case study on scm in retail
TRANSCRIPT
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supply chain management. n making their choices, companies need to plan for effective
supply chain management, in order to gain competitive advantage.
( theory that has gained momentum in the last few years is the concept of supply chain
management. n recent years, there have been numerous advances and developments in
supply chain techni*ues and management. One of the reasons is that as trade barriers
drop and markets open, competition have become more intense hence companies need
to be more competitive and cost effective. (n initiative to help achieve this is a supply
chain management program. Supply chain management is the management of upstream
and downstream activities, resources, and relationships with suppliers and customers,
which is re*uired to deliver products or services. n theory, if this is done well it will lead
to competitive advantage through differentiation and lower costs as suggested by orter")/&'.
Supply Chain:(ll the necessary activities re*uired for creating and delivering products and
services to customers.
Supply chain management: This includes managing supply and demand, sourcing raw
materials and parts, manufacturing and assembly, distribution across all channels, and
delivery to the customer "Supply 0hain 0ouncil, %&&)'.
Supply chain management: (ccording to the 0ouncil of Supply 0hain !anagement
rofessionals "0S0!', Supply chain management encompasses the planning and
management of all activities involved in sourcing, procurement, conversion, and logistics
management. t also includes the crucial components of coordination and collaboration
with channel partners, which can be suppliers, intermediaries, third-party service
providers, and customers. n essence, supply chain management integrates supply and
demand management within and across companies.
E-Procurement: 1-rocurement is essentially an nternet2ntranet based purchasingapplication or hosted services that streamlines buying trading partners, maximi3es trade
efficiency across the entire supply chain, and provide strategic e-commerce capabilities in
internet time "T$4, %&&%'.
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Logistics:The management and movement of product and services, including storage and
warehousing, and their transport via air, land, and water "0oyle, 5ardi, and 6angley,
)//'.
Logistics:The management and movement of product and services. This includes storage
and warehousing of products, and their transport via air, land, and water.
Logistics is that part of the supply chain process that plans, implements, and controls the
efficient, effective flow and storage of goods, services, and related information from the
point-of-origin to the point-of-consumption in order to meet customers' requirements.
Tata Stee!"formally known as Tata ron and Steel 0ompany 6td.' is the largest private
sector steel company in ndia in terms of domestic production. $anked %7/th on 8ortune
4lobal 7&&, it is based in 9amshedpur, 9harkhand, ndia. t is part of Tata 4roup of
companies. Tata Steel is also ndia:s second-largest and second-most profitable company
in private sector.
SAP AG! a multinational software development and consulting corporation, which
provides enterprise software applications and support to businesses of all si3es globally.
+ead*uartered in ;alldorf, 4ermany, t was founded in )esignS( 5usiness (ll-in-One software
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O$%ecti&e o# t'e "tud!
The present study explores and investigates how Tata Steel uses supply chain
management to gain competitive advantage and increase business success. This study
provides a theoretical framework to understand a firms performance and argues that
supply chain management will help a firm to be competitive and successful. The
ob?ective of this study is to explore and investigate how firm scope, design, and
implement supply chain management. t also tries to find the advances and new ideas in
supply chain management. 5ecause the ma?ority of companies cannot compete on the
basis of price alone, some sort of differentiation is necessary. The nternet coupled with
other computer technologies, allow companies new avenues to distinguish themselves
from their competition. One of these avenues is supply chain management, supply chain
management allows a company to reduce its costs, create opportunities to increase value
for its customers and increase its competitive ability in the market. !ost importantly, this
study endeavors to determine how Tata steel implemented supply chain management
1$ Software that can provide competitive advantage
n fulfilling this ob?ective, this study addresses the following research issues@
). To see the effect of implementation of supply chain management techni*ue on the
productivity of the company, across the period of time.
%. To analy3e the profit margin of the company before and after implementation of
supply chain management 1$ package.
A. To study the inventory of the company before and after implementation of supply
chain management.
B. To make a study of the working capital management of the company before and after
implementation of supply chain management.
7. To compare the reduction in the cost of production after implementation of Supply
chain management
C. To provide suggestions for the improvement of efficiency and functions of the
company.
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Scoe o# t'e "tud!
The present study covers a period of ten years from )-%&&& to %&&/-%&& as ade*uate
information and data for this research were only available for this period. The data is
based on a single company operating in 9harkhand ndia. This research focuses on how
Tata Steel implemented 1$ system, strategy and technology. To answer the primary
research *uestion, a number of sub-*uestions have been developed.
Hot'e"i"!
n order to reach the ob?ective of the study the following ma?or hypothesis were
formulated.
)' mplementing S( has made a reduction on the working capital of the company.
%' There has been a decrease in the volume and value of inventory of the company.A' There has been a decrease in cost of production of the company and increase in
labour productivity.
7' There has been improvement in the customer order management and customer
satisfaction.
C' Supply chains of this company contribute to competitive advantage and long term
profit and health of the company.
Met'odoo* o# t'e "tud!
This study employs the *ualitative research process using single case studies. There are
several reasons for this@
Since the focus of this research is on high technology companies operating in
ndia.
Supply chain management is a vast collection of techni*ues. +ence, selection of
supply chain factors and strategies can be a complex process. n such a dynamic
setting it is best to use *ualitative research methodology "using case studies' to
understand the situation.
8urthermore face-to-face meetings with respondents can help provide
understanding and information on several *ualitative areas, such as@ reasons for
implementing specific supply chain factors "or strategies'D customer needs data,
and discussions and feedback on the *uestionnaire.
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The secondary data needed for this study has been collected from various sources like
9ournals, annual report, rofit and loss account, 5alance sheet, financial Statement of the
company, online published document on internet, previous research report related to Tata
Steel. This research is exploratory in natureD both primary and secondary data is
collected.
C'ateri"ation! Pan o# t'e "tud!
This research is focused on how Tata Steel implemented 1$ system to manage its
supply chain management to increase its $O and benefit to the company, investor and
people at large. This research consists of seven chapters.
0hapter ). ntroduction.0hapter %. 0onceptual study of Supply 0hain !anagement.
0hapter A. Tata ron and Steel 0ompany- (n overview.
0hapter B. mplementation of 1$ system S( and 1- commerce in Tata Steel.
0hapter 7. erformance !easures of Supply 0hain !anagement.
0hapter C. $elationship between supply chain management and performance in Tata
Steel.
0hapter
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understanding that can lead to building a foundation for more extensive research in the
future.
This research work has been completed after facing various types of difficulties because
it is too tough to measure the success of an 1$ implementation in a company. The first
tough task was collection of data for the purpose of review. Since the data is related to
implementation of any 1$ systems are confidential of the company. 4etting primary
data from the company is very difficult. 8or being a private company the employees of
the company are reluctant to give any information, which is specific to that company.
4etting the response of the *uestionnaire was the toughest part in the collection of data,
since the respondent were not willing to give their opinion to the *uestions. They left
many of the *uestions unanswered. Through this thesis have tried to give useful and
positive result so that it can act as guidance for further research in this field.
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SF!!($E O8 T+1 0+(T1$S
0+(T1$
Introduction
This chapter serves as an introduction to the research. t comprises sections, which cover
the importance of the study, ob?ective of the research, scope of the study, +ypothesis of
the study, source of data collection,a brief description of the methodology, an outline of
the structure of the study, key definitions, limitations of this research, and the chapters
conclusion.
0+(T1$
Concetua Stud o# Su C'ain Mana*e+ent4lobali3ation also brings foreign competition into markets that traditionally were local.
6ocal companies are thereby forced to respond by improving their manufacturing
practices and supply chain management. 1xperience shows that the gains to be made in
cost, lead-time and *uality through working in partnership with customers and suppliers
are significant.
Supply chain management "S0!' is the process of planning, implementing and
controlling the operations of the supply chain as efficiently as possible. Supply 0hain
!anagement spans all movement and storage of raw materials, work-in-process
inventory, and finished goods from point-of-origin to point-of-consumption
4aneshan and +arrison have yet another analogous definition@
( supply chain is a network of facilities and distribution options that performs the
functions of procurement of materials, transformation of these materials into intermediate
and finished products, and the distribution of these finished products to customers.
(ccording to ;ikipedia.org
Su C'ain Mana*e+ent (SCM)! Supply chain management is the process of
planning, implementing, and controlling the operations of the supply chain with the
purpose of satisfying customer re*uirements as efficiently as possible. Supply chain
management spans all movement and storage of raw materials, workinprocess
inventory, and finished goods from pointoforigin to pointofconsumption
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The definition one A+erican ro#e""iona a""ociationput forward is that Supply 0hain
!anagement encompasses the planning and management of all activities involved in
sourcing, procurement, conversion, and logistics management activities. mportantly, it
also includes coordination and collaboration with channel partners, which can be
suppliers, intermediaries, third-party service providers, and customers. n essence, Supply
0hain !anagement integrates supply and demand management within and across
companies. !ore recently, the loosely coupled, self-organi3ing network of businesses
that cooperates to provide product and service offerings has been called the Extended
Enterprise.
Logistics is that part of the supply chain process that plans, implements, and controls the
efficient, effective flow and storage of goods, services, and related information from thepoint-of-origin to the point-of-consumption in order to meet customers' requirements.
The broader view of S0! is depicted in the below figure in a simplified supply chain
network structure. This would explain the basic difference between 6ogistics and S0!.
Supply 0hain is inter-company integration of business process and relationships and
where as 6ogistics is intra-company integration.
Fi*ure ,-.! "i+i#ied "u c'ain net/or0 "tructure
)
roviding enhanced value to customers at the least Total cost Galue, Gelocity and
Gisibility.
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S0! rinciples@
Fltimate customer focus, =etwork of organi3ations working for common purpose and
mutual benefits, rocess orientation, Total systems thinking, 0ost >imension.
nventory
Transportation
;arehousing
nformation
0+(T1$
Tata Iron and Stee Co+an 1An O&er&ie/
The history of steel making in ndia can be traced back to B&& 50 when the 4reek
emperors used to recruit ndian archers for their army who used arrows tipped with steel.!any more evidences are there of ndians perfect knowledge of steel-making long
before the advent of 0hrist. (rchaeological finds in !esopotamia and 1gypt testify to the
fact that use of iron and steel was known to mankind for more than six thousand years
and that some of the best products were made in ndia. (mong the widely-known relics is
the ron illar near Hutab !inar in >elhi. The pillar, built between A7& and A/& (>, did
not rust so far -----an engineering marvel that baffles the scientists even today. Eet
another engineering feat is the famous Sun Temple at #onark in Orissa, built around
)%&& (>, where steel structurals were used for the first time in the world.
The Tata 4roup is almost )7& years old. t currently comprises C operating companies,
which together employed some A7
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romoted in )/
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hase - To 1xtend S( in ;orks with 80O, !!, K H!
hase - To implement S( modules such as (sset !anagement K 5udget
management sub-modules of 80O, lant maintenance, +uman $esources, roduction
Optimi3er "such as S( (O'
hase - S1! "Strategic 1nterprise !anagement'
L The solution covered /7M of Tata Steels business-process re*uirements.
L S( has a large customer base and is a leader in ndias 1$ market.
L The solution incorporated E%# functions that Tata Steel desired.
L S( could provide skilled implementation partners.
8igure ).)@ S( mplementation n Tata steel
I+e+entin* e2co++erce
n %&&), Tata Steel and S(6, two of the largest steel companies in South (sia, reali3ed
the significant contribution that the nternet and e5usiness could make to reengineer the
steel supply chain and they ?oined hands to set up metal?unction services limited which
went on to become the world:s largest e!arketplace for steel, and ndia:s largest
e0ommerce company within a short span of time. !etal?unction was renamed to
m?unction to give a new corporate identity to the company.
Ser&ice" ro&ided $ +%unction
E2di"tri$ution!n a bid to cut down on the distribution cost and serve customers better,
Tata ron K Steel 0ompany 6td proposes to adopt the Nhub and spoke:: concept, as
recommended by the management consultant, 3oo4 Aen Ha+iton. The essence of the
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concept is as follows@ Tata Steel will gradually do away with its stockyards, in their
placeD it will set up at different locations hubs which will act as stocking points of generic
materials to serve a much larger number of customers. There will be rail connections
between the hubs and the company:s 9amshedpur plant and road connections between the
hubs and various consumption centers in the region concerned. ( beginning has already
been made. The company has closed down nearly a do3en of its %/ stockyards and the
closure of the rest will be undertaken in due course, as and when the G(T is in force.
The first hub, located within the 9amshedpur plant itself, has already started functioning
on an experimental basis. (t least four more are in view. These will be located at Sankrail
near #olkata, Gi?ayawada, =agpur and >elhi. ( sub-hub might also be considered for
8aridabad to cater to the specific re*uirements of the customers in the region. ( totalinvestment of about $s elhi.
Lo*i"tic" and Dei&er Ti+e
Tata Steel puts a lot of emphasis on enhancing logistics in order to improve delivery time,
reduce transportation cost and better inventory management at stockyards located at
strategic points. The import 2 export logistics is handled by its T#! >ivision. Tata
Steels expertise in both in-bound and out-bound logistics makes its 8erro (lloys and
!inerals >ivision "8(!>' the preferred supplier of imported thermal coal to customers
in ndia. Tata Steel has its own stockyards and exclusive berths alongside both +aldia
and 0alcutta ports, e*uipped with sophisticated material handling e*uipment, to ensure
damage-free smooth shipment and manned by trained personnel, well-versed in handling
logistics and loading. 5esides, storage is planned in con?unction with experts and the
actual loading is supervised by an internationally reputed independent inspection agency.
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C'anne Finance In Tata Stee
e2Coection!!etal9unction has offered buyers the convenience of paying for materials
with a simple click of the mouse. ( cash management service arranged in association
with 0itibank and +>80 has expanded the scope of e-selling to include the collection of
money.
Tata Steel and !etal9unction are working together to not only increase the *uantities of
products sold over the last fiscal year but are also identifying new products to be sold
through this highly efficient route. 0hannel finance !etal9unction provides a uni*ue
service of arranging finance for the distributors of Tata Steel on an online, %BP< basis.
!etal9unction has negotiated with some leading private and foreign banks in ndia tooffer credit to the distributors of Tata Steel. This has ensured that Tata Steel need not
offer credit on sales. This has increased realisations and lowered the working capital
re*uirements of Tata Steel.
Gra' ,-.! S'o/" enetration o# c'anne #inance
The above graph is ?ust a pictorial depiction of the continual K sustainable increase in
channel 8inance as a proportion of Sale towards regular >istribution 0hannel of Tata
Steel. 0redit Sales of Tata Steel have steadily decreased over the period from 8iscal %&&%
to 8iscal %&&/.
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e2Sein*! Tata Steel initiated the first online e-Sale through !etal9unction in the month
of 8ebruary %&&% and since then has sold %%),%7 !T. The products that Tata Steel has
sold through !etal9unction are@ +S! >efectives, +S! O$, 4 0oils, 6 >efectives,
rime 5illets and Secondary roducts. The results have been extremely encouraging for
Tata Steel, with products being sold to customers all over the country. The prices
obtained by !etal9unction have been reflective of the market situation.
The entire cycle time of selling materials is reduced by the speed and efficiency with
which on-line competitive bidding events can be created and managed. Through intensive
market-making efforts and the use of technology, !etal9unction is bringing in both,
greater efficiencies to processes and greater focus to the sale of non-core products of Tata
Steel.
!etal9unction.com commenced e-selling in 8ebruary %&&% and has worked with its
clients to migrate products from the traditional offline process to the online platform. Till
A) !arch %&&A, !etal9unction.com sold %7/,
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---QSTEP I----------QSTEP II-----------QSTEP III--------------STEP I5---Q
Fi* ,-6! T'e Proce"" Fo/ o# "ae" order in SAP
)&&M secured receivables
)&&M timely payment
ncreased buying power of the distributors
mproved margin and supply chain visibility
Single window in terms of visibility of !S
C'aen*e" in i+e+entin* SAP
1$ implementation is not as simple as installing software package since it involves a lot
of changes to be done in the mindset of the people of the company to be successful. The
paper looks at these factors and discusses how adoption of new 1$ system results in the
creation of improved processes, practices and capacities. These *uality initiatives
mandate a transformational change in the mindsets, attitudes and culture and focuses on
critical elements like leadership, employee involvement, training and education,
teamwork and many others. These critical elements create a foundation, which facilitates
1$ implementation.
(s Tata Steel works toward its goal of becoming a top player in the world steel market, it
faces several challenges and opportunities. These include@
L Operating in a competitive market
L Supporting ambitious growth plansL $eshaping its business processes and T infrastructure
0+(T1$ G
Per#or+ance Mea"ure" o# Su C'ain Mana*e+ent.
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Supply chain performance measures can be classified broadly into two categories
*ualitative measures "such as customer satisfaction and product *uality' and *uantitative
measures "such as order-to-delivery lead time, supply chain response time, flexibility,
resource utili3ation, delivery performance, etc.'. n our study we consider only the
*uantitative performance measures. mproving supply chain performance re*uires a
multi-dimensional strategy that addresses how the organi3ation will service diverse
customer needs. ;hile the performance measurements may be similar, the specific
performance goals of each segment may be *uite different.
Huantitative metrics of supply chain performance can be classified into two broad
categories@ =on-financial and financial.
,) Non2Financia Per#or+ance Mea"ure"
6) Financia Mea"ure"
=on-8inancial erformance !easures
mportant metrics include@ cycle time, customer service level, inventory levels, resource
utili3ation, performability, flexibility, and *uality. There is a detailed discussion of these
in. ;e will focus here on the first four measures.
Cce ti+e
Cu"to+er Ser&ice Le&e
In&entor Le&e"
Re"ource utii4ation
Cce ti+e
0ycle time or lead-time is the end-to-end delay in a business process. 8or supply chains,
the business processes of interest are the supply chain process and the order-to-delivery
process. 0orrespondingly, we need to consider two types of lead times@ supply chain
lead-time and order-to-delivery lead-time. The order-to-delivery lead-time is the time
elapsed between the placement of order by a customer and the delivery of products to the
customer. f the items were in stock, then it would be e*ual to the distribution lead-time
and order management time. f the items were made to order, then this would be the sum
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of supplier lead-time, manufacturing lead-time, distribution lead-time, and order
management time. The supply chain process lead time is the time spent by the supply
chain to convert the raw materials into final products plus the time needed to reach the
products to the customer. t thus includes supplier lead time, manufacturing lead time,
distribution lead time, and the logistics lead time for transport of raw materials from
suppliers to plants and for transport of semi-finished2finished products in and out of
intermediate storage points. 6ead-time in supply chains is dominated by the interface
delays due to the interfaces between suppliers and manufacturing plantsD between plants
and warehousesD between distributors and retailersD etc. 6ead time compression is an
extremely important topic because of time based competition and the correlation of lead
time with inventory levels, costs, and customer service levels.
Cu"to+er Ser&ice Le&e
0ustomer service level in a supply chain is a function of several different performance
indices. The first one is the order fill rate, which is the fraction of customer demands that
are met from stock. 8or this fraction of customer orders, there is no need to consider the
supplier lead times and the manufacturing lead times. The order fill rate could be with
respect to a central warehouse or a field warehouse or stock at any level in the system.
Stock out rate is the complement of fill rate and represents the fraction of orders lost due
to a stock out. (nother measure is the backorder level, which is the number of orders
waiting to be filled. To maximi3e customer service level, one needs to maximi3e order
fill rate,minimi3e stock out rate, and minimi3e backorder levels. (nother measure is the
probability of on-time delivery, which is the fraction of customer orders that are fulfilled
on time, i.e. within the agreed-upon due date.
In&entor Le&e"
Since inventory-carrying costs can contribute significantly to total costs, there is a need to
carry ?ust about enough inventories to satisfy the customer demands. nventories held in a
supply chain belong to four categories $aw materials, work-in-process "unfinished and
semi-finished parts', finished goods inventory, and spare parts. 1ach type of inventory is
held for different reasons and there is a need to keep optimal levels of each type of
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inventory. Thus measuring the actual inventory levels will provide a useful picture of
system efficiency.
Re"ource utii4ation
( supply chain network uses resources of various kinds@ manufacturing resources"machines, material handlers, tools, etc.'D storage resources "warehouses, automated
storage and retrieval systems'D logistics resources "trucks, rail transport, air-cargo
carriers, etc.'D human resources "labor, scientific and technical personnel'D and financial
"working capital, stocks, etc.'. The ob?ective is to utili3e these assets or resources
efficiently so as to maximi3e customer service levels, minimi3e lead times, and optimi3e
inventory levels.
Financia Mea"ure"
There are several fixed and operational costs associated with a supply chain. Fltimately,
the aim is to maximi3e the revenue by keeping the supply chain costs low. 0osts arise
due to inventories, transportation, facilities, operations, technology, materials, and labor.
The financial performance of a supply chain can be evaluated by looking into the
following items.
0ost of raw material
$evenue from goods sold
(ctivity-based costs such as material handling, manufacturing, assembling, etc.
nventory holding costs
Transportation costs
0ost of expired perishable goods
enalties for incorrectly filled or late orders delivered to customers
0redits for incorrectly filled or late deliveries from suppliers
0ost of goods returned by customers 0redits for goods returned to suppliers
Typically, the financial performance indices can be put together using the following
ma?or modules@ activity based costing, inventory costing, transportation costing, and
inter-company financial transactions.
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Developing and maintaining a supply chain performance measurement system represents
one of the more significant challenges faced in SCM initiatives. However, if supply
chains are to be improved, decisions need to be based on objective performance
information and will require sharing of this type of information with ey supply chain
members. !rgani"ational willingness to share information with other supply chain
members is a critical selection criterion for SCM membership. #n organi"ation that is
willing to receive information from other supply chain members but is reluctant to share
information is a poor candidate for inclusion in an SCM initiative.n today:s economy the
battlefield is shifting from individual company performance to what we call Supply
hain !erformance. Supply 0hain erformance refers to the extended supply chain:s
activities in meeting end customer re*uirements, including product availability, on-timedelivery, and all the necessary inventory and capacity in the supply chain to deliver that
performance in a responsive manner. Supply 0hain erformance crosses company
boundaries since it includes basic materials, components, subassemblies and finished
products, and distribution through various channels to the end customer. t also crosses
traditional functional organi3ation lines such as procurement, manufacturing, distribution,
marketing K sales, and research K development. The nternet is a key enabler of both
supply chain performance improvements and richer supply chain performance measures.
0+(T1$ G
Reation"'i $et/een Su C'ain Mana*e+ent and er#or+ance in Tata
Stee-
The introduction of S( $2A solutions within Tata Steel has 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.
Nost the introduction of the S( solution, the results have been terrific. The company
has spent close to $s.B& crore on S( implementation, and has saved $s.AA crore within
a few months of implementation.
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7or0in* Caita Cce
;orking capital cycle, also known as the asset conversion cycle, operating cycle, cash
conversion cycle or ?ust cash cycle, is used in the financial analysis of a business. The
higher the number, the longer a firm:s money is tied up in business operations and
unavailable for other activities such as investing. The cash conversion cycle is the
number of days between paying for raw materials and receiving cash from selling goods
made from that raw material.
( short cash conversion cycle indicates good working capital management. 0onversely, a
long cash conversion cycle suggests that capital is tied up while the business waits for
customers to pay. The longer the production process, the more cash the firm must keeptied up in inventories. Similarly, the longer it takes customers to pay their bills, the higher
the value of accounts receivable.
On the other hand, if a firm can delay paying for its own materials, it may reduce the
amount of cash it needs. n other words, accounts payable reduce net working capital
$aw material holding period has increased by 77M while there has been an
efficient !anagement in the stocks in process and stores K spares holding period
this is depicted by a decrease of C&M and A&M in the holding days respectively.
The credit receivables period has also been brought down considerably by about
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4raph ).)@ ;orking capital analysis.
T'e in&entor +ana*e+ent
The inventory management in %&&A-&B and %&&B-&7was best in the company history.
Online availability of data will further improve nventory !anagement in the stockyards,
leading to better customer services. 6ead time re*uired to process orders, settle
complaints, develop new products and reconcile accounts, in substantially lesser time.
4raph ).%@ nventory turnover "n >ays'
( reduction in lead time for spending approvals, now )/%& days from C7
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De$tor" Turno&er
The average debtors to turnover were down to days from C/ days cent, which was the
highest in the period from )C to %&&.
4raph ).A@ ->ebtors Turnover in number of days
La$our roducti&it
6abour productivity in 0rude Steel has been continuously improving from A Tons2 !an
year in )C-< to )7% Tons2!an year in %&&&-&) and stands at A
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4raph ).B@ Shows labour productivity from )C-< to %&&/-&
E3ITDA Mar*in
$efers to 15T>( divided by total revenue. 15T>( margin measures the extent to
which cash operating expenses use up revenue. 15T>( is a rough approximation for
cash flow and it is calculated as revenues - expenses "excluding taxes, interest,
depreciation, and amorti3ation'.E3ITDA is the acronym for Earnin*" $e#ore Intere"t8
Ta9e"8 Dereciation8 and A+orti4ation. t is a non-4(( metric that is measured
exactly as stated. (ll interest, tax, depreciation and amorti3ation entries in the ncome
Statement are reversed out from the bottom line =et ncome. t purports to measure cashearnings without accrual accounting, canceling tax-?urisdiction effects, and canceling the
effects of different capital structures.
15T>( differs from the operating cash flow in a cash flow statement primarily by
excluding payments for taxes or interest as well as changes in working capital. 15T>(
also differs from free cash flow because it excludes cash re*uirements for replacing
capital assets "capex'.
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Gra' ,-:! E3ITA;Turno&er (
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t leads to complete transparency in customer ledgers, orders, stock ledgers, dispatches
and credit lines. t is nternet enabled and allow customer to use S( to get information
on their orders.
;ith S( solution Tata Steel can now update their customers on a daily basis and
provide seamless services across the country improving customer management. The
availability of online information has facilitated *uicker and reliable trend analysis for
efficient decision-making. 5esides the streamlined business process reduces the levels of
legacy system and also provides consistent business practices across locations and
excellent audit trail of all transactions. Team (SS1T at Tata Steel.
Foreca"tin* caa$iitTata:s forecasting ability has also improved dramatically. rior to implementing supply
chain software, the company had no systematic insight into how to evaluate the accuracy
of its forecasts for demand as well as for raw materials. =ow, it has the tools to analy3e
its forecast predictions against actual results, enabling root-cause analysis capabilities to
identify what has caused the differences. Nmproving our ability to forecast allows the
company to use due-date-based planning, which helps them to meet demand with higher
utili3ation.
0+(T1$ G
Reco++endation" and Concu"ion
Reco++endation" and Concu"ion
8rom the above analysis and discussion it can be concluded that, Supply chain
management has become not ?ust a *uestion of efficient logistic process, but is related to
the growth and survival of organi3ation"s'. ;ith customers becoming more demanding in
their re*uirement of services from the suppliers, the construction of an efficient and
integrated supply-chain has assumed paramount importance. nformation technology
plays a ma?or role in the formation of the supply chain. 1fficient dissemination of
information upstream and downstream is a ma?or re*uirement for the implementation of
the supply chain, T provided with nternet, 1> and 4roup;ares and other application
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softwares. (fter analy3ing the complete implementation have the following suggestion
which can be added to the present 1$ environment to make it more effective.
). n purchasing, the approval process is not integrated with the companys e-mail
system, which results in additional unnecessary effort, less control, and longer lead
times. Tata Steel could streamline its purchasing process by using myS( 1$ e-
mail integration for workflow approvals. n addition, the company could save time
and streamline communication by using the new S( solutions, rather than
spreadsheet the solution to handle its budget process outside.
%. 1valuate S( functions for a monthly rolling budget forecast based on a total cost
breakdown for existing cost centers. This would speed up the budget processdramatically and free management from non-value-added tasks. t would enable the
use of what-if scenarios to show the pro?ected budget impact of various business
decisions.
A. n "trate*ic urc'a"in*, the company must increase the share of annual rate
contracts in total purchasing, and there is an opportunity to reduce inventory-carrying
costs by improving the share of vendor-managed inventory.
B. Tata Steel faces considerable data duplication in its purchasing functions, as some
parts have multiple universal material codes. ;ith the companys current expansion
plans, the number of parts is bound to grow, with a parallel increase in duplication.
Tata Steels interaction and integration processes, as well as its T landscape, are also
likely to expand. 5ecause data interfaces between S( and non-S( software are
batch oriented, processing for real-time updates is not possible. n addition, there are
multiple systems in place at Tata Steel that involve a variety of independent software
vendors using different technology and interfaces. n plant maintenance, employees
have found it difficult to enter work-order data. This can be resolved through the use
of mobile asset management during maintenance operations. !eanwhile, if Tata Steel
hopes to increase total steel capacity using the same number of resources, it must free
up personnel from routine activities.
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7. n +anu#acturin*, a real-time analytics engine could aggregate and deliver a unified
version of events, alerts, key performance indicators, and decision-making support to
production personnel through role-based dashboards.
C. !eanwhile, if Tata Steel hopes to increase total steel capacity using the same number
of resources, it must free up personnel from routine activities. The new S( software
offers untapped potential for Tata Steel. 0urrently the company exerts an
unnecessarily large effort to gather information on product batches for production
and sales order processing. ndustry-specific functions within the new software could
solve this problem, which is typical for many mills.
rive (dditional Galue Through 1xtending the S( 8ootprint Tata Steel has
additional re*uirements that could be satisfied by other S( applications. 5ecause
the company releases significant amounts of emissions into the atmosphere during its
manufacturing processes, for example, the management of emission certificates is a
very important issue that could be enhanced through further automation.
/. 1valuate the S( =et;eaverR !aster >ata !anagement "S( =et;eaver !>!'
component for powerful data cleansing functions. This component can also be helpful
for unifying and maintaining customer data.
Ena$e Furt'er 3ene#it" t'rou*' 3etter Deci"ion Ma0in*
(vailable reporting processes are insufficient at all departments. Standard reports
dont cover management needs. 0reating reports takes too much effortD non-S( data
must be entered manually. The heads of the individual business units seem to be
looking for a better solution that will help them eliminate routine data and events and
enable them to focus on exceptions. To support business decision-making, data must
be collected from different SystemsD this is currently done without seamless system
support.
. 1valuate the S( x(pp (nalytics composite application, which helps managers
*uickly create a wide range of reports and graphic representations of data without
programming. 1valuate manufacturing intelligence dashboards. These dashboards
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are user centric and role based, filtering out daily routine data and helping managers
retrieve data that is important to them. (vailable roles include plant manager,
production supervisor, *uality manager, and maintenance technician. The dashboards
also offer powerful functions for data cleansing.
Reco++endation=" #or ne9t "te"
5ased on this experience, we developed a wide range of recommendations from
capturing additional value from the companys current T investments to deploying new
technology to support future innovation.
Fsing an approach similar to 4artners !agic compares the potential value creation "on
the hori3ontal axis' for each recommendation with the effort "on the vertical axis'
involved in its implementation. ;e can see in 8ig ).A that enterprise service-orientedarchitecture "enterprise SO(' ")%' has the highest potential value creation but also comes
with very high effort. On the other hand, analytics ")A' and dashboards ")B' re*uire
relatively low effort but return good value. Strategic purchasing with the myS(
Supplier $elationship !anagement "myS( S$!' application "7', a master roll-out
template ")', and two composite applications "< and ' have a positive balance of value
for effort.
8ig ).A! Gartner="!agic
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Concu"ion
8rom the above analysis and discussion it can be concluded that, Supply chain
management has become not ?ust a *uestion of efficient logistic process, but is related to
the growth and survival of organi3ation"s'. ;ith customers becoming more demanding in
their re*uirement of services from the suppliers, the construction of an efficient and
integrated supply-chain has assumed paramount importance. nformation technology
plays a ma?or role in the formation of the supply chain. 1fficient dissemination of
information upstream and downstream is a ma?or re*uirement for the implementation of
the supply chain.
The purpose of this research was to provide better understanding how S( and e-
commerce has helped the Tata Steel to be more competitive. ;e have conducted anextensive analysis and managed to collect sufficient information in order to provide
comprehensive answer to the research *uestion. The purpose of this study had been
mainly to describe a phenomenon within a specific area of research. ;e aimed to get a
better understanding of the phenomenon by answering the research *uestions connected
to S(, e-procurement and other initiative taken by Tata Steel to make them more
competitive in the market. The analysis and interpretation of the data from the case study
was drawn out in 0hapter C. (fter going through the analysis we can assume that all the
research issues were answered. +owever, there are several limitations to this study and
further research can be undertaken.