TISCO - The World's Most Cost-Effective Steel Plant

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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. In the second half of 1998, in association with McKinsey, TISCO implemented TOP program at its G blast furnace8. TOP was widely regarded, as a program, which would have a maximum positive impact to the bottomline, with minimum investment, required in minimum time (See Exhibit IV). It aimed achieving large improvements in throughput, quality and cost in the short term. In the long run, TOP was expected to enable the TISCO to achieve high rates of performance improvement (See Exhibit V).

Since TISCO's scale of operations was quite large, the whole organization was divided into manageable 'units' to facilitate the implementation of TOP. A unit team was formed comprising a unit leader and two facilitators. Initially, McKinsey provided the facilitators. The unit leader was responsible for the performance of that particular unit. The team worked full time on the TOP program for a period of 12 weeks. Around eight units were addressed simultaneously during the 12 weeks, and this was also known as 'Wave.' The entire Wave was divided into five phases (See Exhibit VI).

The unit team's objective was to explore ideas to reduce the cost or delays made by the unit by about 40%. In the process, the team was expected to identify and understand how each cost element could be reduced. The team had to establish relationships between key performance indicators and the elements that had an impact on them. Each team was asked to set itself a target based on the TOP norms; develop ideas to improve from the present level of performance to the target level; and implement those ideas.

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8] A blast furnace is a towering cylinder lined with heat-resistant (refractory) bricks, used by integrated steel mills to smelt iron from its ore. Its name comes from the 'blast' of hot air and gases forced up through the iron ore, coke and limestone that are loaded into the furnace.