Essa r Steel

7/29/2019 Essa r Steel

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Essar Steel

Essar Steel is a global producer of steel with a footprint in India, Canada, USA, the

Middle East and Asia. Essar Steel is one of India's largest exporters of flat products,

exporting to the highly demanding US and European markets, and to the growing

markets of South East Asia and the Middle East.

A number of major client companies have approved Essar steel for their use,

including Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway, and Maruti

Suzuki. Essar Steel has acquired extensive quality accreditations and their lean

team has enabled them to achieve highest productivities and lowest manpower

costs among steel plants internationally.

Their supply chain has been aligned to meet their business objectives and

structured as follows

Figure 1: Essar Supply Chain Goal Alignment
http://www.essarsteel.com/http://www.essarsteel.com/


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Essar Supply Chain - Strategic Advantage

A major strategic advantage is their high level offorward and backward

integration. They are totally integrated from raw material to finished products

adding value at every stage of the manufacturing process. Their areas of operationinclude:

Iron Ore Beneficiation

They have an 8 MTPA plant at Bailadilla (Chhattisgarh) and a 12 million ton per

annum (MTPA) plant at Dabuna (Odisha), both strategically established to leverage

the rich iron ore deposits of the respective states. The plants pump the iron ore

slurry to Essar Steel pellet plants at Visakhapatnam (Andhra Pradesh; 267 km

pipeline) and Paradip (Odisha; 253 km pipeline) respectively.

Pelletization

They have an 8 MTPA pelletization plant at Visakhapatnam and a 6 MTPA pellet

plant at Paradip, both of which provide vital raw material to the steel plant at Hazira

(Gujarat).

Iron and Steel

They have a fully integrated world-class facility at Hazira, housing the world's fourth

largest single-location steel plant. It has a steel-making capacity of 10 MTPA, holds

ISO: 9001:2000, IS 9002 and TUV, and ISO 140001 certification and is India Chiller

Energy Efficiency Project (ICEEP) Protocol compliant.

The facility also houses a 6.8 MTPA sponge iron plant (the world's largest gas-based

sponge iron plant in a single location); a 1.5 MTPA plate mill (the largest in India); a

0.6 MTPA pipe mill with with internal and external coating facilities of up to 2 million

square meters annually; and a 1.4 MTPA cold rolling complex comprising two

galvanizing lines, a batch annealing furnace and a skin pass mill.

Steel Processing

They have a downstream capability hub at Pune (Maharashtra),which houses a 0.6

MTPA cold rolling plant, a 0.5 MTPA galvanizing plant, a 0.4 MTPA color coating

plant, and a 0.65 MTPA pickling line.


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Steel Distribution

Essar Steel is the first steel company to set up an end user distribution chain for

steel products under the brand names Essar Hypermart and Essar Expressmart.

Hypermart is the world's largest steel retail chain with a network of over 375 retailoutlets across India, Indonesia, Nepal and the Middle East.

Essar Steel has the largest downstream capabilities in India.

Essar Steel's processing and distribution facilities are the largest in India with an

aggregate annual capacity of 4 million tonnes from its facilities in Pune

(Maharashtra), Hazira (Gujarat), Bahadurgarh (National Capital Region), Chennai

(Tamil Nadu), Bhuj (Gujarat) and Dubai (UAE)

The flow of operations is illustrated as follows:

Figure 2: Operations Flow


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Essar Supply Chain - Evolution

Initially Original Equipment Manufacturers (OEM customers) and retail outlets were

directly served from Hazira plant and its downstream service centre. Subsequently,

a few retail hubs were setup ( such as VITCO in Surat, ARK in Pune) to serve retail

outlet segment. The main drawbacks of these models were:

Away from the market and customers

More lead time to serve

Low responsiveness to changes in needs of customers

Transit Damage

Essar Steel decided to focus on market ownership to influence consumption. It

adopted a hub and spoke model in supply chain to cater to its OEM and retail

customers. Majority of mother coils were to be routed through Steel Service Centers

(SSC) closer to consumption points. In case of retail outlet, coils were to be sent

from Hazira or any other SSC to Retail Outlet Service Centre (ROSSC) closer to retail

market centroids for processing as per market demand. Each ROSSC was designed

to serve RO in a radius of 200-300 km wherein delivery was to be made within 24

hours.


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Figure 3: Hub and Spoke Model of Supply Chain

Figure 4: Factors for deciding number of warehouses

Factors affecting the number of ware houses built by Essar Steel include:


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Inventory Cost

Transportation Cost

Warehousing Cost

Cost of Lost Sales

Maintenance of customer service levels

Servicing small quantity of buyers


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Essar Supply Chain - Characteristics

Value-Added Product Solutions

Essar Steel is driven by technology to deliver products of the future. The Hazira

plant is one of the most technologically advanced plants in the world.

Collaborative Approach

Essar Steel has established close research and development with OEMs and

customers to develop specific and customized products. Production scheduling is

integrated with inward plans of customers. They work closely with their customers

to guide them on best product application mix.

Customer Value Management

Essar Steel adopts a relationship driven model and has adapted web-based CRM

modules to serve customers in a better manner. They believe in understanding

needs of customers by closely working with them.

Logistic Solutions

Essar Steel is driven to save on logistics cost to customers and customize product

on delivery. They are the only company to have Service Centers near steel

consuming hubs to deliver customized products at scheduled time as desired by

customers. They are the first steel company in the world with forward integration

into retail through 600+ Expressmarts and Hypermarts which enable them to serve

SMEs and small customers.

Key Sustainability Accomplishments - Green Supply Chain

8.72% reduction in greenhouse gas emissions in India in 2011

99% reuse of byproducts in Hazira plant

130000 cubic metres of water conserved at Hazira through rainwater

harvesting

91% of solid waste utilized in Hazira


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5.2% reduction in specific water consumption of crude steel at

Hazira in 2011

Essar Steel won CSE Green Rating Award in 2012

(Source: www.essarsteel.com)


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Distribution Network of Essar Steel

Major Steel Service Centre (owned by Essar Steel)

Bahadurgarh (North)

Bhuj (West)

Indore (Central)

Pune (West)

Chennai (South)

Kolkata (East)

Retail Outlet Service Centre (ROSSC)

Company owned ROSSC throughout India

Retail Outlets (Hypermarts)

Company owned 600 outlets spread across 20 states

Express Marts

Retail Outlet Selling Points

Figure 5: Distribution Network

Overview


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Hub and Spoke Model Significance for Essar Steel

Customer Centric Supply Chain

Better control over inventory due to improved forecasting

Postponed differentiation hold inventory at intermediate stages

Average inventory holding period has decreased from 30 days to 21 days

Build brand awareness through Hypermarts

Reduction in Lead Time leading to Just in Time (JIT) supply

Supply of specific width of any length as against pre-decided length and

width

Hub and Spoke Model Significance for Customers

Easier accessibility and convenience for purchase of steel ( Steel available

when they need, where they need)

Pre-dispatch inspection to ensure quality control in product for customers

Performance tracking against world benchmarks

Easier access to technical and operational support

Provides flexibility in business and helps to improve working capital cycle


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Figure 6: Hub and Spoke Model Relevance


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References:

www.essarsteel.co.in

http://www.steelworld.com/Quasteel.htm

http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_steel2212.

pdf
http://www.essarsteel.co.in/http://www.steelworld.com/Quasteel.htmhttp://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_steel2212.pdfhttp://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_steel2212.pdfhttp://www.essarsteel.co.in/http://www.steelworld.com/Quasteel.htmhttp://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_steel2212.pdfhttp://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_steel2212.pdf

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