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Role of Steel Service Centres in the Automotive Supply Chain Abraham Stephanos Chief Operating Officer Tata Steel Processing & Distribution Limited Indian.

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Presentation on theme: "Role of Steel Service Centres in the Automotive Supply Chain Abraham Stephanos Chief Operating Officer Tata Steel Processing & Distribution Limited Indian."— Presentation transcript:

1 Role of Steel Service Centres in the Automotive Supply Chain Abraham Stephanos Chief Operating Officer Tata Steel Processing & Distribution Limited Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

2 What do service centres do? Inventory Holding Processing Distribution & Logistics Inventory Management Services Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

3 Producers of Steel Final Consumer Direct to Consumer Value Addition Need in Intermediate Services Supply Chain Mgt Procurement Strategic Alliances Technical Services Stocking Processing Customization Just - In - Time Delivery Service Centres provide this expertise Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

4 From the Steel Mills Perspective Need for Steel Mills to focus on Core businesses and business processes. Greater attention to Logistics and Supply Chain Management Focus on Value Chain costs and efficiencies From the Customers Perspective Traditional Cutters provide limited value: No inventory holding Usually low end processing Very old / reconditioned equipment Quality depends on customers inspection Highly fragmented Mostly small shops with informal labor Need to remove costs from the supply chain Need to improve service levels in the supply chain The need to unlock value from the supply chain … Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

5 …led to the emergence of the organised service centre industry Growth of Auto & White Goods Segment Entry of MNCs Stringent Quality Requirements Tight Delivery Commitments Expectation of Professional Service Focus on supply chain efficiencies Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

6 1990s Howrah,Belur,Shalimar cutters; BMW 2000 – 2005 TRF,Tata Ryerson 2005 – 2010 BMW ( exp) Steelium Distributors 2010- Essar 1990s G Williams, Allied 2000 – 2005 Tata Ryerson 2005 – 2010 Pos IDPC, Essar, Steelium Dtors, TSPDL 2010- Sumitomo, Pos IDPC ( Exp) 1990s Taloja cutters, Ampil, MSSCL, Tata Ryerson 2000 – 2005 Hemnil, Loha Ispat 2005 – 2010 Pos IPPC, Essar, ARK Steelium Dtors, Posh, MSSCL 2010- Pos IPPC II, Essar- Indore, Loha Ispat 1990s Manali Cutters, Ramanasekhar Industries 2000 – 2005 Pos Hyundai, Toyota Tsusho 2005 – 2010 Hyundai Hysco, Steelium Dtors Essar, JSW 2010- Pos ICPC, Toyota Tsusho (Exp), Pos Dighe, Kawarin The automotive industry has been the main catalyst for the growth of service centres Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

7 Today we have a wide gamut of service centres … from cutters to high end … Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

8 Independent Steel Mill Promoted OEM Promoted Metal Trading House Promoted SMPC Loha Ispat Ranka TSPDL POSCO Essar Jindal Essar Jindal Toyota Tsusho Toyota Tsusho Honda Trading Hyundai Hysco Sumitomo Caparo Marubeni MSSCL Metalone …with a variety of ownership models Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

9 The typical automotive steel supply chain: Service Centres Tier 1 Auto Vendors Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

10 Body in While Assembly / Welding Large Parts Stamping Small Parts Stamping, Plate Fabrication Press Blanking, TWB, Sheet Fabrication, Inventory Mgt, IT Support, Technical Services Slitting, P&0, Precision Levellling CTL, Shearing Warehousing & Debulking Value Creation Technical Sophistication of Operations Logistics Provider Stage 1 Processor Stage 2 / 3 Processor Automotive Tier 1 Supplier Home Appliance Auto Source: Mitsui Service Centres can be categorised into Stage 1 & Stage2/3 processors: Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

11 Typical Stage 1 processing output: Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

12 Typical Stage 2/3 products: Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

13 Customers Stockyards Traders Customers Steel Mills Processors & Cutters 2012 Service Centres (Tolling) Service Centres (Distribution) 2 Mn 3 Mn 1.25 Mn 2007 3.5 Mn 4 Mn 3.5 Mn While Stage 1 processing demand is growing in leaps and bounds … Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

14 OEM Stockyards Traders OEM Steel Mills Stage 2/3 service centres 2012 Stage 2/3 Service Centres (Tolling) Tier 1/ Tier 2 / Tier 3 vendors 0 0.2 Mn 2.3 Mn 2007 0 0.6 Mn 5.1 Mn 1.9 Mn2.4 Mn … Stage 2/3 processing is still primarily carried out by Tier 1 vendors, but new sophisticated service centres have entered the fray Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

15 Stage 2/3 customer expectations are distinctly different from those of Stage 1 15 Product Quality Order Execution Commercial Aspects Customer Care Customer Care Management Customer Expectations Source: TSPDL research Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

16 Dimension Tolerance Dimension Tolerance Complaint Resolution Complaint Resolution Yield Reports Material Reconciliation Material Reconciliation STAGE I APQP/ PPAP/ FMEA Process Delivered Quality in PPM Internal PPM Plan for Every Part (PFEP) STAGE II PRODUCT QUALITY PRODUCT QUALITY Customer Expectations – Product Quality 16 Source: TSPDL research Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

17 ORDER EXECUTION ORDER EXECUTION STAGE II Forecast Based Planning KIT Deliveries KANBAN Pull-Trigger System Process Control & Process Capabilities 17 Delivery Compliance Delivery Compliance Lead Time Lead Time Inventory Holding Inventory Holding VIVO STAGE I Source: TSPDL research Customer Expectations – Order Execution Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

18 Price Stability Price Stability Competitive Pricing Competitive Pricing Availability of Credit Availability of Credit STAGE I COMMERCIAL ASPECTS COMMERCIAL ASPECTS STAGE II VA / VE Savings Cost of Poor Quality (COPQ) Long Term Pricing (YOY Cost Reduction) 18 Source: TSPDL research Customer Expectations – Commercial Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

19 Accessibility Of Concerned Person Accessibility Of Concerned Person Timely Resolution Of Complaints Timely Resolution Of Complaints Advance Intimation Of Supplies Advance Intimation Of Supplies Commitment on Supplies Commitment on Supplies STAGE I CUSTOMER CARE CUSTOMER CARE STAGE II Growth Aligned With OEM VA / VE Projects JIS Delivery EVI 19 Source: TSPDL research Customer Expectations – Customer Care Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

20 Five Major Trends impacting Global Auto Supply Chain: Flexible Manufacturing – VW produces 7 models on 3 line – BMW produces 4 Models 2 lines Build to Order – BMW more than 80% of production done according to orders received from customers. SSCs/ vendors assist by providing delivery of more than 85% of orders on promised day and 95% in the same week Risk Sharing – Investment by SSCs/ vendors in development (R&D) & expansion plans for new products Outsourcing of Manufacturing – To reduce investment & fixed cost, globally automakers are increasing outsourcing manufacturing - related activities to specialist companies, especially in Press & body shops operations – Renault – Oxford Automotive supplies stampings & welded sub assemblies Daimler – tailored blanks for C class are supplied by ThyssenKrupp BMW – Tower & Magna for welded sub assemblies Outsourcing Logistics – All major global auto manufacturers rely heavily on outsourced logistics suppliers (TNT logistics, LGI, Dana Brazil, Exel etc.) Source: Metal One Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

21 Indian auto sector is expected to shift towards higher usage of Cold Rolled and High-Strength steels Steel Consumption in Auto (Mn MT) Source: Essar Steel presentation at Indian steel conference May 2010 2.8 5.2 CAGR: 13.2% Cold rolled (CR)Hot rolled (HR) CAGR: 12.5% CAGR: 13.6% Grade-wise usage Advanced High strength, 3% Mild, 62% High Strength, 34% Ultra High strength, 1% Advanced High strength, 30% Mild, 24% High Strength, 36% Ultra High strength, 10% 2003 2015 Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

22 Conventional Stamping Laser Welded Blank Tailor Rolled Blank High Frequency Induction Welded Hydroformed Tubes Laser Welded Hydroformed Tubes Tailor Rolled Hydroformed Tubes Hot Stamping (Direct & In-Direct) Laser Welded Blank Quench Steel Tailor rolled Blank Quench Steel Roll Forming Laser Welded Coil roll Formed Tailor rolled Blank Roll Formed Roll Form with Quench Multi Walled Hydroformed Tubes Multi Walled Tubes Laser Welded Finalized Tubes Laser Welded Tube Profiled Sections What is New in Steel? The steel vehicle of the future will use several new steels and manufacturing technologies: Source : Tata Steel Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

23 Service centres will become an integral part of the automotive supply chain in India Availability is still the key issue in India – High concentration in steel industry – Limited availability of grades outside general engineering and construction Going forward (next 5 – 10 years) – Shift in focus from Availability to Service – More Service Centres will enter Stage 2/3 processing area – Not all service centres would be able to successfully meet the customer expectations in Stage 2/3 processing – Macro trends in automotive industry such as flexible manufacturing, outsourced logistics, use of new materials and technologies will see emergence of dedicated automotive service centres that are closely aligned with OEMs Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

24 Thank You


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