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Role of Steel Service Centres in the Automotive Supply Chain

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Presentation on theme: "Role of Steel Service Centres in the Automotive Supply Chain"— 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 Service Centres provide this expertise
Value Addition Need in Intermediate Services Supply Chain Mgt Procurement Strategic Alliances Technical Services Stocking Processing Customization Just - In - Time Delivery Direct to Consumer Special Packaging Kan-Ban systems Final Consumer Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi DL_INO451_5(Service centres).ppt

4 The need to unlock value from the supply chain …
From the Steel Mill’s 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 Customer’s Perspective Traditional ‘Cutters’ provide limited value: No inventory holding Usually low end processing Very old / reconditioned equipment Quality depends on customer’s 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 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 MNC’s 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 Indian Steel Markets 2011 Conference
The automotive industry has been the main catalyst for the growth of service centres 1990s G Williams, Allied 1990s Howrah ,Belur,Shalimar cutters; BMW 2000 – 2005 Tata Ryerson 2000 – 2005 TRF ,Tata Ryerson 2005 – 2010 Pos IDPC , Essar , Steelium D’tors , TSPDL 2005 – 2010 BMW ( exp) Steelium Distributors - Sumitomo , Pos IDPC ( Exp) - Essar 1990s Taloja cutters, Ampil, MSSCL, Tata Ryerson 1990s Manali Cutters , Ramanasekhar Industries 2000 – 2005 Hemnil, Loha Ispat 2000 – 2005 Pos Hyundai , Toyota Tsusho 2005 – 2010 Pos IPPC , Essar , ARK Steelium D’tors , Posh , MSSCL 2005 – 2010 Hyundai Hysco , Steelium D’tors Essar, JSW - Pos IPPC II , Essar- Indore , Loha Ispat - Pos ICPC , Toyota Tsusho (Exp) , Pos Dighe , Kawarin Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

7 Indian Steel Markets 2011 Conference
Today we have a wide gamut of service centres … from ‘cutters’ to ‘high end’ … Cutters Low end Mid End High End Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

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

9 The typical automotive steel supply chain:
Steel Mill Mother Coils OEM Coil Store Slitting/ Blanking Lines Slit coils Rectangular /Trapezoidal blanks Profile blanks Stamping Lines Body Panels Assembly Lines Body –in-white Customer FinishedCars Service Centres Tier 1 Auto Vendors Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi

10 Service Centres can be categorised into Stage 1 & Stage2/3 processors:
Value Creation Technical Sophistication of Operations 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 Automotive Tier 1 Supplier Stage 2 / 3 Processor Auto Stage 1 Processor Home Appliance Logistics Provider Source: Mitsui Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi SHA-RYT pages for Stephan 10 10

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

14 Stage 2/3 Service Centres (Tolling)
… Stage 2/3 processing is still primarily carried out by Tier 1 vendors, but new sophisticated service centres have entered the fray 2007 2012 Steel Mills Stage 2/3 Service Centres (Tolling) Stockyards ‘Traders’ 2.3 Mn Tier 1/ Tier 2 / Tier 3 vendors 5.1 Mn 1.9 Mn OEM OEM OEM 2.4 Mn Stage 2/3 service centres 0.2 Mn 0.6 Mn Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi SHA-RYT pages for Stephan 14

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

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

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

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

19 Indian Steel Markets 2011 Conference
Customer Expectations – Customer Care STAGE II Growth Aligned With OEM VA / VE Projects JIS Delivery EVI Accessibility Of Concerned Person Timely Resolution Of Complaints Advance Intimation Of Supplies Commitment on Supplies STAGE I CUSTOMER CARE Source: TSPDL research 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 Steel Markets 2011 Conference
Indian auto sector is expected to shift towards higher usage of Cold Rolled and High-Strength steels Steel Consumption in Auto (Mn MT) Grade-wise usage 2003 CAGR: 13.2% Advanced High strength, 3% Ultra High strength, 1% 5.2 High Strength, 34% CAGR: 12.5% Mild, 62% 2.8 2015 Ultra High strength, 10% CAGR: 13.6% Mild, 24% Advanced High strength, 30% High Strength, 36% Cold rolled (CR) Hot rolled (HR) Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi Source: Essar Steel presentation at Indian steel conference May 2010

22 Indian Steel Markets 2011 Conference
What is New in Steel? The steel vehicle of the future will use several new steels and manufacturing technologies: 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 Indian Steel Markets 2011 Conference 15-16 March, 2011, Delhi Source : Tata Steel 22

23 Indian Steel Markets 2011 Conference
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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