IT STRATEGY CASE STUDY FOR STEEL INDUSTRY IN INDIA

     

How and Why TATA STEEL……..??

·   Tata Steel Limited which was formerly known as TISCO i.e. Tata Iron & Steel Company Limited is an Indian Multinational steel-making company headquartered in Mumbai, Maharashtra, India and is a subsidiary of TATA Group – the most trusted & valuable group in India.

·   It is the 11^th largest steel company in world according to worldsteel.org with annual crude steel capacity of 26.2 million tonnes (Mt).

·       It is the 2^nd largest private-sector steel company in India after SAIL.

Background & History of TATA STEEL

·  Established in 1907 as Asia's first integrated private sector steel company, Tata Steel Group is among the top-ten global steel companies with an annual crude steel capacity of over 29 million tonnes per annum.

·       Founded by Dorabji Tata

·       CEO – T. V. Narendran

·  It is now the world's second-most geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries.

·       The Tata Steel Group, with a turnover of Rs.1,48,614 crores in FY’14, has over 80,000 employees across five continents and is a Fortune 500 company.

·   Tata Steel’s larger production facilities comprise those in India, the UK, the Netherlands, Thailand, Singapore, China and Australia.

·  Operating companies within the Group include Tata Steel Limited (India), Tata Steel Europe Limited (formerly Corus), Tata Steel Singapore and Tata Steel Thailand. 

·  The Tata Steel Group’s vision is to be the world’s steel industry benchmark in “Value Creation” and “Corporate Citizenship” through the excellence of its people, its innovative approach and overall conduct.

· Underpinning this vision is a performance culture committed to aspiration targets, safety and social responsibility, continuous improvement, openness and transparency. 

·       In 2008, Tata Steel India became the first integrated steel plant in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management.

·    In 2012, Tata Steel became the first integrated steel company in the world, outside Japan, to win the Deming Grand Prize 2012 instituted by the Japanese Union of Scientists and Engineers.

Case of IT Strategy

·       Tata Steel was initial facing the challenges of –

o   The technology that Tata was using was a simple replication of manual system.

o   It operated as individual islands of information & technology was outlived its lifetime and was completely obsolete.

o   Employees & Management faced a cumbersome task exchanging & retrieving information from the system.

o   Moreover reliability of information obtained was questionable because of inconsistency and duplication of data from different departments.

o   No built-in integrity check for various data sources.

o   Several cases of information missing.

o  The management at Tata Steel wanted the software to seamlessly integrate with its existing information system and further provide compatibility with its future implementations. 

How it was implemented….?

·       Tata Steel adopted ERP technology to take a lead in the competitive steel industry and through constant learning, innovation and refinement of its business operations, has transited seamlessly from a production-driven company to a customer-driven one.

·       They re-designed the two-core business processes, Order Generation & Fulfilment and the Marketing Development processes, to improve customer focus facilitating better credit control and reduction of stocks.

·       After an in-depth study of functionality, cost, time, compatibility, esteem, operability, support and future organizational requirements was done, SAP topped the list of contenders.

·       The implementation of SAP software was associated with certain strategic goals in mind.

·       With this implementation, TISCO wanted to bring forth a culture of continuous learning and change. This would enable TISCO to achieve a world-class status for its products and services and strengthen its leadership position in the industry.

·       Besides this, TISCO also wanted the software to result in quick decision-making, transparency and credibility of data and improve responsiveness to customers across all areas.

·       “Implementing any ERP system is a challenge for an organization because of the declining success rate of ERP implementations world-wide. The challenge is compounded if the ERP provider is a world leader” - SAP.

·       At Tata Steel, however the challenge did not lie in successfully implementing SAP or in rolling it out to 46 odd geographic locations across the country under a big bang approach in just eight months.

·       It was inspiring to know that TEAM ASSET with support from Pricewaterhouse Coopers and SAP successfully lived up to our axiom and truly demonstrated leadership skills by going live across 46 locations within a record time frame of eight months.

·       In January 99 the team from TISCO was decided and christened 'TEAM ASSET' an acronym for Achieve Success through SAP Enabled Transformation.

·       The TEAM ASSET had two simple axioms:

o   Go-Live date - 1st November 1999

o   There are only 24 hours a day

·       Preparatory task forces activities were conducted and core business processes were mapped to SAP modules.

·       Also another parallel activity called 'Change Management' was initiated within the company. The prime objective of 'Change Management' was to reach out to people involved non-directly in the project to apprise them of the developments taking place.

·       Tata Steel planned a big-bang approach of going live with all the modules at the same time, in just a span of eight months.

·       Driven against the speed of time, the pace of implementation was fast with all activities backed by a lot of thought process and meticulous planning.

·       On 1st November 1999 Tata Steel pulled off a big bang implementation of all SAP modules at one go across 46 countrywide locations, as per the set deadline.

USP’s of IT Strategy

·       USP is just-in-time delivery, made possible through efficient processes imbibed from other company.

·       The location of processing plants and warehouses, and the installation of SAP at every point forms the hardware.

·       The software team consists of people who are highly trained and customer focused. Their main job is to keep track of customer’s inventories and needs on a daily basis and ensure that the company’s supply chain is balanced.

·       Among the top ten global steel companies with an annual crude steel capacity of over 28 million tonnes per annum.

Key Outcomes of the IT Strategy

·       The introduction of SAP solutions within Tata Steel led to efficient business processes, enhanced customer service, reduced costs, improved productivity, accelerated transaction time, workflow management and reduction in the number of credit management errors.

·       “Post the introduction of the SAP solution, the results have been terrific. The company has spent close to Rs 40 crore on SAP implementation, and has already saved Rs 33 crore”.

·        The manpower cost has reduced from over $ 200 per ton two years ago, to about $140 per ton in 2000.

·        The overdue outstanding was brought down from Rs.5170 million in 1999 to Rs.4033 million by June 2000.

·       The inventory carrying cost was drastically deflated from Rs.190 per ton to Rs.155 per ton.

·       To add to this, there had been significant costs savings through management of resources with the implementation of SAP.

·       With SAP's solution Tata Steel can now update their customers on a daily basis and provide seamless services across the country improving customer management.

·       The availability of online information has facilitated quicker and reliable trend analysis for efficient decision-making.

·       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.

Statement by TATA STEEL Executive

"Now I shudder to think how we were functioning so many years without a world-renowned ERP system. Along with the hard times we had, came the rewards of the success of implementation," remarked Mr. K. V. Srinivasan, Member, Team ASSET at TISCO.

Suggested IT Strategy v 2.0 for TATA STEEL to maintain competitive advantage in future

·       In future, Web enabling of SAP R/3 should be implemented.

·       On the surface, it means it would allow anyone to access SAP R/3 over the Internet.

·       But beneath it, the implications are tremendous, as it would result in sharing of information with enterprise accounts and key customers.

·       The success in Marketing and Sales has prompted a re-visit of the existing system in the works and a detailed rollout is expected as below.

·         Phase I - To Extend SAP in Works with FI, CO, MM, PP & QM.

·         Phase II - To implement SAP modules such as Asset Management & Budget management sub-modules of FICO, Plant maintenance, Human Resources, Production Optimizer (such as SAP APO)

·         Phase III - SEM (Strategic Enterprise Management)

·       The company should also adopt the mySAP Customer Relationship Management solution to enhance its customer relationships in the near term and eventually realize its dream of a becoming the most efficient and competitive company in the world in its vertical.