1.1.

INTRODUCTION TO THE COMPANY

The industrial city of Ludhiana, located in the fertile Malwa region of Central Punjab is
otherwise known as the “MANCHESTER OF INDIA”. Within the precincts of this city is
located the Corporate Headquarters of the Vardhman Group, a household name in Northern
India has carved out a niche for itself in textile industry. The Vardhman Group, born in 1965,
under the entrepreneurship of Late Lala Rattan Chand Oswal has today blossomed into one of
the largest Textile Business houses in India. Father of present chairman cum managing
director, Sh.S.P.OSWAL.

1.1.1 BRIEF HISTORY

At its inception, Vardhman had an installed capacity of 14,000 spindles, today; its capacity
has increased manifold to over 5.5 lacs spindles. Perhaps the largest conglomerate in India.
Since then Vardhman Group has not looked back and it is scaling ever-new heights. The
Group has 19 operational plants with installed spinning capacity of about 5,00,000 spindles,
216 shuttle less looms and about a45 tons per day dyeing capacity, capable of processing
variety of raw materials available world wide. In 1973, the company acquired Oswal Steels
(now known as Vardhman Special Steels) at Faridabad. It manufactured alloy steel and had a
capacity of 50,000 metric tpa. Another steel unit was added to the bandwagon in 1986 and
today the group vaunts of a combined steel melting capacity of 1,25,000 tpa and rolling mills
capacity of 65,000 TPA.

1.1.2 CORPORATE SOCIAL RESPONSIBILITY

Every company is liable to fulfill its social responsibility. It is the major responsibility i.e.
considered for the organization to succeed. Some of the CSR activities of VARDHMAN are:
• Sri Aurobindo Socio-Economic and Management Research Institute is engaged in the
promotion of education, research and publications highlighting social and economic
issues facing the society. The Institute runs a Human Resource Development Centre for
providing career counseling and guidance to college students in Punjab. The teams of
experts also visit the colleges in the state to prepare college students for gainful
employment in the industry.

• Sprung from a keen desire to set up an educational institution in Ludhiana and inspired by
the writings of Sri Aurobindo and the Mother, the Trust has set up a college - Sri

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 Aurobindo College of Commerce and Management (affiliated to the Punjab University)
with the mission to create an institution with distinction dedicated to the ideals of creating
disciplined career oriented young people ready for going for administrative and
management roles in enterprises or to set up their own business as entrepreneurs.

• A Vardhman initiative to improve the yield of cotton in Punjab in 2001 when the State
had suffered a shock of crop devastation and area under cotton cultivation was dwindling,
led to the experiment to adopt villages and see whether concerted efforts in bringing
knowledge to farmers could improve the yield of cotton. The experiment was successful
as it improved the yield of cotton to 873 kg/hectare in 2005 in adopted villages where the
average yield of cotton in the State of Punjab was 587 kg/hectare (world average - 700
kg/hectare). It found mention in the President's broadcast on Technology Day (11/05/04)
as a 'technological event which has the potential to penetrate into our everyday lives'. The
Village Adoption Programme also found mention in the President's address to the nation
on the eve of India's 56th Republic day. The President of India was gracious to bless one
of the participating Villages -'Gehri Buttar' (District - Bathinda) by his presence on
December 10th 2005.
• Vardhman is actively engaged in the activities of Nimbua Greenfield Punjab Limited
(www.ngpl.co.in) formed by a consortium of Industries of Punjab for developing a
common facility for storage, treatment and disposal of hazardous wastes generated by the
Industry with a Government of India grant. www.ngpl.co.in).
• Vardhman is committed to be a responsible corporate citizen. The Vardhman Group has
always emphasized on total customer focus in all operational areas. It has continuously
monitored and nurtured relationships with all customers and business associates.
• Vardhman believes in:

 Absolute market orientation for a quick and positive response to the

customer's needs.

 An uncompromising commitment to a flexible, professional and personalized

service from within a stimulating result-oriented environment.

 Delivery to a consistent standard, competitively and meeting deadlines.

 Responsive approach to the benefits of R&D and modern technology.

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  Having faith in individual potential and respect for human values.

Table 1.1 Board of Directors

BOARD OF DIRECTORS

SHRI PAUL OSWAL CHAIRMAN CUM MANAGING DIRECTOR

SH. BAL KRISHAN BATRA NOMINEE OF IDBI LTD.

SH. SURINDER KUMAR BANSAL NOMINEE OF IFCI LTD.

SH. SURINDER SINGH BAGII

AIR MARSHAL K.S.BHATIA (RTD.)

SH. CHAMAN LAL JAIN

SH. S.K. BIJALANI

SH. RAJENDRA

SH. BAL KRISHAN CHOWDARY

SH. SUCHIT JAIN EXECUTIVE DIRECTOR

SMT. SUCHITA JAIN EXECUTIVE DIRECTOR

1.1.3 VARDHMAN SPECIAL STEEL

Vardhman Special Steel was established in the year of 1972 to manufacture Special and
Alloy Steel. The true impetus came upgrading of the plant located in Ludhiana (north India)

4
to an ultra modern plant. Today it has an installed capacity of 1, 00,000 with the MT per
annum. The state-of –the-art steel mill has one UHP 30MT electric arc furnace, ladle furnace,
vacuum degassing station, 9/16 meters bloom caster and a bar mill to roll a large range of
shapes and sizes. The contemporary technologies like electromagnetic stirrers, auto mould
level control and auto controlled cooling etc. in the bloom caster have been deployed to
produce high & consistent quality special & alloy steels. These quality products find
application in automotive components, forging, ball bearing, engineering application,
railway, defence etc. Continuous research and development efforts, focused on customer
satisfaction, have enabled Vardhman Special Steels to meet the stringent quality requirement
of producers of all types of commercial vehicles, tractor, car, two wheelers, defence
application, railway components, bearing, capital good and other engineering products. The
company has received approval for its products from leading OEMs like Telco, Ashok
Leyland, Maruti, Hindustan Motors, Yamaha, LML, Kinetic, Mahindra & Mahindra, Punjab
Tractors and Escorts among others. Vardhman Special Steel focuses entirely on the
requirement of its customers. This is one of the main strengths of VSS becoming a preferred
OE supplier to large corporate.

1.1.4 ENGINEERED FOR THE FUTURE

Vardhman Special Steels incorporates some of the most advanced manufacturing facilities
with equally reliable support facilities. The plant has well conceived layout plan with modern
material handling facilities-all designed for economic processing of materials and human
skills. Vardhman's ability to adopt changes in technology is evident in its extensive use of
automation and contemporary concepts.

1.1.5 MANUFACTURING PROCESS OF STEELS

The liquid steel will be made by melting dry and scrap in the proportion in an electric arc
furnace. The Arc Furnace will be used mainly as a fast melting unit. After melting, the carbon
and phosphorus in the metallic charge will be brought down to the desired level and the bath
temperature suitably raised. The semi finished liquid steel will then be tapped slag- free as far
as practicable in to a pre- heated ladle, depending on the steel grade aimed, the liquid steel
will then be subjected to suitable secondary refining and finishing treatment. The finished
liquid steel will then be continuously cast in to Billets.

5
The number & capacity of electric arc furnace are usually determined on the basis of
production programmed and the average Tap-To-Tap Time. The Tap-To-Tap Time will
depend on several factors, such as the type of charge materials, level of power input, grades
of steel and their quality requirements and provision for secondary refining facility etc.

The tap-to-tap time is the sum total of the time consumed for various operations such as
feting, tap holes maintenance, electrode adjustment, and scrap charging and melting, DRI
feeding, refining & tapping. As the furnace charge consists of about 30% of DRI and small
amount of cast iron scrap, both having higher contents of phosphorus input in to the furnace
will be high necessitating slightly longer refining in the EAF itself under an oxidizing slag.
All other refining and finishing activities can be transferred to the ladle furnace unit. During
this period of dephosphorization, bath carbon will also come down to the desired level.

Based on the average tap-to-tap time for the EAF its production capability will be 10-12 heats
per day. This will be feasible with good quality raw materials, efficient operating practice and
experienced operating and maintenance personnel, considering utilization factor as 90%,
expected average production will be 12 heats per day. The product mix includes carbon
steels, alloy steels and spring steels. The secondary refining unit consists of ladle refining
furnace & vacuum degassing plant. The billets produced from the concast machine are
preheated after cutting in to the desired length for the purpose of rolling in the round shape.
The rolled product is cut into desired length and laid on cooling bed in order to ensure that it
can be handled both manually & mechanically for further inspection, end cutting, pressing
and storing in the store yard. Some lots of rolled bars peeled/machined into smaller diameter
to have zero surface defects and centre less grinding of some lots done to have very close
dimensional control after peeling.

MANUFACTURING FACILITIES

LOCATION OPERATIONS CAPACITY

LUDHIANA STEEL MAKING 1, 00, 000 Mt / pa
ROLLING 50,000 Mt / pa
FARIDABAD ROLLING 25,000 Mt / pa

CAPACITY
Unit Installed Capacity As at 31.03.10 As at 31.03.09

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Steel Ingots/Billets MT 100,000 100,000
Rolled Products MT 40,000 40,000
Oxygen Gas Cu.M 2,450,000 2,450,000
ACTUAL PRODUCTION
Units Current Year Previous Year
Steel Ingots/Billets MT 50,294 52,613
Rolled Products* MT 46,324 48,990
End Cutting/Misroll MT 2,159 2,312
Oxygen Gas** Cu.M. 1,592,852 1,638,015

Figure 1.1 Process Flow

Electric Arc Ladle Refining Vacuum

Raw Material
Furnace Furnace Degassing

Heat Rolling Mill Bloom Bloom Caster

Treatment Conditioning
(Optional)

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 Bright Bars Testing & Shipment
(Optional) Inspection

1.1.6 PRODUCTS
 Plain Carbon Steel
 Case Hardening Steel
 Through Hardening Steel
 Free/Semi Free Cutting Steel
 Spring Steel
 Ball Bearing Steel
 Round Corner Squares
 Round Bars

1.1.7 PRODUCT-MIX

CATEGORY OF STEELS BLOOMSIZES

* LOW ALLOY AND CARBON 220 X 220 MM

* FREE AND SEMI FREE CUTTING 200 X 200 MM

* BEARING, BORON & MICRO-ALLOYED 160 X 160 MM

ROLLED PRODUCTS SUPPLYCONDITIONS

* ROUNDS: 25– 90 mm dia. HOTROLLED

*SQUARES: 45-110mm rcs. HOTROLLED & ANNEALED

1.1.8 QUALITY PHILOSOPHY

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In order to achieve total customer satisfaction it is important to meet their expectations in
terms of quality and prompt, professional response to their needs. It is the belief that makes
Vardhman fully geared to provide pre and post sales technical support to its customers
including assistance in material selection.

To ensure the right quality, Vardhman Special Steels has been quick to incorporate state – of
– the – art technology in its quality control programme. At first, the process parameters and
conditions are developed. Later, these are constantly monitored throughout the entire
manufacturing process. The quality parameters are repeated within a narrow range from heat
to heat. The final procedure is then inspected and tested to ensure compliance with the
customer’s requirement. Appropriate statistical quality control systems and the latest testing
facilities are the hallmarks of Vardhman’s Quality Assurance Department.

1.1.9 MAJOR CUSTOMERS AND OEM’S APPROVALS

Table 1.2: OEM’S Approvals and Major Customer

MAJOR OEM’S APPROVALS MAJOR CUSTOMERS

• TELCO • GNA GROUP
• ASHOK LEYLANDS • HAPPY FORGINGS
• MAHINDRA & MAHINDRA • HIM- TECHNO FORCE
• ESCORTS • SANDHU FORGINGS
• BAJAJ TEMPO • UMASHANKAR KHANDELWAL Co
• EICHER • AMFORGE INDUSTRIES
• PUNJAB TRACTORS • VELTECH FORGINGS
• HMT • AHMEDNAGAR FORGINGS
• RAILWAYS(RDSO) • BRAKES INDIA LTD.
• LML • UNITY FORGE

1.1.10 SWOT ANALYSIS

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An assessment of the long term financial health of an enterprise is an Important task for its
strategy and for the investors and lenders who provide funds to the enterprise in different
forms. SWOT analysis is a qualitative tool which by identifying the strengths and the
weaknesses, opportunities and threats to the organization makes an overall assessment of the
financial strengths.

 STRENGTHS

• Good Brand Equity

• Good technological base with Foreign Collaboration
• High Quality Standards
• High Production Capacity
• Own Research and Development department
• Commitment for growth
• Human Capital
• Zero Defect and optimum production with zero wastage
• Its culture and philosophy

 WEAKNESSES

• Comparatively high prices

• Lesser degree of promotional activity
• Long Hierarchy

 OPPORTUNITIES

• As quality is good and prices are comparatively high, Vardhman can always
easily liquidate stock pressure by slight reduction in prices.
• As brand image is very good and production is too wide, Vardhman can have
some good customers with whom direct business can be established. With this
Vardhman will have better Quantity and Regularity of sales.
• Strict payments are strengths at times as well as weakness. If a moderate
policy, as per present conditions are adopted, the dealers and customers shall be
attracted to buy more and regularly.

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 • Shortened hierarchy shall provide hope for better customer service.

 THREATS

• Smaller players in the market are using Vardhman’s process as a shield to

push their product at lower prices.
• Companies from south are entering into Ludhiana market.
• Capacity of Yarn Spinning is increasing rapidly in comparison to increase in
market size, resulting into the addition of new players. This would result in
price cuts, liberalization of payment, terms and conditions etc.of the various
functional areas. The other facilities at the corporate office include meeting
rooms, boardrooms, and conference halls.

1.2 INTRODUCTION TO THE STUDY

1.2.1 Meaning of Marketing

Marketing management is the art and science of choosing target markets and getting, keeping and
growing customers through creating, delivering, and communicating superior customer value.
The aim of marketing is to know and understand the customer so well that the product or service
fits him and sell itself.

1.2.2 Introduction to Marketing Department of VSS

VSS is having a modern marketing department headed by experienced team which covers all the
activities for conversion of finished goods into cash. It keeps vigil on the market feed-back on the
level competition, market, trend, changing customer needs and modifications. The marketing
department deals with domestic sales, while export department of the group manages export sales.
VSS specially deals with automobiles and auto forging companies like Milestones, Swaraj, Farms
part, A.P.M. International, Tata Motors Ltd., JMT Auto Ltd, Namo Narayan Industries, Mohindra
engineering concern, etc. With the help of marketing of VSS know about:-

• How can we grow our business?

• How can we build stronger brand?
• How can we keep our customer loyal for longer

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 • How can we improve sales for productivity more Important?

During summer training, we get wide information about VSS plant through survey of their
customer. Near about 80% customer are satisfied & 20% customer have faced some problems like
high price, response to enquiries & complaint handling. Then we have prepared questionnaires.
This questionnaire contains questions related to performance criteria of company. The question
like:-

Table 1.3: Feedback Form

VARDHMAN SPECIAL STEELS,LUDHIANA
VOICE OF CUSTOMER
(for FY 2007-08)

In an endeavor to continuously improve our service to customer, we would like to have your
valuable feedback. We would request you to please spare a few valuable moments of yours to
fills up this feedback form.
Customer name:____________________ Place : ________________________
Contact person: ____________________Designation________________________

Rating
Please tick against each performance criteria
S.No. Performance Criteria (5) (4) (3) (2) (1)
1 Quality of Product Excellent Very Good Satisfactory Poor
Good
2 Adequacy of Quality Excellent Very Good Satisfactory Poor
System Good
3 Delivery Excellent Very Good Satisfactory Poor
Performance Good
4 Complaint Handling Excellent Very Good Satisfactory Poor
Good
5 Response to Excellent Very Good Satisfactory Poor
Enquiries Good

6 Difficulties faced by Never Rare Sometimes Often Frequent

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 your customer due to
our product
7 Premium Freight Never Rare Sometimes Often Frequent

Comments & Suggestions for Improvement

• Quality of product
• Adequacy of quality system
• Delivery performance
• Complaint handling
• Responses to enquiries
These questions have five options like excellent, very good, good, satisfactory & poor.

1.2.3 Explanation of Responses Of Customer

• Acc. To First question 100% customer are satisfied about quality of product. They have
faced no problem related to quality of product. That means the entire customers are
satisfied. The conclusion of first question is performance of quality of product is excellent
• Consequently, 95% customers are satisfied about adequacy of quality system. 5%
customers have some problems. But the conclusion of this question is very good.
• Consequently, 100% customers are satisfied about delivery performance. Its means the
company meets expectation or wishes of customer. The conclusion of this question is
excellent.
• Consequently, 80% customers are satisfied related to complaint handling & the rest 20%
customer said that the complaints are not handled properly and quickly. But the overall
result is good.
• Consequently, 80% customers are satisfied about responses to enquiries & 20% customers
suffering from some problems. Those means 20% customers are dissatisfied. The judgments
of this question are good

1.3 MEANING OF LOGISTICS

The term "logistics" originates from the ancient Greek "λόγος" ("logos"—"ratio,
word, calculation, reason, speech, oration"). Logistics is considered to have

13
originated in the military's need to supply themselves with arms, ammunition and
rations as they moved from their base to a forward position. In ancient Greek,
Roman and Byzantine empires, there were military officers with the title ‘Logistikas’
who were responsible for financial and distribution of supplies.
The Oxford English dictionary defines logistics as: “The branch of military science
having to do with procuring, maintaining and transporting material, personnel and
facilities. “Another dictionary definition is: "The time related positioning of
resources." As such, logistics is commonly seen as a branch of engineering which
creates "people systems" rather than "machine systems "...."Logistics means having
the right thing, at the right place, at the right time. Logistics is defined as a business
planning framework for the management of material, service, information and capital
flows. It includes the increasingly complex information, communication and control
systems required today’s business environment.
Logistic can also be defined as:-

1. Logistics is the management of the flow of goods, information and other resources,
including energy and people, between the point of origin and the point of
consumption in order to meet the requirements of consumers. Logistics involves the
integration of information, transportation, and inventory, warehousing, material-
handling, and packaging. Logistics is a channel of the supply chain which adds the
value of time and place utility. We can’t imagine any business without logistics.
2. Logistics is the process of strategically managing the procurement, movement and
storage of materials, parts through the organization and its marketing channels in such
a way that current and future profitability are maximized through the cost-effective
fulfillment of orders.

3. Logistic is that part of Supply Chain process that plans, implements and controls the
efficient, effective flow of and storage of goods, services and related information from
the point of consumption in order to meet the customers, requirement.

4. It is only in the last 20 years or so that the concept of Logistic Management has
emerged and developed into a separate, recognizable management functions. Like
many other new business concepts, Logistic Management also originated in US. It is
founded on a practical fundamental principle, i.e. the cost of storage and movement
are closely interrelated and by dealing with them as a single unified activity, can we

14
 achieve or realize the true potential of each. In a crux it can be said that Logistic
Management aims at seven R's.

SEVEN R’s
• Right product

• Right quantity

• Right condition

• Right time

• Right place

• Right customer

• Right cost

Types of logistics

Inbound Logistics:

The Business Scenario Map shows the process of planning and executing all inbound
transportation which is based on purchase orders. The process starts with the creation of a
purchase order. This order represents a transportation need. To secure efficiencies,
transportation planning for these orders is done jointly with other processes creating
transportation needs, like replenishment processes or regular order based outbound
fulfillment.

Outbound Logistics:

Movement of material associated with storing, transporting, and distribution a firm's goods to
its customers.

1.3.1 LOGISTICS AS BACKBONE FOR ANY BUSINESS

• The customer in today’s marketplace is more demanding, not just of product but also
of services.
• In today’s marketplace the order winning criteria are more likely to be service based
then product based.

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 • Logistics Management can provide a multitude of ways to increase efficiency and
productivity and hence contribute significantly to reduce unit costs.

• The scope of logistic spans the organization, from management of raw material
through to the delivery of final product.

Peter Drucker described physical distribution as the "last frontier of cost reduction". Using
skilled management and modern technology for inventory management, inventory processing
and transportation can reduce cost.
Companies which have productivity advantage are known as cost leaders and which
have value advantage are known as service leader. Companies which don’t have any
advantage fall under commodity market and companies like Vardhman special steels
which have both productivity as well as value advantage fall under the category of
“service and cost leader.

1.3.2 Function of Logistics

Figure 1.2: Functions of Logistics

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Logistics, the synonymous term of physical distribution, involves planning, Implementing,
and controlling the physical flow of materials from the point of origin to the point of the
consumer at a profit. The role of logistics is to get the right amount of product to the right
places in the right time. Logistics or physical distribution (PD): Planning, implementing, and
controlling the physical flows of materials and final goods from points of origin to points of
use to meet customers’ needs at a profit & Supply chain management Emphasizes close
cooperation and comprehensive inter organizational management to integrate the logistical
operations of the different firms in the channel.

1.3.3 INVENTORY CONTROL

Business firms usually believe that if too high an inventory level is maintained then they
would have to bear a very high inventory carrying cost and also a high risk of obsolesce. On
the other hand, if too Iowan inventory is maintained, then it would result in high restocking
and production cost, as balance between the two extremes need to be achieved. This can be
done by related factors like movement and storage. This function of physical distribution is
called inventory control. It deals with the determination of optimal producers for procuring
stocks of commodities to meet future demand. The decision concerning when and how much
to order is a matter of balancing various conflict cost functions. Inventory control aims at
minimizing inventory cost, subject to demand and service constraint.

Inventory control guides a firm on factors such as

1. How much to order?
2. When to order?
3. How to control stock-outs at lowest cost?

1.3.4 STRUCTURE OF INDIAN STEEL INDUSTRY

India has emerged as the 3rd largest exporter of iron ore behind Brazil and Australia. India
stands in top 10 countries in producing steel in the world. But its global trade only accounts
for only 2% of the global steel trade. The domestic steel industry reported rapid growth
during the period between 2003-04 and 2007-08, and steel producers responded positively to
this by announcing large Greenfield or Brownfield expansion projects. Almost all domestic
steel companies, along with some international majors, have announced large expansion
projects. While some of the projects are likely to be deferred or shelved, the capital

17
expenditure for the industry would still be large, given the high capital intensity of steel
projects. The last decade of the twentieth century will go down as one of the most turbulent
phases for Indian steel industry.
The period witnessed sweeping changes in the steel arena, transformation of self contained
national markets into linked global markets and consequent fierce competition; oversupply of
most kinds of steel resulting in no real appreciation of steel prices and simultaneous rise in
input cost; and most importantly, rise in customer expectations. The profitability of Indian
steel companies has improved in 2009-10 on a quarter-on-quarter basis.
Besides a somewhat improving steel price scenario, a significant softening of iron ore and
cooking coal prices has also contributed to this improvement. India with its abundant
availability of high grade iron ore, the requisite technical base and cheap skilled labor is thus
well placed for the development of steel industry and to provide a strong manufacturing base
for the Metallurgical industries. Companies in more mature industrial countries like India are
increasingly forced to look to assets (and growth) by setting up production operations (steel
factories) in key developing economies that places then close to natural resource supplies
(both in terms of inputs and energy).Recent years have witnessed unprecedented turmoil in
the global steel market. The crisis in the international steel market might be attributed to the
misbalance between capacity, demand and production and consequent drop in prices.
Availability of iron ore was and is not an issue, as the domestic production of iron ore is
sufficient to meet demand. Secondary steel producers require closely sized lumps (CLO)
which generate fines. In addition, at the time of mining 60% of the ore comes as fines and
balance 40% as lumps (including big boulders). Thus, in the total production of iron ore 70-
72% are fines either at the time of mining or while crushing into CLO or handling
(loading/unloading) operations at mines, railway stations or at ports. India is 5th largest
producer of steel with total production of 53.08 MT in 2007. The crude steel production in
India registered a moderate year-on-year growth of 2.7% in 2009 and reached 56.6 Million
Metric Tons. On the other side, some Asian countries such as Japan and South Korea saw
significant decline in their production levels. In 2008, per capita finished steel consumption
stood at an estimated volume of around 44 Kg, which represents tremendous growth potential
for coming years. This further signifies the resilience and strength of the Indian steel industry
against external risk factors. Indian steel industry mainly consists of three distinct groups.
The first group comprises the integrated steel producers which produces greater than 1MT
and includes Steel Authority of India Ltd (SAIL), Tata Steel (capacity 3 Mt) and Rashtriya
Ispat Nigam Ltd (RINL) (3 Mt). SAIL has four integrated steel plants at Bhilai (4 Mt),

18
Bokaro (4 Mt), Durgapur (2 Mt) and Rourkela (1.8 Mt). The group of secondary majors
consists of the Ispat Group, Jindal Group, Lloyds and Essar. Their capacities range between
1 Mt and 2 Mt using a mix of technologies, with much lesser degree of backward integration.
These two strategic groups together hold around 70% of the mild steel capacity in the Indian
steel industry. The third groups of tertiary producers are mini-steel plants, using electric arc
or induction furnaces and are very small in size. There have been almost revolutionary
changes in the global steel scene with fierce competitive pressures on performance,
productivity, price reduction and customer satisfaction. National boundaries have melted to
encompass an ever increasing world market. Trade in steel products has been on the upswing
with the production facilities of both the developed and the developing countries
complementing each other in the making of steel of different grades and specialty for the
world market. The Indian steel industry comprises of the producers of finished steel, semi
finished steel, stainless steel and pig iron. Indian steel industry, having participation from
both public sector and private sector enterprises, is one of the fastest growing markets for
steel and is also increasingly looking towards exports as driving the growth of the industry.
The Endeavour is not only in tandem with India's National Steel Policy of achieving a
production level of 110 Mt of crude steel by the year 2020. The timely completion of the
projects for new forthcoming steel plants is of great challenge in the present Indian scenario.

1.3.5 LOGISTICS IN INDIAN STEEL INDUSTRY

There is a growing concern for the macro and micro level logistics of Indian steel industry.
The customer delivery times, inventory management, cargo handling at ports, procurement of
iron Ore and other raw materials are some of the areas in which steel manufacturers are
focusing at micro level. Some of the concerns of logistics for the steel industry at macro level
are High transportation costs: This is one of the major concerns which are affecting the
growth of the industry. Due to the problems in infrastructure and also with low levels of
productivity in terms of handling and transporting cargo, the costs of transportation were
soaring day by day. Lack of connectivity to the ports with sufficient rail and road networks is
also one of the causes for high transportation costs. Along with the transportation costs, the
costs of order placement and transactions costs are also increasing. Industry should look for
the efficient flow of information from end to end in the supply chain. Implementation of
technologies like EDI (electronic data interchange) and ERP (enterprise resource planning)
will help to improve reliability of the information flow and also reduce the costs to a greater
extent. The implementation of these technologies and also the other strategies like BPR

19
(business process reengineering) are at the initial stages in the industry. Apart from some
major producers of steel like Tata, JSW, ISPAT etc were able to successfully implement them
in their steel plants which helped them in reducing the inventory lead times and also
improved the information flow. These technologies must be implemented in a large scale at a
macro level so as to increase the growth of Indian steel industry. Creating the virtual
information networks from end to end will not only save in terms of costs but also the time
for order placing and procurement can be done. Lead times and delivery schedules can be
improved much better than ever before. The advantage of a proper IT-based information
system is that accurate information can be obtained at a much faster rate, reducing downtime
and speeding up decision making process. Since, time is more than money; it would have
direct impact on cost. The objective would be to implement IT in all operations and to
integrate these with day-today decision-making process. IT applications will help in
streamlining both process chain and supply chain and would thereby result in cost reduction
and increase in productivity. Proximity and access to raw materials. Infrastructure
development requires the transport of raw materials for steel production for achieving the
goal of 75 million ton of additional capacity by 2019-20 will require the movement of an
additional 300 million ton of raw material Freight movements are further delayed by onerous
transport regulations, which include restrictions in the hours of the day that heavy vehicles
can operate, interstate border crossing closures and lengthy trans- border crossing procedures,
frequent tolls and inspections, and road closures at night due to the risk of attacks by
insurgents or bandits. The efficiency of Indian ports is affected by shallow draught, low
productivity, high costs, long vessel 60 turnaround times, poor governance, and lengthy
customs delays. Shipping costs are consequently high — a shipment from India to the United
States can cost 20 per cent more than from Thailand and 35 per cent more than from China.
Unlike international ports like Singapore and Rotterdam, the shortage of storage space in the
major ports in India had further compounded the problem of speedy evacuation of cargo from
port premises responsiveness.

1.3.6 PERFORMANCE OF LOGISTICS IN INDIAN STEEL INDUSTRY:

Some of the key performance indicators of logistics in Indian steel industry are:
Table1.4: Performance Indicator
Performance attribute Factors India International standards

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Reliability Performance to 40-65% 97.5%
customer dates
Responsiveness Response time to 1 day-1month Less than 3 hrs
enquiry
Flexibility Re-plan cycle time 1-3 month 15 days
Assets Inventory turns 3-5 times 7 times

From the above table it can be observed that the performance of India in terms of logistics is
poor and has to improve drastically to be in the global competition. Though Indian companies
are excelling in terms of production they are lagging far behind in terms of supply and
distribution of the finished product which affects the industry considerably includes costs of
idle freight, detention, in plant logistics, transaction costs, handling and storage costs, lashing
and bracing costs etc
1.3.8 FUTURE OUTLOOK FOR THE INDIAN STEEL INDUSTRY
The sponge iron has of late come up as a major input material for steel making through
electric furnace route – both Electric Arc Furnace and Induction Furnace. Due to long
gestation period, huge investments, dependence for coke on foreign suppliers, the steel
industry is slowly diverting itself from blast furnace route to electric furnace route and the
requirement of Sponge Iron is increasing 67 very fast. Another major reason is the global
shortage of scrap. The steel making furnaces in the eastern region use average 70% Sponge
Iron in the feed material for steelmaking The future for the Sponge Iron is therefore quite
bright. The steel is today considered as the backbone of India economy. The growth of
economy has a direct relation with the demand of steel. With the present steel intensity index,
considering the GDP projection by the Government of India, growth of steel demand will be
around 11% annually. As per the National Steel Policy issued by the Ministry of Steel – India
will produce 110 million tons of steel by 2020. The requirement of Sponge Iron as metallic
will be 30 million tons. The Ministry of Steel has decided to come out with a White Paper on
the logistics requirement of the steel industry at a production capacity of 250-300 million
tons. The exercise has been prompted by the logistics constraints in the movement of raw
materials and end-products faced by the country today when steel production is at 65 million
tons. It is expected that India would become the second biggest producer of steel within the
year 2016 and the production per year would be 137 million tons.
Today India produce 13.9 million tons of sponge iron, out of which 4.2 million ton is gas
based and remaining 9.7 million ton is coal based. India has a proven reserve of 410 million

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ton of high grade iron ore, another 440 million ton of high grade iron ore which will be
established. India has total 9992million ton of iron ore reserves (as per IBM report of1995).
India has sufficient non-coking coal through of high ash low fixed carbon grade. Coal is used
as a reducing for sponge iron making in the furnace. The availability of scrap of required
quantum is unlikely and therefore scraps needs to be replaced more and more by DRI.
Expanding India’s steel sector depends on lower port costs for handling key inputs such as
Coking coal which is predominantly imported, as well as servicing potential steel exports as
Envisaged under the National Steel Policy

1.2.11 PROCESS OF LOGISTIC IN VARDHMAN SPECIAL STEELS :-

Figure 1.3: Process of Logistics

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Dipatch schedule is made by marketing dapartment as per the requirement of the customers
then loading advice is prepared. Then loading is done by the trucks which is hired from the
transportersby negotiating with them for fare and selected the best option. Trucks gate
inward is made and weighted at weighbridge than Delivery Order is made and truck is sent to
B.B.S(bright bar shop) or to the rolling mill where the finished product is to be ready for
loading.After truck is loaded it is again weighted at weigh bridge and then security check is
done and gate outward is made from their truck is sent to final destination (depots and
distributor). But if the loading product is of different in(grade no, heat no, size) and sent it to
same destination then truck is again and again weighted at the weight bridge which has the
capacity of weighing 40 tonns maximum.

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