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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"With cost-cutting measures and good management, a company like TISCO may be the last one standing."

- Rajeev Das, Analyst, Paribas Asia Equity.

"It is our endeavor to reduce the cost of saleable steel by 2.5 - 3 per cent every year."

"We realize that however efficient we become, the steel industry is not likely to return the cost of capital. This is no fault of ours, but due to the structure of the global and Indian steel industry."

- B. Muthuraman, Managing Director, TISCO.

Background Note

Tata Iron and Steel Company (TISCO) was established in 1907 by J N Tata¹ at Jamshedpur in Bihar, India. TISCO offered a wide range of products (See Exhibit I) and services including Hot rolled/Cold rolled (HR/CR) coils² and sheets, tubes, construction bars, forging quality steel, rods, structurals, strips and bearings. It also manufactured material handling equipment, ferro alloys and other minerals, software for process controls, and offered cargo-handling services.

In the early 1980s, TISCO initiated a modernization program of its steel plant (See Exhibit II). Explaining the need of modernization, J J Irani, the then managing director of TISCO said, "We would have been finished otherwise.... you cannot fight a modern-day war with weapons of the Mahabharata.

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We would have been annihilated had we not modernized. We realized this and embarked on the four phases of modernization. We addressed our drawbacks like the steel making process, our weakest link."

By mid-1990s, TISCO had become India's most cost-effective steel plant. It also became Asia's first and India's largest, integrated steel producer (ISP)³ in the private sector. By 2000, eight divisions of Tata Steel were ISO-14001⁴ certified, including Noamundi Iron Operations, West Bokaro Collieries, Ferro Alloy Plant, Joda, Sukinda Chromite Mines, Joda East Iron Mines, Tubes Division, and Growth Shop & Steel Works. By early 2000, TISCO had completed four phases of the modernization programme with an investment of about Rs 60 billion⁵. The company had invested Rs 4 billion on consultancy fees during 1990 to 2000. The fifth phase of the program had commenced in April 2000 (See Exhibit III).

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1] Jamshedji Nusserwanji Tata (J N Tata) was the founder of the Tata Group of companies.

2] Hot rolled coil is a coil of steel rolled on a hot-strip mill (hot-rolled steel). It can be sold in this form to customers or be processed further into other finished products. Cold rolling is a process where the shape and structure of the steel can be changed by rolling, hammering, or stretching it at a low temperature (often room temperature).

3] The Integrated steel producers have manufacturing facilities right from the iron ore stage to the finished steel stage.

4] The International Organization for Standardization (ISO) develops voluntary technical standards. The ISO 14000 standards are on environmental management.

5] In September 2002, Rs 48 equaled 1 US $.