Pre- Submission Report On SUPPLY CHAIN MANAGEMENT PRACTICES IN INDIA (A CASE STUDY OF TISCO

)

FOR THE AWARD OF THE Ph.D. DEGREE IN COMMERCE 2010

Research Scholar (Manoj Kumar Rakesh)

Supervisor Dr. K. K. Agarwal DEPARTMENT OF COMMERCE MAHATMA GANDHI KASHI VIDYAPEETH VARANASI-221002

SUPPLY CHAIN MANAGEMENT PRACTICES IN INDIA (A CASE STUDY OF TISCO) Introduction Today’s world is moving in turbulent economic environment, firms are striving for ways to achieve competitive advantage. One of the approaches is to manage the entire supply chain to reduce costs and improve performance to create competitive advantage and business success. Supply chains are now at the center-stage of business performance of manufacturing and service organisations. This research explores and investigates how high technology firm’s uses supply chain management to gain competitive advantage and increase business success. This research provides a theoretical framework to understand a firm’s performance and argues that supply chain management will help a firm to be competitive and successful. In order to leverage on existing supply chain investments, firms in the Steel Manufacturing industry, like many other industries, are faced with the challenge of being able to align their supply chain strategies with the effective use of technology. To this end, manufacturing firms are changing their focus from a simple product-focus, to a more customer focused approach, achieved through the development of more viable, longerterm relationships with their customers. Many firms in this industry sector have realised that the Internet is an effective tool that can be used to build these relationships. This is achieved by adding value to the services a firm offers to its customers (Kalakota and Robinson, 2000). The result of this approach is a shift in supply chain management practices, whereby, a business to consumer link is added in the supply chain, typically at the distribution end (Anderson, 2001) the business to consumer link is facilitated through the integration of Internet technologies into the supply chain. Supply chain management is not a static concept or solution. Instead, new advances and techniques for supply chain management continue to mushroom. This tremendous growth in new ideas and processes is starting to influence and change the business processes and models of companies. Hence companies have many choices in selecting programs in

supply chain management. In making their choices, companies need to plan for effective supply chain management, in order to gain competitive advantage. A theory that has gained momentum in the last few years is the concept of supply chain management. In recent years, there have been numerous advances and developments in supply chain techniques and management. One of the reasons is that as trade barriers drop and markets open, competition have become more intense – hence companies need to be more competitive and cost effective. An initiative to help achieve this is a supply chain management program. Supply chain management is the management of upstream and downstream activities, resources, and relationships with suppliers and customers, which is required to deliver products or services. In theory, if this is done well it will lead to competitive advantage through differentiation and lower costs as suggested by Porter (1980).
Supply Chain: All the necessary activities required for creating and delivering products and services to customers.

Supply chain management: This includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, distribution across all channels, and delivery to the customer (Supply Chain Council, 2001). Supply chain management: According to the Council of Supply Chain Management Professionals (CSCMP), Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. E-Procurement: E-Procurement is essentially an Internet/Intranet based purchasing application or hosted services that streamlines buying trading partners, maximizes trade efficiency across the entire supply chain, and provide strategic e-commerce capabilities in internet time (ITRG, 2002).

SAP AG: a multinational software development and consulting corporation. Ranked 258th on Fortune Global 500. land. India. company's best known product is its SAP Enterprise Resource Planning (SAP ERP)s. and water (Coyle. It is part of Tata Group of companies. It was founded in 1972. including storage and warehousing. and controls the efficient. which provides enterprise software applications and support to businesses of all sizes globally. This includes storage and warehousing of products. and their transport via air. Logistics: The management and movement of product and services. services. land. Bardi. and related information from the point-of-origin to the point-of-consumption in order to meet customers' requirements. Germany. and Langley. implements. it is based in Jamshedpur. Tata Steel: (formally known as Tata Iron and Steel Company Ltd.It the largest software enterprise in Europe and the fourth largest software enterprise in the world. Tata Steel is also India's second-largest and second-most profitable company in private sector. List of SAP Products SAP Business Suite SAP ERP (Enterprise Resource Planning) SAP CRM (Customer Relationship Management) SAP SCM (Supply Chain Management) SAP SRM (Supplier Relationship Management) SAP PLM (Product Lifecycle Management) SAP Netweaver SAP Business One SAP Business ByDesign SAP Business All-in-One software The Objective of the study: .Logistics: The management and movement of product and services. and water. 1988). and their transport via air. effective flow and storage of goods. Jharkhand.) is the largest private sector steel company in India in terms of domestic production. Logistics is that part of the supply chain process that plans. Headquartered in Walldorf.

this study addresses the following research issues: 1. To make a study of the working capital management of the company before and after implementation of supply chain management. 2. across the period of time. To see the effect of implementation of supply chain management technique on the productivity of the company. The Internet coupled with other computer technologies. 4. One of these avenues is supply chain management. The objective of this study is to explore and investigate how firm scope. and implement supply chain management. Scope of the study: . create opportunities to increase value for its customers and increase its competitive ability in the market. some sort of differentiation is necessary. design. 3.The present study explores and investigates how Tata Steel uses supply chain management to gain competitive advantage and increase business success. It also tries to find the advances and new ideas in supply chain management. To compare the reduction in the cost of production after implementation of Supply chain management 6. Most importantly. 5. supply chain management allows a company to reduce its costs. This study provides a theoretical framework to understand a firm’s performance and argues that supply chain management will help a firm to be competitive and successful. Because the majority of companies cannot compete on the basis of price alone. To study the inventory of the company before and after implementation of supply chain management. To analyze the profit margin of the company before and after implementation of supply chain management ERP package. this study endeavors to determine how Tata steel implemented supply chain management ERP Software that can provide competitive advantage In fulfilling this objective. allow companies new avenues to distinguish themselves from their competition. To provide suggestions for the improvement of efficiency and functions of the company.

The data is based on a single company operating in Jharkhand India. and discussions and feedback on the questionnaire. 1) Implementing SAP has made a reduction on the working capital of the company. customer needs data. a number of sub-questions have been developed. This research focuses on how Tata Steel implemented ERP system. To answer the primary research question. Supply chain management is a vast collection of techniques. such as: reasons for implementing specific supply chain factors (or strategies). There are several reasons for this: • • Since the focus of this research is on high technology companies operating in India. . selection of supply chain factors and strategies can be a complex process. Hence. • Furthermore face-to-face meetings with respondents can help provide understanding and information on several qualitative areas. In such a dynamic setting it is best to use qualitative research methodology (using case studies) to understand the situation. Methodology of the study: This study employs the qualitative research process using single case studies. strategy and technology.The present study covers a period of ten years from 1999-2000 to 2008-2009 as adequate information and data for this research were only available for this period. Hypothesis: In order to reach the objective of the study the following major hypothesis were formulated. 3) There has been a decrease in cost of production of the company and increase in labour productivity. 5) There has been improvement in the customer order management and customer satisfaction. 6) Supply chains of this company contribute to competitive advantage and long term profit and health of the company. 2) There has been a decrease in the volume and value of inventory of the company.

This study is an exploratory case study with a limited sample size. Chapterisation: Plan of the study: This research is focused on how Tata Steel implemented ERP system to manage its supply chain management to increase its ROI and benefit to the company. Balance sheet. the findings cannot be generalized beyond the context of this study. the goal of this research effort is to seek greater . financial Statement of the company. Introduction. Chapter 5. Chapter 4. As an exploratory study. The theoretical model derived from this research is only applicable to the high technology companies. This research consists of seven chapters. Relationship between supply chain management and performance in Tata Steel. Profit and loss account. Chapter 1. and voluminous documents. India. Therefore.An overview. annual report.The secondary data needed for this study has been collected from various sources like Journals. Performance Measures of Supply Chain Management. perceived lack of rigor. Limitation There are several limitations in this study. Yin (1994) cites several known limitations and criticisms of the case study research methodology. Chapter 6. previous research report related to Tata Steel. Chapter 3. both primary and secondary data is collected. Tata Iron and Steel Company. The most significant weakness of this study can be attributed to the chosen case study research methodology. This research is exploratory in nature. The research is focused on single company operating geographically in Jharkhand. These include the lack of generalization. Chapter 2. Chapter 7.commerce in Tata Steel. Suggestions and Conclusion. Conceptual study of Supply Chain Management. investor and people at large. online published document on internet. subjectivity. Implementation of ERP system SAP and E.

understanding that can lead to building a foundation for more extensive research in the future. which is specific to that company. The first tough task was collection of data for the purpose of review. For being a private company the employees of the company are reluctant to give any information. Getting the response of the questionnaire was the toughest part in the collection of data. They left many of the questions unanswered. This research work has been completed after facing various types of difficulties because it is too tough to measure the success of an ERP implementation in a company. SUMMARY OF THE CHAPTERS CHAPTER I Introduction . Through this thesis I have tried to give useful and positive result so that it can act as guidance for further research in this field. Getting primary data from the company is very difficult. Since the data is related to implementation of any ERP systems are confidential of the company. since the respondent were not willing to give their opinion to the questions.

which cover the importance of the study. Importantly. key definitions. According to Wikipedia. lead-time and quality through working in partnership with customers and suppliers are significant. and finished goods from point-of-origin to point-of-consumption Ganeshan and Harrison have yet another analogous definition: A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials. source of data collection. work-in-process inventory. Supply chain management spans all movement and storage of raw materials. and the chapter’s conclusion. It comprises sections. transformation of these materials into intermediate and finished products. and finished goods from point–of–origin to point–of–consumption The definition one American professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing.org Supply Chain Management (SCM): Supply chain management is the process of planning. and the distribution of these finished products to customers.This chapter serves as an introduction to the research. scope of the study. it . implementing. CHAPTER II Conceptual Study of Supply Chain Management Globalization also brings foreign competition into markets that traditionally were local. procurement. Local companies are thereby forced to respond by improving their manufacturing practices and supply chain management. work–in–process inventory. an outline of the structure of the study. limitations of this research. Supply Chain Management spans all movement and storage of raw materials. and logistics management activities. Hypothesis of the study. implementing and controlling the operations of the supply chain as efficiently as possible. conversion. Experience shows that the gains to be made in cost. and controlling the operations of the supply chain with the purpose of satisfying customer requirements as efficiently as possible. Supply chain management (SCM) is the process of planning. a brief description of the methodology. objective of the research.

and customers. This would explain the basic difference between Logistics and SCM.0: simplified supply chain network structure Source :(http://www-935. Figure 1. Supply Chain Management integrates supply and demand management within and across companies. and related information from the point-of-origin to the point-of-consumption in order to meet customers' requirements. Velocity and Visibility. third-party service providers. Cost Dimension. Process orientation. In essence. self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise. Network of organizations working for common purpose and mutual benefits. The broader view of SCM is depicted in the below figure in a simplified supply chain network structure.ibm. implements. intermediaries.also includes coordination and collaboration with channel partners. Supply Chain is inter-company integration of business process and relationships and where as Logistics is intra-company integration. effective flow and storage of goods. Inventory . SCM Principles: Ultimate customer focus.html) Providing enhanced value to customers at the least Total cost Value.com/services/uk/bcs/html/bcs_scmsol. Logistics is that part of the supply chain process that plans. Total systems thinking. and controls the efficient. which can be suppliers. the loosely coupled. More recently. services.

Tata Steel. and a shareholder base of over 2 million. services. Yet another engineering feat is the famous Sun Temple at Konark in Orissa. where steel structurals were used for the first time in the world. The Group has operations in more than 54 countries and its companies export products and services to 120 nations. Archaeological finds in Mesopotamia and Egypt testify to the fact that use of iron and steel was known to mankind for more than six thousand years and that some of the best products were made in India. Among the widely-known relics is the Iron Pillar near Qutab Minar in Delhi. did not rust so far -----an engineering marvel that baffles the scientists even today.5 billion (Feb 2009) billion in 2008-09. which together employed some 357. is the world's sixth largest steel company. and the Tata Trusts. formerly known as TISCO (Tata Iron and Steel Company Limited).Transportation Warehousing Information CHAPTER III Tata Iron and Steel Company –An Overview The history of steel making in India can be traced back to 400 BC when the Greek emperors used to recruit Indian archers for their army who used arrows tipped with steel. engineering. Promoted in 1874 by Jamsetji Tata with a single textile mill. The pillar. with an annual crude steel capacity of 31 million . a Parsee family of the close-knit Zoroastrian community.000 people worldwide and had revenues of US$ 72. energy. materials. The Tata Group is almost 150 years old. built between 350 and 380 AD. built around 1200 AD. It currently comprises 96 operating companies. the group has always been controlled by the Tatas. Its 28 publicly listed companies have a combined market capitalisation of US$72. consumer products and chemicals. Many more evidences are there of Indians’ perfect knowledge of steel-making long before the advent of Christ. Tata is active in seven major business lines: information systems and communications.5 billion that is the second highest among Indian business houses in the private sector.

To Extend SAP in Works with FICO. material management. has transited seamlessly from a production-driven company to a customerdriven one. On 1st November 1999 Tata Steel pulled off a big bang implementation of all SAP modules at one go across 46 countrywide locations. PP & QM Phase II . MM. it is based in Jamshedpur. Plant maintenance. Human Resources. Jharkhand. 2008. the pace of implementation was fast with all activities backed by a lot of thought process and meticulous planning. It is part of Tata Group of companies. an ERP system.32. innovation and refinement of its business operations. Production Optimizer (such as SAP APO) Phase III . with its recent acquisitions. India. It is the largest private sector steel company in India in terms of domestic production. Ranked 258th on Fortune Global 500. SAP was introduced in the areas of sales and distribution. was implemented at Tata Steel for better customer order management and fulfillment.commerce in Tata Steel SAP. as per the set deadline. Tata Steel has adopted SAP R/3 an ERP technology to take a lead in the competitive steel industry and through constant learning. in just a span of eight months. Tata Steel planned a big-bang approach of going live with all the modules at the same time. Its main plant is located in Jamshedpur.350 crore during the year ended March 31. Tata Steel is also India's second-largest and second-most profitable company in private sector with consolidated revenues of Rs 1. Phase I . Driven against the speed of time.110 crore and net profit of over Rs 12. Jharkhand.To implement SAP modules such as Asset Management & Budget management sub-modules of FICO.SEM (Strategic Enterprise Management) .tonnes. CHAPTER IV Implementation of ERP system SAP and E. Financial-Account Receivables and control. the company has become a multinational with operations in various countries.

two of the largest steel companies in South Asia. and India's largest eCommerce company within a short span of time. Services provided by mjunction E-distribution: In a bid to cut down on the distribution cost and serve customers better. • SAP has a large customer base and is a leader in India’s ERP market. Metaljunction was renamed to mjunction to give a new corporate identity to the company. • SAP could provide skilled implementation partners. A beginning has already . in their place. realized the significant contribution that the Internet and eBusiness could make to reengineer the steel supply chain and they joined hands to set up metaljunction services limited which went on to become the world's largest eMarketplace for steel. Booz Allen Hamilton. Tata Iron & Steel Company Ltd proposes to adopt the "hub and spoke'' concept. There will be rail connections between the hubs and the company's Jamshedpur plant and road connections between the hubs and various consumption centers in the region concerned. Figure 1.• The solution covered 85% of Tata Steel’s business-process requirements. Tata Steel and SAIL.1: SAP Implementation In Tata steel Implementing e-commerce In 2001. as recommended by the management consultant. • The solution incorporated Y2K functions that Tata Steel desired. it will set up at different locations hubs which will act as stocking points of generic materials to serve a much larger number of customers. The essence of the concept is as follows: Tata Steel will gradually do away with its stockyards.

While the company will provide the land and the handling equipment. These will be located at Sankrail near Kolkata. located within the Jamshedpur plant itself. as and when the VAT is in force. The lands about 20 acres at Sankrail and 30 acres at Vijaywada — have been identified. has already started functioning on an experimental basis. The company has closed down nearly a dozen of its 28 stockyards and the closure of the rest will be undertaken in due course. Instead. Logistics and Delivery Time Tata Steel puts a lot of emphasis on enhancing logistics in order to improve delivery time. it will not participate in the day-to-day running of the hubs. Tata Steel has its own stockyards and exclusive berths alongside both Haldia and Calcutta ports. the day-to-day operation will be left to the private vendors. The company is believed to have already identified the vendors. Tata Steel’s expertise in both in-bound and out-bound logistics makes its Ferro Alloys and Minerals Division (FAMD) the preferred supplier of imported thermal coal to customers in India. to ensure damage-free smooth shipment and manned by trained personnel. At least four more are in view.been made. The import / export logistics is handled by its TKM Division. This is followed by the one at Delhi. A sub-hub might also be considered for Faridabad to cater to the specific requirements of the customers in the region. Nagpur and Delhi. A cash management service arranged in association with Citibank and HDFC has expanded the scope of e-selling to include the collection of . well-versed in handling logistics and loading. equipped with sophisticated material handling equipment. reduce transportation cost and better inventory management at stockyards located at strategic points. A move is afoot to make the hubs at Sankrail and Vijayawada operational in the current financial year itself. The first hub. A total investment of about Rs 70 to Rs 80 crore is being planned for setting up the hubs. storage is planned in conjunction with experts and the actual loading is supervised by an internationally reputed independent inspection agency. Besides. Channel Finance In Tata Steel e-Collection: MetalJunction has offered buyers the convenience of paying for materials with a simple click of the mouse. Vijayawada.

The products that Tata Steel has sold through MetalJunction are: HSM Defectives. Channel finance MetalJunction provides a unique service of arranging finance for the distributors of Tata Steel on an online. The prices obtained by MetalJunction have been reflective of the market situation. This has increased realisations and lowered the working capital requirements of Tata Steel. This has ensured that Tata Steel need not offer credit on sales. with products being sold to customers all over the country. Tata Steel and MetalJunction are working together to not only increase the quantities of products sold over the last fiscal year but are also identifying new products to be sold through this highly efficient route. . LP Defectives. The results have been extremely encouraging for Tata Steel. HSM POR. e-Selling: Tata Steel initiated the first online e-Sale through MetalJunction in the month of February 2002 and since then has sold 221. Credit Sales of Tata Steel have steadily decreased over the period from Fiscal 2002 to Fiscal 2008. Prime Billets and Secondary Products. Graph 1. MetalJunction has negotiated with some leading private and foreign banks in India to offer credit to the distributors of Tata Steel. GP Coils.money. 24X7 basis.0: Shows penetration of channel finance The above graph is just a pictorial depiction of the continual & sustainable increase in channel Finance as a proportion of Sale towards regular Distribution Channel of Tata Steel.259 MT.

MetalJunction.com has tied up with Citibank and HDFC Bank Collecting sales tax documents.343 Crore. like earnest money deposit and principal. Ensuring fast and secure handling of money. Conducting the auction event Fulfillment services Undertaking collection of payments. The Process Flow of sales order in SAP This is a unique fully automated 4-step process starting from Sales Order to Money Receipt generation in Tata Steel SAP R3 system and finally dispatch of materials from the stock-yard which is powered by the integrated channel finance application designed. MetalJunction.com takes end-to-end responsibility of selling client's low 'value' and/or standard products. Creating suitable market lots to ensure maximum participation from buyers. Through intensive market-making efforts and the use of technology. greater efficiencies to processes and greater focus to the sale of non-core products of Tata Steel.com offers two types of e-selling services: Full Service on a business process outsourcing(BPO) mode MetalJunction. Undertaking market research and market-making activities to generate buyer leads.723 MT of steel aggregating Rs. Till 31 March 2003.com commenced e-selling in February 2002 and has worked with its clients to migrate products from the traditional offline process to the online platform.The entire cycle time of selling materials is reduced by the speed and efficiency with which on-line competitive bidding events can be created and managed.com sold 258. developed and hosted --->STEP I---------->STEP II----------->STEP III--------------STEP IV---> . MetalJunction. MetalJunction.Managing customer complaints. MetalJunction is bringing in both.

teamwork and many others. training and education. delivery performance. supply chain response time. These quality initiatives mandate a transformational change in the mindsets.Fig 1. it faces several challenges and opportunities. As Tata Steel works toward its goal of becoming a top player in the world steel market. Supply chain performance measures can be classified broadly into two categories qualitative measures (such as customer satisfaction and product quality) and quantitative measures (such as order-to-delivery lead time. Improving supply chain performance requires a multi-dimensional strategy that addresses how the organization will service diverse .2: The Process Flow of sales order in SAP 100% secured receivables 100% timely payment Increased buying power of the distributors Improved margin and supply chain visibility Single window in terms of visibility of MIS Challenges in implementing SAP ERP implementation is not as simple as installing software package since it involves a lot of changes to be done in the mindset of the people of the company to be successful. In our study we consider only the quantitative performance measures. which facilitates ERP implementation. The paper looks at these factors and discusses how adoption of new ERP system results in the creation of improved processes. etc. resource utilization. These critical elements create a foundation.). flexibility. practices and capacities. employee involvement. attitudes and culture and focuses on critical elements like leadership. These include: • Operating in a competitive market • Supporting ambitious growth plans • Reshaping its business processes and IT infrastructure CHAPTER V Performance Measures of Supply Chain Management.

and quality. We will focus here on the first four measures. If the items were made to order. manufacturing lead time. For supply chains. There is a detailed discussion of these in. While the performance measurements may be similar. inventory levels. It thus includes supplier lead time. the specific performance goals of each segment may be quite different. and order management time. performability. the business processes of interest are the supply chain process and the order-to-delivery process. distribution lead-time. resource utilization. The order-to-delivery lead-time is the time elapsed between the placement of order by a customer and the delivery of products to the customer. we need to consider two types of lead times: supply chain lead-time and order-to-delivery lead-time. Quantitative metrics of supply chain performance can be classified into two broad categories: Non-financial and financial. • • • • Cycle time Customer Service Level Inventory Levels Resource utilization Cycle time Cycle time or lead-time is the end-to-end delay in a business process. then this would be the sum of supplier lead-time. If the items were in stock. manufacturing lead-time. and the logistics lead time for transport of raw materials from . then it would be equal to the distribution lead-time and order management time. distribution lead time. flexibility. The supply chain process lead time is the time spent by the supply chain to convert the raw materials into final products plus the time needed to reach the products to the customer.customer needs. 1) Non-Financial Performance Measures 2) Financial Measures Non-Financial Performance Measures Important metrics include: cycle time. customer service level. Correspondingly.

The order fill rate could be with respect to a central warehouse or a field warehouse or stock at any level in the system. Inventory Levels Since inventory-carrying costs can contribute significantly to total costs. there is a need to carry just about enough inventories to satisfy the customer demands. storage resources (warehouses.). which is the fraction of customer demands that are met from stock.suppliers to plants and for transport of semi-finished/finished products in and out of intermediate storage points. and minimize backorder levels. i. Stock out rate is the complement of fill rate and represents the fraction of orders lost due to a stock out. rail transport. Customer Service Level Customer service level in a supply chain is a function of several different performance indices. For this fraction of customer orders. Resource utilization A supply chain network uses resources of various kinds: manufacturing resources (machines. within the agreed-upon due date. finished goods inventory. minimize stock out rate. To maximize customer service level. costs. which is the number of orders waiting to be filled. between distributors and retailers. etc. Inventories held in a supply chain belong to four categories Raw materials. Thus measuring the actual inventory levels will provide a useful picture of system efficiency. there is no need to consider the supplier lead times and the manufacturing lead times. which is the fraction of customer orders that are fulfilled on time. material handlers. and spare parts. Another measure is the backorder level. between plants and warehouses. Another measure is the probability of on-time delivery. and customer service levels. Lead time compression is an extremely important topic because of time based competition and the correlation of lead time with inventory levels. The first one is the order fill rate. one needs to maximize order fill rate. air-cargo . automated storage and retrieval systems). etc. work-in-process (unfinished and semi-finished parts). logistics resources (trucks.e. Lead-time in supply chains is dominated by the interface delays due to the interfaces between suppliers and manufacturing plants. Each type of inventory is held for different reasons and there is a need to keep optimal levels of each type of inventory. tools.

etc. transportation costing. Ultimately. materials. assembling. and labor. The objective is to utilize these assets or resources efficiently so as to maximize customer service levels. etc. stocks. scientific and technical personnel). technology. and financial (working capital. operations. The financial performance of a supply chain can be evaluated by looking into the following items. transportation. • • • • • • • • • • Cost of raw material Revenue from goods sold Activity-based costs such as material handling. decisions need to be based on objective performance information and will require sharing of this type of information with key supply chain . Costs arise due to inventories. the financial performance indices can be put together using the following major modules: activity based costing. the aim is to maximize the revenue by keeping the supply chain costs low. Developing and maintaining a supply chain performance measurement system represents one of the more significant challenges faced in SCM initiatives. facilities. Financial Measures There are several fixed and operational costs associated with a supply chain.). and inter-company financial transactions.carriers.). minimize lead times. human resources (labor. and optimize inventory levels. inventory costing. However. if supply chains are to be improved. etc. Inventory holding costs Transportation costs Cost of expired perishable goods Penalties for incorrectly filled or late orders delivered to customers Credits for incorrectly filled or late deliveries from suppliers Cost of goods returned by customers Credits for goods returned to suppliers Typically. manufacturing.

reduced costs. marketing & sales. CHAPTER VI Relationship between Supply Chain Management and performance in Tata Steel. is used in the financial analysis of a business. The company has spent close to Rs. accelerated transaction time. Supply Chain Performance refers to the extended supply chain's activities in meeting end customer requirements. on-time delivery. Working Capital Cycle Working capital cycle. cash conversion cycle or just cash cycle. Supply Chain Performance crosses company boundaries since it includes basic materials. distribution. manufacturing. The introduction of SAP R/3 solutions within Tata Steel has led to efficient business processes. In today's economy the battlefield is shifting from individual company performance to what we call Supply Chain Performance. and all the necessary inventory and capacity in the supply chain to deliver that performance in a responsive manner. and distribution through various channels to the end customer. Organizational willingness to share information with other supply chain members is a critical selection criterion for SCM membership. operating cycle. and has saved Rs. enhanced customer service.members. also known as the asset conversion cycle. including product availability. workflow management and reduction in the number of credit management errors. The Internet is a key enabler of both supply chain performance improvements and richer supply chain performance measures. and research & development. components. An organization that is willing to receive information from other supply chain members but is reluctant to share information is a poor candidate for inclusion in an SCM initiative.33 crore within a few months of implementation. the results have been terrific. subassemblies and finished products. improved productivity.40 crore on SAP implementation. "Post the introduction of the SAP solution. It also crosses traditional functional organization lines such as procurement. The .

the more cash the firm must keep tied up in inventories. We can see from the graph it came down slowly from 1999 onwards. the higher the value of accounts receivable. The cash conversion cycle is the number of days between paying for raw materials and receiving cash from selling goods made from that raw material. it may reduce the amount of cash it needs. On the other hand. Conversely. the longer it takes customers to pay their bills. Similarly. In other words. Gross working capital during the period 1998-99 was highest for the company.higher the number. The longer the production process. accounts payable reduce net working capital • Raw material holding period has increased by 55% while there has been an efficient Management in the stocks in process and stores & spares holding period this is depicted by a decrease of 60% and 30% in the holding days respectively.1: Working capital analysis. A short cash conversion cycle indicates good working capital management. if a firm can delay paying for its own materials. • The credit receivables period has also been brought down considerably by about 77% which shows the efficiency of the debtors’ management. . Graph 1. the longer a firm's money is tied up in business operations and unavailable for other activities such as investing. a long cash conversion cycle suggests that capital is tied up while the business waits for customers to pay.

To add to this. Debtors Turnover The average debtors to turnover were down to 9 days from 68 days cent. 155 per ton. 190 per ton to Rs. Graph 1. now 18–20 days from 65–70 days earlier. Lead time required to process orders. develop new products and reconcile accounts.The inventory management The inventory management in 2003-04 and 2004-05was best in the company history. there have been significant costs savings through management of resources with the implementation of SAP. Online availability of data will further improve Inventory Management in the stockyards. leading to better customer services. which was the highest in the period from 1996 to 2009.2: Inventory turnover (In Days) A reduction in lead time for spending approvals. The inventory carrying cost has drastically deflated from Rs. settle complaints. . in substantially lesser time.

3: . Total number of employees has come down from 78. .252 in September 2001 and about 35. Labour productivity has multiplied three from 1999-2000 to 2008.000 in 2008.276 in March 1993 to 48.Debtors Turnover in number of days Labour productivity Labour productivity in Crude Steel has been continuously improving from 93 Tons/ Man year in 1996-97 to 152 Tons/Man year in 2000-01 and stands at 370 Tons/Man year in 2008.Graph 1.

tax. and amortization). and Amortization. depreciation and amortization entries in the Income Statement are reversed out from the bottom line Net Income. EBITDA is the acronym for Earnings before Interest.4: Shows labour productivity from 1996-97 to 2008-09 EBITDA Margin Refers to EBITDA divided by total revenue. canceling tax-jurisdiction effects. EBITDA margin measures the extent to which cash operating expenses use up revenue.Graph 1. EBITDA also differs from free cash flow because it excludes cash requirements for replacing capital assets (capex). EBITDA differs from the operating cash flow in a cash flow statement primarily by excluding payments for taxes or interest as well as changes in working capital. EBITDA is a rough approximation for cash flow and it is calculated as revenues . depreciation. It purports to measure cash earnings without accrual accounting. Taxes. and canceling the effects of different capital structures. Depreciation.expenses (excluding taxes. It is a non-GAAP metric that is measured exactly as stated. . All interest. interest.

customers would generally not receive advance notice if their order would not be ready as promised. Realizing that its industry-leading position was hanging in the balance. Without any method to analyze forecast versus actual performance. And third. the company conducted an exhaustive survey to establish detailed customer requirements. To make matters worse. further alienating customers whose orders may have been just as important but less urgent. accurately project a revised delivery date so that the customer could modify its schedules accordingly. and this lack of communication burdened customer resources down the line. To address customer needs. it was impossible to design improvements in the overall delivery system. The survey yielded three imperatives. Tata started the improvement process by articulating its strategic drivers: improved customer satisfaction and higher asset utilization. customers were promised a due date that was not based on hard data. notify the customer early in the process—not at the point of the missed delivery. provide an accurate promise as to when the order would be delivered. Orders were delivered when promised only about 50 percent of the time. First. The plant would often scramble to address the needs of high-priority customers. in the finishing and distribution channels. Second.5: EBITA/Turnover (%)from 1996-97 to 2008-09 Customer satisfaction Customer satisfaction was a real issue at Tata Steel. plant capacity or raw-material availability.Graph 1. When orders were placed. in the event that the order due date would be missed. .

Efficient dissemination of information upstream and downstream is a major requirement for the implementation of the supply chain. The availability of online information has facilitated quicker and reliable trend analysis for efficient decision-making. but is related to the growth and survival of organization(s). dispatches and credit lines. orders. enabling root-cause analysis capabilities to identify what has caused the differences. Prior to implementing supply chain software. IT provided with Internet. stock ledgers. EDI and GroupWare’s and other application . Now. the company had no systematic insight into how to evaluate the accuracy of its forecasts for demand as well as for raw materials. It is Internet enabled and allow customer to use SAP to get information on their orders. With customers becoming more demanding in their requirement of services from the suppliers.It leads to complete transparency in customer ledgers. Team ASSET at Tata Steel. CHAPTER VII Recommendations and Conclusion Recommendations and Conclusion From the above analysis and discussion it can be concluded that. Information technology plays a major role in the formation of the supply chain. the construction of an efficient and integrated supply-chain has assumed paramount importance. Besides the streamlined business process reduces the levels of legacy system and also provides consistent business practices across locations and excellent audit trail of all transactions. it has the tools to analyze its forecast predictions against actual results. "Improving our ability to forecast allows the company to use due-date-based planning. Forecasting capability Tata's forecasting ability has also improved dramatically. With SAP solution Tata Steel can now update their customers on a daily basis and provide seamless services across the country improving customer management. Supply chain management has become not just a question of efficient logistic process. which helps them to meet demand with higher utilization.

Meanwhile. as some parts have multiple universal material codes. Tata Steel’s interaction and integration processes. In plant maintenance. as well as its IT landscape. 1. Because data interfaces between SAP and non-SAP software are batch oriented. 3. Tata Steel could streamline its purchasing process by using mySAP ERP email integration for workflow approvals. employees have found it difficult to enter work-order data. there are multiple systems in place at Tata Steel that involve a variety of independent software vendors using different technology and interfaces. the company could save time and streamline communication by using the new SAP solutions. the company must increase the share of annual rate contracts in total purchasing. 4. It would enable the use of what-if scenarios to show the projected budget impact of various business decisions. it must free up personnel from routine activities. This can be resolved through the use of mobile asset management during maintenance operations. In purchasing. This would speed up the budget process dramatically and free management from non-value-added tasks. With the company’s current expansion plans. the approval process is not integrated with the company’s e-mail system. and there is an opportunity to reduce inventory-carrying costs by improving the share of vendor-managed inventory. rather than spreadsheet the solution to handle its budget process outside. with a parallel increase in duplication. which results in additional unnecessary effort. Evaluate SAP functions for a monthly rolling budget forecast based on a total cost breakdown for existing cost centers. After analyzing the complete implementation I have the following suggestion which can be added to the present ERP environment to make it more effective. In strategic purchasing. less control. are also likely to expand. Tata Steel faces considerable data duplication in its purchasing functions. In addition.software’s. the number of parts is bound to grow. . if Tata Steel hopes to increase total steel capacity using the same number of resources. processing for real-time updates is not possible. 2. and longer lead times. In addition.

Evaluate the SAP xApp Analytics composite application.5. Evaluate manufacturing intelligence dashboards. alerts. The new SAP software offers untapped potential for Tata Steel. which is typical for many mills. To support business decision-making. Creating reports takes too much effort. Drive Additional Value Through Extending the SAP Footprint Tata Steel has additional requirements that could be satisfied by other SAP applications. 7. non-SAP data must be entered manually. 6. These dashboards . 8. Meanwhile. a real-time analytics engine could aggregate and deliver a unified version of events. The heads of the individual business units seem to be looking for a better solution that will help them eliminate routine data and events and enable them to focus on exceptions. and decision-making support to production personnel through role-based dashboards. Industry-specific functions within the new software could solve this problem. In manufacturing. Standard reports don’t cover management needs. data must be collected from different Systems. it must free up personnel from routine activities. this is currently done without seamless system support. for example. This component can also be helpful for unifying and maintaining customer data. 9. Because the company releases significant amounts of emissions into the atmosphere during its manufacturing processes. Enable Further Benefits through Better Decision Making Available reporting processes are insufficient at all departments. the management of emission certificates is a very important issue that could be enhanced through further automation. which helps managers quickly create a wide range of reports and graphic representations of data without programming. Currently the company exerts an unnecessarily large effort to gather information on product batches for production and sales order processing. Evaluate the SAP NetWeaver® Master Data Management (SAP NetWeaver MDM) component for powerful data cleansing functions. if Tata Steel hopes to increase total steel capacity using the same number of resources. key performance indicators.

Available roles include plant manager. filtering out daily routine data and helping managers retrieve data that is important to them.3 that enterprise service-oriented architecture (enterprise SOA) (12) has the highest potential value creation but also comes with very high effort. Using an approach similar to Gartner’s Magic compares the potential value creation (on the horizontal axis) for each recommendation with the effort (on the vertical axis) involved in its implementation. Fig 1. and maintenance technician. analytics (13) and dashboards (14) require relatively low effort but return good value. Recommendation’s for next steps Based on this experience.are user centric and role based. Strategic purchasing with the mySAP Supplier Relationship Management (mySAP SRM) application (5). a master roll-out template (19).3: Gartner’s Magic . we developed a wide range of recommendations – from capturing additional value from the company’s current IT investments to deploying new technology to support future innovation. On the other hand. quality manager. The dashboards also offer powerful functions for data cleansing. and two composite applications (7 and 9) have a positive balance of value for effort. We can see in Fig 1. production supervisor.

Conclusion From the above analysis and discussion it can be concluded that. The analysis and interpretation of the data from the case study was drawn out in Chapter 6. The purpose of this research was to provide better understanding how SAP and ecommerce has helped the Tata Steel to be more competitive. After going through the analysis we can assume that all the research issues were answered. there are several limitations to this study and further research can be undertaken. but is related to the growth and survival of organization(s). . We aimed to get a better understanding of the phenomenon by answering the research questions connected to SAP. However. Supply chain management has become not just a question of efficient logistic process. Efficient dissemination of information upstream and downstream is a major requirement for the implementation of the supply chain. Information technology plays a major role in the formation of the supply chain. the construction of an efficient and integrated supply-chain has assumed paramount importance. The purpose of this study had been mainly to describe a phenomenon within a specific area of research. e-procurement and other initiative taken by Tata Steel to make them more competitive in the market. With customers becoming more demanding in their requirement of services from the suppliers. We have conducted an extensive analysis and managed to collect sufficient information in order to provide comprehensive answer to the research question.

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