Wires Business CaseStudy - FINAL

8/8/2019 Wires Business CaseStudy - FINAL

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© 2010 Hay Group. All Rights Reserved

Achieving High PerformanceThrough IntegrationTata Steel Wires BusinessJuly 2010



2 © 2010 Hay Group. All Rights Reserved

Overview of the integration journey

Company: Lanka Special

Steels Limited

Product: GI Wire

Capacity : 7,000 MT

Company: Wuxi Jinang Metal

Products Co

Product: PC Strand, PC Wire, PHC

Bar, PE Unbonded Strand,

Capacity: 82,000 MT

Company: Siam Industrial

WireProduct: PC Strand, PC Wire,

PE Extruded, Wire Mesh, Cold

Drawn

Capacity: 153,000 MT

Company: Tata Wires Division

Product: Tyre, Spring, Spoke,

LRPC, PC Wire, Cable Amour,

ACSR, Card Clothing,

Galvanized, Welding

Capacity: 240,000 MT

Wires Business’ presence across the region

1984

•TSL acquires a majority stake in SSL to enabledownstream value creation

2002

•SSL merges with TSL to enhance both upstream anddownstream value creation, leverage TSL’s brandstrength to fuel to growth plans and avoid tax liabilities

2002 -

2004

•Creation of growth story for the wires business.Consolidation drive in wires business to increase pan-

India market share e.g. ISWP acquisition in Jamshedpur.

2004

•Foray into overseas markets through acquisition of SriLankan steel manufacturer which had 70% market share.Growth strategy and business plans (of LSSL) werealigned to India.

2005•Acquisition of NatSteel but the acquired entities werestill being managed independently

2006 -2008

•Global Wires Business formally announced. The wiremanufacturing units were carved out as a separatevirtual entity within TSL and all entities would report intothe EIC GWB in a formal manner

Strategic priorities for integration

• Growth story of the Steel and Wires business was different and

focus on the wires business was getting diluted in the larger

scheme of things

• Removal of competition between entities by clearly demarcating

markets thus leading to enhanced focus on increasing the footprint

of the wires business

• Sharing best practices in production and processes to enhance

operational efficiency

• Rationalization in the overall logistics cost by exploiting the

geographic benefits of each unit




GWB has developed a robust structure and coordinationmechanism to create value through integration

Tata Steel Ltd

NatSteel Asia

WJMP China

Global Wires

Business

LSSL – Sri

Lanka

Wire Division

India

SIW Thailand

Governance Structure

• The Global Wires Business is a virtual entity within the

Tata Steel organization i.e. it is an integration of entities insimilar businesses and serves as the corporate centre for

the integrated business

• From a business reporting perspective, the MD of each

unit reports into the Executive In-Charge of GWB who is

ultimately head accountable for the overall performance of

the business

• MDs of each unit are also fully responsible for the

performance of their own units

• From a functional perspective, the GWB consists of Heads

of various functions i.e. Marketing, Production, Logistics

etc

• These GWB function heads are the existing function heads

in the units and therefore have a dual reporting

relationship - to the MD of the Unit and the EIC of GWB.

Eg. Head BD of GWB also serves as the Head of BD for the

Indian unit

• The GWB function head is responsible for resolving allconflicts in the function, regular conducting review

meetings and spreading best practices across all the units

EIC - GWB

Head Logistics Head Marketing Head

Production

Head Other

MD LSSL MD WiresDivision MD SIWMD WJMP

Head Logistics

Head Marketing

Head Others

Head Logistics

Head Marketing

Head Others

Head Logistics

Head Marketing

Head Others

Head Logistics

Head Marketing

Head Others

Business reporting

structure of GWB

Functional reporting

structure of GWB

Coordination Mechanism

• GWB function heads regularly undertake review meetings

(annual and monthly) to assess function performance

• GWB function heads also serve as the final decision making

authority for their function in the event of conflict

• Regularly inter-unit development projects are undertaken to

ensure collaboration, knowledge transfer and cross cultural

sensitization




How integration has changed the way Wires Businessoperates

Markets

ANZ

North America

UK & EU

Middle East & Africa

ASEAN

South East Asia

India

Units

China

Thailand

India

Auto Constru

ction

Power Retail

India √ √ √ √

Thailand

√

Srilanka

√

• Each market is served by multiple units depending on pre-defined factors thus ensuring value

maximization

• Although branding is still different for each unit, for each market there exists a single point ofcontact for the customer for all the units. The corporate takes the final decision on who will

service the contract on the basis of pre-defined criteria

• While inter-unit conflicts are discussed in the review meetings to arrive at an amicable solution,

GWB serves as the final decision making authority

• Integration has led to the sharing of best practices and processes across the region. GWB

benchmarks the various processes which is then implemented across all the units to enhance

productivity e.g. replicating Thailand’s maintenance practices across units to increase machine

uptime

• Units are better placed to negotiate with equipment manufacturers and get hands on experience

at another unit even before the machinery is delivered at their own unit. E.g. Knowledge of

existing issues in the Thailand plant with the same equipment led to a better negotiation for the

same equipment for the Tarapur plant.

• Manufacturing heads also meet yearly to undertake joint projects thus enhancing collaboration

across all the units

• There is review forum for procurement and logistics which undertakes initiatives to optimize

logistic costs e.g. Indian unit now serves the Middle Eastern market (instead of China) because of a

lower freight cost.

• Restructuring manufacturing capacity from west to east to significantly reduce logistics costs and

serve customer on a pan-India basis

M a r k e t

i n g

M a n u f a c t u r i n g

L o g i s t i c s




Impact of integration on the business value chain

Freight costs and

duties as

applicable

Billets WirerodsWires

manufacturingPC Strand Stocking Points Sales

Integration has led to the

formation of a well defined

and cost effective

procurement strategy. For

e.g. SIW procures either from

China or Tata Steel Thailand

depending on the market it

services

Because of integration, GWB has been able to optimize

its logistics costs. Freight cost is a very significant cost

element in the value chain; India now services the Middle

East market and SIW services the Australian market

because of a low logistics cost for the former and a FTA

agreement for the latter.

Integration has allowed the sharing of best

practices in production and R&D across the

region. Benchmark processes and practices

are applied uniformly to reduce overall

production costs and improve efficiency.

E.g. reduction in wire loading time through

adoption of Chinese wireloading technique.

Integration has enabled GWB to compress its sales

structure. Currently, there is only 1 sales representative

per geography taking orders for all the 4 entities rather

than 1 individual per entity.

Integration has led to stocking points being serviced bymultiple units on the basis of pre-defined arrangements

thus enabling GWB to reliable customer service and

maximize group level profitability

Integration has had a value creating impact across almost all the elements of Global Wires

Business’ value chain




The positive impact of integration

“Indian managers are excellent

long term planners and theirChinese counter parts are

excellent at short term

planning. We now leverage

both of them to achieve both

long and short term

objectives”

“It is cheaper to service some

Indian stocking points from

Thailand through the sea

route. We can consider this

option because we are an

integrated organization”

“Integration has given the

smaller entities the financial

strength and expertise of our

steel business to expand the

product portfolio, assimilatetechnology better and enhance

their market share through

better channel management”

“NatSteel China and Thailand

were not collaborating and

were competing for the same

customers. Integration allowed

us to harmonize relations andensure that both the units

leverage their unique

strengths to serve different

markets”

“Integration has led to the

alignment and harmonization

of the business plans and

strategy of all the units with

the Global Wires Business

thus enabling us to service

ourcustomers better”

“Regional MDs have the option

to refuse an order if it is not

profitable. Also, all financial

and sales related conflicts are

openly discussed and resolved

in the review meetings”

“SSL was suffering financially

and another unit had cash

surplus which it wanted to

park profitably. We ensuredthat this surplus of the latter

was provided to SSL thus

rescuing the former and

creating value for the latter.”

Marketing/ Finance

Marketing/ Finance

Logistics

Strategy/ Marketing

Strategy

Finance

Culture




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