DECLARATION

This is to certify that the material embodied in this study entitled Outbound Logistics

Outbound logistics
Planning and Scheduling at
Customer Service Division
of Tata Steel India

planning

and

scheduling
Customer

at
Service

Division of Tata Steel

India indebtedness to
other work/publications
has been acknowledged
at the relevant places.

Author:
Subrata
Basak
(MP150

This study has not been

submitted

elsewhere

either wholly or in part

for award of any degree.

This is to certify that the project titled Outbound Logistics planning and scheduling at
Customer Service Division of Tata Steel India is a part of academic curriculum for the
degree of PGDM [PT] 2015-18 under the Guidance of Prof. Trishit Bandyopadhyay
(XLRI) and Mr. Ashish Kr Gupta (Chief, Customer Service Division & Logistics, Tata
Steel Ltd).

Executive Summary
Tata Steel India aims to build, capitalize on and sustain a decisive
competitive advantage in their reliability of meeting due date performance
and availability commitments to the market as well as in further improving
on their cost advantage by continuously improving customer satisfaction.
CSD manages out bound logistics (OBL) & warehousing of finished goods and
ensuring on time delivery of damage free products and documentation to
customers. Hub and spoke supply network comprising 22 warehouses
served through rail; road and waterways are used to handle outbound
logistics. CSD delivers its services through Planning, Transportation &
Warehousing.
The challenge for CSD and Tata Steel as a whole is to meet consumer
expectations such as:

Reduction in Lead times

Commitment to order fulfilment

Information transparency

Flexibility to respond to customer requirements

Quality of Delivery
Key requirements for achieving customer expectations, reliability and due
date performance of > 95% include the ability to reliably predict the market
demand, convert that to annual business plan and then execute that plan on
a monthly, weekly and daily basis with the help of various planning and
scheduling tools. Most important aspect is managing the complex supply
chain having multi-product, multi-location, multi-business environment.
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This report consist of as-is planning and scheduling process of outbound

supply chain which starts from Annual logistics Plan and ends with daily
dispatch plan. In addition to detailing of the as-is process, we have also done
the assessment of current process and suggested many improvement to
make the process world class.

Table of contents
Introduction...................................................................... 6
a)
b)

About Tata Steel India.......................................................................................... 6

Overview of Outbound Logistics..........................................................................7

Outbound Logistics Network..............................................8

Outbound Logistics Planning Process.................................9
a)
b)
c)

Annual Logistics Plan........................................................................................... 9

ALP Preparation: Process Flow...........................................................................11
ALP Process Brief Overview............................................................................... 11
(1) Analysis of historical despatch data...............................................................11
(2) Inputs from Annual Sales Plan.......................................................................12
(3) Constraint Analysis........................................................................................ 13
(4) Development of despatch plan for current year............................................13
(5) Project impact of cost change due to contract revisions (Transportation or
Handing)............................................................................................................... 14
(6) TDSC matrix and Lead Matrix preparation.....................................................14
(7) Prepare Domestic ALP for current year..........................................................15
(8) Combine Export ALP to prepare overall ALP..................................................15
d) Resource Planning............................................................................................. 16
(1) Transportation contract planning...................................................................16
(2) Warehouse infrastructure planning................................................................17
e) Despatch Planning............................................................................................. 18
(1) Despatch Planning:........................................................................................ 19
(2) Shipment Execution:...................................................................................... 19
(3) STO / DO Generation:..................................................................................... 19
(4) Vehicle Placement, Loading and Unitization, Weighment:.............................19
(5) Documentation:............................................................................................. 19
(6) Delivery, Freight Payment:............................................................................. 19

Assessment of current process.........................................20

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a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)

Scope of the assessment................................................................................... 20

Assessment Areas and Key Characteristics.......................................................20
As-Is Planning Process....................................................................................... 21
Supply Chain Innovation areas and gaps in Tata Steel......................................21
Changes in Business Landscape with respect to Logistics.................................23
Key Challenges and Opportunities.....................................................................25
Solutions and Recommendations.......................................................................25
Planning process................................................................................................ 26
Forecast Collaborations with Supplier................................................................28
System Integration and KPI Dashboard.............................................................28
Monthly S&OP Meeting...................................................................................... 28
Key KPIs for Outbound Supply Chain at Tata Steel.............................................29
Reference KPIs to monitor.................................................................................30

Conclusion......................................................................31
Annexures......................................................................32

List of Figures
Figure 1: Overview of Tata Steel Process.........................................................7
Figure 2: Historical data from previous ALP...................................................12
Figure 3: Annual Sales Plan............................................................................13
Figure 4: Capacity Constraint.........................................................................13
Figure 5: Annual Despatch Plan transportation mode wise............................14
Figure 6: Total Delivery System Cost(TDSC) matrix.......................................15
Figure 7: Zone wise rail coefficient................................................................15
Figure 8: Region wise desptach plan (mt)......................................................16
Figure 9: ALP distribution List........................................................................16
Figure 10: Transportation clusters across India..............................................17
Figure 11: Few photographs of Chennai Stock Yard.......................................18
Figure 12: Scope of the assessment..............................................................20
Figure 13: Assessment Areas.........................................................................20
Figure 14: As-is planning process..................................................................21
Figure 15: Suggested Planning Process.........................................................26
Figure 16: Various inputs and outputs of each steps of Planning...................26
Figure 17: Suggested Process of Annual Logistics Planning...........................27
Figure 18: Suggested Process of monthly and weekly Logistics Planning......27
Figure 19: Suggested Process of daily Dispatch Planning..............................28
List of Tables
Table 1: Supply Chain Innovation areas and gaps..........................................21
Table 2: List of changes in Logistics Landscape.............................................23
Table 3: Key KPIs of Outbound Logistics.........................................................29
Table 4: Reference KPIs to monitor................................................................30
List of Abbreviations
TSL
Tata Steel Ltd
CSD
Customer Service Division
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TQM
GDP
CVM
RVM
CST
VMI
JIT
OE
OBL
TOC
TDSC
TDC
EPA
ABP
ALP
GEPA
LEPA
STO
DO
RR
LR

Total Quality Management

Gross Domestic Product
Customer Value Management
Retail Value Management
Customer Service Team
Vendor Managed Inventory
Just In Time
Original Equipment Manufacturer
Outbound Logistics
Theory of Constraints
Total Delivery System Cost
Technical Delivery Condition
External Processing Unit
Annual Business Plan
Annual Logistics Plan
Global EPA
Local EPA
Stock Transfer Order
Direct Order
Railway Receipt
Lorry Receipt

Introduction
a) About Tata Steel India
Tata Steel, one of the largest companies of the Tata Group, was founded by J
N Tata in 1907 in pursuit of his dream of an independent and prosperous
India. It is Asias first integrated steel plant engaged in mining of raw
materials, production and rolling of steel and marketing and sales of end
products. It has pioneered in introducing many physical and social
infrastructures in the country which includes creation of the first planned city
of India called Jamshedpur. Tata Steel encouraged the formation of Indias
first Workers Union, which was established in March 1920. In its journey of
more than hundred years, the company has traversed many landmarks and
milestones in the area of technology and business. In 2008, Tata Steel India
(TSL) became the first integrated steel company in the world to be awarded
the Deming Application Prize for excellence in TQM.
Liberalization of the Indian economy in 1991 opened doors to global
competition along with a healthy GDP growth rate in the country. Keeping
pace with the increasing demand of steel in the country, Tata Steel enhanced
its capacity from 2.3 mtpa in 1992 to 5 mtpa in 2005, then to 6.8 mtpa in
2007, 9.9 mtpa in 2016 and is now slated to grow to 13 mtpa by FY17. Apart
from pursuing growth in India through Greenfield (in the states of Odisha,
Chhattisgarh and Jharkhand) and Brownfield (at existing site in Jamshedpur)
expansions, Tata Steel also acquired manufacturing facilities in the UK,
Netherlands, Thailand, Singapore, China and Australia. With this, the Tata
Steel Group has become the worlds tenth largest steel producer (as per
World Steel Association) with its annual crude steel capacity of over 25.92
mtpa for the year ended on March 31, 2016.
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Tata Steel Group, a Fortune 500 company, is now one of the world's most
geographically-diversified steel producers, with over 80,000 employees and
operations in 26 countries having commercial presence in over 50 countries.
A strong TQM culture has been in practice for over a decade which has
helped in pursuing performance excellence in all spheres of business.
To sustain world benchmark in EBITDA performance, the company embarked
on another improvement journey in March 2010, known as Kar Vijay Har
Shikhar (KVHS), which means Conquer every peak. The initiative intends
to challenge the previous best achieved for the KPIs in operational areas.
One of the focus areas of the company (alongside expansion) was to improve
engagement with customers. TSL is the first steel company in India to
develop a Distribution Strategy which is a differentiator in the market. Along
with a distribution strategy, it also framed its Automotive Strategy which
provided a view to the product-service strategy for the Indian Automotive
customers
In context of the poor infrastructure and road conditions in various states if
India, complying with delivery schedules is a big challenge as most of its
customers are located in the western and southern part of the country. The
company focuses on improving domestic supply chain performance through
the TOC (Theory of Constraints) methodology and has achieved good results.
Customers under the TOC program have benefitted by the improvement of
due date performance and have reduced their inventory levels by half.
Initiatives like CVM, CST, VMI and EVI have been launched for select OE
customers. The objectives of these initiatives are to create mutual value and
long term partnership with select customers. The RVM program reaches out
to the retail consumers across India thereby building channel capability and
sale of branded products. Focused accelerated improvement process is also
being carried out through the KVHS program.
TSL is one of the few steel companies which is fully integrated from mining to
manufacturing and marketing of finished products. It operates captive iron
ore, coking coal, and chrome ore mines in the Indian states of Jharkhand and
Odisha. The Schematic Process Flow Diagram of the integrated steel making
value chain is depicted below.

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Figure 1: Overview of Tata Steel Process

b) Overview of Outbound Logistics

CSD is responsible for out bound logistics (OBL) & warehousing of finished
goods and ensuring on time delivery of damage free products and
documentation to customers. Hub and spoke supply network comprising 22
warehouses served through rail; road and waterways are used to handle
outbound logistics. CSD delivers its services through Planning, Transportation
& Warehousing.
The Customer Service Division translates customer orders into physical
deliveries. This is to be done at the lowest possible cost whilst maintaining
the promised delivery conditions. CSD along with Marketing & Sales is the
face of Tata Steel to its customers. Delivering goods & services as per our
promise involves a strong customer orientation. CSD manages a large
number of interfaces across the supply chain including Customers, Marketing
& Sales, Production, External Processing Agents, and Procurement etc.
Management of these relationships is the key to the success of the business.
The challenge for CSD and Tata Steel as a whole is to meet consumer
expectations such as:

Reduction in Lead times

Commitment to order fulfilment

Information transparency

Flexibility to respond to customer requirements

Quality of Delivery
So, to maintain our position as preferred supplier, major focus areas for CSD
would be to scale up its service offerings and to maintain decisive
competitive edge. Some of the initiatives taken up by CSD to meet customer
expectations are:
Stockyard Expansion Plan
Network Redesigning
Customised Transportation
IT Implementation
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Business Objectives and Strategies:

Improving customer service by focusing on Due Date

Performance

Reduction in delivery system cost

Establishing system for capturing and reducing customer

claims.

Infrastructure development plans to align with Tata Steels

growth plans
One of the most important key performance indicators for CSD is total
delivery system cost or cost to serve customers. TSL outbound logistics cost
was around Rs 2801 / ton in the financial year 2015. There was massive cost
reduction exercise that was undertaken at the beginning of FY16 and as a
result the cost reduced to Rs 2545 / ton in FY16 and currently the cost is ~Rs
2390 /ton. The top management has given an aspirational target of Rs
2000 /ton. Apart from cost CSD is committed to improve safety performance,
supply defect free steel to customers and reduce of lead time, vehicle
turnaround time and thereby reduction of inventory.
To achieve these business objectives, the planning and scheduling
activities of outbound logistics are most critical activity.

Outbound Logistics Network

Tata Steel has two major plant locations and each plant has mills. Mills are
categorized into two subgroups based on type of items that they are
producing. These groups are FP and LP. FP is Flat products (Coils and Sheets)
and LP is Long products (TMT steel bars and Wire rods)
Plant Jamshedpur has six Mills. Following three mills produce FP items. Hot
Strip Mill (HSM), Cold Rolling Mill (CRM), Thin Slab Caster (TSCR). Following
three mills produce Long Products: Merchant Mill (MM), New Bar Mill (NBM),
Wire Rod Mill (WRM). There are External Processing Agents across India for
producing various Flat and Long products.
Newly commissioned
Kalinganagar Plant at Odisha has single mill which produces FP product
coils
22 Stockyards are there across the county. Service or business is divided into
four regions North, South, East and West. Network divided into different
clusters. Clusters are defined based on regions and each cluster will have set
of predefined destination. Business is predefined or allocated to some
transporters in each of the clusters.
Assumption is that transporters have all types of vehicles available with
them.

Equipments/Vehicles are categorized into three types

1. Wagons.

Six types of wagons and each wagon have different

dimensions and chargeable capacities

Rake can consist of 43/45/54 number of wagons

Rakes availability at each location is provided

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o
o
o
o
o
o
o

Wagon loading rules are defined by railways and has

to honor those rules

2. Trailers

Four types of trailer and each trailer have different

carrying capacities
3. Special Vehicles
o Used for delivery of high quality material which are
recognized by TDC No and not all vendors are have these
vehicles.
Three Types of modes are presently modeled Rail, Sea and Road.
Transit time for Rail routes are available only for destination locations
where rake is allowed.
TDSC matrix is provided for 1st leg with all possible route/cost and
second leg cost details provided, combination of both first leg cost and
second leg cost provides total freight cost.
Second leg movements will help in consolidation opportunities at
stockyard (Hub) which may decrease total freight cost/idle freight
cost.
Despatch should not happen for customers whose credit and waybills
are pending.
All business related constraints related to equipment, customer,
transporter, mill loading, stockyard unloading, wagon loading rules are
provided
Delivery will be done directly to customer using Road/Rail or it should
be done through stockyard and then to destination.
Special Orders will be identified using items which are marked as
special items and these orders should be dispatched using special
vehicles. Parcel movements and Less Than Truckload movement are
not required for Tata Steel business.

Outbound Logistics Planning Process

The Planning process is quite complex. The management system
chart of outbound logistics is given below (Figure 2). The planning
starts with Annual Logistics Plan (ALP) which is nothing but
Aggregate Logistics Plan. The details of ALP process is given in
subsequent section.

a Annual Logistics Plan

The Annual Logistics Plan (ALP) provides decision support to the below line
functions:
Customer Service Division (CSD)
Flat Product (FP) planning
Long Product (LP) planning
Marketing & Sales (M&S)
This translates the Annual Sales and Operation Plan into outbound annual
logistics plan, which helps in
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Deciding the major mode of transport for various destinations

Planning the routing of material to warehouses
Delivering Tata Steels products and services with optimized cost
Helping in facility planning as the impact of region and route wise
changes in sales plan is translated to transport and warehousing plan

Key inputs for the plan are taken from below sources. We will see in detail
each of these sources and the impact of the same.
Annual Sales Plan for all three verticals of Steel M&S
Annual Production Plan for all Finishing Mills and External Processing
Agents (EPAs)
Available transport modes, the capacity constraints, route restrictions
Network Data Handling and warehousing facilities at Stockyards and
Hubs
Cost model & Tax structure
Service level requirements of customers
Product Characteristics
Total System Delivery Cost (TDSC) Matrix

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Figure 2: Process of Customer Service Division (responsible for Outbound Logistics)

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b ALP Preparation: Process Flow

Analysis of historical despatch data

Inputs from Annual Sales Plan

Constraint Analysis

Development of despatch plan for current year

Project impact of cost change due to contract revisions (Transportation or
Handing)
TDSC matrix and Lead Matrix preparation

Prepare Domestic ALP for current year

Combine Export ALP

Develop overall ALP for current year

Distribution of ALP

c ALP Process Brief Overview

(1)

Analysis of historical despatch data

Historical data provides a main input for ALP. Historical Logistics data can
provide insights into compliance to plan vs. actual material movement in
previous year ALP.
Data

collection:
Rail mode & Road mode volume
Rail mode and Road mode cost
Regional distribution of volume and cost
Direct & stockyard through volume

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LEPA & GEPA through volume movement

Data Sources:
Monthly ZSS file (ZSS is a transaction in SAP)
Works file
GEPA file
Stockyard file
Stockyard handling rate file
Previous year ALP

Figure 2: Historical data from previous ALP

(2)

Inputs from Annual Sales Plan

Annual sales plan take into consideration the volume projections for
particular destination or customer. Product wise future demand is necessary
for logistics planning. It also consists of target to the sales force from all 3
divisions of M&S. This plan gives an idea about region wise volume
movement.
Data to be collected:
Annual Business Plan containing the customer wise annual sales
target,
Destination wise volume
Product segment wise volume

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Special requirements of customers (Eg. Specialized vehicles, special

saddles, VMI/JIT for specific customers)
Proposed production locations of SPCs

Data Sources:
Current year sales plan
Service level requirements through interactions with M&S, FP planning,
LP planning

Figure 3: Annual Sales Plan

(3)

Constraint Analysis

Annual Logistics Plan needs to consider the constraints from various

movements in supply chain. ALP should be designed according to those
constraints. Some of the constraints are:
Constraint in transportation
o Rail constraint: Rake availability, Availability of preferred types of
rake Eg. BRN/BOST etc
o Road constraint: Previous road contracts volume, Loading and
despatch capacity, Trailer availability
Constraints in stockyard
o Storage capacity
o Connectivity through Rail, Road
o Handling capacity
Constraints by M&S
o Customer service level
o Tax implications
Constraints by Sales planning
o Production capacity constraints

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Figure 4: Capacity Constraint

(4)

Development of despatch plan for current year

Based on data collected above, Historical data, Annual Sales Plan and
constraints annual logistics plan is prepared. This includes detailed
information about:
Rail vs Road volume
Destination wise / Customer wise volume
Customers service levels
Product wise distribution
Region wise distribution
Customer Account Manager wise volumes
Sales office wise volumes
Mill wise volumes

Figure 5: Annual Despatch Plan transportation mode wise

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(5) Project impact of cost change due to contract revisions

(Transportation or Handing)
Logistics cost which is included in in ALP is highly dependent on
transportation cost or freight charges. At the same time handling costs at
different locations also impact TDSC. Hence after consulting with
transportation contracting team in procurement expected revisions in
contracts are included in ALP. Also warehouse handling contract rates as well
as other handling rates and their projections for next year are taken from
respective functions. This data is used to calculate the logistics cost for
above calculated volumes.
(6)

TDSC matrix and Lead Matrix preparation

With above data TDSC matrix is calculated which consists of cost to serve
various destinations through various modes. TDSC matrix consists of the
addition of following costs:
Road Mode:
Road freight
Road handling charges
Taxes and surcharge
Rail Mode:
Rail Freight
Siding charge
Idle freight
Ex-siding handling
2nd leg road freight
Unitisation
Demurrage
Taxes and surcharge
Also Lead table is calculated which consists of distances to various
destinations through various modes (new destinations as per Annual Sales
Plan are added).

Figure 6: Total Delivery System Cost(TDSC) matrix

(7)

Prepare Domestic ALP for current year

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Based on current years despatch plan developed, the costs and leads are
put for different types of despatch to calculate overall TDSC at different
levels.
FP TDSC
LP TDSC
Zone wise TDSC
Total cost of transportation
Overall cost of warehousing
Average lead
100%
90%
80%
70%

83%
80%
77%

71%
67%
63%

60%

92%
89%
86%
74%
66%
50%

50%
40%
30%
20%

12%

10%
0%

1% 1%

East

Local
FY'16 (P)

North
FY'16 (A)

South

West

FY'17 (P)

Figure 7: Zone wise rail coefficient

(8)

Combine Export ALP to prepare overall ALP

After combining export TDSC which is prepared by Export Logistics

Department overall TDSC plan is prepared.

Figure 8: Region wise desptach plan (mt)

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This ALP is distributed to the list of recipients as mentioned in the ISO

procedure.

Figure 9: ALP distribution List

d Resource Planning
(9)

Transportation contract planning

Annual Logistics Plan is useful in contract planning of road transport as it

mentions the road volumes in various regions of India.
Tata Steel operates in 11 clusters all over India. Certain transporters operate
in certain areas. Hence ALP helps in negotiating as well as planning optimal
volume contracts considering allowable variability in volumes of ALP. Below
are the clusters Tata Steel operates in:

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Figure 10: Transportation clusters across India

(10) Warehouse infrastructure planning

Annual Business Plan gives an overall picture of planned material movement
of material throughout the year. This gives an input to the infrastructure
planning team to check whether current infrastructure in terms of handling
capacity and storage capacity is sufficient or not.
Infrastructure Planning includes flowing steps if current infrastructure in
insufficient:
1. Need identification based on volume growth and scenario etc
2. Feasibility study: Location, Land availability, cost involved etc
3. Investment decision: Financial calculation Investment through
partners/ Own
4. Management approval
5. Detail Engineering: Plant layout, Designing, BOQ formation
6. Project implementation: Construction of building, Procurement of
material, equipment's etc.
7. Progress monitoring: Project Cost & Completion time
8. Project Completion
9. Operationalize: Vendor Contracting & stabilization

Key Infrastructural Facilities:

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Covered shed

Railways siding

EOT cranes

Storage and handling systems

Paved yard surface

Parking facility

Drainage & rain water management

Amenities for staff

Road area

Office space

Electricals & IT system

Rest rooms

Figure 11: Few photographs of Chennai Stock Yard

e Despatch Planning
ALP acts as a base for despatch planning which is an activity of evacuating
the material from plant to customer or stockyards on day to day basis.
Annual Logistics Plan gives a volume which will be moved from plant. This
yearly volume is broken up into monthly as well as daily volumes considering
seasonality in steel demand. These volumes are secured by capacity
planning by contract management. Policy decisions such as rail coefficient
which are decided by strategic point of view as well as TDSC matrix act as a
guide to the daily despatch planning.

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As mills produce the material from inputs of sales planning and capacity
constraints material is ready to be despatched. Despatch process can be
summarized as below:
Despatch Planning
Shipment Execution
STO/DO Generation
Vehicle Placement
Loading and Unitization
Weighment
Documentation
Delivery
Freight Payment

(11) Despatch Planning:

To despatch all finished and semi-finished goods is the responsibility of
planning team. Daily meeting is conducted with all mills and Railways where
planning for current date and next date is done. Co-ordination with Railway
execution team is necessary for Railway schedule. Planning team collects
inventory information from all mills and Rail and Road availability from
respective teams. Based on this information and TDSC matrix and
constraints despatch plan is formed.
(12) Shipment Execution:
Based on above data rakes and trailers are provided to respective mills
where loading on respective material is done by each mill considering
optimal use of resources.
(13) STO / DO Generation:
STO or DO are generated in SAP for material movement delivery and
accordingly vehicle placement is done.
(14) Vehicle Placement, Loading and Unitization, Weighment:
Planning and execution team manages the rake and trucks supplied from
Railways and Transport contractors respectively. The aim is to load the right
material in the right vehicle in minimum time securely before actual
despatch. Order details are updated against respective Transporter in vehicle
tracking system in the case of Road mode. Vehicles are placed by transporter
in Transport Park. Inspection is done by Park staff and vehicle is released for
reporting at loading point for that mill.
(15) Documentation:
Rail: 3 copies of invoice, RR Report
Road: 3 copies of invoice, Lorry Receipt, Road permits, Way bill, Challan, Test
Certificate

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(16) Delivery, Freight Payment:

Vehicles are tracked by GPS. Once vehicle delivers the consignment, GRN is
entered in VTS and Lorry Receipt is uploaded by transporter. Freight payment
for Railways is collected via freight management tool from center a/c
automatically. For transporter payment is done post verification of hard
copies of LR, delivery time, and quality of delivery and payment terms as per
contract.

Assessment of current process

As a part of this project, the planning and scheduling process of outbound
logistics of Tata Steel has been studied and we found many improvement
opportunities in the CSD department. This document provides a high level
assessment report of logistics processes.
a Scope of the assessment
The first leg movement and storage at stockyard was part of the scope for
this assessment as shown in the figure below.

Figure 12: Scope of the assessment

c) Assessment Areas and Key Characteristics

The following figure (Figure 13) shows the areas various areas of assessment
of outbound supply chain.

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Figure 13: Assessment Areas

a As-Is Planning Process

The as-is planning process which was assessed by interviewing planning
people of Customer Service Division is shown in Figure 14. We have found
that the monthly planning is done at the gross level. It is not detailed out for
capacity planning at carrier, mode and destination level.

Figure 14: As-is planning process

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d) Supply Chain Innovation areas and gaps in Tata Steel

Various gaps which have been observed during the assessment are listed in
Table 1 in detail. Also external and internal environment changes wrt Tata
Steels OBL are tabulated in Table 2.
Table 1: Supply Chain Innovation areas and gaps

Planning
Funnel

Evaluation
of Network
and
Scenarios

Forward
Plan from
FP and LP
Carrier
Planning
and
Utilization

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Planning process is limited to annual

process, beyond that it is pretty much
daily execution meeting and monthly
capacity discussion
No visible linkage of Monthly plan to
weekly schedule and having root
causing process to move toward close
loop learning
There is no single view of overall
network and decision making process
it happens at different areas of business
No balanced view of business objectives
like Customer Service need, Evacuation
Requirements, Logistics cost etc.
Absence of a continual feasibility check
on infrastructural constraints like
loading unloading capacity, in-plant
movement, actual lead time etc.
No adequate process to evaluate
tradeoff between primary transport and
secondary transport, this is very
important as there is significant cost
differences.
Simulation for variability in demand,
capacity, rate increases, addition of new
carriers, etc also not present.
In todays situation LP and FP plan
cannot provide reliable visibility more
than 2-3 days.
Due to low visibility of material (mainly
in LP), dispatches of small quantities to
a closer by final destination resulting in
idle freight or using costlier transport.
Carrier planning process is limited to 2-3
days window, it is more of utilizing
available capacity to fullest level as
oppose to planning what capacity is
needed.
Transportation lot sizes creates famine
feast kind of situation for LP impacts
customers
The load building and planning
according to wagon/vehicle type
is

not yet done (Idle Freight).

CSD
Overall
Planning
Process

Customer
Satisfactio
n and
Service

Current
KPI and
Tracking
Process

Current process is bit of reactive in

nature to the extent of use available
asset to the best of utilization
Monthly planning process is at very high
level, no visibility at the level source
destination level and what capacity type
is needed
LP customer faces issues with due date
compliance because of smaller lot sizes
at time
FP customer refuses to pick up product
when more than ordered quantity is
delivered.
Usage of customer forecast is a suspect,
not sure what is the usage
Current KPIs are very internal focused
and does not look into customer level of
measurement
Some of these measures are skewed
and favorable to dept as true standard
LT, distance etc may not be there
The KPIs linked to the outbound supply
chain are reported and analyzed using
different independent systems which
makes the KPI tracking tedious and
prone to error. There is no common
interface to assess impact of business
changes on logistics network

e) Changes in Business Landscape with respect to Logistics

Table 2: List of changes in Logistics Landscape
Capacity
Expansion

25 | P a g e

Present
Existing
infrastructure
and capacity
being used to
drive more
production and
dispatches

Future ( 2-3 years)

The loading and
unloading capacities,
in plant logistics have
not been improving.
The expansion of steel
capacity would exert
tremendous pressure
current infrastructure,
the problem will
get aggravated as
capacities show
region
concentration.

Present

Future ( 2-3 years)

Logistics

Technolo
gy

26 | P a g e

More of local
execution
Average
capacity
utilization ~60%
Relation based
vendor
management
Carriers with
very basic
capability
Storage
capacity issue
in the
plant and across
market
Bigger lot sizes

Vendors have
basic capability
on carrier
tracking
No intelligence
on routing
optimization

Cannot work
with forecast

Credible third party

players in logistics
have emerged
Good numbers of
logistics companies
are setting up
warehouse space in
the country
Tata Steel Ltd
working towards lastmile rail connectivity
with specially
designed wagons
New heavy vehicles
with more carrying
capacity.
Logistics companies in
India are showcasing
their green capability
Out bound logistics
costs: due to the
problems with
inefficient
maintenance of
cargo, the out bound
costs of the logistics
are increasing
considerably. Out
bound logistics costs
includes costs of idle
freight, detention, in
plant logistics,
transaction costs,
handling and storage
costs, lashing and
bracing costs etc.
Services centers are
getting connected
with better technology
for better visibility
Firms are investing
on technology ,
having scheduling and
tracking capabilities
Technology
investment t

Present

Future ( 2-3 years)

make 'In plant
logistics'( includes the
activities such as real
time
location visibility
levels, in plant
wagon/truck turn
around , dispatch
spread, inventory
optimization, route
network, no of
handlings, efficient
loading)
saving significant
logistics money

Limited 3PL
capability

Customer
Requirem
ent

Supplier
Requirem
ent

27 | P a g e

Customer is
providing large
lead time, to the
tune of 30- 45
days of order
lead time.
Dispatch
compliances
in the
range of 6070%.

Supplier
responds to
asset need on
need basis to
best of their
abilities
forward visibility
on
manufacturer
as well as by
suppliers is
limited
More of
average
capacity
utilization,
control and
monitoring

Continuous availability
with long term
commitments
Short ordering lead
time
100% conformity to
delivery schedules
Coming closer to our
plant through service
centers or warehouses
Flexibility in systems
to manage
fluctuations in
market requirements
Forecast
for supply
of resource
requirements
System to track and
monitor the real
time
Performance of
delivery
commitments.
Control Operational
costs and increase
Asset utilization
Ability to aggregate
and working with
multimodal
transport

Present
scopes are
limited to
month/quarter
level discussion

Future ( 2-3 years)

f) Key Challenges and Opportunities

Key Challenges
Improved customer sat having compliance to MOU and dispatch
requirements
On time evacuation and placing inventory in market
Improve on cost leakages on account of sub-optimal asset
utilization, idle freight etc
To be able to plan on transportation having forward visibility from
production
Technology and optimization platform which improves productivity
of CSD, allows planning and collaboration with production and
suppliers
Opportunities

Feasible network to maximize on customer service level

continuous adjustment and tweaking the network with regards to
inventory policies and market expansion
Integrated transportation planning capability
Tie back LP and FP production plan as input at monthly level with
weekly rolling capability
Can combine new production centers as well as service centers
Monitor asset utilization and making sure load building process
understands different asset type and contractual requirement
Invest and train logistics providers
Organizational alignment /commitment and processes to make CSD
to plan and deliver to plan

g) Solutions and Recommendations

Create CSD Planning Calendar
Monthly S&OP meeting : 1st working day of the month
FP and LP provides month visibility on production plan at daily
level for next 30 days
CSD provides 30 days long transportation plan on weekly buckets
Consensus on the plan and publish month long daily plan to
railways and Transporter (rolling basis)
Weekly planning
a. Saturday or Monday every week
b. FP and LP provides weekly daily level production plan
28 | P a g e

c. Sign off exceptions like source changes, expedites, interwarehouse stock transfers o Weekly plan published to
suppliers
Daily Execution

h) Planning process
The Figure 15 and Figure 16 show the future planning process and related
inputs and outputs from the process. Figure 17, 18 and 19 highlight the
details of Annual Logistics Plan, Monthly Plan and Daily Plan respectively.

Figure 15: Suggested Planning Process

29 | P a g e

Figure 16: Various inputs and outputs of each steps of Planning

Figure 17: Suggested Process of Annual Logistics Planning

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Figure 18: Suggested Process of monthly and weekly Logistics Planning

Daily Logistics Planning

Process reengineering for everyday planning will be required in the new
scenario. It should look like below

Figure 19: Suggested Process of daily Dispatch Planning

i) Forecast Collaborations with Supplier

Contract capacity and capacity type as per annual plan
31 | P a g e

Share monthly and weekly plan with supplier. Monthly plan will
help supplier to plan capacity and drive utilization. Weekly plan
will help to deploy capacity
Agree on fence or forecast window against which suppliers
are liable to deploy capacity, scorecard on waterfall and
variances
j) System Integration and KPI Dashboard
Create and capture planning master data o Lanes and
standard lead time
a. Calendars
b. Inventory policies
c. Tariff
d. Lot sizes
e. Capacity type and utilization target o Order priority, asset
priority
f. Integrate FP & LP output for CSD visibility and forecasting
Transportation plan collaboration with suppliers
Build integrated logistics dashboard to track important KPI identify inputs
from planning and execution system
k) Monthly S&OP Meeting
Participated by FP and LP planning heads, CSD, Sales
planning and stockyard
Develop consensus on month production and its
deployment
Discuss problem with previous month, root cause and
incorporate learning into the planning engines
Publish month deployment plan to suppliers Agree on L2
and L3 process, sign off

l) Key KPIs for Outbound Supply Chain at Tata Steel

To measure the effectiveness and efficiency of the current and future
outbound supply chain, we have also analyzed the current trends of various
key performance indicators as shown in Table 3. Table 4 shows the
benchmark KPIs that Tata Steel should aim to achieve in 2 -3 years time by
improving planning and scheduling process of outbound logistics.
Table 3: Key KPIs of Outbound Logistics

Type
Production

32 | P a g e

KPIs
Despatch Vs
Production
Logistics failure in
DDP

UOM
%
%

Observatio
n

Best
Practice

Measured at gross
level
Lead time is self
defined

Measure at SKU
level
Lead time is actual

Delivery

Cost

Efficiency

Lifting Compliance

Transit Compliance

% RRT
Compliance

Total Delivery
System cost
(TDSC)

Rs/t

VIVO

Hrs

Own Vehicle
Utilization

Planning accuracy:
Annual Logistics
Plan Vs Actual
(TDSC)

Measured at gross
level

Measured as plan
vs actual

Measured against
self-imposed
reliability level
Mode level cost
minimization

Measured against
customer
requirement
Total landed
logistics cost

Doesnt consider
vehicle placement
by Carrier

Measured from the

time vehicle is
committed by
Carrier

50% vehicles are

Market hires.
No. of own GPS
Makes tracking
mounted vehicle
unreliable for line
waiting for material
of business
more than 24
extensively using
hours = 0 nos.
market hired
vehicles

Variance (%)

Plan accuracy is at
a very high level

Track total vehicle

utilization

Plan accuracy to
be measured at an
Execution level.
Waterfall variance
for all plans
Annual, Monthly,
Weekly

m) Reference KPIs to monitor

Table 4: Reference KPIs to monitor
Tata Steel

Conclusion
Tata Steel implemented Supply Chain solutions in the area of Demand
Planning, Supply Planning and Factory planning. Based on the assessment of
the current process, we have found out some improvement to be done for
more effective and efficient outbound transportation management. The
solutions we have suggested is in line with Tata Steels ambitions in future
too i.e. the solutions are scalable. Based on the assessment done, the key
findings, Tata Steels business requirements related to Transportation
Management are as follows:
33 | P a g e

Execution

Near Term Capacity Planning for execution purposes

Transportation Execution and Tracking

Elimination of manual planning processes in Transportation Planning

and scheduling

Better Dock scheduling reduction or piling up of Trucks at

warehouse.
Tactical

Insight into Transportation costs during the planning phase.

Capacity Planning at a Carrier ,Service and Lane Level

a.
With an objective to minimize Transportation cost
b.
At Monthly or Quarterly level and
c.
Alignment of planned capacity with the stake holders
Strategic

Capability to do what if analysis with the objective of reducing

Transportation cost and improving customer service levels
a.
Tariff negotiation with the carrier
b.
Addition of cross docking points in the Transportation Network

Decision support and analytics that can enable Tata Steel to adapt
to changing nature of Transportation Business. Few examples of
changes happening in the Transportation Industry in India and at
Tata steel:
a.
Credible third party players in logistics have emerged.
Suppose Tata Steel wants to make a shift from traditional
transportation model to sourcing out a portion of the
Transportation network to these 3 PLs.
b.
Tata Steel Ltd working towards last-mile rail connectivity with
specially designed wagons
c.
New heavy vehicles with more carrying capacity. Integration
of multimodal operations are more effective
d.
Environmental Initiatives like tracking and reducing Carbon
footprint.

34 | P a g e

Annexures
Annexure 1: Assumptions in ALP
Plan FY 17
No further freight increase is assumed in the rest of the
Base Freight
year.
Birrajpur
No discount on base freight for short lead destinations
HRC: 11.8%
HRS: 9.1%
CRC: 9.3%
Idle Weight%
CRS: 3.7%
TMT: 1.2%
WR: 5.8%
Billet: 1.2%
215 KT based on the assumption of 2200 T CC and
following No of Rakes:
Container
Apr Jul: 6 (Boisar, Navkar & Ch)
Rake Vol
Aug Nov: 8 (Boisar & Ch)
Dec Mar: 10 (2 rakes to North)
29 KT per month
Special Vehicle
~50% of this is from GEPA & CRM Bara and rest is from
Vol
Works
30% Service Tax @ 14.5%, making the net tax 4.35%(Till
Service Tax*
Mat 31st), 4.5% from June 1st 2016 (0.5% Krishi Kalyan
Cess)

35 | P a g e

Annexure 2: TDSC details

Total Delivery System Cost (TDSC):
(TDSC = 1st leg freight + Idle freight + Wagon handling charges +
Handling Charges at Hubs/SYs/CAs + 2nd leg freight + Siding
charges)

1st leg Freight: Freight cost incurred on all pre-paid movements from JSR
works / EPAs to direct customers, to SY/Hubs/ CAs or to EPAs
Idle Freight: Freight paid on account of idle weight moved by railways
(idle wt. = carrying capacity of wagon actual weight moved per
wagon)
Handling Charges: Cost incurred in handling and storing material at
warehouses
2nd leg freight: Freight cost incurred in all pre-paid movement ex
Hubs/SY/ CA/ LEPA.

Total Delivery System Cost (Rs/t) - Domestic:

Cost basket (Rs Cr.)
TDSC = ------------------------------------------------------Despatch from Works & GEPAs (Tonnes)
Cost basket in Rs Cr. (numerator):
This is the summation of all the costs (rail / road ) incurred on finished steel
transfers to profit centers and EPAs, and final dispatches from the Works and
the GEPAs (TRY-CR, TRY-Bara, BMW, ISWP, Beekay Steel etc) to the customers
(direct, ex-siding, or, via stockyards). It does not include cost involved in
moving Export material. Export Cost is captured in the Export TDSC
separately.
The various cost elements include:
1. Rail freight
2. Road Freight both 1st leg and 2nd leg
3. Carraige & Handling and CA Charges paid on stockyard and ex siding
despatches.
4. Wagon handling cost paid at works
5. Siding charges
Tonnage Basket: This is the summation of all outbound steel shipment (1st
leg) from Works & GEPAs excluding export despatches and customer pick up
from works.
The following table shows the depiction of Tonnages & Freights in various
legs of finished steel movement used in TDSC preparation
Transfe
From\To GEPAs
SYDs
LEPAs
Customers
rs **
Works
- Frt in
Road:
Road:
Road:
Tonnage
1st leg, Tonnage & Frt
Tonnage &
Tonnage &
& Frt in
-Tonnag
in 1st leg,
Frt in 1st leg, Frt in 1st leg, 1st leg
e not
Rail:
Rail:
Rail:
conside (a) Till ex-sdg (a) Till ex-sdg
(a) Till exred
point - 1st leg
point - 1st
sdg point (b) After exleg
1st leg
sdg point (b) After ex(b) After ex36 | P a g e

From\To

GEPAs

SYDs

LEPAs

Customers

2nd leg

sdg point 2nd leg

sdg point 2nd leg

Transfe
rs **

Road:
Tonnage &
Frt in 1st leg,
Rail:
Tonnage
(a) Till exGEPAs
& Frt in
sdg point 1st leg
1st leg
(b) After exsdg point 2nd leg
Tonnage & Frt
Tonnage &
SYDs
in 2nd leg
Frt in 2nd leg
Tonnage & Frt
Tonnage &
Tonnage &
LEPAs
in 2nd leg
Frt in 2nd leg Frt in 2nd leg
* Gepa: TRY-CR, TRY-Bara, BMW, ISWP, Gayathri Sales, Beekay Steel.
** Transfers to Tubes, TCIL, CRC-W, WRM-W, Agrico)
Road:
Tonnage & Frt
in 1st leg,
Rail:
(a) Till ex-sdg
point - 1st leg
(b) After exsdg point 2nd leg

37 | P a g e