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Essar Steel
Essar Steel is a global producer of steel with a footprint in India, Canada, USA, the
Middle East and Asia. Essar Steel is one of India's largest exporters of flat products,
exporting to the highly demanding US and European markets, and to the growing
markets of South East Asia and the Middle East.
A number of major client companies have approved Essar steel for their use,
including Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway, and Maruti
Suzuki. Essar Steel has acquired extensive quality accreditations and their lean
team has enabled them to achieve highest productivities and lowest manpower
costs among steel plants internationally.
Their supply chain has been aligned to meet their business objectives and
structured as follows
Figure 1: Essar Supply Chain Goal Alignment
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Essar Supply Chain - Strategic Advantage
A major strategic advantage is their high level offorward and backward
integration. They are totally integrated from raw material to finished products
adding value at every stage of the manufacturing process. Their areas of operationinclude:
Iron Ore Beneficiation
They have an 8 MTPA plant at Bailadilla (Chhattisgarh) and a 12 million ton per
annum (MTPA) plant at Dabuna (Odisha), both strategically established to leverage
the rich iron ore deposits of the respective states. The plants pump the iron ore
slurry to Essar Steel pellet plants at Visakhapatnam (Andhra Pradesh; 267 km
pipeline) and Paradip (Odisha; 253 km pipeline) respectively.
Pelletization
They have an 8 MTPA pelletization plant at Visakhapatnam and a 6 MTPA pellet
plant at Paradip, both of which provide vital raw material to the steel plant at Hazira
(Gujarat).
Iron and Steel
They have a fully integrated world-class facility at Hazira, housing the world's fourth
largest single-location steel plant. It has a steel-making capacity of 10 MTPA, holds
ISO: 9001:2000, IS 9002 and TUV, and ISO 140001 certification and is India Chiller
Energy Efficiency Project (ICEEP) Protocol compliant.
The facility also houses a 6.8 MTPA sponge iron plant (the world's largest gas-based
sponge iron plant in a single location); a 1.5 MTPA plate mill (the largest in India); a
0.6 MTPA pipe mill with with internal and external coating facilities of up to 2 million
square meters annually; and a 1.4 MTPA cold rolling complex comprising two
galvanizing lines, a batch annealing furnace and a skin pass mill.
Steel Processing
They have a downstream capability hub at Pune (Maharashtra),which houses a 0.6
MTPA cold rolling plant, a 0.5 MTPA galvanizing plant, a 0.4 MTPA color coating
plant, and a 0.65 MTPA pickling line.
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Steel Distribution
Essar Steel is the first steel company to set up an end user distribution chain for
steel products under the brand names Essar Hypermart and Essar Expressmart.
Hypermart is the world's largest steel retail chain with a network of over 375 retailoutlets across India, Indonesia, Nepal and the Middle East.
Essar Steel has the largest downstream capabilities in India.
Essar Steel's processing and distribution facilities are the largest in India with an
aggregate annual capacity of 4 million tonnes from its facilities in Pune
(Maharashtra), Hazira (Gujarat), Bahadurgarh (National Capital Region), Chennai
(Tamil Nadu), Bhuj (Gujarat) and Dubai (UAE)
The flow of operations is illustrated as follows:
Figure 2: Operations Flow
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Essar Supply Chain - Evolution
Initially Original Equipment Manufacturers (OEM customers) and retail outlets were
directly served from Hazira plant and its downstream service centre. Subsequently,
a few retail hubs were setup ( such as VITCO in Surat, ARK in Pune) to serve retail
outlet segment. The main drawbacks of these models were:
Away from the market and customers
More lead time to serve
Low responsiveness to changes in needs of customers
Transit Damage
Essar Steel decided to focus on market ownership to influence consumption. It
adopted a hub and spoke model in supply chain to cater to its OEM and retail
customers. Majority of mother coils were to be routed through Steel Service Centers
(SSC) closer to consumption points. In case of retail outlet, coils were to be sent
from Hazira or any other SSC to Retail Outlet Service Centre (ROSSC) closer to retail
market centroids for processing as per market demand. Each ROSSC was designed
to serve RO in a radius of 200-300 km wherein delivery was to be made within 24
hours.
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Figure 3: Hub and Spoke Model of Supply Chain
Figure 4: Factors for deciding number of warehouses
Factors affecting the number of ware houses built by Essar Steel include:
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Inventory Cost
Transportation Cost
Warehousing Cost
Cost of Lost Sales
Maintenance of customer service levels
Servicing small quantity of buyers
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Essar Supply Chain - Characteristics
Value-Added Product Solutions
Essar Steel is driven by technology to deliver products of the future. The Hazira
plant is one of the most technologically advanced plants in the world.
Collaborative Approach
Essar Steel has established close research and development with OEMs and
customers to develop specific and customized products. Production scheduling is
integrated with inward plans of customers. They work closely with their customers
to guide them on best product application mix.
Customer Value Management
Essar Steel adopts a relationship driven model and has adapted web-based CRM
modules to serve customers in a better manner. They believe in understanding
needs of customers by closely working with them.
Logistic Solutions
Essar Steel is driven to save on logistics cost to customers and customize product
on delivery. They are the only company to have Service Centers near steel
consuming hubs to deliver customized products at scheduled time as desired by
customers. They are the first steel company in the world with forward integration
into retail through 600+ Expressmarts and Hypermarts which enable them to serve
SMEs and small customers.
Key Sustainability Accomplishments - Green Supply Chain
8.72% reduction in greenhouse gas emissions in India in 2011
99% reuse of byproducts in Hazira plant
130000 cubic metres of water conserved at Hazira through rainwater
harvesting
91% of solid waste utilized in Hazira
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5.2% reduction in specific water consumption of crude steel at
Hazira in 2011
Essar Steel won CSE Green Rating Award in 2012
(Source: www.essarsteel.com)
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Distribution Network of Essar Steel
Major Steel Service Centre (owned by Essar Steel)
Bahadurgarh (North)
Bhuj (West)
Indore (Central)
Pune (West)
Chennai (South)
Kolkata (East)
Retail Outlet Service Centre (ROSSC)
Company owned ROSSC throughout India
Retail Outlets (Hypermarts)
Company owned 600 outlets spread across 20 states
Express Marts
Retail Outlet Selling Points
Figure 5: Distribution Network
Overview
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Hub and Spoke Model Significance for Essar Steel
Customer Centric Supply Chain
Better control over inventory due to improved forecasting
Postponed differentiation hold inventory at intermediate stages
Average inventory holding period has decreased from 30 days to 21 days
Build brand awareness through Hypermarts
Reduction in Lead Time leading to Just in Time (JIT) supply
Supply of specific width of any length as against pre-decided length and
width
Hub and Spoke Model Significance for Customers
Easier accessibility and convenience for purchase of steel ( Steel available
when they need, where they need)
Pre-dispatch inspection to ensure quality control in product for customers
Performance tracking against world benchmarks
Easier access to technical and operational support
Provides flexibility in business and helps to improve working capital cycle
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Figure 6: Hub and Spoke Model Relevance
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References:
www.essarsteel.co.in
http://www.steelworld.com/Quasteel.htm
http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_steel2212.
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