Supply Chain Management practices in India

(A Case study of TISCO )

Dr. K.K Agarwal

(Reader, Mahatma Gandhi Kashi Vidyapeeth)
kkagarwal3@gmail.com
Varanasi-UP, India.

ManojKRakesh
PhD. Scholar (Mahatma Gandhi Kashi Vidyapeeth Varanasi)
mkrakesh@rediffmail.com

The term ‘supply chain management’ (SCM) was coined by Houlihan in 1985.
Supply chain management is the management of the flows of material and
information, which are managed between facilities such as vendor, manufacturer
and distributor. It performs functions of procurement of material, transformation
of material into the finished goods and distribution of these finished goods to
customers. Its strategy is to coordinate the various organizations’ objectives in order
to increase the efficiency of the entire supply chain.

Thomas & Griffin classified the operational coordination of the supply chain
management into three categories; buyer – vendor coordination, production-
distribution coordination and inventory- distribution. A supply chain management
is a network of firms activities, organizations, and the technologies that performs
the function of procurement of raw material from vendor firms, transformation of
this material into intermediate and finished products and distribution of this
finished products to the customers.

|The logistics is concerns moving material, raw and finished;

1) Materials management plus physical distribution management equals

logistics management.

2) Supply chain encompasses logistics activities, with manufacturing planning

added.

3) Supply chain looks at material flow from raw-material acquisition, through

all
Value-added steps, to customer delivery

Model of the general organization of our supply chain management.

Step 1 – customer service strategy : It is our premise here that the firm has already
gone through the process of establishing a corporate- wide business strategy, i.e. ,
has well- determined lines of business, core competencies, growth objectives, and
stakeholder commitments. From a supply chain strategy perspective, the execution
of the business strategy will involve understanding and setting customer service
requirements of each product-market segment, identifying opportunities for
differentiation (Shapiro, 1984), and deciding on strategic responses to customer
requirements in order to maximize revenue with the most efficient use of capital
resources. Students appreciate that with a well-defined supply chain strategy, it is
possible to substantially improve the seemingly Conflicting goals of shareholder
wealth and customer service.

Step 2 – Network configuration : This step primarily involves the determination of

the Supply chain network, i.e., the choosing the channels of supply and distribution
(Fisher, 1997) and defining the best supply chain network options and associated
costs of offering varying levels of service. This includes choosing the optimal
number, location, role, associated linkages, and aggregate plans of each channel
partner. Once the supply chain network is defined and put into place, it very much
determines the levels of service it can provide to customers. When we teach network
configuration we identify the different product , information, cash, and process
flows in the supply chain, and analyze how we can position resources to optimize
these flows. For example, if the customer service strategy is growth-oriented with a
premium on mass-customization, the product flows can be altered via several means
such as postponement or process reversal – to optimize for this strategy.

Step 3 – Demand and Supply Planning : This stage of planning determines the exact
flow and timing of materials such as raw material release to manufacturing
facilities, or finished goods to the distribution centers or customer markets. The
network configuration phase has already determined the locations, origins, and
destinations of these material flows. The material flow and timing decisions are
typically arrived at by using time-phased , or requirements planning, techniques,
working from the forecasted demand back through the supply chain to the raw
material sources. Additionally, examples abound (and we use them as a back-drop
when teaching) of firms using specialized demand and supply planning procedures,
Collaborative Planning, Forecasting, and Replenishment (CPFR), Efficient
Consumer Response (ECR), Quick Response (QR) On the out-bound side; and
Vendor Managed Inventory (VMI), Continuous Replenishment (CRP), and JIT II
on the inbound side.

Step 4 – Transaction Processing and Short Term Scheduling : Customer orders

arrive at random and they are assigned to a predetermined (by supply chain
configuration methods) location and carrier. The flow of this order (timing and
quantity) through the supply chain is already determined by the demand and supply
planning process. Transaction processing is therefore more like a day-to-day
accounting system, tracking and scheduling every order to meet customer demand.
Sample transactions include order entry at the retail markets; physical
replenishment and order fulfillment of the goods at the distribution centers;
material releases and purchase orders at the manufacturing facility.

Transforming a business to address the needs of today’s marketplace requires

effectively managing the flow of information across key operational interfaces like
supplier-procurement, raw material-production, operations-maintenance, product-
distribution, retail-customer – in other words, the extended supply chain of the
organization.

TCS’ dedicated solutions, services and software products for manufacturing and
process industries help companies optimize their production process and integrate
operational requirements with enterprise-level decision-making processes. This
provides the enterprise a seamless coverage of key business and production
functions and enables a coherent flow of information at all critical interfaces. TCS
designs and deploys solutions in a modular and scalable fashion so that the client
has IT infrastructure setup and management.

CemPac TM: Productivity solutions for the cement industry

CemPac is a suite of productivity solutions for cement manufacturing processes.

CemPac mill and kiln optimization solutions have been implemented at several
cement plants in India and have delivered significant operational benefits ranging
from 8-10% improvement in throughput, 5-8% reduction in specific energy
consumption and upto 15% reduction in product quality variance. The CemPac
solution methodology is applicable to almost any continuous processing operation.

FACTORe : Asset management for eManufacturing

FACTORe is a leading edge software solution specifically designed to streamline the

maintenance management function in any manufacturing or process environment.
FACTORe provides an integrated environment for condition monitoring, fault
diagnosis,
maintenance scheduling, inventory management and breakdown prediction.

GE Transportation Systems (GETS): Engineering Design and Development

Center(EDDC), Bangalore TCS is GETS’ partner in the EDDC, a state-of-the-art
offshore design and development center that delivers engineering solutions that
align with GETS product development and service initiatives as well as GE’S
commitment to globally source the best available solutions to address the needs of
their customers.

The Associated Cement companies(ACC): CemPacTM

TCS and ACC, one of India’s largest cement manufacturers developed a Computer
Integrated Manufacturing(CIM) solution to provide operational improvements
through automation at ACC’s cement plants in India. The quantified operational
benefits from this implementation led to the development of CemPac, a complete
process productivity suite for the cement industry.

Review of literature:

The integration aspect of Supply Chain Management : A frame work and

simulation, Ram Ganeshan Asst. Professor of Operation Management, Univ of
Cincinnati; USA.
Delivering the goods : The art of managing your Supply Chain.Schechter, Doman
and sander Gordon F NJJ, WILEY & Sons.

Bernard J Angerhofers & Maries C Angeles, Dept. of Information System &

computing, BRUNEL Univ. UK. According to him participative Business Modelling
comprises of four project phase.

1) The project definition phase using cognitive mapping.

2) Model conceptualization phase.
3) The modeling formalization phase.
4) The knowledge dissemination phase.

The first work in system dynamics in relation to supply chain management goes
back to Forrester (1958). So Forrester can be regarded as the father of system
dynamics and originator of many of the technique of modern SCM.

Information about Tata Steel

The Tata group is India’s best- known conglomerate in the private sector with a
turnover of around US $ 10.4 billion (equivalent to 2.4 % of India’s GDP). Long
known for its adherence to business ethics, it is India’s most respected private
business group. With 219,000 employees across 94 companies, it is also India’s
largest employer in the private sector.

Founded by Jamsedji Tata in the 1860s, the group’s early were inspired by the
spirit of nationalism. The group pioneered several firsts in Indian industry:
India’s first private sector steel mill, first private sector power utility, first
luxury hotel chain and first international airline, amongst others.

Tata Iron and Steel Company was floated on 26th August 1907. Faced with global
competition, Tata steel has bent backwards to turn itself into one of the world’s
lowest-cost steel makers. B.Muthuraman, who has recently taken over from J.J
Irani as managing director of the Tata Iron and Steel Co. Ltd. (or Tata Steel).
As a steel maker, Tata Steel is not one of the world’s biggest. Despite having
doubled production to almost 3.5 million tones over the past 20 years, it accounts
for only a moderate slice of the Indian market of 25 million tones (and a tiny
silver of the world market of 830 million tones). But it can justifiably claim to be
one of the world’s best. At an average manufacturing cost of about $155 per
tonne (ex-gate), it has nearly matched the efficiencies of Shanghai-based Bao
Steel. And it scores higher on several qualitative measures.

Tata Steel has taken another bold step in creating ‘customer account managers’
who are empowered to a surprising extent for a company that was once famous
for its command-and-control structure. This way, these managers get to spend
most of their time on external customer issues (instead of wrangling deals for
them at the back-end). Tata Steel has started treating its own departments as
customers. Russi Mody, who went to extraordinary lengths to win staff
dedication. According to a world Steel Dynamics report, soft issues such as labor
harmony and commitment are differentiators that do work in the company’s
favor.

SAP India, the leading provider of business software solutions and Tata Steel,
India’s first and largest steel plant in the private sector, today announced a
landmark partnership wherein the steel major will offer business software
solutions for the metal industry in the country. This is the first time that Tata
Steel has diversified into offering business software solutions. Under the
partnership, Tata Steel will offer small and medium sized businesses (SMB) in
the metal industry a pre-configured industry specific solution built on the my
SAP All-in-one platform. Partnership between SAP and Tata Steel offers other
organization the unique combination of the leading ERP and the proven domain
expertise of Tata Steel to meet their IT requirements.

Importance of the study

The successful implementation of an on-line procurement system can reduce the

administrative costs for a company while providing proof of concept for a wider
implementation of E-business. An Internet based procurement system contains
all of the essential elements of a full supply chain application, but on a more
manageable scale.

Successful supply chain management results in cost savings for the companies,
their suppliers and consumers. “Companies no longer compete—supply chain
do.” It’s supply chain that create competitive differentiation by how fast, how
cheaply, and how well they deliver on customers’ demands for products or
services.” The key to gaining competitive advantage through the supply chain is
shared information. In fact, the proper view of a fully functional supply chain is
a network of suppliers, distributors and customers. The network view
emphasizes the interrelated structure and information needs of a supply chain.
How well a company implements this network will determine how successful
their supply chain becomes.

Objective of the study

The purpose of this research is to demonstrate that through the use of supply
chain management a company may better respond to its competitors and
provide more value to its customers. In support of this position academic
research will be analyzed and condensed, trade journals reviewed and business
articles summarized.

Because the majority of companies cannot compete on the basis of price alone,
some sort of differentiation is necessary. The internet coupled with other
computer technologies, allow companies new avenues to distinguish themselves
from their competition. One of these avenues is supply chain management,
supply chain management allows a company to reduce its costs, create
opportunities to increase value for its customers and increase its competitive
ability in the market.

To see the effect of implementation of supply chain management on the

productivity of the company across the period of time.

1) To analyze the profit margin of the company before and implementation of

supply chain management.
2) To compare the reduction in the cost of production after implementation of
supply chain management
3) To make a study of the inventory of the company before and after
implementation of supply chain management.

Scope of the study

This study will be undertaken in a single company Tata Steel. Since Tata Steel in
partnership with SAP this study will help us to analyze the difference in the
working capital before and after implementation. Tata Steel has implemented
sap in a phased out manner to increase coverage of business process and
business unit.
This study will help us to analyze the effect of implementation of computerized
supply chain management on the profit margin of the company.

Hypothesis :
In order to reach the objective of the study the following major hypothesis will
be formulated

Supply chains of this company contribute to competitive advantage and long

term profit and health of the company.

1) There has been a decrease in the volume and value of inventory of the
company.
2) Implementing SAP has made a reduction on the working capital of the
company.
3) There has been a decrease in input to per unit of final steel produced by the
company.
4) There has been a decrease in cost of production of the company.
5) There has been reduction in the administrative cost of the company.

Research Methodology

This research will be exploratory in nature, both primary and secondary data
will be collected research methodology will be of searches of secondary
information sources. The first searches for online sources were Meta searches for
the general topic of supply chain management.
Secondary data will be collected from
1. Annual report of the company
2. Accounts department
3. Financial statement.

Primary data will be collected by the use of structured questionnaire, personal

interview.

Of the company before implementation of the software related to supply chain

management and after implementing it.

Limitation

• In the present work it has been assumed that implementing SAP has
reduced the time and cost of production.
• This study is conducted in a single organization so the findings of this
research can not be assumed to be applicable universally.
• Cooperation among all levels of the supply chain is essential to share the
benefits of decreased inventory obsolescence and warehousing costs.

Chapterisation :
 Chapter 1 Introduction.

Chapter 2 Tata Iron and Steel company – An Overview.

Chapter 3 Conceptual Study of Supply Chain Management.

Chapter 4 Implementation of SCM in Tata Iron and Steel co Ltd.

Chapter 5 Relationship between Supply chain Management and

Performance in Tata Iron and Steel Company.

Chapter 6 Conclusion.

Bibliography :

Sunil Chopra, Peter Meindl; Supply Chain Management Strategy Planning &
Operation, Pearson Education, 2nd ed. 2004

Bayles; e-commerce Logistics and fulfillment, Pearson Education,

Business Logistics/ Supply Chain Management – Ballon, Pearson Education

Christofer; Logistics and Supply Chain Management, Pearson Education,

B. S. Sahai – Supply Chain Management, Macmilan.

Duschinsky – Peter (Aug. 2000) Can you Afford Not To Buy Into Procurement?
Computer Weekly

Kalakota – Ravi ( May 2000) Inter – Enterprise Fusion The Future of Supply
Chain EAI Journal.

Kay – Russel , (Dec 2001) Supply Chain Management Computerworld

Pender, Lee (July 2000). The Five Key To Supply Chain Success CIO Magazine.