An update on Viable Vision Discovery & Learning update on Viable Vision Discovery & Learning...

An update on Viable VisionDiscovery & Learning

Presented by

Bimlendra Jha

Program Managers:Henning du Preez Avneesh Gupta

5th November 2007

Welcome to the

World of Steel

Welcome to the

World of Steel

Where the journey is the destination

Where the journey is the destination

TOCICO Annual Conference Nov 2007

Viable Vision @ Tata Steel

About Tata Group – People Before Profits

-Developing Improvement Philosophy at Tata steel

-VV Template for Tata Steel – What’s different?-Learning

About Tata Steel


Tata Group


• India’s largest Business Group

• Operations in over 80 countries. Exports to over 85 countries.

• Main companies in 7 business sectors

• Largest employer in the private sector (289,500 employees)

• Aggregate revenues of US$ 28.8 bn (FY07), Profit $ 2.8 bn

• Revenues equivalent to 3.2% of India’s GDP

• International income 38% of group revenue

• Total market capitalization of US$ 69.8 bn (as on Nov 1st, 2007)

Introduction


History - Group Firsts

Tata Motors - India’s first indigenous car1998

Tata Consultancy Services — software1968

Tata Airlines — Became Air India/ IA1932

Tata Power — hydro power1910

Tata Steel — Asia’s first steel plant1907

Taj Mahal Palace Hotel — luxury hotels1902

1868: Jamsetji Nusserwanji Tata sets up a private trading firm, laying the foundation of the Group


Steel

HotelsInsurance & Asset ManagementInternational Trade

BeveragesWatchesRetailing

AutomobilesAuto ComponentsAir-Conditioning

Basic ChemicalsFertiliserPesticides

Power

Services (9%)

Materials (23%) Energy(7%)

Chemicals (4%)

Engineering(32%)Consumer

Products (5%)

SoftwareTelecom ServicesAutomation & Control Systems

Information System and Communications (20%)

Group Today - 7 Business Sectors

96 Operating companies ; 246,000 employees

NOTE: The numbers within the brackets indicate % contribution to total group revenues (2005 –’06)


Group Corporate Centre Provides Strategic Direction

Finance/HR/M&As/Brand/Legal and Assurance/TQMS

Group Structure

Shareholding in main operating companies

66% Public Trusts

3% Family

13% Tata Companies

18% External Shareholder

29% Tata Sons

19% Jardine Matheson Group

52% Other Tata Companies

Promotes Group entry into new businesses

PROMOTER COMPANIES OwnershipActivity

Tata Sons

Tata Industries

Group Structure


The TATA Group – Purpose

Our purpose in Tata is to improve quality of life of the communities we serve

through Leadership in sectors of national economic significance.


The TATA Group – Five Core Values

Integrity: Fair, honest, transparent in all dealings. Everything we do must stand the test of public scrutiny.

Understanding : Care, respect, compassion for customers and colleagues.

Excellence : Highest possible standards in quality of goods and services.

Unity : Build strong relationships with partners and customers worldwide.

Responsibility : What comes from the people goes back to the people many times over.


National Institutions built by Tata

. Indian Institute of Science.

. Tata Institute of Social Sciences

. Tata Memorial Hospital for Cancer Research

. Tata Institute of Fundamental Research

. National Centre for the Performing Arts.






About Tata Steel


Tata Steel - Values

“In a free enterprise, the communityis not just another stakeholder in business, but is, in fact, the verypurpose of its existence.” – J N Tata

Profit sharing bonus granted first time in India1934

Maternity Leave with pay, Historical Labor Accord1928

Retiring gratuity introduced1937

Leave with pay, workers Provident Fund Scheme1920

Schooling facilities for children1917

Free medical aid1915

Eight hour working day1912

Industrial practices

Founder of Tata SteelA visionary ahead of his times


Tata Steel Sales Since 1956 (Rs Crore)

02000400060008000

100001200014000160001800020000

FY19

56

FY19

59

FY19

62

FY19

65

FY19

68

FY19

71

FY19

74

FY19

77

FY19

80

FY19

83

FY19

86

FY19

89

FY19

92

FY19

95

FY19

98

FY20

01

FY20

04

FY20

07

Presently 1$ = Rs 40, Also 10 Million = 1 Cr

$ 5 Bn


Tata Steel PBT Since 1956 (Rs Crore)

01000200030004000500060007000

FY19

56

FY19

59

FY19

62

FY19

65

FY19

68

FY19

71

FY19

74

FY19

77

FY19

80

FY19

83

FY19

86

FY19

89

FY19

92

FY19

95

FY19

98

FY20

01

FY20

04

FY20

07

Presently 1$ = Rs 40, Also 10 Million = 1 Cr

$ 1.565 Bn


Tata Steel PBT/ Sales Since 1956 (%)

0%5%

10%15%20%25%30%35%40%

FY19

56

FY19

59

FY19

62

FY19

65

FY19

68

FY19

71

FY19

74

FY19

77

FY19

80

FY19

83

FY19

86

FY19

89

FY19

92

FY19

95

FY19

98

FY20

01

FY20

04

FY20

07


You are taking the responsibility at a historic moment.

Tata Steel is going to turn 100 years during your tenure.

Internal Communication Document 2002



• Tata Steel has lived for 95 years

• We can make it live for another 100 years, at least.

• What will allow Tata Steel to survive so many years?

Survival



• Sensitive to the environment

• Cohesion and identity

• Tolerance to different view points

• Conservative Financials

The Key characteristics of companies that live long years:


At different points in time in our long History, we have focused on different Stakeholders:

Employees, Society & Community

Customer

Supplier

Investor

1907 1995 1999 2002



PAT & EVA Of Tata Steel If The Present Trend Continues

322 283424

553

200 18779 121

-553 -586-433

-358-530

-769

-971 -979-1200

-1000

-800

-600

-400

-200

0

200

400

600

800

FY'98 FY'99 FY'00 FY'01 FY'02 FY'03 FY'04 FY'05

PAT EVA

Actuals ProjectionRs Crores




Our New Vision Focuses on building value for the Investor

without losing our aspiration of improving the quality of

life of our employees and the Communities we serve

Vision Focus


Tata Steel – Vision Articulated as in 2002


How can we create Value?

EVA = (ROIC - WACC) Invested Capital

1. Increase ROIC by Increasing Revenues, Reducing Costs and improving productivity

2. Profitable Growth - New Investment with ROIC > WACC

3. Divest from Value Destroying Activities

4. Increase Competitive Advantage Period over which ROIC>WACC

5. Reduce WACC

COST COMPETITIVENESS, QUALITY & THROUGHPUT can help us survive on a long term basis




How can we create Value?

Improving Competitive Advantage Period

1. Customer Satisfaction

2. Products & Service Quality

3. Employee Safety

4. Efficiency & Productivity

5. Employee Satisfaction

6. Market Share

7. Process Improvement, Innovation & Re-engineering

8. Employee Development & Training

9. New Product Development

EVA means conducting our business better






About Tata Steel


MUSTERINGRESOURCES

SELF CONFIDENCE

DETERMINATION

ACHIEVEMENT

It is essential for the top management to set out aspiration that creates, by design, a chasm between ambition and resources.

© C K Prahlad

ASPIRE Philosophy

© Dr. T Mukherjee


History of Improvement Initiatives 1990-2003

0

4000

8000

12000

16000

2003

QIP

B’ mkgTOP

TPM

KM

PEP6 Sigma

Aspire

TOP in Mktg.


Time

Performance

Cont Imp with ASPIRE Black Belts

Cyclic/ One TimeInterventionA

B

C

D

B1C1

C2

D1

C0

Cont Improvement


Conceptualizing a new ASPIRE Framework:

Performance

Time

A combination of Continuous and Cyclic Improvement Intervention will accelerate our rate of improvements and not allow habits to establish.


QUALITY SYSTEMS / ISO

Abnormalities

Minor Issues

Major IssuesNeeds focused, structured & time bound approach to solve.

Objective: Breakthrough Improvement

DM

AIC

/ CVM

/ RVM

/ SVM

TPM

/QC

s

Space for all to choose his own area to excel.

Needs Focused, structured approach to solve.

Objective: Sustenance thru’people involvement.

Self

initi

ated

pr

ojec

tsPr

iorit

y pr

ojec

ts

Vision 2007

ASPIRE Before Viable Vision

Supplier

Customer

Process

SVM

DMAIC/SIP/TPM

CVM/RVM

Knowledge Management

Missing links: Envisioning, Value Innovation & Systems Approach


Systems Approach for Improvement Project Selection

Strategic Intent

CTQ/CTC/CTP Prioritized

Process Priority

Prioritized Strategic objectives

Stakeholderinputs

AspirationalGoal Setting

Performance Review Inputs

Strategy workshop

Criteria:BLI+EOI+Gap

Criteria:Impact on SO

Criteria:Gap

Cause(s)/ Solution

Kaizen/ Suggestions/ QC

DMAIC

SIP

Unknown/ Complex

Known/ Cross-functional

Low complexity/Local issues

© Bimlendra Jha

BLI= Bottom Line ImpactEOI= Ease of ImplementationQC = Quality CircleSO = Strategic ObjectiveSIP= Self Initiated Projects


POWER OF PRODUCT AND MARKET MIX

$200

$250

$300

$350

$400

$450

$500

Base Grade Mid Range High End Managing the MixIllustrative

• Product Mix• Technology

Improvement

• Customer Mix• Price Contracts• Branded Products

• Channel Management

• Customer Value Management

Years

Rea

lisat

ion


IMPACT OF MIX ON OPERATING PROFIT

2,302342

421

1,154

253

132 1,707

1,000

1,250

1,500

1,750

2,000

2,250

2,500

FY'96 FY'01 FY'03

Rs

Cro

res

Operating Profit

Volume

Mix


“Godrej has been working closely with Tata Steel since early 2003….. Company executives claim that association with Tata Steel has helped the supplier understand the need for steel that is dent resistant and so on. Godrej claims an improvement of 20-25% in steel inventory after these initiatives took shape.”

Business Standard25th November, 2003

GODREJ ON TATA STEEL

EBIDTA : INTERNATIONAL MAJORS

Source: Company web-sites and Analyst reports

0

10

20

30

40

50

FY' 98 FY' 99 FY' 00 FY' 01 FY' 02 FY' 03 FY'04

Tata Steel China Steel POSCO Arcelor Nucor Gerdau

Net Profit % of Net Sales

%


9%

4%

0%2%

0%

5%

10%

Tata Steel POSCO China Steel Nucor

17%

4%2%

-4%-5%

0%

5%

10%

15%

20%

Tata Steel POSCO ChinaSteel

Nucor

EBIDTA

CAGR : FY’98 to FY’03

26%

9%

-11%

1%

-20%

-13%

-5%

3%

10%

18%

25%


22%

0%

-12%-2%-20%

-13%

-5%

3%

10%

18%

25%


Source: Company web-sites and Analyst reports

Net Sales

Net Operating Profit PAT



ASPIRE After Viable Vision: Focus on T3ASPIRE After Viable Vision: Focus on T3






About Tata Steel

The principle of agreement with GCL is that, GCL will be paid relative to the direct profit created. Consequently, the variable component of GCL fee will only be paid for the profit it creates above the Expected Net Profit (ENP), where the ENP is the Net Profit (before depreciation, interest, exceptional items and tax), that it is reasonable to expect Tata Steel will achieve without GC involvement and is calculated from the following formula:

ENPy = base year profit + change in profit due to change in prices + change in profit due to change in planned available capacity + Tata Steel’s self improvement factor

ENPy = NP04/05 + (MPy–TPy)TSy + NP04/05x(TAy-T04/05)/T04/05 + SIFxN


Two scenarios:1. Market prices high – then contribution will mainly come from getting higher prices2. Market prices low – then contribution will come from holding prices and higher prices

1:1

2:5Product Mix

enhancement

2:6Mines

enhancement

Overall strategy

2:2Reliability

Comp. edge

2:4VMI

Comp. edge

2:1Distributors Comp. edge

2:3Rapid

Comp. edge

Competitive edge

3:5Growth(Buffer)

3:4Sale funnel

Manage.

3:3ValueSelling

3:2Offer

design

3:1High DDP

Build SustainCapitalize

3:6Market

Segmentation

- The way to have a decisive competitive edge is to satisfy a client’s significant need to an extent that no significant competitor can. -Different clients have different significant needs. -Not all the current customers will fit nicely into selected competitive edges

1:1

Strategy

Parallel assumptions

Tactic

Sufficient assumptions

(The Company is solidly on POOGI (Process Of OnGoing Improvement))

The aggressive growth of Tata Steel is (almost) not effected by market price oscillations.

- To ensure aggressive growth (also in profit and ROI) Tata Steel’s T (Throughput*) must grow, and continue to grow, faster than OE (Fixed cost). *Throughput = Sales – Variable Cost

- A competitive edge that is not based on low prices enables a company to hold its prices against cheaper offers.

- Exhausting the Company 's resources and/or taking too high risks severely endangers the chance of reaching the strategy.

Build a decisive competitive edge (which is not based on low prices) and the capabilities to capitalize on it, on big enough markets without exhausting Tata Steel’s resources and without taking too high risks.






About Tata Steel

Process of institutionalisation

• Process:1. TOC implementation plan is part of ABP finalisation process2. Roll-out through cross functional teams3. Full time task force for ensuring implementation rigor, training and removing implementation

issues

• Training: 1. TOC fundamental training2. TOC supply chain training3. TOC SFS/Value selling training4. TOC training to distributors5. TRD Training6. TOC operations training

• Reviews:1. Review by Sr. VV team: Monthly 2. Apex TQM review: Quarterly3. Daily management through war rooms and concerto status review: Daily4. IT status review: Fortnightly / Monthly5. COMS review: Fortnightly

Mini Jonah by Henning: 10 persons (CSI & Steel Making)‘S-DBR’ by Eli Schragenheim: 65 personsCCPM Application experts by Dr. James Holt: 30 persons6 week Application Expert program by Goldratt Schools: 34 persons certified by TOCICO as ‘Certified Practitioners’ in Supply-Chain and LogisticsTRD Training: 200 officers

TOC in Mining

TOC MINING OBJECTIVES1. IMPROVE THE THROUGHPUT

Ensuring right quality

Improving reliability of dispatches

Improving volumes to meet demand

Reducing cost/t w/o compromising above

2. IMPROVE THE MINE LIFE

Maximizing mineral recovery

Improving yield

IMPROVE FLOW

Life of the mine is the maximum value that can be recovered now and in future from all its mineral reserves given to us by the nature.

PlannedYield: 39%

Unknown

10% Plant effectiveness

5% Contamination

5% Liberation

6% Fines3.6% Other

70% Production

Starvation

Blockage

Own Problems

Average – 8000t

Belt problem

Mechanical Breakdown

De-watering problem

Leakages

Ultra fines

Product bunkers Full

Ropeway not available

Chute / Plough jamming

Raw Coal not available

Raw coal quality is poor

Feed pumps breakdown

IDENTIFYING FACTORS IMPEDING FLOW

Washing PlantProcess Yield

MANAGING FLOW IN MINES

Drilling Blasting Loading & Transp

Plant Process

Exposed Coal

Planned OB area available

Drill Hole InventoryCoal &OB

Blasted Material

Equipment Buffer

RawMaterialBuffer

Product Buffer

IDENTIFIED CONSTRAINT

OR LEVERAGE

POINT

Flow improved by monitoring the BUFFER STATUS in the WAR ROOM,

identifying causes of blockages and starvation and taking up

improvement projects (POOGI)

West Bokaro Effectiveness Model

R

IC

cc

MC

cc

M

W3

W2

MC

CC

MC

CC

MC Clients

C

RCC

C

RCR

Q-AB

Q-SE

Q-E

C

T

EC RD

EC CH

CH

D RD

D RD

D RDE E

E E

EE

w

w

w

Current

10,000t

EC

EC

EC

Q

1 day

1 day

1 day EC R

3500t8 hours

3600t8 hours

RC

4000t

4000t

2500t Production rate

aligned with client consumption rate

2500t

4x5000t

4000t8 hours

6000t16 hours

1 day

1 day

1 day

1 day

Reject

ECEC

EC

MAJOR ACTIONS AND ACHIEVEMENTS

1. Increase in the plant capacity from 400 tph to 450 tph

2. Increase in plant run hours by 5%.

3. Reduction in fines generation in W#3 by 5%, improves yield.

Providing resources for quick change over from one type of feed to other.Providing extra resources for continuous plant operations.Providing resources for quick analysis of samples for taking corrective actionProviding pre-screening facility to reduce fines overloading

2AchievementActionstep


1. Reduction in s.d of ash in the raw coal feed.

2. Reduction in coal dilution improves yield

3. Longer campaign size for a given batch improving yield.

4. Mines buffer compliance improving by more than 30%.

5. Higher flexibility to mining equipments improves utilization

6. Increase in quantity of feed processed by the plant by almost 6 LT.

Feeding coal in uniform batches of atleast 9000 TProviding coring facility in mines for better quality controlDecoupling mining from plant by putting appropriate buffers and assigning responsibility to mines for buffer maintenance.CCPM done on ropeway shutdown to improve its availability and reduce constraint blockageProviding extra resources and incentives to downstream transportation facilities of products to reduce blockageIncreased coordination between mine, plant & ropeway planned maintenance

3AchievementActionstep


1. Increase in the plant capacity2. Increase in Alumina content in the

slimes from 5.5% to 7%.

Providing resources for quick change over from one type of feed to other.Providing extra resources for transport and dry processing of soft lumpy ore.

2

1. Reduction in Al in fines ore from 2.12 to 2.0%

2. Increase in feed alumina from 2.3% to 2.6% thus increasing mine life

3. Improving s.d of Al from 0.11 to 0.05.

4. Eliminating slime coating of lumps5. Higher flexibility to mining

equipments improves utilization

Batch processing of soft hard ore, friable ore and hard lumpy oreDecoupling mining from plant by putting appropriate buffers

3

AchievementActionstep

Maintenance & Sustenance ProjectsMaintenance & Sustenance Projects

Definition

Maintenance Maintenance ProjectsProjects

Maintenance to overcome normal wear & tear of equipment

Inspect the components which need repair or change (CDT)

Cleaning and painting

Sustenance Sustenance ProjectsProjects

Based on the need, equipment need to be upgraded for- Higher production- Meet certain quality requirement of enriched product mix- Modification to reduce cost of operation- Modifications to comply with new environmental and safety regulations.

Maintenance & Sustenance ProjectsMaintenance & Sustenance ProjectsNeed to apply CCPM (Performance gap)

Maintenance - In terms of statistics: We have about 10% down time / year

About 8% to 9% of which is Planned

Industry Benchmark ??

1% increase in availability – 38 Mil USD in Sales

SustenanceHuge demandNeed to augment capacities to meet demandCapture desired market segmentsAll this would lead to higher down time

Maintenance & Sustenance ProjectsMaintenance & Sustenance ProjectsClassification of Maintenance & Sustenance Projects

Project Management Time

1. Manage & execute ourselves –some contractor labor used for low end jobs.

2. Manage ourselves but use external expertise for execution

3. Offload the entire project including project management

4. Work coordinated by us –executed by petty contractors but offload project management & engineering

A. Short term project- 5 days to 1 month

B. Long Term Project- 1 month to 1 year

We have not applied CCPM in projects spanning more than 1 year

Results AchievedResults AchievedSummary of Results - Fy’07 (year ending 31st March 07)

• CCPM adopted as a process of planning, executing most maintenance projects (14) & some sustenance project (4).

• Project durations were reduce from 10% to 32% of time in maintenance projects.

• Project duration reduced for 7 to 15 % of time for sustenance projects.

• Savings Rs 35 Crs (US $ 8.7 Mil)

Summary of Results - Fy’08 Q1 (year ending 31st March 08)• CCPM applied in all maintenance (10) & sustenance projects (4). • Project durations were reduce from 5% to 27% of time in maintenance

projects.

• Project duration reduced for 18 to 25 % of time for sustenance projects.

• Savings (cost accounting) Rs 19 Crs (US $ 4.7 Mil)

Building High DDP

2630353952

5080

303

326

264

229

243 239

118

0

50

100

150

200

250

300

350

400

1.9.0

61.1

0.06

1.11.

061.1

2.06

1.1.0

7

1.2.0

7

1.3.0

7

1.4.0

71.0

5.07

1.06.

071.0

7.07

1.08.

071.0

9.07

1.10.

07

Indexed TRDBaseline

Baseline 100TRD : 28435 (Rs Cr Days)

TRD Indexed TRD % of Baseline* (as on 1st October’07)

Final Target 1 %

Inde

xed

TRD

%

*Baseline Period

CR & HR: Mar-May ’07, Longs & Tubes: Jul-Sep’05, Wires: Dec’06-Feb’07

29

97

7353455855435450

42575649

0

100

200

1.9.06

1.10.0

61.1

1.06

1.12.0

61.1

.071.2

.071.3

.071.4

.071.0

5.07

1.06.0

71.0

7.07

1.08.0

71.0

9.07

1.10.0

7

Indexed TRD Baseline TRD

Baseline TRD 100 (Jul – Sep’05)TRD : 4263 (Rs Cr Days)

Longs

3328

21

4229

2787

186

472

420357285

371334

0

100

200

300

400

500

1.9.0

61.

10.0

61.

11.0

61.

12.0

61.

1.07

1.2.0

71.

3.07

1.4.0

71.

5.07

1.6.0

71.

7.07

1.8.0

71.

9.07

1.10

.07

Indexed TRDBaseline TRD

Baseline TRD 100 (Mar-May’07)TRD : 7287 (Rs Cr Days)

CR

Inde

xed

TRD

%

6438 6936

354092

168

662681

1009827955

957

-100

100

300

500

700

900

1100

1.9.06

1.10.0

61.1

1.06

1.12.0

61.1

.071.2

.071.3

.071.4

.071.5

.071.6

.071.7

.071.8

.071.9

.071.1

0.07

Indexed TRDBaseline TRD

Baseline TRD 100 (Mar-May’07)TRD : 1307 (Rs Cr Days)

HR

Inde

xed

TRD

%In

dexe

d TR

D %

Final Target 1 %

TRD: Product category-wise (as on 1st October’07)

Wires

1410152251

648497108

150125

0

100

200

1.12

.06

1.1.0

7

1.2.0

7

1.3.0

7

1.4.0

7

1.5.0

7

1.6.0

7

1.7.0

7

1.8.0

7

1.9.0

71.

10.0

7

Inde

xed

TRD


TRD: Product category-wise (as on 1st October’07)

Good

Baseline 100 (Dec ’06 – Feb’07)TRD : 11134 (Rs Cr Days)

Tubes

2958 2364

101

455

354

312635444344460

250

500

1.9.06

1.10.0

61.1

1.06

1.12.0

61.1

.071.2

.071.3

.071.4

.071.5

.071.6

.071.7

.071.8

.071.9

.071.1

0.07

Inde

xed

TRD


GoodTRD calculation includes quantity, which

was not there earlier. The baseline remains unchanged.

Baseline 100 (Jul-Sep’05)TRD : 4445 (Rs Cr Days)

Final Target 1 %

KPI MONITOR

Sales to Distributor (mt)39675

357553423929085

28823 3033531213

05000

1000015000200002500030000350004000045000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

FY06 FY07

Sales to Consumer(mt)

24916

36510

287232807132630 32108

46216

25892

05000

100001500020000250003000035000400004500050000


FY06 FY07

Distributor Inventory Days (Avg)

56891011978

7

0

10

20

30

40

50


FY06 FY07

Retailer Inventory Days (Avg)

192418

22

23 26 24 2324

0

10

20

30

40

50

60


FY06 FY07

Uniform Stock levels, and a 12days Reduction 7days Reduction in Inventory, Scope for more!!

35% increase in Sales – Rs.328Cr.Significant increase in sales !!

Discussion

“Did we get the desired results?”

“W W W / W W W”

Discussion

“This is the way steel has to be sold”

“It is such a joy to implement the TOC concepts in our Distribution. Why do you

spoil the show by asking for money?”


I have missed more than 9,000 shots in my career. I have lost almost 300 games.

On 26 occasions I have been entrusted to take the game winning shot...

and I missed.

I have failed over and over and over again in my life. And that's precisely why I succeed.

Michael Jordan (1993-, American Basketball Player, Actor)

Freedom to Fail…

Thank You

An update on Viable Vision Discovery & Learning update on Viable Vision Discovery & Learning...

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