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

Essar Supply Chain - Strategic Advantage

A major strategic advantage is their high level of forward 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 operation include:

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.

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 retail outlets 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

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.

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:

Inventory Cost Transportation Cost Warehousing Cost Cost of Lost Sales Maintenance of customer service levels Servicing small quantity of buyers

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

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 )

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
Figure 5: Distribution Network Overview

Retail Outlets (Hypermarts) Company owned 600 outlets spread across 20 states

Express Marts Retail Outlet Selling Points

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

Figure 6: Hub and Spoke Model Relevance

References:
www.essarsteel.co.in http://www.steelworld.com/Quasteel.htm http://planningcommission.nic.in/aboutus/committee/wrkgrp12/wg_steel2212. pdf