Inventory

A

PROJECT REPORT

ON

INVENTORY MANGEMENT

AT

TATA STEEL LTD.

“IN PARTIAL FULLFILMENT FOR THE COURSE OF MBA”

PREPARED BY: RINKI KUMARI

ROLLNO: 10MBA02260

JAMSHEDPUR WOMENS COLLEGE

TATA STEEL (JWC) Page 1

DECLARATION

I RINKY KUMARI hereby declare that the project entitle “inventory management at Tata steel” in the record of authentic work carried out by me during the period from 16th may to 15th July in partial fulfillment of master of business administration(MBA) of Jamshedpur women’s college ,Jamshedpur.

This is the work, which is done by me under the guidance and supervision of Mr. Indrajeet Roy (head-account and finance) and my facilitator Mr.Imtiaz Ahmed of Tata steel, Jamshedpur.

The findings and conclusions of this report are based on my personal

study and experience, during the tenure of my summer internship.

Name: Rinky Kumari

Date: 16th July, 2011

Place: Tata steel, Jamshedpur Signature:


ACKNOWLEDGEMENT“If heart could speak words would have no end”

Learning is the beginning of wealth.

Learning is the beginning of health.

Learning is the beginning of spiritually.

Searching and learning is where the miracle process all begins.

This project for me was a great practical learning process along with the theoretical knowledge which I have gained. To work under the guidance, immense support, motivation, inspiration of all business leader of “TATA STEEL LTD” was a great experience for me.

First and foremost I would like to thank “TATA STEEL LTD” and “Jamshedpur women’s college” for giving me an opportunity to undertake this project work.

I take this opportunity to express my gratitude towards those whose guidance and co-operation has helped me immensely during the completion of this project. I express my sincere thank to Mr.Iindrajeet Roy and Mr.Imtiaz Ahmed without whose guidance this project would not have assumed real dimensions.

Finally, I would like to thank all the staff member of “TATA STEEL LTD” for helping me at various situations when required.

RINKY KUMARI

rinki__sharma @sify.com


EXECUTIVE SUMMARY

Established in 1907, Tata steel is Asia’s first and India’s largest integrated private sector steel company with its captive iron ore and coal mines and one of the world most modern steel making and facilities at Jamshedpur in eastern India which includes a state-of-art cold rolling mill complex. Tata steel is the among the lowest cost producer of steel in the world.

The aim of the project is to understand what inventory management is and how it work in Tata steel and other steel companies. What is the various method of inventory management and what method does Tata steel follows for the same.

But some other aims are as follows:

To carry out a critical analysis of Tata steel (steel division) inventory management.To find out the area of weakness in the existing inventory control mechanism.To extrapolate the decision position with the steel industry.

The objectives of the project are:-

To understand the concept of inventory management and its management in Tata steel.To calculate the various inventory ratios and drive conclusion from it.To analysis the efficiency of purchase department, supply chain department and finance and account department related to inventory management.To understand and analysis the deviation in the theoretical aspect and practical implementation of an inventory system.

The aim of the project is to make use of the study of various inventory management methods and utilizing them to find the best inventory management method, the steel industry should flow to minimize problem the plant faces.


The projects concludes with major finding and recommendations.

TABLE OF CONENT

Sl No. Content Page No.

1. Introduction to STEEL industry 06

2. Journey to TATA STEEL 14

3. Board of Directors 21

4. Mission and Vision 30

5. Strategic Business Units 31

6. Finance and Accounts Department of TATA STEEL 42

7. Inventory Management and its types 47

8. Inventory Management at TATA STEEL 53

9. Balance Sheet 60

10. Profit and loss Accounts 61

11. Cost Sheet 63

12. Financial Ratio Analysis of TATA STEEL 65

13. Company overview of JINDAL and SAIL 75

14. Comparison between TATA STEEL,JINDAL and SAIL 81

15. Presentation of inventory of TATA STEEL 85

16. Finding and Recommendations 88

17. Bibliography 91


INTRODUCTION TO STEEL INDUSTRY:-

1. GLOBAL SCENARIO:-

Steel, the recycled material is one of the top products in the manufacturing sector of the world.

The history of the modern steel industry began in the late 1850s, but since then steel has been

basic to the world's industrial economy. It grew at a rapid pace. It started reaching heights, with

the global players in the steel industry such as Tata Steel, SAIL and others.

The sub-prime crisis that erupted in the US and Western Europe impacted the global financial

system, resulting in a significant cut-back in investment flows and the availability of funds. The

developing world continued to enjoy growth in its demand for goods and services, contributing

to the global inflationary trends in oil, coal, minerals and other commodities. The cost of food

similarly rose in several countries during the latter part of the year, leading to unrest and

hardship amongst the poorer nations. Some governments have lately begun to impose anti-

inflationary measures on their over-heated economies to curb runaway price increases and

consumption.

The global steel industry predictably also faced pressure on their margins arising from cost

increases in iron ore and coking coal, but for the most part these increases were absorbed by the

market through steel price increases. The full impact of these cost increases on steel producers

and the consequential higher steel prices to user industries will, however, only be felt in the

current year, at which time one might expect some slow-down in economic activity and

consumer demand. In 2007 the World Crude Steel output reached to 1343.5 million metric tons

and showed a growth of 7.5% over the previous year. It is the fifth consecutive year that world

crude steel production grew by more than 7%.

In 2007 the World Crude Steel output reached 1343.5 million metric tons and showed a

growth of 7.5% over the previous year. It is the fifth consecutive year that world crude

steel production grew by more than 7%. (Source: IISI)

China remained the world’s largest Crude Steel producer in 2007 also (489.00 million

metric tons) followed by Japan (112.47 million metric tons) and USA (97.20 million


metric tons). India occupied the 5 th position (53.10 million metric tons) for the second

consecutive year. (Source: IISI)

The International Iron & Steel Institute (IISI) in its forecast for 2008 has predicted that

2008 will be another strong year for the steel industry with apparent steel use rising from

1,202 million metric tonnes in 2007 to 1,282 million metric tonnes in 2008 i.e. by 6.7%.

Further, the BRIC (Brazil, Russia, India and China) countries will continue to lead the

growth with an expected increase in production by over 11% compared to 2007.

The following table shows the growth in terms of crude steel production for the top ten steel

producing nations

Figures in million tones


2. DOMESTIC SENARIO:-

The steel industry in

India has been moving from strength to strength and according to the Annual Report 2009-10 by

the Ministry of Steel, India has emerged as the fifth largest producer of steel in the world and is

likely to become the second largest producer of crude steel by 2015-16.

Led by strong demand for autos and engineering services, the domestic steel demand in India

remains robust, as per Moody's sectoral

analysis on Asia's steel sector. According to

the analysis, the outlook for the domestic

operating environment is positive, driven by

robust growth in infrastructure, autos and

construction and constrains on additional

supply by 2011.

Indian steel industry was reserved for the

Public Sector (Government controlled

Companies) till the year 1991except for Tata

Iron & Steel Company Ltd the only private sector integrated steel plant. After the economic

reforms of 1991, this sector was opened up to the private sector and India has seen an impressive

growth in the production of steel. Consequently, the capital structure of the steel companies has

undergone notable changes in the post liberalization era. The Contribution of the steel industry is

near to 2% of its GDP.

SAIL is India's largest steel producing company. With a turnover of Rs. 43,935 crore and annual

production of around 12.4 million tonne, the company is among the four Maharatnas of the

country's Central Public Sector Enterprises. SAIL has five integrated steel plants, three

special plants, and one subsidiary in different parts of the country. During the calendar year

2009, SAIL emerged as the second highest net profit earning company amongst all steel

companies of the world. This was mainly because of increased thrust on fund management and

replaced high cost short term loans with low cost debts. SAIL has a credit rating of AAA from

FITCH thus making it a credit-worthy company.


64.88

571.8

90.5

71.270.67

Annual Production 2009-10

(In million tonnes)India

China

Japan

Russia

USA

Tata Steel is the World’s sixth largest and India's second-largest and second-most profitable

company in private sector with annual production of around 6.5 million tonne. It is the first

integrated steel plant in Asia and world’s second most geographically diversified steel producer

and a Fortune 500 company. It was Tata Steel’s acquisition of Anglo-Dutch steel maker Corus

which catapulted it into a major global steel producer. According to FITCH, Tata Steel has a

stable credit rating of BBB- which reflects the company’s position as a dominant and efficient

value added steel producer.

Jindal Steel and Power Limited is another major steel producer in the Indian steel industry. Its

annual production in 2009-10 was around 1.3 million tonnes. JSPL has consistently tapped new

opportunities by increasing production capacity, diversifying investments and leveraging its core

capabilities to venture into new businesses. The company produces economical and efficient

steel and power through backward integration. An enterprising spirit and ability to discern future

trends have been the driving force of this company’s remarkable growth. It has won wide

acclaim for its efficient operations and commitment towards environment and society.

Rashtriya Ispat Nigam Limited (RINL) is the first shore based integrated steel plant in the

country located at Visakhapatnam in Andhra Pradesh. The plant was commissioned in August

1992 with a capacity to produce 3 million tonne per annum (Mtpa) of liquid steel. The plant has

been built to match international standards with state-of-the-art technology, incorporating

extensive energy saving and pollution control measures. It achieved a production level of 1.9

million tonnes in 2009-10. FITCH has awarded BB- credit rating to RINL.

Bhushan Steel is another major player in the Indian steel industry. It is comparatively new to the

steel industry and has a present capacity of around 1.9 million tonnes. It has various expansion

plans lined up. Its annual production was around 1.1 million tonnes in the year 2009-10. CARE

has awarded a rating of A+ which is indicative of the robust cash flow generated by this

company.


Indian Steel Industry is gradually trying to trying to offset the effects of recession by

concentrating on transportation and construction projects that are usually funded by the

Government. But has Indian economy is showing favorable signs of recovery;

domestic demand for steel is

gradually increasing fuelled by

growth in automobile and

infrastructure. In consistent to

the above trend, the domestic

steel producers are going for

capacity expansion to account

for the surging demand for steel.

The National Steel Policy has

forecasted the domestic demand

to reach 110 million tonnes by

2019-20 and annual steel consumption to grow by 16% annually. This indicates robust growth

opportunities in the steel sector and subsequently this is going to reflect on the capital structure

of the steel companies.


SAIL Tata Steel

Bhushan

Steel

JSPL RINL02468

101214

Annual Steel Production in Mil-lion Tonnes (2009-10)

Annual Steel Production in Million Tonnes (2009-10)

TOP STEEL PRODUCING COMPANIES:-

SOME OF THE LEADING COMPANIES IN INDIAN STEEL INDUSTRY ARE:

Bokaro Steel Plant: Steel manufacturer.

Essar Steel: Producer of sponge iron, steel and iron ore pellets.

Jindal Iron & Steel: Producer of galvanized steel products.

Jindal Steel & Power: Manufacturer of mild steel slabs and sponge iron.

Steel Authority of India: Manufacturer of steel and iron.

Tata Steel: Producer and supplier of wire rods, bars, and steel flats


UNDERSTANDING THE STEEL INDUSTRY USING MICHAEL PORTER ANAYLYSIS:-

Michael Porter had identified five competitive forces that shape every single industry and the market. These forces help in analyzing the industry from the intensity of competition to the probability and attractiveness of an industry.

THREAT OF NEW ENTRANTS :

The easier it is for new companies to enter the industry, the more cut-throat competition there will be. Steel industry is highly capital intensive and is estimated that to set up 1 MTPA capacity of integrated steel plant, it requires around Rs. 30 billion of investment depending upon the location of the plant and technology used. The government follows a favorable policy for steel manufacturers but certain discrepancies involved in allocation of iron ore mines and land acquisition in India.

BARGAINING POWER OF SUPPLIERS : If one supplier has large impact on the company‟s margin and volume then it holds substantial power. In the steel industry the bargaining power of supplier is very low because the big players in the industry have their own mines for major raw materials. However, still a few companies have to depend up on suppliers for the raw materials.

BARGAINING POWER OF BUYER : In the steel industry unlike the household goods market the buyers have a very low bargaining power. The only effort which can be done towards ensuring that the buyers are saved in the curb or ceiling laid by the government on the prices which can be charged by the companies on its product. However, most of the sale of steel is to the other industries or to through the distribution network and very less to the common man.


COMPETITIVE RIVALRY:In India the steel industry is dominated by a major few players only and the degree of competitive rivalry is very low as the demand is always more than the supply or the production of the companies. THREATS OF SUBSTITUTES:The presence of substitute products increases the propensity of customers to switch to alternatives. The usage of aluminum has been constantly growing in the automobile sector which used to be the major customer of the steel industry. However, because of the durability and other features of the steel, aluminum does not stand as a threat in the market



COMPANY PROFILE: TATA IRON AND STEEL COMPANY

We aspire to be the global steel industry

benchmark for Value creation and corporate

citizenship

Tata Steel is the world's 8th largest steel manufacturer. It operates in more than 20 countries

and has a commercial presence in over 50.

The company was established in Jamshedpur, India, in 1907. In the past few years, Tata Steel has invested in Corus (UK, renamed Tata Steel Europe), Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings (Singapore). With these, the company has created a manufacturing and marketing network in Europe, South East Asia and the Pacific-rim countries, currently ranked 410th on Fortune Global 500; it is based in Jamshedpur, Jharkhand, India. It is part of Tata Group of companies. Tata Steel is also India's second-largest and second-most profitable company in private sector with consolidated revenues of 132,110 crore (US$29.33 billion) and net profit of over 12,350 crores (US$2.74 billion) during the year ended March 31, 2008. Tata steel is the 8th most valuable brand according to an annual survey conducted by Brand Finance and The Economic Times in 2010.


http://en.wikipedia.org/wiki/Indian_rupee

http://en.wikipedia.org/wiki/Indian_rupee

Its main plant is located in Jamshedpur, Jharkhand, with its recent acquisitions; the company has

become a multinational with operations in various countries. The Jamshedpur plant contains the

DCS supplied by Honeywell. The registered office of Tata Steel is in Mumbai. The company

was also recognized as the world's best steel producer by World Steel Dynamics in 2005. The

company is listed on Bombay Stock Exchange and National Stock Exchange of India, and

employs about 81,269 people.

It has the capacity to produce over 30 million tonnes of crude steel every year. The company

produces crude steel and basic steel products, and makes steel for building and construction

applications through Tata BlueScope Steel, its joint venture with Australia's BlueScope Steel.

Tata Steel has also set up joint ventures for the development of limestone mines in Thailand, the

procurement of low-ash coal from Australia and coking coal from Mozambique, and the setting

up of a deep-sea port in Orissa in India. The company is exploring opportunities in the titanium

dioxide business in Tamil Nadu, India, and will soon be producing high carbon ferrochrome

from its plant in South Africa.

It was Tata Steel’s acquisition of Anglo-Dutch steel maker Corus which catapulted it into a

major global steel producer. It also raised debt capital from the market to finance the takeover.

Infusion of debt in the capital structure has long term implications on its capital budgeting

decisions and has also impacted the dividend and investment decisions. According to FITCH,

Tata Steel has a stable credit rating of BBB- which reflects the company’s position as a dominant

and efficient value added steel producer.

Indian Steel Industry is gradually trying to trying to offset the effects of recession by

concentrating on transportation and construction projects that are usually funded by the

Government. But has Indian economy is showing favorable signs of recovery; domestic demand

for steel is gradually increasing fuelled by growth in automobile and infrastructure. In consistent

to the above trend, the domestic steel producers are going for capacity expansion to account for

the surging demand for steel. The National Steel Policy has forecasted the domestic demand to

reach 110 million tonnes by 2019-20 and annual steel consumption to grow by 16% annually.

This indicates robust growth opportunities in the steel sector and subsequently this is going to

reflect on the capital structure of the steel companies including Tata Steel.


ANOTHER FEATHER IN CAPITAL OF TATA STEEL:-

Corporate Awards:- The rating of being one of the world’s top ten “most admired companies” by FORTUNE magazine and the hay group in the industry- metal category.The economic times company of the year award.The best establishment award by the president of India, Mrs. Pratibha Devi Singh Patil. The super brand award of Tata Tiscon.Companies with highest corporate image by Nielsen.

Award for Excellence in knowledge:- The most admired knowledge enterprise (MAKE) Asia award 2009 for the 6th time.The fifth BML Munjal award for excellence in learning and Development.

Award for excellence in corporate Social Responsibility (CSR):- The golden peacock global award.The significant achievement in sustainability certification from CII-ITC.The TERI CSR award. The times of India CSR award.The rashtriya khel protsahan purashkar.The Ispat paryavaran purashkar special award.The Xiamen city top Employers award to NAT steel Xiamen for the second time.The outstanding award for employee relation and welfare 2009 to siam industrial wires (SIW) Thailand.


The good governance for environment in the factory and enterprises award to SIW. The corporate social responsibility department of industrial work to SIW.The green star award from the industrial Estate Authority of Thailand (IEAT) to riam construction steel company (SCSC).

FOUNDERS OF TATA STEEL:-

JAMSEDJI NUSSERWANJI TATA (1839 – 1904)

He was a visionary behind Tata Steel .He realized that India’s real freedom depended upon its self-sufficiency in scientific knowledge, power and steel, thus devoted the major part of his life, and his fortune to three great enterprises-The Indian institute of Science at Bangalore, the Hydro-electric schemes and the Iron & Steel Works at Jamshedpur .He envisaged and conceived a steel town to the very last detail, later to be named as Jamshedpur.

J.N. Tata had exhorted to his sons to pursue and develop his life’s work ; his elder son, Sir Dorabji Tata(1859-1933)

carried out the bequest with scrupulous zeal and distinction .Thus , even though it was Jamshedji Tata who had envisioned the mammoth projects, it was in fact Dorabji Tata who actually brought the ventures to existence and fruition. He was the first chairman of the gigantic Tata enterprises.

It was in 1907 that the village of Sakchi was discovered at the confluence of two rivers, Subarnarekha and Kharkhai and the railways station of Kalimati .The Tata Iron and Steel Company was floated.

SIR DORABJI TATA (1859 – 1933)

Sir Dorabji Tata(1859-1933) carried out the bequest with scrupulous zeal and distinction. Thus, even though it was Jamshedji Tata who had envisioned the mammoth projects, it was in fact Dorabji Tata who actually brought the ventures to existence and fruition. He was the first chairman of the gigantic Tata enterprises.

J. R. D. TATA (1904 – 1993)


JEHANGIR RATANJI DADABHI TATA has been one of the greatest builders and personalities of modern India in the twentieth century.

He assumed Chairmanship of Tata Steel at the young age of 34, but his charismatic, disciplined and forward looking leadership over the next 50 years led the Tata Group to new height of achievement, expansion and modernization.

His style of management was to pick the best person for the job at hand and let him have the latitude to carry out the job. He was never interested for Micro- Management. It was he who zeroed in on Sumant Moolgaokar, the engineering genius who successfully steered our company for many years. He was a visionary whose thinking was far ahead of his time, which helped Tata Group launching its own Airline, now known as Air

India. He was awarded the country’s highest civilian honour, the Bharat Ratna in 1992.

RATAN NAVAL TATA

Ratan Navel Tata was born on December 28, 1937, in Surat. He is the present Chairman of Tata Group, India’s largest conglomerate founded by Jamshedji Tata and consolidated and expanded by later generation of his family. He is one of the most well known and respected industrialists in India.

Tata was born into wealthy and famous family of Mumbai. His childhood was troubled as his parents separated in the mid 1940s, when he was about seven and his younger brother was five. His mother moved out and both he and his brother were raised by his grandmother Lady Navarjbai.

Ratan Tata completed his degree in architecture with structural engineering from Cornell University in 1962, and the Advance management Program from Harvard Business School in 1975. He joined the Tata Group in December 1962 on the advice of JRD Tata. He was first sent to Jamshedpur to work at Tata steel. He worked on the floor with the other blue collar employees, shoveling limestone and handling the blast furnaces. He was appointed the Director In Charge of The National Radio & Electronics Company Limited (Nelco) in 1971 and was successful in turning Nelco around.



BOARD OF DIRECTORS

Mr. Ratan N. Tata Chairman

Mr. B. Muthuraman Vice Chairman

Mr. Nusli N. Wadia Company Director

Mr. Iahaat Hussain Board Member

Mr. Subodh Bhargava Board Member

Mr. Jacobus Schraven Non-Executive Independent Director

Dr. Jamshed J. Irani Board Member

Mr. Andrew Robb Non-Executive Independent Director

Mr. S. M. Palia Company Director

Mr. Suresh Krishna Financial Institutions Nominee

Mr. Kirby Adams Managing Director & CEO, Tata Steel Europe

Mr. H.M. Nerurkar Managing Director, Tata Steel Limited

Tata Steel Group Senior Management

H.M. Nerurkar Managing Director, Tata Steel Limited

Kirby Adams Managing Director & CEO, Tata Steel Europe

Dr. Karl,Ulrich Kohler Chief Operating Officer, Tata Steel Europe

Koushik Chatterjee Group Chief Financial Officer

Jean Sebastien Jacques Group Director (Strategy)

Manzer Hussain Group Director (Communication)

Kees Gerretse Group Director (Procurement)

Avneesh Gupta Group Director (Total Quality Management)

Dr. Debashish Bhattacharjee Director (Research, Development and Technology)


Andrew Page Director (Health and Safety)

Dr. Paul Brooks Director (Environment)

Shreekant Mokashi Chief (Group Information Services)

Uday Chaturvedi Managing Director, Corus Strip Products UK, TSE

Anand Sen Vice President (TQM and shared services) TSL

Frank Royle Director (Finance) TSE

AbanIndra M. Misra Vice President (Coke, Sinterand Iron and IR) TSL

Theo Henrar Managing Director, Corus Strip Products IJmuiden, TSE

Varun Jha Vice President (Engineering and Chhartisgarh Project) TSL

Tor Farquhar Director (Human Resourse) TSE

Radhakrishnan Nair Chief Human Resourse Officer, TSL

Adriaan Vollebergh Managing Director, Tata Steel International, TSE

Partha Sengupta Vice President (Raw Material) TSL

Hridayeshwar Jha Vice President (Orissa Project) TSL

Alastair Altken Managing Director (Distribution, UK and Ireland) TSE

N.K. Misra Group Head (Mergers and Acquisitions) TSL

Dook van den Boer Manufacturing Director (Corus Strip Products IJmuiden) TSE

Sanjeev Paul Vice President (Corporate Services) TSL

Jon Bolton Manufacturing Director (Corus Long Products) TSE

T.V. Narendran Vice President (Safety and Flat Products) TSL

Rod Jones Director (Corus Consulting) TSE

Bimlendra Jha Vide President (Long Products) TSL

V.S.N. Murty Chief Finacial Controller (Corporate) TSL

Laptawee Senavonge President, Tata Steel Thailand

Vivek Kamra President and CEO, NatSteel Holdings

Sandip Biswas Group Head(Corporate Finance, Treasury and Investor Relations, TSL)

Lim Say Yan Group Head(Corporate Assurance and Risk Management)

A. Anjeneyan Company Secretary and Chief of Compliance, TSL


Helen Matheson Director Legal, TSE

Dr. Shaun Doherty Executive Officer to the CEO,TSE

Arun Misra Principal Executive Officer, TSL




ORGANISATIONAL PROFILE OF TATA STEEL:-

Established in 1907, Tata Steel is Asia's first and India's largest private sector steel company. Tata Steel is among the lowest cost producers of steel in the world and one of the few select steel companies in the world that is EVA+ (Economic Value Added).

Tata Steel has operations in 10 countries and maintains a strategic presence in select Geographic’s through exports.

GROWTH AND GLOBALISATION .

JAMSHEDPUR, INDIA-

5 million tonnes per annum, slated to reach 7 MTPA in 2008&10 MTPA by 2011.

Partnership with Corus

On partnership with Corus group, the combined entity will be the 6 th largest steel producer and the 2nd most geographically diversified steel company in the world.

Nat steel Asia Singapore

2 million tonnes; Singapore, China, Vietnam, Thailand and three other South East Asian countries.

Tata Steel, Thailand-

1.7 million tonnes

Limestone mining in Thailand.

Low ash coal in Australia.


http://www.tatasteel.com/careers/profile.htm#TOP

Wire manufacturing unit in Sri Lanka known as Lanka special steel captive raw material resources in India give it a competitive advantage.

Other Projects:

India

1.2 MTPA Metcoke project in West Bengal Deep sea port in Dhamra, Orissa Titanium Dioxide project in Tamil Nadu Joint Venture with BlueScope Steel for metallic coating and painting steel unit

Overseas:

Development of a source of low ash coal from Queensland, Australia

Ferro Chrome production in Richards Bay, South Africa


GLOBAL ASPIRATIONS: OUR POSSIBILITIES

Steel Plant Projects:

India :

The Company has embarked upon setting up three green field steel plants in eastern India:

12 MTPA* plant in Jharkhand

6 MTPA plant in Orissa

5 MTPA plant in Chhattisgarh

Jamshedpur Steel Works will become a 7 MTPA unit by 2008 and 10 MTPA by 2010.


STEEL BUSINESS UNIT:-

RAW MATERIAL AND FINISHED PRODUCTS

Ore/coal and iron ore mining mainly and iron making.

LONG PRODUCTS

Wire rod mill. Bar mill Merchant mill.


FLAT PRODUCTS

Hot strip mill. Cold rolling mill


MISION AND VISSION OF TATA STEEL:-

MISSION:

Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to strengthen India’s industrial base through the effective utilization of staff and materials. The means envisaged to achieve this are high technology and productivity, consistent with modern management practices.

VISSION:

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

We make the difference through:

Our people, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion.

Our offer, by becoming the supplier of choice, delivering premium products and services, and creating value for our customers.

Our innovative approach, by developing leading edge solutions in technology, processes and products.

Our conduct, by providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards.


STRATEGIC BUSINESS UNITS

Apart from the main steel division, Tata Steel's operations are grouped under the following strategic business units.

BEARINGS DIVISIONS:

Manufactures ball bearings, double row self-aligning bearings, clutch release bearings and tapped roller bearing for two wheelers, fans, water pum

FERRO ALLOYS AND MINERALS DIVISION:

Operates chrome mines and has unit for making ferro chrome and ferro manganese. Its one of the largest players in the global ferro chrome marke


RINGS AND AGRICO DIVISION:

The ring plant manufactures forged and rolled rings for bearings and automotive components.

TATA AGRICO

It is the first organized manufacturer in India of hand tools and implements for application in agriculture.

TATA GROWTH SHOP (TGS):

Has designed, developed, manufactured, erected and commissioned thousands of tonnes of equipments ranging from overhead cranes to high precision components, including a rocket launch pad for the Indian Space and Research Organization.

TUBES DIVISION:

The biggest steel tube manufacturer with the largest market share in the country, it aspires to strengthen its market presence by expanding and modernizing its commercial and precision tube manufacturing capacity.

WIRE DIVISION:

A pioneer in the manufacture of steel wires in India, it produces coated and uncoated wires, branded as Tata Wiron. The division also operates a wholly owned subsidiary in Sri Lanka.


SOME MAJOR BRANDS

This is world’s first branded Cold Rolled Steel product.

Galvanized corrugated sheets.

Re-bars

It is the most valued brand in plumbing segment.


It caters to the equipment needs of the farming, mining &construction.

It has made deep inroads in the highly competitive auto market.

It services requirements in a wide gamut of industries including automotive, agriculture, fencing and power.

Galvano is galvanized plain (GP) steel offering available in sheet & coil forms for all customer segments like white goods , panels, bus bodies etc. Galvano offers commitment to deliver high performaces to meet diverse and stringent needs of the General Engineering Segment.

SUBSIDIARY / ASSOCIATES / JVs

THE TINPLATE COMPANY OF INDIA LTD: 35% market share in industry.

TAYO ROLLS LTD: Country's leading roll manufacturer and supplier

TATA RYERSON LTD: In the business of steel processing and distribution


TATA REFRACTORIES: The largest producer of refractories in India

TATA SPONGE IRON LTD: Has an installed capacity of 240,000 tonnes

TATA METALLIKS LTD: Among the top wealth creators in the country.

TATA PIGMENTS LTD: Produces synthetic iron oxide pigments.

JAMSHEDPUR INJECTION POWDER LTD: Produces 15,000 tonnes of desulphurising compounds per annum.

TM INTERNATIONAL LOGISTICS LIMITED: Services include material handling and port operations.


INDIAN STEEL AND WIRE PRODUCTS: Comprises a wire unit and a steel rolling manufacturing unit

METAL JUNCTION.COM: Provides e-business services and solutions to Indian Industry.

DHAMRA PORT : Deep drafted port project, a 50:50 JV between Tata Steel and L&T.

TRF Ltd: An engineered-to-order equipment and systems provider.

JAMSHEDPUR UTILITY AND SERVICE COMPANY :The country's first municipal and civic services enterprise.

TATA BLUESCOPE: Metallic coating and painting facility.\


LANKA SPECIAL STEEL LIMITED:A wholly owned subsidiary it is the only unit in Sri Lanka

manufacturing galvanized wires

SILA EASTERN COMPANY LIMITED: A 49% joint venture to undertake development of limestone mines in Thailand.

NATSTEEL ASIA SINGAPORE:Presence in six countries in S E Asia and China, mainly long products

MILLENNIUM STEEL, THAILAND: Long products rolling.

TATA NYK: A 50:50 JV for shipping dry bulk and break bulk cargo.


CORUS: Now a part of Tata Steel Group. It manufactures, processes and distributes metal products as well as provides design, technology and consultancy services.

EXPANSIONS AND NEW PLANTS

Recognizing the need for growth as the world recovers from the financial crisis, the Tata Steel Group has put into action initiatives that will ensure its growth is sustainable. These initiatives span the entire supply chain, from raw materials to logistics and value-added manufacturing.

MTPA EXPANSION PROJECT AT JAMSHEDPUR

Company is executing a 2.9 million tonne expansion project at Jamshedpur which is expected to complete in the third quarter of financial year 2011-12. When completed, this project will enhance Jamshedpur work’s capacity to 9.7 mtpa.

The expansion project will involve setting up the following new facilities: a 3.05 mtpa capacity blast furnace, 2 coke oven batteries each with a capacity of 0.7 mtpa, a 6 mtpa pellet plant, a 2.4 mtpa Thin Slab Casting & Rolling (TSCR) facility, a Linz-Donawitz (LD) Basic Oxygen Converter and a lime calcining plant. The configuration and capacity of these new facilities have been chosen with a strategic rationale.

In addition, the Company is focusing on several downstream facilities that are being set up in coated and packaging products, which are consistent with the Company’s long-term strategy to increase the ratio of value-added products in its output. The Company continues to pursue its long-term strategy to build green field capacity in India, including in Orissa.


The expansion will allow the company to utilize its existingResources more efficiently, whether they be manpower,Utilities or the Company’s capital…..

PROGRESS OF RAW MATERIAL PROJECTS

The coal project in Mozambique and the iron ore project in Canada are the key projects in the strategy to enhance the Group’s raw materials integration. Significant progress has been made by the management of the Joint Venture Company with Riversdale Mining in Mozambique towards the development of the Benga reserves, as is shown by the Benga Coal and Benga Power projects receiving environmental clearance. The Benga coal reserves have been upgraded by 84% to 502 million tonnes and the measured coal resource by 126% to 710 million tonnes, firmly establishing Benga as one of the most significant coal deposits outside Australia. The Company is also one of the largest shareholders in Riversdale Mining Limited, which is listed in Australia.

PEST ANALYSIS ON TATA STEEL

1. POLITICAL ASPECT

The 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 ASPECT

The 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 ASPECT

In 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 ASPECT

Indians 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 reserve.

SWOT ANALYSIS ON TATA STEEL


1. STRENGTH

Strong brand name of TSL and TATA Group. India Operations capable of meeting its own iron ore requirements. Raw material security building through global operations. Leading sales and distribution capability. Low ware labor availability. EVA + Company.

2. WEAKNESS

Low R&D investment.


Unscientific Mining. Low Productivity.

3. OPPORTUNITIES

Unexplored rural markets. Growing domestic markets. Growing global markets. Developing countries not restrained under the Kyoto protocol. Carbon credit trading on the rise. High investment in infrastructure development.

4. THREATS

World’s big producer. China set to becoming a net exporter. High duties relating to pollution control and high energy cost. Global economic slowdown.

THE FINANCE AND ACCOUNTS DEPARTMENT

The Accounts department of TATA STEEL was established with the objective of recording of financial transaction and meeting the statutory requirement. With the change in time, requirements & perception, it has evolved itself into FINANCE & ACCOUNTS division with a vision to becoming a business partner and aid the top management in running business, moving from transaction processor to financial analysts. Composition of professionals Finance & Accounts division integrated its man power requirement with that of TATA STEEL. The company’s initiatives to attract and retain the best talents also form part of the division. Finance and accounts division has 152 professionals, having one or more qualifications, which add up to 74 chartered

Accountants and 6 company secretaries and 20 other professionals.


Technical up gradation office automation as a part of modern day initiatives has also been studied and is in the advanced stag of implementation in the division. Some of the major technologies, facilities & equipment implemented during the year in the division include:

1. Fully Integrated SAP R3 system, wherein the transactional data is entered in the respective parent department. Thus avoidance of double data entry in the division.

2. LAN connectivity throughout the division & e- mail ID’s to the entire officer’s facilitating easy communication. Also available is “round the clock internet facility” to all the officers for gathering & sharing information.

3. Office automation in the area of data dissemination & document storage is also coming to the division in big way in the near future.

4. Revamping of Intranet site of F&A in the progress to enrich & update the employees with latest updates.

FUNCTIONS OF DEPARTMENT

Functions performed by the division and the reports provided to the top management include:

Monthly profit statement. Monthly, quarterly & annual reports. Decision support system Payment of salaries, wages & other dues to employees. Cost & inventory reports. Payment of dues & compliance to employees. Inter-company comparisons. Payment to vendors. Various analyses. Evaluation of business projects.


GROUPS AND SECTIONS OF FINANCE AND ACCOUNTS

DEPARTMENT

The whole finance and accounts department of Jamshedpur is divided in different groups and sections. These are:

1. Cash Office2. Finance and Cost3. Payroll Accounts4. Purchase and Capital Group 5. Sales and Indirect Taxation

Sales and direct taxation group is responsible for accounting. It is also related to post sales activities like debtors & town accounting. It comprises of the following section:

Exercise section Freight section Town Debtor’s section Sundry Debtor’s section

CONSOLIDATED FINANCIAL HIGHLIGHTS 2009-10

(Rs in crores)

Turnover = Sales and Other Operating Income (-) Excise Duty


FY 09 FY 10 Q1 FY 10

Q2 FY 10

Q3 FY 10

Q4 FY 10

(4,000)

(3,000)

(2,000)

(1,000)

-

1,000

2,000

3,000

4,000

5,000

6,000 4,951

(2,009) (2,209) (2,707)

473

2,434

Profit After Tax

EBITDA = Profit before exceptional items and taxes (+) Net Finance Charges(+) Depreciation (-) Minority Interest (+) Share of Profit of Associates


Profit after taxes, minority interest and share of profit of associates

FY 09 FY 10 Q1 FY 10

Q2 FY 10

Q3 FY 10

Q4 FY 10

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000 18,495

9,340

204 402

3,401

5,333

EBITDA

FY 09 FY 10 Q1 FY 10 Q2 FY 10 Q3 FY 10 Q4 FY 10 -

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

120,000.00

140,000.00

160,000.00 147,329.00

102,393.00

23,292.00 25,395.00 26,202.00 27,504.00

Turnover

FY 09 FY 10 Q1 FY 10

Q2 FY 10

Q3 FY 10

Q4 FY 10

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

20%

8%

-4% -3%

13%

25%

Return on Invested Cap-ital

EBITDA Margin = EBITDA/Turnover


FY 09 FY 10 Q1 FY 10

Q2 FY 10

Q3 FY 10

Q4 FY 10

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

13%

9%

1%2%

13%

19%

EBITDA Margin

Net Operating Profit before tax and exceptional items /(Net Fixed Assets (excluding WIP) + Goodwill + Investments + Adjusted Net Current Assets)


WHAT IS INVENTORY?

Inventory refers to stock pile of product a firm is offering for sale and components that make up the product .in other words inventory is composed of assets that will be sold in future in normal course of business operation. Inventory is a quantity or store of goods that is held for some purpose or use .inventory play a crucial role in the companies purchasing –production –marketing.

TYPES OF INVENTORY:-

RAW MATERIAL

Raw materials are inventory items that are used in the manufacturer's conversion process to produce components, subassemblies, or finished products. These inventory items may be commodities or extracted materials that the firm or its subsidiary has produced or extracted. They also may be objects or elements that the firm has purchased from outside the organization. Even if the item is partially assembled or is considered a finished good to the supplier, the purchaser may classify it as a raw material if his or her firm had no input into its production. Typically, raw materials are commodities such as ore, grain, minerals, petroleum, chemicals, paper, wood, paint, steel, and food items. However, items such as nuts and bolts, ball bearings, key stock, casters, seats, wheels, and even engines may be regarded as raw materials if they are purchased from outside the firm.

WORK-IN-PROCESS

Work-in-process (WIP) is made up of all the materials, parts (components), assemblies, and subassemblies that are being processed or are waiting to be processed within the system. This generally includes all material—from raw material that has been released for initial processing up to material that has been completely processed and is awaiting final inspection and acceptance before inclusion in finished goods.

Any item that has a parent but is not a raw material is considered to be work-in-process. A glance at the rolling cart product structure tree example reveals that work-in-process in this situation consists of tops, leg assemblies, frames, legs, and casters. Actually, the leg assembly and casters are labeled as subassemblies because the leg assembly consists of legs and casters and the casters are assembled from wheels, ball bearings, axles, and caster frames.


FINISHED GOODS

A finished good is a completed part that is ready for a customer order. Therefore, finished goods inventory is the stock of completed products. These goods have been inspected and have passed final inspection requirements so that they can be transferred out of work-in-process and into finished goods inventory. From this point, finished goods can be sold directly to their final user, sold to retailers, sold to wholesalers, sent to distribution centers, or held in anticipation of a customer order.

SPARES PARTS

This category includes those products, which are accessories to main products produced for the purpose of sale. Example of spare items is blots .nuts, clamps, screws etc.

INVENTORY MANAGEMENT:

Inventory management system provides information to efficiently manage flow of materials, effectively utilize peoples and equipment ,co-ordinate internal activities and communicate with customers .inventory management does not make decisions or manage operations, they provide the information to managers who make more accurate and timely decisions to manage their operations.

A firm neglecting the management of inventories will be jeopardizing its long run profitability and may fail ultimately .it is possible for a company to reduce its level of inventories to a considerable degree without any adverse effect on production and sales by using simple inventory planning and control techniques .the reduction in excessive inventories carries a favorable impact on companies profitability.

The purpose of inventory management is to keep the stock in such a way that neither there is over stocking nor under stocking.

A proper planning of purchasing, handling, storing and accounting should form a part of inventory management an efficient system of management will determine.

AIM OF INVENTORY MANAGEMENT:


reduced inventory investmentimproved customer serviceincreased productivity

OBJECTIVE OF INVENTORY MANAGEMENT:

To Ensure Adequate Stock.Minimize the Cost of Purchasing and Storage.To Reduce the Risk of Deterioration.Effective Use of Available Capital.To Give Maximum Satisfaction to Customers.To Minimize Loss Due to Price Decline.Maximum Use of Storage Capacity.to insure a continuous supply of raw material to facilitate uninterrupted production.

NEED FOR INVENTORY MANAGEMENT:

Recent studies have shown that in many manufacturing companies the inventory investment can range from 20 to 30% of its total investment capital. Inventory management must have as its aim the reduction and control of that investment in inventory .organizational responsibilities vary from industry to industry and more particularly with the size of the company .responsibility for inventory management was usually a multi shared function amongst most of operating department .with the growing trends towards material management concept ,top management has seen the wisdom of delegating full authority and responsibility for the handling of material to one person –the material manager .the purchasing department exerts a certain amount of influence on inventory decision.

WHY SHOULD INVENTORY BE HELD?

Holding inventory involves blocking of firm’s fund and the cost of storage and handling. Every business enterprise has to maintain a certain level of inventories to facilitate uninterrupted production and smooth running of business. In absence of inventories, a firm will have to make purchase as soon as it receives orders. It means loss of time and delays in the execution of orders which May sometimes result in loss of business and customer.


INVENTORY MANAGEMENT TECHNIQUE:

The objective of inventory control is to reduce the investment in inventory without affecting the efficiency in the areas of production and sales .There are various techniques for inventory control:

1. ECONOMIC ORDER QUANTITY (EOQ):-

Refers to the optimum order size that will result in the lowest total of order and carrying cost for an item of inventory given its expected uses, carrying cost and ordering cost. By calculating an economic order quantity the firm attempts to determine the order size that will minimize the total inventory cost. We assume the order cost, is constant regardless of the size of order. In the purchase of raw material or other item, these cost represents the clerical costs involve in placing an order as well as certain cost receiving and checking the goods once they arrive . for finished goods inventories ordering cost involve scheduling a production run .when set up cost are large as they are in producing a material piece of metal, for eg- ordering cost are likely to involve nothing more than record keeping. The total ordering cost are nothing but cost per order times the number of orders for that period.

To find out EOQ; the formula is= √2AO/C

Where; A= Annual consumption; O= ordering cost, C= carrying cost

2. ABC ANALYSIS:-

In the case of manufacturing company of reasonable size the number of items of inventory runs into hundreds if not more. From the point of view of monitoring information for control it becomes extremely difficult to consider each one of these items. The ABC analysis comes in quiet handy and enables management to concentrate attention and keep a close watch on relatively less number of items which accounts for a large percentage of the value of annual usage of all items of inventory management. The ABC classification process is an analysis of range of items, such as finished products or customer into 3 categories:

A- Outstanding importance,

B- Average importance


C- Relatively unimportant

As a basis for control scheme. Each category can and sometime should be handled in a different way. With more attention being devoted to category A, less to B, and still less to C.ABC analysis is applied to inventory management as a rule of thumb.

3. FNS CLASSIFICATION:-

This type of analysis is more concerned from the point of view of movement of items or issue of the items .items are classified s fast moving, slow moving and non moving based on consumption pattern ot the item.

‘F’ items are those items, which are fast moving i.e. in a given period of time ,say a month or a year they have been issued up till number of items.

‘S’ items are those items which are slow moving in the sense that in a given period of time they have been issued in a very limited number of time .

‘N’ non moving items are those, which are not at all issued for a considerable period of time.

4. XYZ CLASSIFICATION:-

XYZ classification has the value of inventory stored as basis for differentiation .it is calculated by dividing an item’s current stock value of the stores

‘X’ items are those whose value of balance stocks lying in the stock are very high, and are 60% of total stock value

‘Y’ items are those items whose value of balance stock is moderate and is 30% of total stock value.

‘z’ items are those whose value of balance stock lying in the stock is very low, and are 30% of total stock value

5. HML CLASSIFICATION:-

The analysis shows the position of brands among the light medium and heavy buyers, based on both buyers &volume.

HEAVY BUYERS: consumers who are the most intensive buyer of the brand.

MEDIUM BUYER: consumer who are medium intensive buyer of the brand.


LIGHT BUYER: consumer who are the least intensive buyer of the brand.

INVENTORY MANAGEMENT AT TATA STEEL:

Inventory management is one of the most important managerial activities. TATA steel has its own mines and quarries in India and also in some other countries. The raw material inventory includes materials from its own source as well as purchased from others. Raw material inventory therefore lies both at works and its place of extraction. These are transported to works both by road and rail.

To maintain the minimum required inventory is not an easy task. There are many reasons for each different organization as to what the quantity should be maintained. TATA STEEL’s raw material inventory consists of mainly coal and iron ore, but there are many other things included in it in small quantities. TATA STEEL has its transportation system which helps in carrying the materials from different locations to Jamshedpur works.

Each types of production department maintain separate inventory level. TATA steel maintains different types of inventory i.e. raw material, WIP, finished goods, transit inventory, buffer inventory, anticipation inventory and cycle inventory.

For valuation of inventory TATA Steel generally uses FIFO method and for ordering, they use EOQ method.

First in first out (FIFO): A method of valuation of inventory, by which the cost are allocated on the assumption that goods are consumed or sold in the order in which they are received and taken in to stock.

Economic Ordering Quantity (EOQ): It is the optimum quantity of goods for which if orders are placed, the aggregate order placing cost and the aggregate inventory carrying cost will be equal and economical. There will not be any loss by either way. For any item of goods, annual requirement in units, cost of placing one order, cost of carrying one unit in inventory for one year are the influencing factors. Any change in one or more of them will change the EOQ of that item.

To find out EOQ; the formula is= √2AO/C

Where; A= Annual consumption; O= ordering cost, C= carrying cost


CHANNELS OF ORDERING RAW MATERIAL:

POLICIES MAINTAINED BY TATA STEEL FOR INVENTORIES:

Finished and semi-finished products produced and purchased by the Company are carried at lower of cost and net realizable Value.

Work-in-progress is carried at lower of cost and net realizable value.Coal, iron ore and other raw materials produced and purchased by the Company are carried at lower of cost and net realizable value.Stores and spare parts are carried at cost. Necessary provision is made and charged to revenue in case of identified obsolete and non-moving items.Cost of inventories is generally ascertained on the ‘weighted average’ basis. Work-in-progress and finished and semi-finished products are valued on full absorption cost basis.

TATA STEEL has its own electric plant, water preserver and gas preserver for regular production. Dimna Lake is one of the advance points for Jamshedpur plant.


1) Production dept.

2) Inventory controller

3) Purchase dept.

4) Supplier dept.

5) Recievable debt.

6) Inventory dept.

1) Production dept.

2) Inventory controller

3) Purchase dept.

4) Supplier dept.

5) Recievable debt.

6) Inventory dept.

INTEGRATED IT SOLUTION AT TATA STEEL

ENTERPRISE RESOURCE PLANNING

Tata steel has adopted ERP technology to take a lead in competitive steel industry and through constant learning, innovation and refinement of its business operations, has transited seamlessly from a production- driver company to customer-driven one. The existing technology was a simple replication of the manual system .not only did it operate as Individual Island of information but the technology has outlived its lifetime and was completely obsolete.

ERP attempts to integrate all departments and function across the company on to a single computer system that can serve all different department needs and also allow them to have consistent information. Serving the needs of finance, human resource logistics and warehousing is tall order. Each of them is in reasonably sized company typically has its own computer system and database.

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.

SAP TECHNOLOGY AT TATA STEEL:

SAP Enables seamless remodeling of Tata steel from product driven to

customer driven enterprise of the internet economy.

Post the introduction of sap solution, the results has been terrific .the

company has spent close to 40 crores on SAP implementation, and has

already saved 33crores.


Some of the benefits from sap are:

It will lead to complete transparency in customer ledger, orders, stock

ledger, dispatches and credit lines.

It is internet enabled and will allow customer to use sap to get

information on their order

Marketing and sales decision will be made on the basis of data

available online

Lead time required to process orders, settle complaints develop new

product and reconcile accounts, in substantially lesser time.

Online availability of data will further improve inventory management

in the stockyard, leading to better customer service.


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 reassignment 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 SHEDULING COMBING BOTH CONTINIOUS 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.


CURRENT BALANCE SHEET,

PROFIT AND LOSS ACCOUNT

AND COST SHEET OF

TATA STEEL LTD.


BALANCE SHEET OF TATA STEEL LTD. FROM2005-06 TO 2009-10

PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10

Share capital & warrants 553.67

727.73

6,203.30

6,203.45 887.41

Reserves & Surplus 9,201.63

13,368.42

21,097.43

23,972.81 36,074.39

Total shareholder's fund 9,755.30

14,096.15

27,300.73

30,176.26 36,961.80

Loan Amount:

Secured 2,191.74

3,758.92

3,520.58

3,913.05 2,259.32

Unsecured 324.41

5,886.41

14,501.11

23,033.13 22,979.88

Total Loans 2,516.15

9,645.33

18,021.69

26,946.18 25,239.20

Deferred Tax Liability(net)

957.00

748.94

681.80

585.73 867.67

Foreign currency trans. Or goodwill

-

-

-

- 206.95

Provision for employee separation compensation

1,388.71

1,107.08

1,071.30

1,033.60 957.16

TOTAL FUNDS EMPLOYED(NET)

14,617.16

25,597.50

47,075.52

58,741.77 64,232.78

Gross Block 16,564.90

18,526.93

20,847.04

23,544.69 26,149.66

(-)Impairment (94.19)

(100.41)

(100.47)

(100.47) (106.07)

(-)Depreciation (6,605.66)

(7,385.96)

(8,123.01)

(8,962.00)

(10,037.56)

Net Block(FA) 9,865.05

11,040.56

12,623.56

14,482.22 16,006.03

Investment 4,069.96

6,106.18

4,103.19

42,371.78 44,979.67

Foreign currency trans.OR goodwill

-

-

-

471.66 -

Current Assets:


Stores and spares parts 442.66 505.44 557.67 612.19 623.76

Stock in trade 1,732.09

1,827.54

2,047.31

2,868.28 2,453.99

Sundry debtors

539.40

631.63

543.48

635.98 434.83Interest accrued on investment

0.20

0.20

0.20

- 0.29

Cash and bank balance 288.39

7,681.35

465.04

1,590.60 3,234.14

3,002.74

10,646.16

3,613.70

5,707.05 6,747.01

Loans and Advance 1,234.86

3,055.73

33,348.74

4,578.04 5,499.68

Total Current Assets 4,237.60

13,701.89

36,962.44

10,285.09 12,246.69

(-)Current Liabilities (2,835.99)

(3,523.20)

(3,855.26)

(6,039.86)

(6,653.09)

(-)Provisions (972.73)

(1,930.46)

(2,913.52)

(2,934.19)

(2,346.52)

Net Current Assets(TCA-TCL)

428.88

8,248.23

30,193.66

1,311.04 3,247.08

Misc.Expenses 253.27

202.53

155.11

105.07 -

Total Assets(Net) 14,617.16

25,597.50

47,075.52

58,741.77 64,232.78

PROFIT AND LOSS ACCOUNT OF TATA STEEL LTD.FROM 2005-06 TO 2009-10

PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10Income:

Sales and other operating Income

17,144.22 19,762.57 22,191.80 26,843.73 26,757.80

(-) Excise Duty (1,928.72) (2,210.55)

(2,498.52) (2,527.96)

(1,735.82)


Other income 254.76 433.67 335.00 308.27 853.7915,470.26 17,985.69 20,028.28 24,624.04 25,875.77

Expenditure:

Manuf. And other expenses 9,390.54 10,814.77 11,645.24 15,525.99 16,396.00

Depreciation 775.10 819.29 834.61 973.40 1,083.18(-)Expenditure (other than interest transferred to capital a/c)

(112.62) (236.02) (175.50) (343.65) (326.11)

Interest 124.51 173.90 878.70 1,152.69 1,508.4010,177.53 11,571.94 13,183.05 17,308.43 18,661.47

PBT & Exceptional item 5,292.73 6,413.75 6,845.23 7,315.61 7,214.30

(-)Employee seperation scheme

(52.77) (152.10) (226.18) - -

(-)contribution for sports - - (150.00) - -

Exchange gain - - 597.31 - -

Profit before taxes 5,239.96 6,261.65 7,066.36 7,315.61 7,214.30

Taxes:

Current tax 1,579.00 2,076.01 2,252.00 2,173.00 1,998.00

Deferred tax 127.58 (52.51) 108.33 (75.13) 169.50

Fringe benefit tax 27.00 16.00 19.00 16.00 -Education cess on I.T - - - -

1,733.58 2,039.50 2,379.33 2,113.87 2,167.50Profit after tax 3,506.38 4,222.15 4,687.03 5,201.74 5,046.80Balance brought forward for last year 1,790.21 2,976.16 4,593.98 6,387.46 9,496.70Balance brought forward (Hooghly-met coke & power co. LTD. On amalgamation)

- - - - 12.28

Amount available for Appropriation 5,296.59 7,198.31 9,281.01 11,589.20 14,555.78


Appropriations:

Proposed dividends 719.51 943.91 1,168.93 1,168.95 709.77

Dividends on conv. Pref.Shares

- - 22.19 109.45 45.88

Tax on Dividend 100.92 160.42 202.43 214.10 122.80

General Reserve 1,500.00 1,500.00 1,500.00 600.00 504.68

Debenture redemption reserve

- - - - 400.00

2,320.43 2,604.33 2,893.55 2,092.50 1,783.13Balance Carried To Balance Sheet

2,976.16 4,593.98 6,387.46 9,496.70 12,772.65

COST SHEETPARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10Raw material consumed 2368.3 3121.46 3429.52 5709.91 5494.74Payment and provision for employee

1351.51 1454.83 1589.77 2305.81 2361.48

Operation and other expenses 4038.71 4647.28 5068.88 6213.58 6813.33(-)Commission (80.75) (64.71) (52.53) (61.49) (82.17)(-)Provision for wealth tax (0.80) (0.97) (0.95) (1.00) (1.00)Freight and handling charges 1004.32 1117.45 1098.19 1251.23 1357.27Excise duty 76.11 93.63 38.5 -32.75 81.13Depreciation 775.1 819.29 834.61 973.4 1083.18PRIME COST 9532.5 11188.3 12006 16358.7 17107.96Adjustment of WIP(+) Opening stock of WIP 32.42 23.93 28.94 71.48 73.17(-) Closing stock of WIP (23.93) (28.94) (71.48) (73.17) (158.65)FACTORY COST 9540.99 11183.3 11963.5 16357 17022.48Adjustment of finished goods(+)Opening stock of finished goods

887.22 1000.62 1078.08 1074.27 1361.85

(+) Purchase of finished goods 656.08 450.6 446.95 358.87 169.08(-)Closing stock of finished goods

(1000.60)

(1078.08)

(1074.30)

(1361.90)

(1141.40)

COST OF PRODUCTION 10083.7 11556.4 12414.2 16428.3 17412.01


Other income (254.76) (433.67) (335.00) (308.27) (853.79)Provision of debt and advances 6.49 11.99 12.16 8.61 (16.00)Expenditure (Other than interest)

(112.62) (236.02) (175.50) (343.65) (326.11)

Provision for wealth tax 0.8 0.97 0.95 1 1Net finance charges 118.44 268.16 671.73 1152.69 1508.4commission to selling agents 80.75 64.71 52.53 61.49 82.17COST OF GOODS SOLD 9922.77 11232.5 12641.1 17000.2 17807.68PROFIT BEFORE TAX 5292.73 6319.49 7052.2 7315.61 7214.3NET SALES 15215.5 17552.02 19693.3 24315.8 25021.98

CALCULATION OF CURRENT ASSETS AND LIABILITYPARTUCULAR 2005-06 2006-07 2007-08 2008-09 2009-10CURRENT ASSETS: stores and spares 442.66 505.44 557.67 612.19 623.76stock in trade 1732.09 1827.54 2047.31 2868.28 2453.99sundry debtors 539.4 631.63 543.48 635.98 434.83interest accrued on investment 0.2 0.2 0.2 0 0.29cash and bank balances 288.39 455.41 465.04 1590.6 3234.14loans and advances 1234.86 3055.73 3022.62 4330.43 3628.28

TOTAL(CA) 4237.6 6475.95 6636.3210037.48

10375.29

CURRENT LIABILITIES: sundry creditors 2534.03 3145.99 3243.42 3842.78 4086.65subsidiary companies 62.37 102.61 115.74 1358.12 1514.3interest accrued but not due 24.29 47.11 231.05 506.68 676.66advances received from the customers 185.07 198.28 226.03 297.37 334.99liability towards investors education and protection fund 30.23 29.21 39.02 34.91 40.49provision for retiring gratuities 0.81 49.31 0 0 0provision for employee benefits 0 470.19 848.54 1143.08 1127.5provision for taxation 250.04 448.68 854.74 493.59 507.13provision for fringe benefits 2.37 18.37 19.12 19.12 2.12proposed dividend 719.51 943.91 1191.12 1278.4 709.77TOTAL (CL) 3808.72 5453.66 6768.78 8974.05 8999.61


FINANCIAL RATIO

ANALYSIS OF TATA STEEL


1. RAW MATERIAL CONVERSION PERIOD

This ratio shows how many days are used for manufacturing raw materials.

Formula:

x 365

Where average stock of raw material = (Op. stock of raw mat + Cl. Stock of raw mat)/2


Average stock of raw material Total raw material consumed

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10Opening stock of raw material 603.7 707.54 720.52 901.56 1433.26Closing stock of raw material 707.54 720.52 901.56 1433.26 1153.94Average stock of raw material 655.62 714.03 811.04 1167.41 1293.6Total raw material consumed 2368.3 3121.46 3429.52 5709.91 5494.74RAW MATERIAL CONVERSION PERIOD(IN DAYS)

101.4 83.4 86.31 74.63 85.93

2005-06 2006-07 2007-08 2008-09 2009-100

20406080

100120

RAW MATERIAL CONVERSION PERIODS (IN DAYS)

RAW MATERIAL CONVERSION PERIODS (IN DAYS)

ANALYSIS:

If we look towards for the year 2004-05, then we can easily observe that, the raw material conversion period is too high than the year 2010-09. This trend is showing that the period for conversion of raw material is decreasing year by year. It very good sign for the company. Because as soon as raw material is used for production the storing cost will be less. So this chart is showing how efficiently TATA steel is reducing its storing cost and how fast raw material is used for production.

2. WORK IN PROGRESS CONVERSION PERIOD

This ratio shows in how many days the WIP is converted into finished products.

To find out this ratio, the formula is;

Average stock of work-in-process x 365

Cost of productionWhere average stock of WIP = (Op. stock of WIP+ Cl. Stock of WIP)/2

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10Opening stock of WIP 32.42 23.93 28.94 71.48 73.17

Closing stock of WIP 23.93 28.94 71.48 73.17 158.65

Average stock of WIP 28.18 26.44 50.21 72.325 115.91

Cost of production 11470 13300.2 14423.5 18917.71 17124.8

WIP CONVERSION PERIOD(IN DAYS)

0.89 0.72 1.27 1.39 2.47


2005-06 2006-07 2007-08 2008-09 2009-100

0.5

1

1.5

2

2.5

3



ANALYSIS:

As we can see in the chart that WIP converted into finished product within a day in the year 2004-05 to 2006-07. But in recent year it is taking more than one day. If we measure this chart, we can say that the efficiency level of TATA steel is reducing year by year to convert WIP to finished goods.

3. FINISHED GOODS CONVERSION PERIOD

It refers to the time in which the finished goods are converted into sales or in other way we can say that the time period between production and sales when the finished goods kept in the ware house before the actual sale is made.

So formula for FGCP is;

Average stock of finished goods x 365Cost of goods sold

Where average stock of finished goods = (Op. stock of finished goods +Cl. Stock of finished goods)/2

Particulars

2005-06 2006-07 2007-08 2008-09 2009-10Opening stock of finished goods 887.82 1000.62 1078.08 1074.27 1361.85

Closing stock of finished goods 1000.62 1078.08 1074.27 1361.85 1141.4

Average stock of finished goods 944.22 1039.35 1076.18 1218.06 1251.62

Cost of goods sold 12012.39 13673.3 14874.23 18989 17140.09


1FINISHED GOODS CONVERSION PERIOD(IN DAYS)

28.69 27.7 26.4 23.41 26.65

ANALYSIS:

From the table and the chart we can easily observed that, though in the year 2005-06 the conversion period increased than the year 2004-05. But fortunately the recession period couldn’t hit the sales for the year 2006-07 to 2010-09. The finished goods were converted into sales even less than only 25 days in the year 2010-09. It shows the efficiency of not only quality of the steel but also the efficiency of marketing department of TATA steel.

4. RAW MATERIAL TO CURRENT ASSETS

It indicates the percentage of raw materials in the current asset of the company.

To find out this;

Raw material(closing) x 100Current asset

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

Raw material(Closing) 707.54 720.52 901.56 1433.26 1153.94

Current assets 4237.6 6475.95 6636.32 10037.48 10375.29

RAW MATERIAL TO CURRENT ASSETS 16.69 11.13 13.58 14.27 11.12


2005-06 2006-07 2007-08 2008-09 2009-100

5

10

15

20

25

30

35

FINISHED GOODS CONVERSION PERIOD(IN DAYS)

FINISHED GOODS CONVERSION PERIOD(IN DAYS)

2005-06 2006-07 2007-08 2008-09 2009-1002468

1012141618

RAW MATERIAL TO CURRENT ASSETS

RAW MATERIAL TO CURRENT ASSETS

ANALYSIS:

This chart and table can show the one unexpected downfall in the year 2006-07, which is less than 6%. If we observe carefully then we can see that, in the year 2006-07, the raw material trend is nearly same to other years, but due to huge cash in hand increase the current asset. Which reduce the percentage of raw material to current asset?

5. FINISHED GOODS TO CURRENT ASSET

It indicates the percentage of finished goods in the current assets of the company. Finished goods are such a component of the current assets which can be easily converted into cash.

So the formula is;

Finished goods(closing) x 100Current asset


Particulars 2005-06 2006-07 2007-08 2008-09 2009-10Finished goods(Closing) 1000.62 1078.08 1074.27 1361.85 1141.4

Current asset 4237.6 6475.95 6636.32 10037.48 10375.29

FINISHED GOODS TO CURRENT ASSETS

23.61 7.86 16.81 13.55 16.91

2005-06 2006-07 2007-08 2008-09 2009-100

5

10

15

20

25



ANALYSIS:

As we saw in the raw material to current assets, which is same as finished goods to current assets. Due to huge amount of cash held in the year 2006-07, the percentage of finished goods is lesser than the other years. But in the year 2005-06 it is near to 25%. But the percentage is going downwards in the year 2010-09, which is less than 15%.

6. AVERAGE INVENTORY TURNOVER RATIO

It indicates the percentages of inventory with gross sales.

The formula is;

Average inventory x 100Gross sales

Where average inventory = (Op. inventory+ Cl. Inventory)/2

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10Opening inventory 1532.34 1732.09 1827.54 2047.31 2868.28

Closing inventory 1732.09 1827.54 2047.31 2868.28 2453.99

Average inventory 1632.22 1779.82 1937.43 2457.8 2661.13

Gross sales 17144.22 19762.57 22191.8 26843 24315.77

AVERAGE INVENTORY TURNOVER RATIO

9.5 9 8.73 9.15 10.94


ANALYSIS:

As we can observe that, the trend is showing nearly constant, except the year 2004-05. The inventory level is increasing as well as the gross sales. It shows the constant growth of sales and inventory.

7. STOCK TURNOVER RATIO

Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirements of the business. But the level of inventory should neither be too high nor too low.

The stock turnover ratio measures the number of times a company sells its inventory during the year.

The formula for stock turnover ratio is;

Cost of goods soldAverage stock

Where average stock = (Op. inventory+ Cl. Inventory)/2

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10


2005-06 2006-07 2007-08 2008-09 2009-100

2

4

6

8

10

12



Cost of goods sold 12012.39 13673.31 14874.23 18989 17140.09Average stock 1632.22 1779.82 1937.43 2457.8 2661.13STOCK TURNOVER RATIO

7.37 7.68 7.67 7.72 6.44

2005-06 2006-07 2007-08 2008-09 2009-105.5

6

6.5

7

7.5

8

STOCK TURNOVER RATIO

STOCK TURNOVER RATIO

ANALYSIS:

As we can find out that in the year 2004-05 the ratio was very high as compare to other years. In the year 2005-06 it is even less than 7.5, but after that TATA steel maintained the consistency on its growth.

8. INVENTORY CONVERSION PERIOD

This ratio shows in how many days inventories are converted into sales. It is major ratio analysis for cash conversion period. Because it is the first component of the cash conversion period.

The formula is;

Inventories(closing)Sales/365

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10Inventories(Closing) 1732.09 1827.54 2047.31 2868.28 2453.99

Sales 15139.39 17551.09 19693.28 24315.77 25021.98

INVENTORY CONVERSION PERIOD

41.75 38 37.94 43.05 35.79


2005-06 2006-07 2007-08 2008-09 2009-1005

101520253035404550



ANALYSIS:

From this chart we can observed that in the year 2007-08 and 2006-07, the inventory was most efficiently converted into sales. But unfortunately it is very high in the year 2010-09. So it shows the inefficiency for the company.

9. CURRENT RATIO

This ratio is used to judge the short term solvency of a company and is worked out by dividing the aggregate Current Assets by its aggregate Current Liabilities.

To find out the current ratio, the formula is;

Current assetsCurrent liability

Particulars 2005-06 2006-07 2007-08 2008-09 2009-10Current assets 4237.6 6475.95 6636.32 10037.4

810375.29

Current liability 3808.72 5453.66 6768.78 8974.05 8999.61

CURRENT RATIO 1.11 1.18 0.98 1.11 1.15


2005-06 2006-07 2007-08 2008-09 2009-100

0.20.40.60.8

11.21.4

CURRENT RATIO

CURRENT RATIO

ANALYSIS:

In the year 2006-07 this ratio is too high due to huge amount cash held in the company. From here we can say that company has huge liquidity but in other sense we can say that company blocked this huge amount of cash without investing. Again it is very good sign for the company, because the recession hit the world in the year 2007-08 and company has huge amount of liquidity to face the crisis moment. Again we can see that the in the year 2007-08 the ratio is even less than 1. So 2006-07 heavy cash amount saved in the year 2007-08. Rest of the year maintained the consistency, which is just above 1.


COMPANY OVERVIEW OF JINDAL STEEL WORKS LTD.

AND SAIL

JINDAL STEEL AND WORKS


In the world of business, the Jindal Organization is a celebrity. Ranked sixth amongst the top Indian Business Houses in terms of assets, the Group today is a US $10 Billion conglomerate.

Jindal Organization, set up in 1970 by the steel visionary Mr. O.P. Jindal, has grown from an indigenous single-unit steel plant in

Hisar, Haryana to the present multi-billion, multi-location and multiproduct steel conglomerate. The organization is still expanding, integrating, amalgamating and growing. New directions, new objectives... but the Jindal motto remains the same- "We are the Future of Steel ".

The group has been technology-driven and has a broad product portfolio. Yet, the focus at Jindal has always been steel. From mining of iron-ore to the manufacturing of value added steel products, Jindal has a pre-eminent position in the flat steel segment in India and is on its way to be a major global player, with its overseas manufacturing facilities and strategic manufacturing and marketing alliances with other world leaders.

Jindal Organization aims to be a global player. In pursuance of its objectives, it is committed to maintain world-class quality standards, efficient delivery schedules, competitive price and excellent after sales service.


FINANCIAL DATA OF JINDAL STEEL

BALANCE SHEET:

Particulars 31/03/05 31/03/06 31/03/07 31/03/08 31/03/09

Sources of funds:

Owner's fund

Equity share capital 15.4 15.4 15.4 15.4 15.47

Preference share capital 1 - - - -

Reserves & surplus 1,302.98 1,829.31 2,481.33 3,740.98 5,399.85

Loan funds:

Secured loans 1,159.51 1,780.77 2,115.61 1,783.39 2,105.49

Unsecured loans 336.35 964.6 1,392.11 2,079.96 2,857.16

Total 2,815.24 4,590.08 6,004.45 7,619.73 10,377.97

Uses of funds:-

Fixed assets:

Gross block 2,530.28 3,243.05 4,929.03 5,918.94 7,362.90

Less : accumulated depreciation 361.76 542.33 781.75 1,183.11 1,617.00

Net block 2,168.53 2,700.72 4,147.28 4,735.83 5,745.90

Capital work-in-progress 345.7 1,146.27 937.84 660.48 2,318.01

Investments 33.38 430.3 709.82 1,036.19 1,233.40

Total 4,716.13 6,978.01 9,942.22 11,168.33 15,043.21

Net current assets:

Current assets, loans & advances 1,036.30 1,490.50 1,801.66 3,299.57 5,189.28

Less : current liabilities & provisions 769.67 1,178.45 1,595.39 2,115.48 4,111.64

Total net current assets 266.62 312.05 206.27 1,184.09 1,077.64

Miscellaneous expenses not written 1.01 0.74 3.24 3.14 3.02

Total 2,815.24 4,590.08 6,004.45 7,619.73 10,377.97


PROFIT AND LOSS ACCOUNT:

Particulars 2005-06 2006-07 2007-08 2008-09

Income:

Operating income 2565.04 3523.08 5368.14 7677.83

Expenses:

Material consumed 536.71 1,068.50 1,727.40 3,419.42

Manufacturing expenses 545.44 510.96 670.87 773.84

Personnel expenses 79.74 90.14 132.2 181.46

Selling expenses 222.18 276.47 264.73 327.76

Administrative expenses 148.16 167.2 277.03 337.49

Cost of sales 1,532.23 2,113.27 3,072.23 5,039.97

Operating profit 1,032.81 1,409.81 2,295.91 2,637.86

Other recurring income 26.02 36.08 57.31 199.46

Adjusted PBDIT 1,058.83 1,445.89 2,353.22 2,837.32

Financial expenses 108.02 173.19 243.02 267.89

Depreciation 219.17 336.47 451.51 433.03

Other write offs 0.27 0.27 0.27 0.2

Adjusted PBT 731.37 935.96 1,658.42 2,136.20

Tax charges 154.91 241.85 265.55 465.4

Adjusted PAT 576.46 694.11 1,392.87 1,670.80

Non recurring items (12.00) 7.78 (144.57) (144.78)

Other non cash adjustments 8.48 1.1 (11.34) 10.46

Reported net profit 572.94 702.99 1,236.96 1,536.48

Earnigs before appropriation 1,528.77 2,136.05 3,239.54 4,584.28

Equity dividend 46.19 55.43 62.02 85.33

Dividend tax 6.48 8.87 10.55 -

Profit carried to balance sheet 1,476.10 2,071.75 3,166.97 4,498.95


STEEL AUTHORITY OF INDIA:


Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets.

Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets and coils, galvanised sheets, electrical sheets, structural, railway products, plates, bars and rods, stainless steel and other alloy steels. SAIL

produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being India’s second largest producer of iron ore and of having the country’s second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making.

SAIL's wide range of long and flat steel products are much in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organisation (CMO) that transacts business through its network of 37 Branch Sales Offices spread across the four regions, 25 Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact Offices. CMO’s domestic marketing effort is supplemented by its ever widening network of rural dealers who meet the demands of the smallest customers in the remotest corners of the country. With the total number of dealers over 2000, SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts of the country.

SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000 accredited unit of CMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integrated steel plants.

With technical and managerial expertise and know-how in steel making gained over four decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.

SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which helps to produce quality steel and develop new technologies for the steel industry. Besides, SAIL has its own in-house Centre for Engineering and Technology (CET), Management Training Institute (MTI) and Safety Organization at Ranchi. Our captive mines are under the control of the Raw Materials Division in Kolkata. The Environment Management Division and Growth Division of SAIL.

BALANCE SHEET:

Rs in crore


PROFIT AND LOSS ACCOUNT:

Particulars 2005-06 2006-07 2007-08 2008-09

Income:


Particulars 31/03/05 31/03/06 31/03/07 31/03/08 31/03/09

Sources of funds Owner's fundEquity share capital 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40

Reserves & surplus 6,176.25 8,471.01 13,182.75 18,933.17 23,853.70

Loan funds

Secured loans 1,603.98 1,122.16 1,556.39 925.31 1,473.60

Unsecured loans 4,165.81 3,175.46 2,624.13 2,119.93 6,065.19

Total 16,076.44 16,899.03 21,493.67 26,108.81 35,522.89Uses of funds Fixed assetsGross block 28,043.48 29,360.46 29,912.71 30,922.73 32,728.69

Less : accumulated depreciation

15,558.41 17,198.32 18,315.00 19,351.42 20,459.86

Net block 12,485.07 12,162.14 11,597.71 11,571.31 12,268.83Capital work-in-progress 366.48 757.94 1,236.04 2,389.55 6,544.24Investments 606.71 292 513.79 538.2 652.7Net current assets

Current assets, loans & advances

15,521.37 18,788.80 21,673.75 27,309.01 35,666.84

Less : current liabilities & provisions

13,198.12 15,317.67 13,656.77 15,758.74 19,609.72

Total net current assets 2,323.25 3,471.13 8,016.98 11,550.27 16,057.12

Miscellaneous expenses not written

294.93 215.82 129.15 59.48 -

Total 16,076.44 16,899.03 21,493.67 26,108.81 35,522.89

Operating income 28,200.48 34,328.77 39,958.67 43,798.58

Expenses

Material consumed 13,903.23 15,963.13 16,821.39 22,042.58

Manufacturing expenses 2,793.45 2,925.43 3,317.74 3,762.77

Personnel expenses 4,156.97 5,087.76 7,919.28 8,401.73

Selling expenses 1,108.12 1,066.73 1,143.90 935.68

Administrative expenses 1,035.99 1,064.29 1,321.44 1,644.78

Expenses capitalized -1,352.05 -1,423.08 -1,832.22 -1,930.40

Cost of sales 21,645.71 24,684.26 28,691.53 34,857.14

Operating profit 6,554.77 9,644.51 11,267.14 8,941.44

Other recurring income 892.3 1,354.96 1,539.69 2,279.89

Adjusted PBDIT 7,447.07 10,999.47 12,806.83 11,221.33

Financial expenses 467.76 332.13 250.94 253.24

Depreciation 1,207.30 1,211.48 1,235.48 1,285.12

Other write offs 181.44 128.59 75.49 128.02

Adjusted PBT 5,590.57 9,327.27 11,244.92 9,554.95

Tax charges 1,694.36 3,253.80 3,934.65 3,284.28

Adjusted PAT 3,896.21 6,073.47 7,310.27 6,270.67

Nonrecurring items 45.64 53.75 161.9 -277.12

Other non cash adjustments 71.12 60.57 64.61 181.26

Reported net profit 4,012.97 6,187.79 7,536.78 6,174.81

Earnings before appropriation 7,861.47 12,886.63 18,348.43 22,052.47

Equity dividend 826.08 1,280.42 1,528.25 1,073.90

Dividend tax 115.86 197.98 258.91 181.26

Profit carried to balance sheet 6,919.50 11,408.20 16,561.30 20,797.30

RATIOS COMPARISION BETWEEN THREE COMPANIES:

Ratio analysis TATA JINDAL SAIL

Raw material to current asset 11.12 17.3 8.83

Finished goods to current asset 16.91 17.02 33.45


Stock turnover ratio 6.44 7.77 5.08

Inventory conversion period 35.79 53.49 85.61

Current ratio 1.15 0.61 2.01

It will easy to understand when it will put into chart. So, all the necessary charts are given below.

ANALYSIS:

If we compare for TATA STEEL with other companies, then we can see that TATA STEEL’s raw material to current asset is neither too high nor too low. It is maintaining a required amount of raw material in hand.


ANALYSIS:

Here we can see that SAIL is playing a defensive role in case of finished goods. But still TATA steel has limited finished goods to sell. TATA STEEL never tried to block its capital.

ANALYSIS:

Both TATA STEEL and JINDAL STEEL have the good stock turnover ratio. In this case TATA STEEL is far ahead than SAIL.


ANALYSIS:

Inventory conversion period is lowest than other company for TATA STEEL. So from here we can conclude TATA STEEL is the fastest converter company for Inventory.

ANALYSIS:

Current ratio of TATA STEEL is in standard position. Where JINDAL steel’s current ratio is less than 1 and SAIL’s current ratio is more than 2. Where SAIL is blocking its working capital there TATA STEEL is keeping appropriate coverage for current liability.


PRESENTATION OF INVENTORY OF TATA

STEEL


PRESENTATION OF INVENTORY IN A MANNER WHICH IS USEFUL TO

THE MANAGEMENT AND MIS REPORT RELATING TO INVENTORY

MANAGEMENT:

As we know there are different types of inventory in a company. They are:

-RAW MATERIALS

-WORK IN PROGRESS

-SEMI FINISHED AND FINISHED PRODUCTS

-STORES AND SPARES INVENTORY

These are the inventory heads which are maintained by TATA STEEL. Over here I have represented of all inventories segregated each of them in Product and Location wise


SEMI FINISHED /FINISHED PRODUCTS

LOCATION

WORKS 484.9COLD ROLLING COMPLEX-EAST 266.17MARKETING 213.54INTERNATIONAL TRADE 12.47WRM(WEST) 24.01SECONDARY PRODUCTS 144TUBES 90.43AGRICO 11.33BEARINGS 38.38WIRE DIVISION 52.9COLD ROLLING COMPLEX-WEST 23.71 TOTAL 1361.84

PRODUCT

FLAT 348.56

LONG 211.26

CR 256.39

SOS 99.91

SCRAP AT WORK 148.99

OTHERS 295.89

TOTAL 1361.84


RAW MATERIALS

PRODUCT COAL 494.71COKE 212.52IRON ORE 162.09LIMESTONE 35.79DOLOMITE 2.24ANTHRACITE 0.1ALUMINIUM 1.6NICKLE,COPPER AND SULPHUR 0.86FERRO MANAGANESE 9.6SILICO MANGANESE 5.77FERRO SILICON 0.8FERRO MOLYBDENUM 0.46FERRO CHROME 52.74STOCK AT HIGH SEAS 161.99IN TRANSIT 0.85MIDDLINGS 2.31CHROME ORE 149.39TAILINGS 25.87ZINC 8.85

TUBES 5.04WIRE 2.02TIN 7.44OTHERS 90.25TOTAL 1433.29

LOCATION

WORKS 964.27MINES 69.79COLLIERIES 13.02TAILINGS AT WBC AND JHARIA 25.87FAMD DIVISION 336.97CRM(ZINC) 8.85TUBES DIVISION 5.04WIRE DIVISION 2.02TCIL(TIN) 7.44 TOTAL 1433.27

STORES AND SPARES INVENTORY OTHER DIVISIONS

WORKS (INCL.CRM) 424.7

UNDER WORKS DEPT 63.81

TOWN,MEDICAL,ENGG 0.55

MINES AND COLLIERIES 50.24

WRM-WEST 2.45

TUBES 24.52

FAMD 8.71

WIRE DIVISION 1059

BEARINGS 6.04

GROWTH SHOP 15.9

COLD ROLLING COMPLEX-WEST 4.58

AGRICO 0.11

TOTAL 611.39

Finding and recommendations

Findings

During project work I got lots of information regarding inventory management for steel division and the information put forward the project.

Major types of inventory in Tata steel are raw material, work-in-progress, finished goods and spare parts.

Tata steel inventory management uses ABC analysis and for spare planning VED classification is used.

Weighted average method is used for pricing in inventory.

Tata steel has adopted strategic sourcing concept. Using this, organization is achieving a substantial amount of savings through the adoption of different techno-commercial, cost effective measures and leveraging the knowledge.

The inventory ratio shows the efficient and effective inventory management by Tata steel because it is able to reduce inventory level year by year.

Value of inventory has increased inventory in terms’ of rupees but decreased in tones because of increase in cost of raw material.

Standard costing is used by Tata steel for accounting of inventories.

The organizations efficient labor force and efficient utilization of material contributed to take less time to clear the stock.

Tata steel follows the theory of constraint.


Recommendation

After going through all the information collected and ratios calculations

I would go for the following recommendations:

Company should consider the raw material conversion period and according to demand should produce so that the conversion period is much less and hence cost associated with it can be reduced.

Inventory turnover for Tata steel is much less as competitors. The company should see for the reason and improve to capture the market.

Supply chain management of Tata steel should be improved to reduce inventory level.

Training on SAP usage should be imparted to minimize user errors, if all users know how the complete system works.

Retail shop of steel product like steel junction should opened in prime location to increase sales.

Finished goods holding inventory should reduced.


BIBLIOGRAPHY

Annual reports

Tata steel Jindal steel Steel authority of India

Books

Financial management By I.m.pandey Inventory managemebnt and working capital- by p.Gopal Krishnan Cost caccountiug

WEBSITES

WEBSIwww.moneycontrol.com

www.tatasteel.com

www.sail.co.in

www.Jindalsteelpower.com

www.google.com


http://www.tata/

http://www.moneycontrol/

Documents

Inventory