TISCO: The World's Most Cost Effective Steel Plant
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Case Details:
Case Code : OPER011
Case Length : 12 Pages
Period : 1980 - 2002
Organization : TISCO
Pub Date : 2002
Teaching Note : 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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Background Note Contd...
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By April 2001, TISCO had emerged as the world's lowest cost producer of steel. 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 for the financial year
ending March 2001.
The World Steel Dynamics (WSD)6, in a report stated,
"Tata Steel is a 'world
class' steel maker – the only in India – and one of the few companies in the
world with such a standing. This view point is based on a variety of reasons
such as low operating costs, special company culture, good profitability, etc." WSD identified 12 companies as World Class Steel Makers, and ranked them based
on certain factors7 (Refer Table I).
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Analysts felt that TISCO's achievement of becoming the lowest cost producer of
steel was mostly attributed to its implementation of TOP (Total Operational
Performance), a program that focused on improving TISCO's operational
practices and rationalizing procurement costs.
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The 'Top' Program
In the early 1990s, TISCO appointed McKinsey and Booz-Allen & Hamilton
to study its operations and suggest ways to cut costs. Irani explained
the rationale, "Cost-cutting measures are more important in the present
situation where one can no longer control steel prices which are
dictated by international markets." The consultants suggested TISCO to
focus on various components affecting the cost of steel, which included
cost of raw materials, cost of conversion, fuel rate in the blast
furnace and mining of coal. TISCO was advised to use the most modern
technologies to cut costs further... |
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