role of steel service centres in the automotive supply chain abraham stephanos chief operating...
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Role of Steel Service Centres in the Automotive Supply Chain
Abraham StephanosChief Operating Officer
Tata Steel Processing & Distribution Limited
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
What do service centres do?
• Inventory Holding• Processing• Distribution & Logistics• Inventory Management
Services
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
Producers of Steel
Final Consumer
Direct to Consumer
Value Addition Need in Intermediate Services
Supply Chain Mgt ProcurementStrategic Alliances Technical Services Stocking ProcessingCustomization Just - In - Time Delivery
Service Centres provide this
expertise
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
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
The need to unlock value from the supply chain …
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
…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 Conference15-16 March, 2011, Delhi
1990sHowrah ,Belur,Shalimar cutters;BMW
2000 – 2005TRF ,Tata Ryerson
2005 – 2010 BMW ( exp)Steelium Distributors2010- Essar
1990sG Williams, Allied
2000 – 2005Tata Ryerson
2005 – 2010Pos IDPC , Essar , Steelium D’tors , TSPDL
2010-Sumitomo , Pos IDPC ( Exp)
1990s Taloja cutters, Ampil, MSSCL, Tata Ryerson
2000 – 2005Hemnil, Loha Ispat
2005 – 2010Pos IPPC , Essar , ARKSteelium D’tors , Posh , MSSCL
2010-Pos IPPC II , Essar- Indore , Loha Ispat
1990sManali Cutters , Ramanasekhar Industries2000 – 2005Pos Hyundai , Toyota Tsusho
2005 – 2010Hyundai Hysco , Steelium D’tors 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 Conference15-16 March, 2011, Delhi
Cutters Low end Mid End High End
Today we have a wide gamut of service centres … from ‘cutters’ to ‘high end’ …
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
Independent
Steel Mill Promoted
OEM Promoted
Metal Trading House Promoted
SMPC Loha Ispat Ranka
TSPDL POSCO EssarJindal
ToyotaTsusho
Honda Trading
Hyundai Hysco
Sumitomo Caparo Marubeni
MSSCL Metalone
…with a variety of ownership models
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
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
The typical automotive steel supply chain:
Service Centres
Tier 1 Auto Vendors
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
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
Tech
nica
l Sop
histi
catio
n of
Ope
ratio
ns
Logistics Provider
Stage 1 Processor
Stage 2 / 3 Processor
Automotive Tier 1 Supplier
Hom
e Ap
plia
nce
Auto
Source: Mitsui
Service Centres can be categorised into Stage 1 & Stage2/3 processors:
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
Typical Stage 1 processing output:
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
Typical Stage 2/3 products:
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
CustomersCustomers
StockyardsStockyards
‘Traders’‘Traders’
CustomersCustomersCustomersCustomers
Steel MillsSteel Mills
Processors & ‘Cutters’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 Conference15-16 March, 2011, Delhi
OEMOEM
StockyardsStockyards
‘Traders’‘Traders’
OEMOEMOEMOEM
Steel MillsSteel Mills
Stage 2/3 service centresStage 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 Mn 2.4 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 Conference15-16 March, 2011, Delhi
Stage 2/3 customer expectations are distinctly different from those of Stage 1
15
Product Quality
Order Execution
Commercial Aspects
CustomerCare
Management
Customer Expectations
Source: TSPDL research Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
Dimension Tolerance
Complaint Resolution
Yield
Reports
Material Reconciliation
STAGE I
APQP/ PPAP/ FMEA
Process
Delivered Quality in
PPM
Internal PPM
Plan for Every Part
(PFEP)
STAGE II
PRODUCTQUALITY
Customer Expectations – Product Quality
16Source: TSPDL research Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
ORDER EXECUTION
STAGE II
Forecast Based
Planning
“KIT” Deliveries
KANBAN
Pull-TriggerSystem
Process Control
&Process
Capabilities
17
Delivery Compliance
Lead Time
Inventory Holding
VIVO
STAGE I
Source: TSPDL research
Customer Expectations – Order Execution
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
Price Stability
Competitive Pricing
Availability of Credit
STAGE I
COMMERCIAL ASPECTS
STAGE II
VA / VE Savings
Cost of PoorQuality (COPQ)
Long Term Pricing
(YOY Cost Reduction)
18Source: TSPDL research
Customer Expectations – Commercial
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
AccessibilityOf Concerned
Person
Timely Resolution
Of Complaints
Advance Intimation
Of Supplies
Commitment on Supplies
STAGE I
CUSTOMERCARE
STAGE II
Growth Aligned
With OEM
VA / VE Projects
JIS Delivery
EVI
19Source: TSPDL research
Customer Expectations – Customer Care
Indian Steel Markets 2011 Conference15-16 March, 2011, Delhi
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 ThyssenKruppBMW – 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
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
1.8 2.1 2.4 2.7 3.03.4
1.01.2
1.31.4
1.6
1.8
FY10 FY11 FY12 FY13 FY14 FY15
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 Conference15-16 March, 2011, Delhi
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 Conference15-16 March, 2011, Delhi
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 Conference15-16 March, 2011, Delhi
Thank You