Implementing Tata Business Excellence Model in Tata Steel

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Case Details:

Case Code : OPER021
Case Length : 15 Pages
Period : 1996 - 2002
Organization : Tata Steel
Pub Date : 2003
Teaching Note :Not Available
Countries : India
Industry : Steel

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"The pursuit of business excellence was not an extraneous activity; there was a close link between progress on business excellence and a company's results, as Tata Steel had shown."

- Dr JJ Irani, Chairman, Executive Committee, Tata Quality Management Services (TQMS).

"We seemed to have changed our mindset from thinking that we are the best and we have nothing to learn and in bringing this about a great deal of credit goes to the TBEM."

- Ratan Tata, Chairman, Tata Group.

Introduction

According to a report by World Steel Dynamics (WSD)¹, in April 2001, Tata Steel² (TISCO) was ranked as the world's lowest cost producer of steel (Refer Exhibit I). TISCO's operating cost at the 'hot metal' (liquid) stage was $75 per tonne. The company's cost per tonne of finished steel stood at $152 in the financial year 2001. The ranking was based on several factors including low operating costs, special company culture, good profitability, skilled and productive workforce, high quality and niche products and proactive and experienced management. According to the media reports,³ TISCO's achievement of becoming the lowest cost producer of steel in the world was mainly attributed to the company's successful implementation of the Tata Business Excellence Model (TBEM).

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Based on the Malcolm Baldrige Award,⁴ TBEM aimed at establishing a link between business performance and individual performance. TISCO was the first and only Tata group company to achieve the JRD QV award (Refer Exhibit II) in 2000, having scored 616 points out of 1000 points on the TBEM scale. The adoption of TBEM had helped not only TISCO, but also several other companies in the Tata group (Refer Exhibit III) in enhancing the quality of their business processes.

The objective of TBEM was to facilitate every Tata group company achieve business excellence and establish themselves as leaders in their respective industries. The implementation of TBEM had benefited several Tata group companies by improving their productivity significantly.

R Gopalakrishnan, Executive Director, Tata Sons Limited,⁵ commented on the benefits of TBEM: "The renewal of Tata group is principally on the basis of TBEM. The model itself is under constant updation so as to keep itself fresh, vibrant, and contemporary. The model has done a great deal of good for the Tata group as a whole."

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1] A renowned industry analyst firm based in the US.

2] Established in 1907 at Jamshedpur in Bihar (a state in India), TISCO is the country's single largest, integrated steel producer in the private sector. The company offers a wide range of products like construction bars, tubes, hot rolled/cold rolled coils and sheets, rods, strips, bearing, ferroalloys, other minerals and cargo handling services.

3] In an article titled 'Tata Steel targets 750 score on TBEM Scale,' Financial Express, March 27, 2001.

4] Malcolm Baldrige Award is an award given for quality in the US exclusively for the US-based companies. It was instituted in 1987, in the memory of Malcolm Baldrige, who was the US Secretary for Commerce for seven years during Ronald Reagan's reign. It was awarded to those companies which achieved excellence in quality management. The award ceremony was a major corporate event in the US, announced from the White House. IBM, Motorola and Ritz Carlton Hotels have received the Malcolm Baldrige Award so far.

5] Tata Sons safeguards and promotes the Tata brand under the Tata Brand Equity and Business Promotion scheme in the national and international markets. It is the principal investment holding company of the Tata Group.