Management Information Systems

Assignment

On

TATA STEELSubmitted To: Prof. Sanjiv Vaidya

Submitted By:

Arvind Pratap Singh(16)

Lokesh Dhruw(32)

Surat Prakash Dungdung(62)

Shutanu Dutta(63)

IIM Raipur(C.G.)

Table of Contents1. Introduction

2. PEST analysis on Tata Steel

3. SWOT analysis on Tata Steel

4. Porter’s Five Forces Model on Tata Steel

5. Critical Success Factors and Challenges

6. Why IT applications needed at Tata Steel

7. Information systems for a quickly changing steel industry

8. Challenges for the Information Systems in steel industry

9. Strategic IT model for Tata Steel

10. Conclusion

11. Bibliography

Introduction

TATA steel is India’s largest integrated private sector steel company that started its corporate

journey in the year 1907. Backed by captive iron ore and coalmines, Tata Steel runs state-of-

the-art Cold Rolling Mill complex at Jamshedpur, Eastern India. The enterprise has

undergone a modernization programme costing $2.3 billion, resulting in production of steel at

the lowest cost in the world. Being a large entity does not stop things from being subject to

scrutiny and internal audit. They are regularly implemented with the help of committees who

report to the selected members from the senior management.

The company is dedicated to providing laudable services to the stakeholders improve on the

quality and as thrive for innovations and improvements constantly. Tata Steel is a relentless

pursuer of excellence. ASPIRE; Tata Steel’s quality initiative drive combining TPM, Six

Sigma, Total Operational Performance, Suggestion Management and Quality Circles has

reaped rich dividends for the company.

Tata Steel's Jamshedpur plant has a capacity of 4 million tons per year, and produces flat as

well as long products. Currently, to meet growing demands, the plant is being expanded to

accommodate another million. Tata Steel has set up an ambitious target of 15 million ton

capacity per year by 2010. As part of its expansion plans the company recently made

investments in NatSteel Singapore, which will expand its footprint in six countries in the Asia

Pacific region and China.

Tata Steel's products include hot and cold rolled coils and sheets, galvanized sheets, tubes,

wire rods, construction re-bars, rings and bearings. The company has introduced brands like

Tata Steelium (the world's first branded Cold Rolled Steel), Tata Shaktee (Galvanized

Corrugated Sheets), Tata Tiscon (re-bars), Tata Pipes, Tata Bearings, Tata Agrico (hand tools

and implements) and Tata Wiron (galvanized wire products). The Construction Solution

Group explores new avenues for steel utilization by techniques that are economical. Tata

Steel has also developed 'galvannealed' cold rolled steel with technical assistance from

Nippon steel for high-end auto applications.

Automation at Tata Steel Limited follows the Purdue model of Automation Hierarchy.

There are different levels of Automation:

Level 0: Field / Measurement Level - Dealing with sensors and transducers

Level 1: Process Control Level- Dealing with feedback control

Level 2: Process Optimisation and Supervisory Control Level

Level 3: Plant Control level- Dealing with Production Planning and Scheduling

Level 4: MIS-Management Information System at the Corporate Level.

Pest Analysis on Tata Steel1. Political aspectThe government gets several roles influencing the steel industry as follows:

Competitor with the public sector steel companies; Resource allocator by leading the policies; and Regulator on the market industry.

Tata has made huge investments in politically unstable countries like Iran or Thailand. The company contributes to the nation by being a model in terms of corporate social responsibilities and citizen. Indeed, it is a way to face the political environment risks.

2. Economical aspectThe business environment was deteriorated because of the subprime crisis in the U.S.and the liquidity crisis. By acquiring Corus, Tata had gained the fifth place in world steel production. The fluctuations of the currency rates had been a risk for the Corus acquisition, which had thus been financed by amount of debt. Consequently, it broke Tata in its predicted investments and capacity expansions plans. It was facing the fear for recession on negative economical growth. Then, the steel industry is really linked with the economical context.

It means the steel industry production depends on energy prices; demand in the automotive market or in the construction market. An increase in these industries would also strongly affect Tata’s bottom line.

3. Social AspectIn 2009, Tata Steel Ltd. has been awarded the Golden Peacock Global Award for Corporate Social Responsibility. It proves the good ethical behavior of the company and that CSR has a huge place in the business strategy. Tata takes part in social development programs. For instance, the company helped gave medical treatment in rural areas and slums.

Furthermore, it participated in the deployment of a company’s mobile medical unit.

4. Technological AspectIndians are becoming one of the most technologic populations in the world today in terms of their advance in research and development. Advances in technology India have really skilled specialists in different fields, especially in IT applications. It means that it helps corporations to make savings on operating costs and to develop more efficient and effective ways of harvesting and processing the natural reserves

SWOT Analysis1. StrengthTata benefits from many raw materials available at comparatively lower costs and can enjoy raw materials required for the steel production. The company tried to develop the highest technology for quality, cost efficiently and environment friendly process.

 

Tata planned strong acquisitions and mergers on the market to accelerate its growth and its market shares. It thus developed a plan called Enterprise Risk Management ´consisting in providing all information concerning the company’s risks and issues to the shareholders and to integrate the ERM process in the entire decision making and the planning development.

To face against the fluctuation of the Steel Industry, Tata managed a large product mix with a high value added product with lower price volatility. Tata also tried to face the risks and diversified its activities through the acquisition of Corus.

2. WeaknessEven though India has huge resources of raw materials, there could be some problems with their quality. Exemplarily, high ash content of indigenous coking coal adversely affecting the productive efficiency of iron making and is generally imported. One of the issues is also that prices of cooking and non cooking coal are increasing in India and the inputs prices are still really high. As it has been said, steel is a capital intensive industry. The Industry has to face the high cost of capital because in India they are charged an interest rate of around 14% on capital. Finally, in India the advantage of low cost labor is compensated for the low labor productivity.

3. OpportunitiesConcerning the Indian market’s opportunities, the biggest is that there are many possibilities of increasing the steel consumption in all sectors. The development of new infrastructures had increased the demand. For instance, there are possibilities in the Indian Rural Market but also in Indian packaging and water supply sectors. Some marketing surveys predicted that world steel consumption will double in next 25 years. Concerning the acquisition of Corus, it permitted to gain a technological advantage and to improve the production process. In few words, it helped to bring a higher productivity and so to increase the market, to do some economies of scale leading and cost reduction. The huge amount of expenses in R&D is permitting to develop capabilities and practices and then to be more efficient and present at the international scale.

4. ThreatThe point is that economic growth and steel industry growth are really linked. It means that the morose economic context is playing a negative role on the steel industry. Consequently, the Indian steel industry has suffered of prices fluctuations on energy and trade discounts. The steel

industry has to take part in the increasing concerns in global warning and to take care about the externalities. It means to think and act about the conservation of nature for future generations. Furthermore, some researches proved that the steel industry is contributing to the gas emissions. Moreover, plastics are a threat to Indian steel. For the automobile industry, the other material, which can substitute steel, is aluminum. However, at present the high cost of electricity for extraction and purification of aluminum in India is still too high.

Porter’s Five Forces Model for Tata Steel

Critical Success Factors

Improved cost structures

Improve Supply Chain Management

Operational Effectiveness

Highly Technological expertise

Top Competitors for Tata

Steel

• Arcelor Mittal

• Essar Group

• Steel Authority of India Ltd.

• Jindal Vijaynagar Steel Ltd.

Challenges

Tata Steel faced many challenges in respect of quality, global cost competitiveness, capacity

expansion and modernization, overstaffing, change management and transformation into

customer driven culture, and shift in focus from steel commodity business to Tata Steel brand

products.

Responses to challenges

Tata Steel responded proactively to these challenges by way of process innovation,

continuous improvement in business, processes, employee-friendly HR management

practices, creating and spreading new performance driven culture, and creating value for

customers and shareholders.

Why IT applications needed in Tata Steel

TISCO faced two major problems from the systems that existed for a long time. Firstly they

were not customer friendly. The whole system was tuned to the process and very little

attention was paid to the customer demands. Secondly the systems were outdates and the

modalities of operation were too complex and not error free. In order to rectify these issues

which would otherwise prove to be major setbacks to the company the organization resolved

to take up ERP. This was instigated by the concerned departments. Leading consultants were

hired and the business structure was studied and suitable plans were drafted accordingly.

Tata steel has adopted ERP technology to take a competitive lead in industry and through

constant learning, innovation and refinement of its business operations, has transited

seamlessly from a production driven company to customer driven one. The existing

technology was a simple replication of manual system. The employees and management at

Tata Steel faced a cumbersome task exchanging and retrieving information from the system.

Further the reliability of the system was questionable because of inconsistency and

duplication of data from different departments. Also there was no built-in-integrity check for

various data sources.Besides, several times the information against certain limits was found

missing.

How IT applications were helpful to achieve CSFs

The management at Tata Steel wanted the software to seamlessly integrate with its existing

information system and further provide compatibility with its future implementations. The

implementation of SAP software was associated with certain strategic goals in mind, with this

implemenation, TISCO wanted to bring forth a culture of continuous learning and change.

This would enable it to achieve a word-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, transparancy and credibility of data and improve

responsiveness to customers across all areas.

TISCO deserves a lot credit for implementing ERP as many organisations in the global level

have given up the idea of ERP due to the fact that there are many failures associated with it,

even in the implementation stage.ERP implementation done in correctly, have caused more

havoc to organizations rather than bringing in profits.

However, TISCO proved to be different from others by choosing ERP at the right time and

implementing it in a proper manner, In the process, they also reported huge profit and

reduction of costs 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 implementation of all SAP modules at one go across 46

countrywide locations.

Strategy of Tata Steel where IT applications will define its

Future

• Emphasis on costs

• Emphasis on operational efficiency

• Ensuring cheaper resources

• Enhancing revenue through better premium in products

Information Systems for a Quickly Changing Steel

Industry

In a quickly changing industry like steel, one need information systems which quickly

provide them the data they need.ERP, especially in its mature implementations today, is the

crucial component for a company’s IT data backbone. ERP can play an essential role in:

Driving accurate and fast decisions (product profitability, procurement spend) with

consistently defined data

Running broadly known and supported applications

Harmonizing and optimizing back-office processes across the enterprise that complies

with finance requirements.

Enabling best-practice demand planning for supply-chain processes.

Future-proofing global applications that support global enterprises.

Challenges for Information Systems in Steel Industry

More than one planning strategy

Steelmakers often use a combination of production planning strategies. Typically the flat or

strip products are make-to-order, whereas the long products are make to- stock. Depending

on the existence of a “de-couple point”, finish-to-order could be a relevant planning strategy

as well. Such a combination of planning strategies affects the design of most ERP processes,

including supply chain processes as well as the financial/cost control processes. Cost control

in make-to-stock tends to go for standard price approaches, but in a make-to-order

environment costing happens on an individual order cost collection and forecast basis. ERP

systems today can handle this kind of complexity.

Complex product variations

A steel product is made up of a large number of characteristics, making the product difficult

to configure when entering it in the ERP system. Configuration in the make-to-order entries

is typically done while entering the order, whereas for the make-to-stock entries,

configuration is done in the product definition, that is, on the “material master”.

This burdens the early discussions during the design phase of an ERP implementation.

Fundamental decisions need to be made very early in the project about how many (finished

product) materials should be defined: one extreme is to define by material group which needs

to be configured completely in the order, or the other end of the spectrum is to define all

possible/feasible characteristic combinations which can possibly explode into an extremely

large number of finished product definitions.

Flexible planning

Planning for steelmaking often needs to happen on short notice, with unstable production

processes and unplanned outputs. This requires continuous re-assignment of products to

processes and orders dependent on the Characteristics described above. ERP systems today

allow re-assigning flexibly to handle this situation.

Specific Customer Service Requirements

To cope with high-demanding customer segments such as automotive and construction, tight

integration with business partners on forecasts, electronic customer orders (EDI, internet etc.)

are typically needed. ERP systems today support electronic integration with partners.

Complex production scheduling combining both continuous and batch

production

Figure below illustrates the flow in a typical steel mill. While the blast furnace and converter

work in batches, the caster works continuously and the finishing lines work in batches again.

Detail

ed margin analysis

In today’s steel industry when prices are high and capacity short, margin analysis becomes

the essential method to tell what money is being made on which customer/product segments.

Recommended Strategic Integrated IT Model for

Tata Steel

An strategic integrated IT model is important in Tata Steel because it lets us see the systems

involved in planning and production. A typical flow would be:

The Supply Chain Management (SCM) application provides the rough-cut planning in

“Demand Planning.” The result is planning blocks of similar products which are then

handed over to production planning.

When orders are being entered, availability checks assign the order to a block (unless

inventory already exists that meets the order) and feeds back a promise date (at the

end of the block to allow for the flexibility of possibly moving to an earlier date).

The mill optimizer then typically would re-shuffle orders in between the blocks, and

feed results back into the SCM application in order to optimize the load balancing.

Right before production starts, planned orders from the SCM application are

converted into production orders and, via the system, are transferred into the MES

(Manufacturing Execution System) layer. It is at that time when quantities are being

translated into pieces (slabs, coils etc.).

Detailed scheduling then takes place, sequencing and combining pieces from various

orders throughout the mill into lots for optimization.

Production completion then posts an updated status of the orders into the system,

including stock receipts of finished products, and so forth.

IT applications helpful in projects

IT applications like SAP will be helpful for equipments requirement planning.

IT applications like PRIMAVERA have lot of advantages in planning & scheduling of

Projects.

Training of updated IT applications and systems

Training and re-training with updated inputs should be a continuous process in steel plants. In

Tata Steel training programmes should be designed for people from different hierarchy

including top level management.

ConclusionThe Experiences of the Tata group in steel production, automobile industry and quality management & services are very important for their performances.Sustainable experiences by companies are essential elements, which need time to be expanded and refined. A company with great industry knowledge and Strategic IT systems is able to enhance specific skills and establish a foundation for continuous improvement. This foundation enables companies to gain a competitive advantage by the improvement and enhancement of intrinsic performance drivers such as speed, quality, cost competitiveness, service and innovation. Tata group operates tangible along with intangible assets. Tangible resources are all physical assets of a company like equipments, machinery, plant and finance. Intangible resources consist of non-physical assets like reputation, information, patents, goodwill and intellectual property such as industry knowledge and expertise. By the successful operation of these assets with the help of Information systems the performance within highly competitive global markets will improve.Tata Steel should focus on IT applications for the value chain of the group. Steel industry like any manufacturing industries have its own value of chain and it is divided into primary steel making and finishing. The aim of this group is to break up this value chain by putting each part where it is the most cost effective.

Bibliography

1. www.tatasteel.com

2. http://en.wikipedia.org/wiki/Steel

3. Article on Indian Steel Industries

4. HBS,Porter’s Five Forces Model Article

5. Article on Indian Steel industry analysis

6. www.icmrindia.com, Articles on Strategic IT Applications