They also formulate and review Company’s Sustainability policy. 4. External
Experts’ perspectives – The Corporate sustainability team also
conducts external
assessments like Dow Jones Sustainability Index and
various other conducted
by the Confederation of Indian Industry, to take their feedback to further
improvise their processes.

 

In their
annual reports, they have repeatedly sighted their awareness
regarding the biodiversity and environmental impact (CO2 & dust emission,
effluent discharge, waste generation) caused by their mining and manufacturing
operations respectively. Several measures have been taken
by the company over
the years to
minimize the
impact like EMS ISO 14001 certification for every key mining and manufacturing
site, adoption of latest technology and operational processes for resource
management, waste reduction, recycling and reusing products, energy and natural
resources conservation.

 

Following
are the sustainable measures taken – Sustainable Mining: · Adopted advanced
scientific techniques like innovative extraction and ore beneficiation to
minimize wastage and conserve natural resources ·
No natural water source has been obstructed because of their mining operations.
In fact they take help of the experts from IIT Kharagpur to monitor ground water
quality in
the mines on a quarterly basis and submit these results to the concerned
Environmental and Government bodies · Implemented rain water
harvesting
systems, recharge ground water artificially and ensuring zero discharge of
wastewater from colliers for water conservation at mines · Mined lands have
been reclaimed by building botanical parks and zoological gardens that house
wide variety
of flora and fauna · For minimizing the impact on biodiversity, they
have strategically chosen their operational sites such that no national park,
wildlife sanctuary, tiger reserves or elephant corridor exists within a 10km
radius of their sites CO2 emission and other effluents discharge: · Created an
enhanced offering in the form of Thinner High Strength
Steel
(HSS) which is lighter than the traditional
forms thus, improving fuel efficiency and reducing the weight of the vehicle,
cost of production, and carbon footprint of the vehicle.

 

·
Progressed towards greening their logistics by using rail transport over road
for transporting products to consumers and using green packaging for their
products · Planting trees on the sites, separating clean and dusty activities
and deploying dust suppression systems for improving the air quality · Using LD
slag as fluxing agent in cement industry · 27 out of 46 operating sites in
India have achieved Zero Effluent Discharge (ZED) status by installing Effluent
Treatment Plants at their sites · They have been
investing heavily in R and adopting the latest available technology for
controlling CO2 emissions like installation of Air Pollution Control Equipment
(APCE) at all plants.

 

Resources
and Waste Management: · Tata Steel is present across the
steel life cycle from raw materials extraction to manufacturing steel, product
designs and their applications. They have adopted worldsteel Life
Cycle Inventory (LCI) methodology that helps them evaluate the
footprints of their products across the value chain from resource
procurement, recycle and re-use of waste to steel production · Undergoing
research and studies for processing slime and low-grade ores for re-use · Using
blast
furnace slag as
clinker
substitute in
slag cement saving mineral resources · Motto: Reduce, recover, re-use and
recycle of wastes through effluent management, emission abatement, technology
solutions etc.

 

Water
Conservation: · Several initiatives like rain water
harvesting, water recovery and recycling have been taken at
their operational facilities to reduce water consumption to the lowest possible
level · Effluent
treatment plants convert effluents into service quality water that
can be used for cooling and quenching Energy Conservation: · Supply
energy efficient steel, by-products and construction material to mitigate
GHG emission ·
Process like TRT along with use of LD gas, improved CO Gas recovery are
being used to
achieve significant energy reduction at Jamshedpur
Steel Works ·
Set up solar plant for office and street lighting as a renewable source of
energy · Developed new technology for extraction of maximum energy from low
grade raw materials A6.

 

Cost
2012-13 2013-14 2014-15 2015-16 2016-17 Employee Wages and Benefits 36,085
36,731 46,019 43,199 46,051 Raw Material Cost 98,770 96,780 117,078 97,000
124,968 Operating Cost 2,70,732 2,88,941 3,17,762 3,50,857 4,13,850 Comparing
the Raw Material costs with previous years, we find an increase in
the FY
2014-15. The reason for the same owes its roots to the stoppage of the captive
iron ore
supply, due to closure of mines in Noamundi, Joda and Khondbond in Quarter 3.

 

Furthermore,
the higher consumption of the imported coal, partly offset
by
less amount of coke consumption led to higher costs. Moreover due to change in
source of the iron ore, Sinter and Pellet Plant operations regime had to be
modified to accommodate multi source iron ore. This further increased the
costs. A similar increase in Raw Materials and wages are seen
in the FY 2016-17.

 

The
primary reason for such increase is the beginning of operations in the
Kalinganagar Plant. B. TATA STEEL OPERATIONS ANALYSIS: B1. Operational
Improvement: 1. New Product Development – The company
plans to develop new products, enhance its value-added services and product to
the existing customers and enter new markets like defense, excavation etc. 2.

 

Process
Improvement – · Utilization of high gangue containing iron
ores for
the production of liquid iron, which will lower the production cost.
This material will be used in the sinter making · Use of non -coking coal from
Haldia in blending to reduce the imported coal requirement and thus reducing
the cost and also utilizing the space · Water recycling at
high temperature to reduce water consumption in Jamshedpur plant · BF
slag utilization in the pellet making to improve its property 3. Industry 4.0 –
They
are looking for opportunities to use the power of data to improve and
redefine current process.

 

As
per the FY 16-17
annual report
they identified opportunities worth 700 crores in the areas like: predictive
asset and quality management. They are using advanced
analytics
techniques in the critical process. Some of the
examples are: Break Out detection system in steel making
area, Equipment health monitoring through integrating QR codes with the
machines. 4.

 

Health
& Safety of Employees – Various initiatives have been taken to
improve health
and Safety
conditions for employees in the steel and mining
industry like setting up safety government committees, improving
infrastructure, launching web-based training platform and Zero Lost Time
Injury (LTI)
program etc. They also introduced smart-watch especially designed for the
safety of crane workers in the plant. B2: Operations SWOT: B3.

 

Cost
Reduction: SHIKHAR 25 Initiative – The company launched this initiative in 2016
with the aim “to achieve benchmark levels while building institutional
capabilities.”7 Till February 2017, Shikar was successful in
cost saving of
$706.12 million. Shikhar 25, works with different department across the plant
and facilitate
continuous improvement projects. They use TQM techniques to
improve the
process.

 

They
also organize idea generating workshops across plant which provide a platform
for the employee to give ideas to make improvements in the
process and
contribute in cost saving. Shikhar works as a central department thus,
facilitating people from multidisciplinary areas to come along and work
together for creating a cost saving or a value addition solution for various
plant problems. New Technology – Tata Steel acquired the
Rio
Tinto’s smelter technology recently.

 

This
new technology will help in reducing the steel making
cost by reduction in energy requirement and emission during the process by 20%.
It will allow the
use of low
priced raw material for the manufacturing with zero emissions. The new
process will eliminate many intermediate steps thus, reducing the total coal
required. And the CO2 produced will be stored and reused.

 

Reduction
in costs by operational excellence – According to their annual report, Tata
steel achieved a total reduction of 3,400 crore rupees in the last
financial year as a result of its operational improvement
initiatives undertaken by the company. This included operational improvements
in raw material handling, logistics and steel and iron making. They have also
increased employee productivity and energy intensity.

 

Some
of their achievements are – • Achieved lowest blast furnace
coke rate
ever owing to improvements in their operations • Streamlining logistics in raw
coal evacuation and maximizing the use of in-house
equipment, both leading to reduction of bottlenecks • Reduction in
transition losses by 40-50% and savings of 30 crores by optimizing
steel making models • Savings of over 100 crores due to reduction in coke rate and
hot metal silicon Process Improvement – The R&D along with
scientific services and Refractory Technology group
(R&D and SS) works continuously towards process improvement.

 

The
projects taken help in achieving cost competitiveness, new product
development
and environmental performance. C: WAY FORWARD FOR THE COMPANY: C1. Workforce
Management: 1. Restructuring – Currently Tata Steel Jamshedpur plant is
employing more than 30000 workers. In comparison with the other steel plants across
the world
and also with JSW Steel Plant India which is producing 14.3 MT with around
12000 employees.

 

In the
balance sheet of
company, employee benefits are a large expense contributing to high production
cost. The
company needs to
lower down its production to remain competitive in the market
which requires restructuring of the work force. 2. Gender
Diversification – Currently only 11 % women employees are working in Tata
Steel.

 

The
gender diversification brings a different mindset on the table which helps in
solving problems better. The company has set a target of
20% women workforce by 2020. C2. New Product Development: Tata
Steel has launched “Pravesh” brand recently which is making a strong
presence in B2C market for the company.

 

We
believe that, in the future, the company should develop more products which are
targeted directly at the customer. Tata Steel already has a very strong, robust
distribution
network in
place with its reach all over India. This will help them to easily penetrate in
the consumer market.

 

The
company is emphasizing on creating value added products to
the customer to
increase its
revenues from
the construction business. This will provide it a
competitive advantage over its competitors. Automotive
Industry is
the biggest customer of Steel Plants but with the development
of
driver less and electric cars, the demand for the steel
can go down as these require light weight material for the body. The company
should plan its operations factoring all the possibilities
and risks in their decisions.

 

They
should also develop products catering to new markets, as a precautionary step
for survival in the worst scenario of losing business from automotive industry.
C3. New Process Development: 3D printing is a disruptive technology which can
completely change the functioning of a steel plant. Extensive research is going
on in this field on how to use iron powder for
directly printing a desired shape.

 

They
should invest in such research and study the market for a
probable demand of this kind of products. Presently, steel is not being used
where intricate
shapes are
required. But with the development in 3D printing technology
for steel, the company can venture into this portfolio and get the first mover
advantage.

 

They
are also working in the field of graphene. The
development in this field will open the doors for many new industries for the
company. The current technology and processes lacks the capability
of
fully utilizing raw materials extracted. They should invest heavily
in
acquiring and developing such technologies that would allow them to
use 100% raw material thus, reducing the production cost of steel.

 

The
company can also invest in the DRI technology which uses steel scrap
for the production of steel. This would enable steel production at
lowered cost. C4. Expansion Their current expansion strategy is to
increase capacity
at the
Kalinganar plant which will take a long time and at Jamshedpur
plant, they have almost exhausted their expansion limit set by the government.
So a good expansion strategy could be to acquire other small plants and
leverage their resources. C5.

 

Digitization
Digital advancements like Industry 4.0, Internet of
things
(IoT), Augmented Reality, Virtual Reality etc. are at the frontlines of every
industry. These technologies are transforming the usual way of doing things
across all functions and verticals by simplifying the processes and reducing
the time
taken. Tata
Steel has
started venturing into this space but needs to further catch up to adopt/design
the right technical solution for their business processes and systems to
develop a
smart steel industry. It would give them a competitive advantage
and lead to cost reduction, increased efficiency and better decision making.

 

Data
Science and Big
Data Analytics
would play
a major
role here by helping them to better understand the consumers and their
preferences, and take data driven decisions. The company has
enormous amount of data generated as
a result of
automation of their processes like purging time, holding time etc. which
can be used by
advanced analytics for accurate predictions.

 

Further
advanced predictive
models can be used to predict an equipment life, failure, capacity
and distribution efficiency. Also steel manufacturing requires very accurate
physical conditions like temperature, pressure etc. and with
efficient digital systems, they can ensure high reliability
for these processes.

 

There are many big data
success stories of transforming business and creating new markets by large
multinationals that they can learn from.