Case Name: Devising an Inventory Management Strategy ensure timely

Material Availability while minimizing the Wasteful and Total Inventory in

the system
Sponsor: Mr. Keshari Kumar, Chief Guide: Mr. Devansh Bajpai, Head
Integrated planning & Services Margin Management and Business
Planning

Background:
Tata Steel produces a wide range of steel products that go through processing at different
stations, namely Caster, Hot Rolling (HR) Mills, Cold Rolling (CR) Mills, and Finishing
Operations for Flat Product Basket. These products have different production lead times and
may or may not touch every single manufacturing resource. Also, customers often require
delivery within a lead time that exceeds the production lead time. This necessitates pre-
empting customer demand for future period and manufacturing against it even before the
receipt of Actual Sales Order.
However, the demand variabilities for different Customer-Product combinations pose a
significant challenge. Certain combinations may experience high variability, leading to
excessive inventory build-up when produced against a forecast, while others may face
stockouts due to insufficient preparation. Thus, postponement of product differentiation while
adhering to Customer SLAs (Service Level Agreements) becomes key in reducing Wasteful
Inventory Generation while meeting the Customer Promise Dates.

Objective:
The main objective of the Steel-a-thon competition is to develop an optimized production and
inventory management strategy that minimizes wasteful inventory while meeting customer
requirements within the specified lead times as per agreed service levels.

Process Details and Case Data:

1. Diverse Production Lead Times: Different steel products have varying lead times at
each processing stage, making it challenging to plan the pipeline inventory.

2. Customer Required Lead Time: Since steel products take long time to manufacture,
customers while placing orders are not willing to wait for the entire Product
Manufacturing cycle. Customer expected lead time of delivery post ordering is often
lesser than Manufacturing Lead time.

3. Demand Variabilities: Demand Forecast depends upon historic trends and cyclicity of
demand. However, these can never be exact predictors of Future Customer demands.
Thus, it becomes extremely critical to take into consideration the variabilities of
demand when planning to avoid wasteful inventory generation or stock out condition.
As part of this case, you have been provided with the Coefficient of Variation of
Demand for each Customer – Product Combination.
 4. Inventory Holding Capacity: The maximum capacity to hold inventory is limited and
attached.

5. Inventory stored at Stockyards: If manufacturing is done against a forecasted order, it

often is stored at Stockyards till the actual orders from customers come up, post
completion of all manufacturing stages.

Following is the sample dataset that the teams have to design their respective solutions
around:

Critical Case Questions:

Suggest an optimal inventory management strategy to ensure Timely Material Availability
while operating at optimal stock levels to prevent conditions of stock out or Wasteful
Inventory:
1. How much inventory should be maintained for each Product - Customer Combination
2. How should this inventory be distributed along the pipeline of Value Chain (Caster,
Mills, Finishing Line, SY etc.)

Key Points to be kept in Consideration:

• As a key principle, as we move towards upstream (From Finishing Operations
towards Caster), due to the aggregation of Demand, the Variability reduces, in
turn, the lead time of Balance Processing Points increases. Thus, balancing
between Postponement of Product Differentiation vs Serving in low lead time
becomes critical.
 e.g.
• Take Assumptive Numbers for any additional data (if required) for the proposed
solution.