Business ExcellenceThe TQM way

Anand Sen

Vice President (TQM & KPO)

TATA STEEL LTD.

Dec 06, 2012

1

2

The Emergent Business Environment

An Integrated TQM Framework2

TQM for Business3

1

3

The Emergent Business Environment

An Integrated TQM Framework2

TQM for Business3

1

1. ContextCurrent good performance often masks the imminent d anger

Global giants in our backyard! Competition

catching up!

Share of domestic RM

declining with expansion

The threat of alternate technologies looms large!

Cut-throat competition even in niche market segments!

Formidable external environment!

Our processes are not near world benchmarks!

4

Let us take a look at the Indian Steel Industry con text …..

Theme Aspiration

1 Raw Materials

▪ Upstream production process able to handle flexible raw material mixes (‘flex fuel’ mindset)▪ Relentless control of yield losses▪ Profitability shifting to RM

2 Production / productivity

▪ Current facilities are debottlenecked instead of just building new capacity▪ Specialization and rationalization of asset base

3 Human resource

▪ Labor effectiveness and new skill set critical to deal with an ever-changing environment▪ Further labor productivity to enable cost reduction

4 Customer▪ Integrated S&OP leading to dynamic margin optimization▪ Maximized predictability and OTIF (On time in full)

5 Energy Efficiency

▪ Steel plants completely self-sufficient in energy requirements▪ Clean and green public image of steel companies

6 Contract models

▪ Online monitoring of raw material prices and flexible reaction to changes▪ Full hedging against raw material price fluctuations

1. Steel IndustryThe new aspiration

5

6

Business to Business

Distributors and

Retailers

Directly to Consumers

Auto

Construction

Heterogeneous

input

▪ Diverse operating characteristics at different stag es of steel making and selling

Raw materials Iron & Steel Finishing Mills

HomogenizationDeveloping wide

variety of products

Different type of

marketing efforts

Need for an integrated improvement framework with relevant TQM methodologies to address different operating environment is necessary

1. Steel IndustryNeed for an integrated improvement framework

7

The Emergent Business Environment

An Integrated TQM Framework2

TQM for Business3

1

8

2. TSL IndiaAn Integrated TQM Framework

Strategy Management:

•Strong MD Diagnosis process for effective Policy

Management

•Introduction of “KVHS” for accelerated EBITDA

generation.

•Improved Risk Management

Higher Student A at Corporate level

510

131

1

6

71

2

3 4

6

FY10 FY11 FY12

16 16

27

Achieving Superior performance- FY12

EBIDTA WBM

Project DDP (LP)

WBM

WSS Cost WBM

Customer Claims

Co. Best

No. of Strategies

AB

C

D

WSS – Works Saleable SteelWBM – World Benchmark in Steel DDP – Due Date Performance

Key improvements:

Effects:

MD Diagnosis in progress

9

Mid 1990s

Annual Business Planning

• Management by objective (MBO) framework

• Monitoring performance vis-à-vis targets

1997-2005

ABP + Balanced Score Card

� Linking targets with activities

� Alignment of the organization towards overall company objectives

� Dashboard for monitoring performance at company and divisional levels

2006- 2008

ABP + Policy Management (PM)

� Greater focus on the ‘process (activities)’ for achieving the targets

� Emphasis on cause - effect relationship

� Focus on vital

few items

SMS with Integrated PM & ABP • Integrated framework for Business

Planning.

• Plan for check.

• Assessment of business planning and

effect ( MD Diagnosis).• Coverage across Divisions & Corporate

functions.

2009 onwards

Towards Achieving World Benchmarks

2. TSL India: Evolution of Strategy Management System (SMS )

Strategy Management System

Leadership Directions

1.Create value for our customers through our offerings.

2.Mitigate the rising input prices through efficient use of resources and high productivity

3.Achieve new benchmarks in Safety, Health and Environment

4.Improve the quality of life of the communities we serve.

2. Leadership Directions

Vision

We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship

10

2. Business Objectives & Strategies (BO&S)

Corporate Objective KPM Key Strategies

1a) To create value through enhanced offerings (products and services) to customers

• Revenue• Share of Business Auto• Premium

• Value Creation for Customers• Redesigning Supply chain and logistics solutions• Enhance system for NPD• Integrated QA system in TSL

1b)To increase our presence in chosen segments/customers

• Sales to Auto• Market share in Hi-end

Auto• Sales to construction

• Meet Growing Customer Demand through 2.9MTPA Brownfield Expansion at TSL, Jamshedpur

1c) Improve Cost competitiveness

• WSS Cost index• WSS Cost

• “Trilemma”• Operational excellence through focused

improvement implementations (KVHS)

2) Developing proficient & engaged employees

• Employee productivity• Develop capability of employees• Leadership development & succession planning

3) Achieve benchmark levels in safety performance

• Fatality• Loss Time Injury

Frequency Rate

• Fool proofing of fatality potential hazards• Reinforcing behavioral safety management• Improvement of contractor safety

4) To remain the Indian steel industry benchmark on CO2 & Dust emission

• CO2 and Dust emission• Adoption of the best technologies, reduction of

coal consumption and up gradation of existing APCEs

5) IMPACTING a million lives-Improving Quality of life of communities around us

• No. of lives impacted• Serving the targeted rural stakeholders in

Jharkhand & Odisha, and the urban stakeholders in Jamshedpur

Information Technology Strategy is an enabler for most of the Objectives & Strategi es11

12

Shared Services

FP

LP

CSI

RM

Energy Efficiency

Speed & through-put

Reliab-ility

Supply chain & logistics

Auto-mation

Dep

loym

ent D

ivis

ions

Competencies

Problem Solving

TOC, CCPM

Weibull

Simulations

Multi-variate

▪ Technical competencies are defined across x- axis, divisions, SBUs, PCs are defined across y-axis

▪ Each area leverages various analytical tools (z-axis) for which experts with relevant skill sets are defined

▪ Prioritized based on current work and importance in FY13

▪ Experts identified for each area to run improvement

Deployment of improvement projects thru’ Focussed

methodologies

Focus areas

2. Customized improvement approach to achieve BO&S

Effective PDCA for elevating and sustaining performance

13

Sustaining Improvement through DM

……

Sustaining Improvement through DM

……

Technical Limit

Benchmark

Internal Best

S D

C

S D

C

S D

C

Improvement Journey (time)

Elevate

P

CA

Per

form

ance

A

A

A

P D

CA

D

P D

CA

2. Improvement PDCA: Indexed on Benchmarking

2. Business Excellence: Focus on performance and health

14

HealthPerformance

Sustainability of the system to deliver

improvementYear-on-year

▪ Relentless focus on benchmarking

▪ Analytics to identify solutions ,

▪ Rigorous efforts to implement

▪ Review systems to ensure target

▪ Institutionalization of improved processes through S&P (SOPs, MSCs etc.)

▪ Develop thematic change agents (EE, Reliability, V-I-U, Analytics, Supply Chain,

Asset Exploitation)▪ Change leadership pipeline through

Development programs across hierarchy

Deliver Rs. Cr impact thru KPI Improvement Year-on year

15

The Emergent Business Environment

An Integrated TQM Framework2

TQM for Business3

1

1

2

3

����

Capability

����

Capability

����

Efficiency����

Efficiency

����

Effectiveness����

Effectiveness

3.TQM for Business: The Improvement Philosophy

TSL has maintained its cost competitiveness through focus on LT Strategy, Operational improvements and organizational improvement

16

Cost Competitiveness

3. TSL’s profitable growth Increasing revenue & maintaining cost competitive ness

17

EBITDA has been growing(up by 23% during post-DAP

period)

EBITDA % - industry benchmark status maintained

Revenue(up by 40% during post-DAP period)

Cost(cost leadership position)

Enabled by value creation for customer through:�Significant improvement in product and service quality (reduction in claims)�Very high level of delivery compliance�New Product Development�Benefit transfers�Continually debottlenecking facilities to improve capacity utilization

Enabled by operational improvement through:�Continually improving productivity in steel operations�Continual reduction in coke rate (prime cost element : 47% of cost)�Maintaining desired level of captive coal share�Enhancing mine life and relentless control of yield losses�Continually enhancing employee productivity

Iron MakingIron Making Steel MakingSteel MakingRaw Material MiningRaw Material Mining

� Diverse high end product mix: Customized shapes, sizes, chemistry, properties ..

� Balancing “Quality-Cost-Mine life” (‘Trilemma”) sustainability

� Process adjustments : Variation in Raw Material impurities; high temperature (up to 17000C) processes

Salient features

Rolling & further processing

7 Types of RM 1 Hot Metal 291 Steel grades 955 Distinct Products

Cus

tom

ers

Raw

Mat

eria

ls

HeterogeneityHeterogeneity HomogenizationHomogenization CustomizationCustomization

18

3a. Integrated Quality Assurance across a long & complex value chain

Key challenges & Salient features of QA

19

Tracking & reviewData analysis,

diagnostics

Aspiration setting

Ideation

Prioritisation

DetailedEvaluation

Impl

emen

tatio

n

1

2

34

5

06

?

Cycle 2 targets?

3b. Process & deploymentThe 6-step KVHS process

20

Cement from BF slag

Coal tailing briquetting

Pooled Iron Granulation

Blending rejects with tailings

Improving Rejects sale

Middling in Ferro Alloys

3b. An example of KVHS deployment: Secondary Products

Launch:14 th Aug12 Aspiration setting Idea Generation

Cu recovery from cables

Improve productivity of MR&SPP

Models Developed

Cement conversion

Tailing briquetting

Middling to Ferro Alloys

Rejects and tailing blend Lazy capital mapping across TSL, India

20

Iron Ore Mine Life (Indexed Years)

Life of Iron Ore Mines in years:

Good

21

3. Achievement of Stretched Business Goals: Effects of “Trilemma”

Mine life is expected to increase by 6 years.Some of the in-house technologies adopted are Slime treatment & Total Beneficiation.

“High end sales” & “% component localisation”

Good

22

3. As a result….a rich history of improving KPI lev els year-on-year ….

• A host of improvement projects result in year-on-year improvement of our major KPIs over the current baseline(s)

• Special focus on product quality through integrated QA approach and cross-functional management.

23

Thank you Thank you

When you are inspired by some great purpose, some

extraordinary project, all your thoughts break thei r

bonds - your mind transcends limitations, your

consciousness expands in every direction, and you

find yourself in a new, great and wonderful world.

Dormant forces, faculties and talents become alive

and you discover yourself to be a greater person

by far than you ever dreamed.

Patanjali (400 BC)

Thank you!Thank you!

27