Evaluating a Supply Chain

· Lowest Cost producers of Steel: Tata steel has been named as the lowest cost producers of steel. This is primarily because of the steady flow of raw materials for the production purpose. Also their mines are located close to the production plant in Jamshedpur. This leads to lower transportation costs which help in improving the overall price of the finished product.

· Employee Welfare: Employees have always been at the heart of this organization. A number of initiatives at domestic as well as global level have been taken to ensure employee’s good health and safety. All the basic amenities like school, hospital, water, telephone lines, housing have been provided to employees working in Jharia mines. All its mines are ISO-14001-Environmental Management System Certified (Tata Steel, 2009).

· Mergers & Acquisitions: Tata’s strategic move of buying Corus, Anglo-Dutch steel maker in 2007 is the largest buy-out deal overseas by an Indian company till date (India Today, 2008). This deal made them the fifth largest producer of steel. It also helped them grab a share of the European market and use new and efficient technologies patented by Corus. The reason behind Corus accepting the deal of Tata steel was that they would get an easy access to raw material reserves in India. The other two acquisitions have been NatSteel of Singapore and Millenium Steel of Thailand (India Today, 2008).

· State of art technology: Tata Steel’s collieries use Surpac, a state-of-the-art mine planning software that estimates the volume of coal in every seam. This is coupled with qualitative detailing that focuses on output consistency. To maximise productivity and utilisation, a voice and data equipped Global Positioning System is used, which helps to supervise mining activity for machine movement and engine status (Tata Steel, 2009).

WEAKNESSES

· High debt-equity ratio: Debt equity ratio implies that how much assets of the organization are financed through loans. Tata steel has always been on the higher side with respect to debt-equity ratio which signifies a negative impact on the organization in the long run. Moreover, if the government announces a hike in the interest rates, it would further add on to the existing debts that are outstanding.

· Attrition trend: Even though Tata steel has been meticulous about employee welfare schemes that are launched from time to time, but still it has not been able to control its attrition rate. The company recorded an attrition rate of 3.19% in the year 2009-10 and this number further rose to 4.48% in the following year (Tata Steel, 2012). One of the reasons for this attrition rate can be SAIL plant in Bokaro. Many employees of Tata Steel are being poached by SAIL and Mittal Steels.

· Lower Liquidity Levels: Major acquisitions of the company have been financed through internal sources. This has led to deep hole in their pockets thereby affecting the liquidity levels.

· Widespread Deficiencies: The cooking coal that is being used as a raw material by iron and steel industry has higher ash content which adversely affects the production of iron. Though the company has huge iron ore deposits mines but still they face a shortage of this raw material which again impacts the overall productivity. Lastly, power supply cuts in India have always impacted the production capacity of the plant.

OPPORTUNITIES

· Huge Overseas Market: The acquisition deals signed by Tata steel has opened up avenues of huge market lying to be tapped. Their low cost of production will be an added advantage that would give them an edge over the competitors.

· Use of new technology: The Tata-Corus deal will help the company to use the new technology and patents owned by Corus group. This will further benefit them by producing in a more cost-efficient method and also improve the overall quality of the product.

· Shift focus on new industries: Industries like automobile, water and irrigation enterprises, and engineering industry use steel as a raw material. Therefore, Tata steel should focus on these industries which would lead to rise in the demand of steel.

· Untapped Rural Market: There is a huge potential lying untapped in the rural markets of India. The company need to do proper marketing and make their presence felt in the rural areas as well. Their cost effectiveness will provide them an edge against competition.

THREATS

· Availability of substitutes: Automobile industry has shifted from steel to plastics as its raw material. Another substitute of steel that is making its place in the market is aluminium. Tata steel has been facing huge losses because of these substitutes. For example, PVC pipes have replaced steel pipes. The company needs to rethink of a strategy to stay in the market.

· Government norms: The company need to adhere to the Co2 emission standards set by the European government for its operations in Europe.

· Economic slowdown in Europe: Tata steel entered the European market at a premium price. However the economic slowdown has posed a threat to the company in terms of its survival and profitability.

· Entry of competitors: Another serious threat being faced by the company is that its rivals like Arcelor Mittal and Posco have decided to enter the Indian markets. This may lead to reduced market share of the company.

ORGANIZATIONAL STRUCTURE

The below table highlights the organizational structure at Tata Steel. The structure can be classified into three categories comprising of Upper management, Middle Management and Lower Management.

After the acquisition of Corus Group, Tata steel thought of having some changes in its organizational structure for the purpose of integration of two groups. A group centre was created for five functions that are to be performed with a common approach across the Tata Steel group. These functions are:

· Technology and Integration;

· Finance;

· Strategy;

· Corporate relations and Communications; and

· Global minerals. (The Hindu, 2007).

BUSINESS PROCESS

Tata Steel has implemented a robust research & development process and design & automation process.

RESEARCH & DEVELOPMENT PROCESS: The company has been investing huge sum of money in the innovation of new and efficient process of manufacturing. They have five research centres across the globe. The Group’s research programme comprises programmes funded by the separate business units and work on a number of identified thrust areas that receive corporate funding (Tata Steel, n.d.).

DESIGN & AUTOMATION PROCESS: Globally, Tata Steel production is controlled and monitored through highly automated, computer-based systems. Such processes include automatic sequencing of equipment, material detection and tracking, strip rolling, furnaces, boilers, material coating, water cooling and many more. The Automation Division of Tata Steel in India is the central agency for design, development, integration and implementation of Process Automation for the Company’s Indian operations and is also an international supplier of high level automation for the metal industry (Tata Steel, n.d.).

ETICAL ISSUES

Tata Steel implemented the Tata Code of Conduct in1998. This code of conduct is a guide to each employee on the values, ethics and business principles expected of him in personal and professional conduct (Tata Steel, n.d.). The company encourages whistle blowing and the reporting of instances of unethical behaviour to the management, while ensuring full protection to the whistleblower in its ‘whistleblower protection and reward policy’. (Rao, 2013).  It is one of the two Indian companies on the list of World’s Most Ethical Companies released by the Ethisphere Institute and also one of the first companies to implement social accountability standards (Datta, 2012).

There have been no instances of unethical behaviour in Tata Steel. However, some important unethical behaviour concerned with manufacturing firms can be:

Exploitation of labours: They may force labour to work for low wages or work extra hours at the same wages. This is generally prevalent in places where there is problem of unemployment.

Environmental Issues: Manufacturing concerns may compromise on environmental laws set the government and adversely affect the health of the residents who live nearby.

These issues could be controlled by setting up a proper system for penalising the employees who violate the code of conduct. Government rules and regulations should be reviewed on regular basis to make any amendments to the existing laws in the light of changing scenario.

REFERENCES